Moon Math Update: Noob DCA Strategy — Second Edition — Vol. 7

We're on day 38 of our DCA. There are 204 days left until you've acquired your first full position in Bitcoin.

https://www.moonmath.win

Weekend Price action

After this last weekend some of you are probably still wondering if I'm stuck on stability. Have I caught up with the times? Am I going to make things right? Am I changing my position?

Let's work through it together by stepping back and taking a look at what might have changed in our projections since acquiring these new data over the weekend.

The Rearview Mirror

https://www.tradingview.com/x/TK2OHx1E/

I'm marking periods of observed distribution with green blocks and periods of accumulation with a blue box. We haven't known it when in periods of accumulation in the past and I don't think it's possible to know when you are. Sometimes people guess and they get it right. If anybody can do that consistently then they can write a best-selling book on trading and end market instability forever.

The same is true for distribution. You can only observe the market in hindsight. So, looking at the market in these terms is extremely limited if you're trying to make projections or understand where we might be headed.

Before the weekend I thought we were in a period of accumulation. I was wrong.

You'll also notice that I moved around where we are on the daily projection. Today, the green projection matches up with February 18th, 2012. The red projection matches up with April 14th, 2015.

Changing Projections

https://www.tradingview.com/x/BzyI540p/

I changed the projections so the matched up with market bottoms that were near stable periods instead of matching up periods based on the beginning of a periods that had high stability and low RSI. The dates are close to the same, but we get nice market bottoms to match up with our current chart.

Shifting Perspective?

https://www.tradingview.com/x/JcJkZEWX/

Looking for an opportunity to shift my perspective and I'm seeing some. I had been optimistic that a period of low volatility had shot off like a rocket, and that, maybe, we'd see bullish recovery by the end of the summer. I'm less convinced of that now. In fact, I'm looking at this chart and wondering if we're going to go sideways through the end of the year. Attempting a new ATH in 2018 is probably off the table unless there's a barrage of good news that flips the market into overdrive.

Distribution and Accumulation

https://www.tradingview.com/x/k07ayBzr/

I've been going on about the debate between distribution and accumulation. They're effectively two sides of the coin that the market is slipping between all the time? What's the motivation of buyers and sellers? You can't really know, but there are some indicators we can use that help us guess at that broadly.

LocalBitcoins Volume

https://anacoinda.github.io/localbitcoins/all.html

Transaction volume looks incredible overall, but we're not seeing growth in North American or Central/South Asia.

Transaction volume growth is coming from Europe and Latin America; places that have distressed currencies and ubiquitous access to (mostly) stable networks.

We're not seeing a rapid influx of capital anywhere, but if you compare actual Bitcoin adoption in places that are using it, presumably for Bitcoin's intended purpose, then I think you start to see an emerging pattern.

Irrational Exuberance

There's growing irrational exuberance among bears illustrated by market descriptions of diverse use cases for Blockchain technology. It's as though the discovery of a new application of the underlying technology is automatically a candidate for a new paradigm in human experience. This is analogous to what we saw around Internet startups in 1995 – 2000. After exposing the market to nearly 1.8 trillion USD in lost value it took two and a half years to find a market bottom. The scale of Bitcoin is very different, but I think it's possible that if alts don't shake out in this market then we're headed for something much worse on a much larger scale.

Actual–real world–Blockchain usage is low while acquisition of cryptocurrencies for speculation is very high. Acquisition for speculation pushes mining infrastructure along; as we've seen. infrastructure isn't fake; it's very real. You can't fake a miner and you can't fake the electricity it's using unless you're stealing it. That economy has grown up and it will keep growing through this market, despite and because of what speculators fail to see: fundamental real world usage.

Transactions are going up, dollars are going down. You don't see things like LocalBitcoins popping up for alts because the alt market, and ICOs, are entirely composed of a group of speculators who have lost their collective minds. Thinking that Bitcoin usage in coffee shops implies is simply not appealing metric. I don't want to mess around in a project where the end game is a Venti-Mocha-Frappachino at Starbucks.

An Alternative to Corruption

Bitcoin isn't here for adoption on Wall Street. It isn't a technology that makes sharing information easier. It isn't something that's meant to overthrow Uber or create a new sharing economy. There isn't some killer application for blockchain that's going to change the economics of how software applications are developed.

Bitcoin protects people who are forced to suffer under systems where power, corruption, and incompetence control the value of money. Any other application for a blockchain I've seen isn't as significant and it doesn't qualify as part of the revolution that Bitcoin already is.

Good hunting.

Previous posts in this series

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Bitcoin – The Currency of the Internet

Moon Math Update: Bitcoin is ready to grow again

Go to http://moonmath.win for the full update and rainbow charts

I've said this before: When I get quiet, it's time to accumulate. I've been quiet. Before I went quiet I suggested it was a good time to DCA into a position. The jury is far from out on that, but I think moon math is tracking pretty well with this retrace.

Moon Math takes a long-term bull perspective. It doesn't say "Insane awesome returns forever!" Instead, it invites you to consider our current price position against past trends. I know for a fact that some people look at the rainbow charts and think "Oh boy, we're in the red and it's only up from here." That's insane. Don't do that again. Projecting the price based on the trend from the ATH isn't going to work out for anyone. The Moon Math we're seeing today is probably a better projector of performance than any time in the last several months (I'll get that time travel feature done someday).

Is this retrace over? I'm going to shout an unsatisfying and resounding "possibly" on this. Part of the reason that I haven't been posting is that my position on this hasn't changed. "Possibly" and "no change" is a boring answer, but I'll spice it up for you a little today, because the outlook has improved from when I last posted.

BBands are tightening.

BBands have been tightening for a while, and we're going to start seeing tight BBands on the 12-hour chart soon. Bitcoin is volatile. BBands like this predict a move in one direction or the other. A direction for the price will be more firmly established in the next five days. If it breaks down I expect slower growth over the next four to six months as well as significantly less volatility. If we break up, then I think we’ll see continued parabolic growth on the log chart and a new ATH in the next month. Clearly, I think that the price breaking down one more time will be good for Bitcoin long-term.

We can sustain BBands this tight for months at a time. Observe the 12-hour bands In April through June in 2017. That pattern shows the price doubling in 2 months. So, nothing definitive there. Having a direction doesn't mean we'll have a big change in price, though.

Bouncing off the bottom of our short-term trend

We've bounced off the bottom of our short-term trend 4 times in the last two weeks with decreasing bear volume. That indicates that there's a lot of support at the bottom of our trend. The drop in volume shows that bears are running out of supply.

The short-term up trend is sustainable

The slope of our short-term trend is only slightly greater than the 6-month trend. IMO, fundamentals show that it's possible to maintain that trend indefinitely. That's true of a rational market, anyway.

Local Bitcoins Volume is growing

Volume at Local Bitcoins is about 5x to 6x what it was this time last year. I'm not sure they can bust at the seams like that for another year, but linear growth from here seems like a conservative expectation for at least the next year. I suspect we're going to see about 40 to 80 million USD a day flow into Bitcoin through Local Bitcoins by the end of 2018. That will be an important metric used to analyze our entrance into a pre-halving market through 2019.

Sentiment is as low as we've seen in a while

Consider the price and infrastructure of Bitcoin today vs six months ago. Consider the attacks we've flourished through. It's normal to see sentiment turn against Bitcoin. If it didn't we'd see unstainable growth and even more volatility. If you bet against the crowd, now is the time to make a bet.

Going back into my hole and shutting up while I'm proven right, again. Maybe I'll check in again later this week.

Good hunting

Go to http://moonmath.win for the full update and rainbow charts

Label 7-day Performance 30-day Performance 60-day Performance 90-day Performance 2017 – Present Performance 2016 – Present Performance 2015 – Present Performance 2014 – Present Performance 2013 – Present Performance 2012 – Present Performance 2011 – Present Performance July 2010 – Present Performance
Starting Price USD $ 11,522.86 $ 14,427.87 $ 9,816.35 $ 6,121.80 $ 997.69 $ 434.46 $ 313.92 $ 770.44 $ 13.30 $ 5.27 $ 0.30 $ 0.09
Compounding Daily Periodic Rate 0.21% -0.70% 0.29% 0.72% 0.63% 0.44% 0.32% 0.18% 0.37% 0.35% 0.41% 0.43%
Over $ 20,000.00 on 2018-10-08 Never!!! 2018-07-30 2018-04-12 2018-04-21 2018-05-29 2018-07-11 2018-11-15 2018-06-20 2018-06-27 2018-06-02 2018-05-26
Over $ 31,622.78 on 2019-05-13 Never!!! 2019-01-03 2018-06-14 2018-07-03 2018-09-11 2018-11-30 2019-07-24 2018-10-23 2018-11-06 2018-09-22 2018-09-10
Over $ 100,000.00 on 2020-11-08 Never!!! 2020-02-01 2018-11-21 2019-01-02 2019-06-03 2019-11-22 2021-04-13 2019-09-02 2019-10-03 2019-06-30 2019-06-04
Over $ 1,000,000.00 on 2023-11-02 Never!!! 2022-03-30 2019-10-06 2020-01-03 2020-11-13 2021-11-04 2024-09-23 2021-05-22 2021-07-26 2021-01-11 2020-11-20

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Bitcoin – The Currency of the Internet