Bitcoin price is on the ropes after failing to make it above $30,000. The market is still fearful after a year long downtrend and 78% drop.
However, as the old adage states, “when in doubt, zoom out.” In this latest look at BTCUSD, one curved median is all the reassurance needed to know that the top cryptocurrency is still on the right track long term.
Zooming Out To Look At Long-Term Logarithmic Growth
Assets of any kind are measured in growth of price and time. Growth can be exponential or logarithmic.
Exponential growth is fast and substantial, commonly associated with compound interest in finance. Growth begins slow, then sharply increases. The stock market in linear scale is a good example of what exponential growth looks like.
Exponential growth in the Dow Jones Industrial Average | DJI on TradingView.com
Meanwhile, Bitcoin growth is logarithmic, which begins fast then slowly decreases over time. Wikipedia says that in computer algorithms, log growth is a “very desirable” indication of efficiency.
In an example from MatcMath, log growth is explained via how children learn words faster at a younger age. Eventually they learn words at a much slower rate as they reach adulthood.
The chart below shows exactly how Bitcoin price climbed rapidly to start, and is now experiencing less and less growth over time. Despite growth slowing, it never stops.
The log growth line could work as a mean for Bitcoin price | BTCUSD on TradingView.com
Bitcoin Price And Reversion To The Mean
The above chart includes the entire history of BTCUSD price action since it began trading.
Its trajectory clearly follows the long term growth of Bitcoin over time, with massive volatility in between. However, since growth itself is slowing over time, so is volatility. This is why the top crypto asset more than likely bottomed after only a 78% drawdown, versus 84% and higher in the past.
Not only does this suggest Bitcoin is nowhere near done growing, using the log growth curve as a median, it’s possible to effectively use it as a mean reversion tool.
Mean reversion strategies involve buying low below the mean, and selling high above the mean. Using that strategy alone has historically been successful. This also puts BTCUSD square in the buy zone but potentially preparing an exit.
Dramatic new lows would mean the end of logarithmic growth in Bitcoin. Which is why the chart the chart is so reassuring.
An example of log growth superimposed over #Bitcoin to highlight the long term trend
Sell above the mean, buy below it
A high timeframe statistical tool based on standard deviations can provide further confirmation of key turning points, entries, or exits pic.twitter.com/fLPCPaDcng
— Tony “The Bull” (@tonythebullBTC) May 17, 2023
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Tony “The Bull”
Tony “The Bull” is a level 3 CMT student (passed level 1 & 2), technical analyst, Bitcoin supporter, and avid speculator. Tony is deeply fascinated by core market principles such as Elliott Wave Theory as they tie into mathematics like Fibonacci ratios. Market timing though DeMark indicators, Ichimoku, Gann tools, or Hurst Cycle Theory are also of key interest. Tony provides completely original content driven by exclusive, independent research. For more insights and education from Tony, check him out on Twitter or in his free TonyTradesBTC Telegram channel. Follow @TonyTheBullBTC on Twitter and search CoinChartist on YouTube.