The Case For $40,000 Bitcoin

With so many people spouting various numbers around as to the future price of Bitcoin, it's hard to know what to believe. I've seen people mentioning $1million bitcoin by 2020 whilst others have said it's going to zero!

I don't think any of us are in a position to accurately predict the future developments of Bitcoin and cryptocurrency in general. We're right at the dawn of a new wave of financial technology and things are moving fast. A single news announcement can swing the price of Bitcoin up several thousand dollars or down to new lows.

The Bitcoin Chart

All we really have are tried and trusted technical analysis charts. The same charts used in stocks, forex and world markets for generations. Although, they are not a guarantee of where the price will go, it's the best measurement we have.

So, let's take a look at the current Bitcoin chart (July 2018).

Whilst I see many speculative investors focusing on daily, hourly and even 1 minute charts, we really should be looking at a much bigger picture in order to get some idea of the current market sentiment and possible direction the price will go.

That's why I've focused on the monthly chart. Bitcoin is comparatively very young so we don't have decades of data. However, we have about 3 years or so of monthly information to go on.

Bitcoin Price History

The first thing that jumps out on the chart is the rapid increase from virtually nothing to around $20,000 in December 2017. This was followed by an equally quick descent back down to lows of below $6k just a few months later.

Since February, we've essentially been oscillating with a high of around $11,700 and a low of around $5,700 but with a very noticeable down trend.

Charting the spikes and the dips

My chart includes fibonacci retracement and extension lines which are used by technical chartists the world over. Again, they are not 100% guaranteed but they may give us a very useful insight into where the price is going.

The base level on this chart (100% fibonacci) goes from around $109 to the peak (0%) of $19,891. The chart is based on the Coinbase price during this period. You may find numbers differ somewhat on other provider's charts but as these are monthly charts, it doesn't matter so much - they are all roughly the same.

After the spike, we can see that the price shot through the important 50% retracement barrier before quickly rebounding back up. This was then followed by another surge downward, though the all important 61.8% line and then again a quick bounce back up.

Since March, the price has drifted down with the odd bounce up. Right now we're sitting at around the lows of February when the price crashed and seem to be bumping along that line.

Where will Bitcoin price go next?

We can see that the last major fibonacci barrier (78.6%) is around the $4,300 mark. So, it could try and test this in order perhaps to stop hunt those entries who have placed stoplosses around the $5k mark.

If price busts through the $4k mark then there is a very good chance we may see a significant collapse, perhaps even $1k or lower!

However, let's make the case that even if Bitcoin crashes considerably lower, the price will not only recover but surpass previous highs.

If, and it's a big if, the current drop is simply a technical retracement, then in the same way we measure the downward trajectory, we should also gauge the upward target levels.

Again, let's look at the chart and the fibonacci levels. Above the 0% line we start going into extension territory.

The first important level is the 38.2% above the 0% line. This comes in at around $27,500.

Next, we have the 50% which comes in just below $30,000 and finally we have a 100% extension of the previous high at around $40,000.

You can of course keep going with 150% and 200% levels higher. This would bring the Bitcoin price in at nearly $80,000. Getting close to that magic $100k amount.

How long for $40k+?

However, if price is to significantly surpass previous highs, I certainly wouldn't expect this to happen overnight or even over several years. You have to appreciate that on its journey to $40k or even $100k, there would inevitably be huge drops, probably in the same manner that we have seen in the last 6-12 months.

So, in conclusion, price is currently around the February 2018 lows, we could see it drop further, much further in fact. But, if we are to believe this is purely a technical drop then hold on for a wild ride upwards.

About the Author
Andrew Bowen is the CEO of PocketRate, a finance comparison website in the UK. He has traded stocks and forex for 20 years. You can follow Andrew on Twitter.