History is repeating itself for Bitcoin. The market is repeating its original crash at a smaller scale. This is called fractal.
Fractals were quite the fashion back in the day and they are everywhere in nature, including the stock market.
Crudely, you can make anything have a fractal nature if you exert a random cyclical action to it. Hit a sheet of wood at random with a hammer and the pattern will be a fractal with a set of mathematical properties. Blow water with the wind from a certain direction then light with the photons of twilight and you will see a fractal sunset. Have a bunch of investors dash around buying and selling a financial instrument and its share chart will be fractal too.
Great, you might say, but how can you make money out of that?
The answer is that fractals have a tendency to repeat at different scales. This is called self-affine and self-similar but it means a weekly pattern will look very like the daily, the hourly, the monthly and even the tick chart pattern because the semi-random process creates similar nested patterns at lots of different scales.
If you want to deep dive this I’d recommend a book like Fractals, Chaos, Power Laws: Minutes from an Infinite Paradise by Professor Manfred Schroeder to fill in the details. Books by my late friend Benoit Mandelbrot are also excellent reading with his late work particularly relevant and interesting, in particular, The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin and Reward.
Obviously if true then fractals can be a massively powerful tool for prediction.
So let’s look at Bitcoin:
It doesn’t take too many psychedelics to note lots of similar moves in this chart, but the second of the big two highlighted would suggest we are well into the end game for the Bitcoin crash. The second fractal is about 25% of the original crash pattern.
That looks like this:
So we might suppose the next repeat of the general fractal pattern might be 25% of the second move.
Let’s project that:
And what do you know….
That repeating pattern would bring Bitcoin down to around $2,500, which has been my re-entry level, as regular readers will note, all along.
However it must be remembered, and it is specially true of fractals, the map is not the terrain. A trading thesis is just a crude map to act as guide. They are, however, convinced you are, just possibilities. Predictions should only ever be used as pathways to pivot on, because the fractal hammer making the repeating pattern, can be torn away and replaced by a different acting force that will completely change and dominate the unfolding outcome.
Fractals repeat if nothing significant interferes with the process creating them and while you might think rolling news would do that, in fact it takes a lot to change the underlying drivers of a process like a market.
The Crypto Spring is coming but we’ve a frost or two on the way first and in percentage terms from here they will be harsh but at a long-term scale they won’t seem like much, which is another insight fractal geometry holds out to the curious.
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Clem Chambers is the CEO of private investors Web site ADVFN.com and author of Be Rich, The Game in Wall Street and Trading Cryptocurrencies: A Beginner’s Guide.
In November 2018, Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards. The awards recognize outstanding performance in institutional financial services reporting in the U.K.