<center>https://markhelfman.com/wp-content/uploads/2020/02/entrepreneur-1340649_1920.jpg</center> <br/><p>In all my conversations about cryptocurrency, few people ask me about the social, political, and economic impact of cryptographically-secure, time-stamped, globally-distributed ledgers. </p>
<p>(Which stinks, because I wrote a book, <em>Consensusland: A Cryptocurrency Utopia</em>, to explore that very topic.)</p>
<p>No, mostly people ask “should I buy bitcoin?” or "what altcoin will give me the best shot at making 100x?" </p>
<p>Those are easy questions to answer. </p>
<p>("Yes" and "nobody knows," respectively.)</p>
<p>A harder question to answer is "how long will this bull market last?" </p>
<p>As we all know, if you miss the peak, bitcoin's price goes downhill <em>a lot</em>, pretty quickly. Do we top out at $20,000? Can we get to $100,000? What about $500,000 or $1 million? </p>
<p>Do we finish a four-year cycle with a peak at the end of 2021? Or does it end sooner? </p>
<h2>The non-trader's theory</h2>
<p>I don't trade, but I understand market cycles and data science models. As an investor, it's pretty important to have a clear view of the market and facts to back up your instincts.</p>
<p>People have created lots of models about bitcoin. I don't know which ones to believe, so I try to learn about them all. When you're making educated guesses about the future, it helps to have as much perspective as possible. </p>
<p>One model is Elliott Wave Theory, which fits cryptocurrency very nicely. In this theory, markets move up in five waves, then down in three waves.</p>
<p>On the way up, the waves go like this:</p>
<ol><li>Up.</li><li>Down, but not that much.</li><li>Up.</li><li>Down, but not as low as the previous wave.</li><li>Up.</li></ol>
<p>During this uptrend, people are largely optimistic. Even during the second and fourth waves, core believers remain positive despite falling prices.</p>
<p>After that, you get three waves down:</p>
<ul><li>Steep, rapid decline.</li><li>Bounce up.</li><li>Long descent.</li></ul>
<p>By the end of that last wave down, even the core believers sell out of the market or resign themselves to their losses. New buyers scoop up assets at basement prices. Then the cycle starts again. </p>
<p>For a more detailed explanation, read <a href="https://en.wikipedia.org/wiki/Elliott_wave_principle">Wikipedia</a>.</p>
<h2>Applying Elliott Wave theory bitcoin</h2>
<p>This gets a little technical, so bear with me. </p>
<p>Based on this theory, could we have started wave 3 of a new five-wave uptrend? Look at this chart:</p>
<img src="https://www.tradingview.com/x/vImYvoPF/" alt="Trading chart showing two Elliott Wave cycles between pre-2011 to 2020, with a correction from 2013 to 2015."/><br/><i>Trading chart showing two Elliott Wave cycles between pre-2011 to 2020.</i>
<p>You see five waves up from 2009 to the end of 2013, then three waves down until mid-2015, then three waves up. It looks like we're in the middle of the third wave, right?</p>
<p>What happens if we examine more closely?</p>
<h3>Starting from the beginning</h3>
<p>When analyzing the chart, you can make the case for 2009-2013 as the first five-wave cycle and 2013-2015 as the corrective a-b-c waves. </p>
<ul><li>Wave 1---only OGs did bitcoin. Nobody else cared, and many laughed them off.</li><li>Wave 2---first crash.</li><li>Wave 3---OGs bounced back and new buyers/miners started getting into it. Price went absolutely insane. Mt. Gox made it easy for people to buy bitcoin while silk road offered the first real-world use case. </li><li>Wave 4---second crash, silk road got busted.</li><li>Wave 5---one last surge.</li></ul>
<p>Then, we got the Mt. Gox disaster, the silk road leaders went to jail, and the U.S. government sold their bitcoin at bargain-basement prices. Everybody capitulated. Everybody thought bitcoin was dead. Lots of people gave up. Some threw away their hard drives and abandoned their wallets. Development almost stopped---in fact, some of the best developers started whole new blockchains. </p>
<h3>We're in the second five-wave cycle?</h3>
<p>By the end of 2015, prices bottomed and we started another cycle, with wave 1 completing in Jan 2018. </p>
<p>Since the market was bigger, the waves got longer. In 2019, we finished the wave 2 correction---many people were still enthusiastic, development actually grew, and traditional financial firms geared up to enter the markets. People were cautiously optimistic (or at least open to the possibility that bitcoin could go up). </p>
<p>Now we are in the middle of a very long, strong, multiyear wave 3. </p>
<h2>Biggest bull market ever?</h2>
<p>If that theory's correct, there's one detail that blows my mind.</p>
<p>Each time we reached a previous all-time high, we got there around the middle of a wave. If that pattern holds true on this fourth go-round, it suggests we could have <em>two more years</em> of a bull market before the next crash.</p>
<p>Can you imagine how high prices could go? For sake of comparison, the dot-com bubble peaked at $6.7 trillion, equal to almost $10 trillion in today's dollars.</p>
<p>If we get even close to those numbers, the cryptocurrency market will go up 33,000% by the end of 2021. Bitcoin's price will hit $300,000 or more.</p>
<p>Insane numbers and probably not realistic. But didn't everybody say that about $10,000, and $1,000 before that, and $100 before that?</p>
<h2>Bullshit, hogwash, and nonsense</h2>
<p>Yes, this data is circumstantial. Nobody can predict the future. As somebody at my bitcoin meetup said, "chart analysis is like driving by looking in the rearview mirror."</p>
<p>All true.</p>
<p>But past is prologue and as long as these patterns remain in tact, you should expect the theory to hold up. After all, this model illustrates human behavior and market psychology. Those things rarely change. </p>
<p>But facts do. Based on the facts that I see, the trend is heading in the right direction and there is nothing to suggest it will shift.</p>
<p>That could be way off, but sometimes it's not the worst thing to be optimistic.</p>
<p>Relax and enjoy the ride.</p>
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<p><em>Mark Helfman is a top writer on </em><a rel="noreferrer noopener" href="https://medium.com/@m.helfman" target="_blank"><em>Medium</em></a><em> for cryptocurrency, finance, and bitcoin topics. His book, </em><a rel="noreferrer noopener" href="https://markhelfman.com/consensusland-a-cryptocurrency-utopia/" target="_blank"><em>Consensusland</em></a><em>, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency. In a past life, he worked for U.S. House Speaker Nancy Pelosi.</em></p>
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