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Many of us have seen the Bitcoin Rainbow chart before. Right now, it implies that there is still room for another leg higher. According to Blockchain Center's 2023 chart, the 'Is this a bubble?' price range is around $111,914 to $143,429.However, we also see the highs diminish over time. The first peak is outside of 'Maximum Bubble Territory,' the second reaching the same area, and the third hitting 'Sell. Seriously, SELL.'While this pattern suggests BTC may only reach 'Is this a bubble?' or 'FOMO intensifies' this cycle, there's another pattern that indicates 'HODL' might be as far as it goes.In the logarithmic chart above, we can see that BTC's price follows a pattern of diminishing returns. It has moved from low to high as follows (rounded):1. 2010/2011: 0.01 to 31.91 = 3,191x2. 2011/2013: 1.99 to 1,242 = 624x3. 2015/2017: 162 to 19,785 = 122x4. 2018/2021: 3,125 to 68,977 = 22x5. 2022/2024: 15,479 to 108,367 = 7xThat means the multipliers from low to high have decreased with the following factors:624.12 ÷ 3,191 ≈ 0.1957 (a 5.10x factor decrease)122.09 ÷ 624.12 ≈ 0.1955 (a 5.11x factor decrease)22.07 ÷ 122.09 ≈ 0.1809 (a 5.52x factor decrease)7.00 ÷ 22.07 ≈ 0.3170 (a 3.15x factor decrease)The most recent bullish run appears to be an outlier; if there'd been a 5.52x factor decrease from 22.07, that would've meant a rough 4x (22.07 ÷ 5.52) from the low, or a peak of 61,916.There are multiple ways to interpret this pattern, and why it may or may not be holding this time around:On the bullish side:It's 'different' this cycleA pro-crypto Trump administration/SEC chair shifts fundamentalsGrowing legitimisation of BTC in institutional and regulatory circlesMore funds flowing in via BTC ETFsCurrency debasement means more demand for BTCThe Rainbow chart indicates there's more room to grow The halving pattern is still playing outSearch interest is below previous peaks on Google Trends, implying more potential interestOn the bearish side:The culmination of bullish fundamental factors has overextended the pattern (much like how RSI can show an asset overbought for a long time before an eventual correction)A risk-on year for assets more broadly has dragged BTC up with it, taking it past the established patternA larger market cap makes it harder to continue expanding exponentially as the market matures. BTC's market cap is $1.8t right now.There is diminishing marginal demand—those already interested in BTC have bought in, reducing the pool of potential buyersThe Fear and Greed index has already reached levels see in previous peaks, like 2021The feverishness surrounding meme coins is reminiscent of previous bubbles, like the ICO bubble and Dotcom bubbleDiscussionI think there are strong arguments to be made on both sides. On one hand, it's true that it really might be different this time around. There's certainly more institutional adoption and regulatory clarity than ever before, with Trump even talking about a strategic Bitcoin reserve. There weren't Bitcoin ETFs in previous cycles, and the halving pattern suggests a peak usually around 1-1.5 years later; it's only been 8 months since the halving in April.While the dollar will likely get stronger under Trump (potentially weakening BTC), there is the argument that weakening purchasing power in many countries is driving entities towards 'hard' assets, like gold, silver, and Bitcoin. Then there is the room for more retail investors to participate, given search results for 'Bitcoin' and 'buy Bitcoin' are lower than previous highs (though I will note that 2021 was also lower than 2017). Lastly, while the Rainbow chart does show diminishing peaks, it does suggest we could still hit 'Is this a bubble?' or higher.On the other hand, this recent run to $100k+ was mostly fueled by Trump's election win and his backing of crypto-friendly Paul Atkins for SEC chair. BTC jumped from around $69k on the day of the election—a bit above the top projected by the factor decrease pattern—and Trump's win may have temporarily distorted the pattern. It is also possible that the market is reaching maturity. Assuming that BTC will move to $250k in 2025 as some predict, its market cap would be around $4.9t. That would put it above Apple's market cap of $3.775t but still decently below gold's $17.6t. However, there's a reason gold is the most valuable asset in the world by market cap: it has historical, cultural, and social significance. Its durability and lustre meant it was used to decorate temples in ancient times and as a symbol of divinity. Over time, that led to it being valued as currency in ancient empires and eventually backing the dollar. In contrast, Bitcoin is relatively young; while feasible that it could eventually overtake gold and still remarkable that it's achieved such a large market cap in around 15 years, it does beg the question if $250k would be too far, too soon. After all, central banks are hoarding gold right now, not Bitcoin.This ties in with the reducing marginal demand for BTC. Those who already believe in its potential have bought in; while the number of participants is likely to go up over time, there don't seem to be many catalysts for many more to join in the near-term (besides rumours of a strategic BTC reserve).2017 was the first time BTC really went mainstream. Alongside relatively low interest rates and a weak dollar, FOMO drove the rally; BTC jumped more than 20x that year. 2021 was similar; cheap money, pandemic boredom, a broader awareness of crypto, and FOMO, pushed BTC to new ATHs.Looking ahead to 2025, there appear to be more bearish catalysts than bullish. Most notable is a Fed worried about inflation and whether it's appropriate to pause easing of rate cuts (Deutsche Bank expects no cuts in 2025, which while a bit extreme, is indication of the current state of affairs). At the time of writing, that's already pushed BTC down to 92K from $108k. There is a US stock market that has risen over 60% since the start of 2023, compared to an average annual return of around 10-11% since 1980. There's also the promise of inflationary tariffs, discretionary spending cuts, rising yields, etc. all of which are the opposite of bullish signals.Combined with the Fear and Greed index hitting 94 in November (just under the 95 peak in early 2021, late 2021 saw peaks of 74) and extraordinary runup in memecoins recently—Fartcoin is worth $1.25 billion right now, up from $40 million at the end of October—the vibes are feeling a bit toppy. ConclusionIn my opinion and on the balance of probabilities, the combination of the currently-overextended diminishing returns pattern and the fundamental factors described skews Bitcoin bearish from here. There are certainly many counter-arguments to be made and I respect the fact that markets can stay irrational for a long, long time and I could be completely wrong (along with the fact I have my own biases). But, I do think it's at least difficult for me to be bullish or buy into Bitcoin here. The risk-reward isn't great; maybe a 2x is achievable, and that also possibly explains a lack of further retail interest and the pump in meme coins recently. As an aside, it's interesting that this pattern would theoretically continue to produce diminishing returns until the multiplier eventually reaches near-zero. I don't think that would be how it works in reality, but it does indicate that Bitcoin could reach a ceiling as cycles continue. Does that imply the pattern has to break at some point, or that there is a true 'natural' high for BTC? I'd be interested to hear your thoughts. Thanks for reading.Disclaimer:This content is for informational purposes only and should not be considered financial, investment, or trading advice. The author is not responsible for any financial losses incurred based on this information. The opinions expressed are solely those of the author and are based on current data and analysis, which may not be accurate or complete. Always conduct your own research.I asked ChatGPT about long-run diminishing returns. Definitely interesting:'As more of the world’s capital that’s willing and able to enter Bitcoin does so, the asset could reach a point where its value movements resemble those of a large, well-established financial instrument rather than a high-growth frontier asset. If today’s large multiples have already fallen to the single digits, the natural ceiling could be within a few cycles of leveling off—implying that at some point, Bitcoin may see returns only a bit above its lows each time, rather than the exponential run-ups of the past.This doesn’t necessarily pinpoint a single price figure, but it does suggest that once global participation plateaus and additional inflows are incremental rather than transformative, Bitcoin’s price could eventually stabilize within a certain high-value range. The “natural ceiling” may thus be where new investment can no longer meaningfully push the price up by large multiples—potentially settling at a valuation in the low to mid hundreds of thousands of dollars, or wherever market conditions no longer support explosive expansions. Beyond that, returns may begin to resemble those of other mature assets, with growth percentages small enough that they’re no longer seen as extraordinary compared to traditional markets.'I suppose that would make sense: over time, Bitcoin is likely to become more 'normal' and sees less volatile daily movements like those in gold or a currency.

BTCUSD Bitcoin is regarded (in some circles) as both a store of value and an inflation hedge. But what if Bitcoin is a leading indicator of inflation?In the chart shown, we can see the various Bitcoin peaks over the years preceding local peaks in US CPI (orange). The US interest rate is in blue.The last 4 peaks in US CPI YoY have occurred between 6.4 and 8.5 months after a peak in Bitcoin's price. Specifically: June 2016 high - 37 weeks (8.5 months) later at 2.7%December 2017 high - 28 weeks (6.4 months) later at 2.9%June 2019 high - 31 weeks (7.1 months later) at 2.5%November 2021 high - 33 weeks later (7.6 months later) at 9.1%It's also worth noting that the sequence of highs is the same; both BTC and CPI have a lower high, a higher high, lower high, then higher high.The peaks in 2011 and 2013 coincided with CPI highs 15 and 26 weeks later, but 2016/2017 was the time when crypto first entered the public's awareness.So why does this happen? Do Bitcoin whales buying lambos stimulate inflation? I'm joking, but I genuinely don't know, and I hope someone can explain lol.I've wondered if it's a case of correlation in that rising inflation is usually a sign of easy financial conditions—the ideal conditions for a risk asset like BTC to pump—with Bitcoin being the first to benefit as the ultimate risk asset (at least in the world of mainstream finance). I'm not sure though.The most concerning thing is the implication. We recently just made another all-time high in Bitcoin, but CPI sits at 3.4% at the time of writing, having moved sideways for almost a year now.As for whether this is a crazy coincidence, or me reaching to an astronomical degree, I don't know. The average period of time over these last 4 periods is 32 weeks, or around October/November time. The only catalysts I see are the US government spending money like it's going out of fashion and rising commodity prices.I'll also note that there doesn't seem to be any correlation with lows in inflation.Personal opinion on inflation:US inflation is stalling, rising, and falling across different measures. Producer prices, services inflation, annual PCE, and some core measures are tilting up. The only real decline recently has been core CPI.It's also interesting to note that 1 and 5-year Michigan inflation expectations are 3.3% and 3%, respectively.Multiple Fed officials have been hawkish lately:Fed's Barr: Q1 inflation was disappointing, it did not provide the confidence needed to ease monetary policy.Fed's Mester: Inflation risks are tilted to the upside.Fed's Bostic: It would not surprise me if it took longer to get to 2% inflation in the US than elsewhere.Given that we've reached a peak in interest rates (for the time being) but inflation has been moving sideways for around a year now, something has to change.It could be argued that monetary policy still needs time to work, but that doesn't really mesh with measures of inflation stalling or rising over the past year. Wouldn't the lag effect continue working to drive inflation lower? Likewise, why would the US economy be growing as fast as it is?One or more of three things will need to change: inflation, unemployment, or interest rates. Unemployment is at 3.9%, low by historical standards but rising since early 2022. Inflation, especially with what we've seen here, may also be on the rise soon. If the main lever the Fed has is monetary policy, it faces a dilemma. The data doesn't support a rate cut right now, while unemployment is rising slowly. If inflation begins to rise again, it may need to hike interest rates—not ideal when Joe desperately needs one for the upcoming election.This scenario of high inflation and high unemployment—stagflation—is what JPMorgan's CEO, Jamie Dimon, has been warning of:'It’s a warning Dimon has issued before, previously saying he fears America is headed for a repeat of the 1970s when everything “felt great” and then quickly about-turned to a period of high unemployment and inflation paired with low demand, also known as “stagflation.”Appearing at AllianceBernstein’s Strategic Decisions conference on Wednesday, Dimon said he simply can’t see how the past five years of massive fiscal and monetary stimulus could result in anything other than this scenario.As it stands, the US dollar looks ready to surge higher and clear 2023 highs:While SPY and BTC, adjusted for inflation (CPI figure taken from first day of trading), sit below their 2021 highs:I am aware that the human tendency to look for patterns and confirmation bias may be clouding my judgement. However, in my view, the market is severely underestimating the risk of higher inflation and a potential interest rate hike, which I believe will drive the dollar higher throughout the rest of 2024. According to the Bitcoin chart, another wave of inflation could be back above 7%+. I personally find that hard to imagine, but second round effects in the 1970s saw inflation shoot past its previous peak. Deutsche Bank has drawn parallels with the 1970s.Long-term views:Long USD, OilShort risk assets (equities, crypto)Unsure on gold and silver but skewed lowerFor these views to be truly validated, I would like to see:DXY above 105.75CL1! above 84SPY below 494QQQ below 414BTCUSD below 56,500This is not financial advice, nor a recommendation. I wrote this to bring attention to something strange I'd found, and strongly encourage you to do your own research. Thank you for reading.While there hasn't been a catalyst for inflation rise again as of yet - US YoY CPI inflation is down to 2.5% right now from 3.3% in May when I posted this - the average timeline for CPI rising after Bitcoin was 7.4 months. BTC rose in March, putting the projected rise between October and November. Now, there is a real catalyst for a potential rise in inflation - Hurricane Milton. After Katrina in August 2005, CPI jumped from 3.6% to 4.7% between August and September. Katrina caused around $125 billion in damage. Katrina was a category 5 hurricane, as is Milton. Projections range from $50 billion to $175 billion worth of damages.While it's difficult to envision a major spike in inflation back to 5-6% this time round, Katrina also didn't follow historic highs in inflation - peak inflation in the 2000s before Katrina was 3.8% in March 2000. The takeaway is that Milton could be the trigger for another rise in inflation. This could also be offset slowing in employment - NFPs tanked from 198k to 57k back to 97k in Aug, Sept, and Oct 2005 respectively. 1Y inflation expectations are low right now, at 2.7%, which may help stem any second-round inflation.There is a risk that this may put the Fed on the backfoot and delay further interest rate cuts, with the next meeting in November.Sources/some reading:tradingeconomics.com/united-states/inflation-cpitradingeconomics.com/united-states/non-farm-payrollstradingeconomics.com/united-states/michigan-inflation-expectationsen.wikipedia.org/wiki/Hurricane_Katrinacnbc.com/2024/10/08/hurricane-milton-could-cause-as-much-as-175-billion-in-damages-according-to-early-estimates.html

I was looking at the BTCUSD chart earlier and I noticed a similarity between the last 2 big moves. You can see each part on the chart.I took the bars pattern tool and applied it to the first bottom and the last bottom. I then scaled it to match the size of the most recent move and overlayed it and... it fits pretty well. And look where it ends? Right on the trendline.To make it even stranger, 122 bars is almost a 0.618 retracement of 198. 122/198 = 0.616298*0.618 = 122.364And of course, the first run up retraced by 0.605.Spooky...I'm not sure if this will play out but it will be cool if it does. Let me know what you think!Happy trading:)P.s. I'd love to learn more about this stuff but if I google fractals I only get Williams fractals. Please point me in the right direction if you have any resources, thxn.b. I reposted this after changing some things slightly expecting to be able to delete the old idea... but I can't delete old posts. Wtf TV

I was looking at the BTCUSD chart earlier and I noticed a similarity between the last 2 big moves. You can see each part on the chart.I took the bars pattern tool and applied it to the first bottom and the last bottom. I then scaled it to match the size of the most recent move and overlayed it and... it fits pretty well. And look where it ends? Right on the trendline.To make it even stranger, 190 bars is almost a 0.618 retracement of 298. 190/298 = 0.6375298*0.618 = 184.164That puts it 6 candles or 12 hours out. Spooky...And of course, the first run up retraced by 0.605.I'm not sure if this will play out but it will be cool if it does. Let me know what you think!Happy trading:)

After breaking through resistance at 57k BTC has drifted gradually up while ranging. Price hit 60k briefly and is now coming to back to test support. A bearish rising wedge has now formed with the characteristic declining volume. The daily/4h charts look ugly while the 1h looks like bulls are struggling, with price hovering around the monthly close for a few days now.I'm going to look for a break of the wedge, a retest back up to the monthly close and then a move down to the major trendline around 54k. This then may form a huge H+S which I'll post about if it does.If this interests you, have a look at my other posts about why I'm HTF bearish on BTC under related ideas.Happy trading, follow for more:)First trouble area hit. Expecting bounce now for a bearish retest.

Institutional/smart money/whales/big spenders move the market. They are the ones with the capital to take out a lot of pending orders. The most small guys can do is hope to not stand in front of them. See 22nd Jan this year. Volume was 143k bitcoin traded this day just on Binance. Price was around 31k, which means that $4,433,000,000 was traded on this day. $4.4 billion was transacted globally through Binance in just one day. My point here is that since the 17th, the IRS has sent out $242 billion in stimulus checks. Yet price hasn't moved that much. All of these 'analysts' saying that stimulus checks will propel BTC to new heights are forgetting that most traders are at the mercy of whales and hedge funds. The big players know that taking money from people when they're in pain (like forcing new greedy entrants to sell at a loss) is the easiest way that they can propel the market in the direction they want. Above all, you have to be pretty dumb (or a daytrader😉) to dump all of your helicopter money in a highly volatile market.TL;DR: Johnny and his $1400 stimulus check won't move the market. 25 million Johnny's and their $1400 stimulus checks might move the market a bit, but the big boys will look to exploit these new entrants by pushing price down hard and letting the cascading liquidation/market sells and capitulation do the rest. Combine that with rising yields, a short-term rising dollar and other scares in the traditional markets, we now have a recipe for a substantial correction.Technically speaking, BTC to me looks like dogshit. I'll start with the overall pattern.A rising wedge has formed while volume toward the apex is dropping (see monthly average of volume). Price is spending much more time around the bottom line, implying it's a weak support. Conversely, the upper line has provoked much stronger moves away, a sign of strong resistance.The break above the weekly (orange line) in a strongly bullish scenario would come back to restest the level, then move cleanly away (see the retest of the 0.5 level). This hasn't; price has moved in and out of the level while mildly respecting it (see the last 3 candles). This indicates buying support is waning. RSI has confirmed the bearish divergence with 3 touches to the trendline. What I'm going to be looking for over the coming week is weakness above the last high at 61.4k~. Specifically, I'd like to see a break that gets rejected within 1 or 2 days before closing back below the high at 61.4k. I'd look for price to top out at $62-65k, which supports my previous BTCUSDT idea of a top in this area (link below). Potential setup:Entry: $63400SL: $68200TP: 41KLet me know what you think below. Happy trading:) ps. if this appeals to your way of trading, follow me for moreWedge broken, let's goooooooooooooo

BTC is yet to fully correct, at least on the weekly. In my eyes, these huge candles up are unsustainable without significant greed. Significant greed cannot continue indefinitely without returning to the mean (neutrality), and likely, significant fear.There are a few factors I believe will influence a correction: Greed across the traditional and crypto markets. See CNN's sentiment analysis and alternative.me's fear and greed index. Only 5% of institutional financial managers are planning to hold BTC in 2021 (volatility being cited as the main reason), implying the feverishness of 'mass adoption' is overstated and overhyped. Bitcoin is back in mainstream media. The more exposure it gets, the more FOMO and greed kick in, the more new investors pile in, the more people ready to buy right at the top and add selling pressure on the way down. Big green (or red) candles, while difficult to gauge the top, often result in big moves back down. Similarly, an almost vertical acceleration implies a significant deviation from its mean (anecdotally, the further and quicker something deviates away from its mean, the quicker it comes back). Currently, BTC's yearly EMA is almost exactly the previous ATH of 20k. Simply, a correction is due. It's gone up but hasn't come down much.So, knowing that a correction is due at some point, we can then try and forecast the top. While looking for similarities between the last ATH and this current rally, I noticed there was a period of consolidation, followed by a higher low that wicked down (marked on the chart).Using these points as anchors, the next anchors are the ATH and the last high at 42k. While the intraday levels of these fibs fit nicely, there are 2 extensions that caught my eye on the weekly that fit almost perfectly. The 1.618 level on the recent fib (grey) and the 3.618 level of the ATH fib (red) both sit around 66.1k and 66.3k respectively. Seeing how well the other levels line up through previous price action gives me confidence these are valid levels. I'll give coordinates at the end of this post so you can see what I mean.I've also included a 3-factor BB on the chart for confluence. While the weekly close tomorrow will change the upper band, its near-vertical ascent will likely eventually be punctured by price. As denoted by the red circles, a reversal has occurred every time a swing has formed there. Moreover, for an asset to exceed 3 times its weekly standard deviation should ring alarm bells in anyone's ears. Okay, so we know where the top might be. How can we make a trade based on this? I'll start with where I think it might end up.If we use 66k as our first anchor and the bottom of the last consolidation at about 3.1k, then the 0.618 level (blue line) lines up perfectly with the most recent fib's 0.618 level on the way up. This falls at 27.5k, or rather, a contraction of 61.8%. The tricky part is stop loss placement. I'm going to say that a technically invalid level would be past the 3.764 level of the ATH fib at 70k. Anything between $71-72k would likely invalidate this idea. In summary:* Entry: 65K* Stop: $71-72k* TP: 27.5k, 31K if conservative, 42K if ultra conservativeLet me know what you think and give me a follow for more.Happy trading!COORDINATES:* ATH fib = (1) 1830.00, (2) 19666.00* Current fib = (1) 3122.28, (2) 42000.00* TP fib = (1) 66026.19, (2) 3122.28Updating 3 years later lol. High was around 65k. Interesting how we closed below the fib extension level in Nov 21.