/biz/ - Business & Finance

I bought at $72k. The bears were annoying this week so I wrote a python program to calculate buys in a more principled way so that we can be sure we're not just FOMOing in at the top.

Bitcoin historically shows power law adoption growth with an exponent between 5 and 6. I used a number on the conservative (lower exponent) side to construct a trend model of the bottoms, which tend to be most consistent. If we estimate current base value of Bitcoin as what the bottom model will be in a year, discounted at 10% for time value of money, and then multiply that by about 3 (it decays over time as bitcoin matures and becomes less volatile) then we get a model for the tops. I calibrated it so that it was fairly conservative and would have been a good time to sell in almost all historical cases. Finally, I put another value line in between as my "buy below" line.

Furthermore, bitcoin displays momentum, with a two or three month exponential moving average being conservative but performant. I combined the value model with the momentum to get a momentum-adjusted value below which we should buy. The punchline is that while the recent peak was just over it, the bear market over the last week took us back into bullish prices. Of course as soon as I realized this and checked the price, it was shooting up. We're a little over half way up this cycle with plenty of momentum. It's time to buy.

Note though that the peaks are getting lower so $100k this cycle is going to be close to the top, and the people talking about $300k are full of shit. I don't know how well this model will hold up into the future, but I made only a few assumptions and fit the data conservatively so I'll be following it for this cycle. At some point in the next couple years, Bitcoin hodl is going to stop outperforming the market under the current adoption growth regime, even if you only buy the bottom. I don't know what happens then, but until then, don't let the bears get you down.