First anniversary review of “The fractal relationship between bitcoin’s first two bubbles and what they might tell us about a third”

Just over a year ago I posted an analysis entitled “The fractal relationship between bitcoin’s first two bubbles and what they might tell us about a third”.

If you didn’t happen upon it, I’d recommend that you click here and read it first if this post is going to make much sense.

It included my 3 year forecast and reasoning behind how that previous price-action might give us some indications as to where we were about to head.

A few people asked for an update along the way so here it is. I’ll write up another update a year from now — if you’re going to be stupid enough to publicly make long term predictions on the price of bitcoin, I don’t think there’s much point in tying yourself up in knots by reflecting on every twist and turn along the way.

So, let’s start by recapping on what, as I agreed myself at the time, seemed like a ridiculous forecast.

It went like this:

a) We were about to break the previous all time high (in USD terms after an initial failed attempt) and that, previously, when the bitcoin price had done so, it had never, so far, fallen back below it.

b) We would then begin a strong push higher, forming a proposed Primary Wave 3 that would temporarily peak at ~$9304 in ~October 2018 (having briefly paused at ~$3000 in ~November 2017).

c ) Then pull back to ~$5500 whilst consolidating in a 5 wave triangle pattern over the course of around a year whilst forming Primary Wave 4.

d) Before finally jumping back onto its pogo stick and springing higher to complete its Primary Wave 5 of the current bubble cycle — topping out at ~$33,717 in May ‘20 (therefore completing Cycle Wave I at the same time).

e) Before crashing again by around 80–90% as Cycle Wave II takes hold.

— — — — — —

First things first, and hands up. I was right-ish, wrong and wrong.

Never being one that likes to reward failure, I’ll do the right thing and agree to block my access to for 3 straight hours, starting…… now.

In the mean time, let’s go back to where I left off last year and see if there’s something to salvage nonetheless.

The final chart indicating my 3 year prediction from my Jan ’17 post

What happened?

So, a few weeks after the original post we finally made a new USD denominated high at $1350 on the day the Winklevii Bitcoin ETF application was rejected. The market reacted negatively to this for a while before deciding, as is its wont, “what the hell, let’s just go up anyway”.

[A brief aside. This was a classic case of the market interpreting news that it had assumed would have a negative impact prior to the event, reacting very differently after it. I was asked a few times after posting the original article about Fundamental Analysis vs Technical Analysis. Each camp tends to like to sneer at the other but you can read my thoughts on the subject in a comment here.]

And so it carried on.

By mid June we’d already hit my projected pausing point within Primary Wave 3 that I’d guestimated might be reached at ~$3000 by ~Nov ’17.

So roughly twice as fast as expected.

The market did take a breather from there for a month or so then, again, simply went marching on its merry way, briefly taking some very short term breathers as it did so.

On November 29th ’17 we then broke clean through the $9304 high that I’d forecast as being a potential crest for Primary Wave 3 by ~ Oct ’18.

And still it just went marching on.

I’d explained my reasoning in the original post for why I thought $9304 might end up marking a high for Primary Wave 3— speculating that this current cycle should be analogous to the first 2 bubble cycles (in 2011 and 2013) whereby each of their respective 3rd waves had peaked at ~8x their preceding 1st waves.

So nil point on that prediction.

But if not there, then how high was this little rocket ship about to fly?

There was one possible pointer, something I’d previously noted when looking back at Wave iii and Wave v within the complete 2012/13 Primary Wave 1 bubble cycle. It wasn’t something I could have calculated in advance for this cycle but, back in 2013, both the $259.34 (wave iii) and and $1163 (wave v) highs had topped out at ~18x their respective 200 week simple moving average prices at the time.

Deviations from 200 Week SMA’s in 2013 (chart courtesy of

I started pointing this out last year when people began screaming “bubble” when bitcoin was trading at ~$4300.

Not even close to being a bubble in relative, 2013 terms.

By early Dec ’17, however, things had started to look decidedly frothier until bitcoin finally seems to have put in a significant top on 17th Dec ’17.

On that day the 200 week simple moving average clocked in at $1229.2 with the high-print coming in at £19,666 — or 15.99x the 200 week simple moving average.

[Another brief aside. If you’re of the thinking, like am, that their might be a decent argument for charting the aggregate price of coins that have forked from a single chain (given that they must have some influence on the price of one another), the combined price of bitcoin plus its recent 2017-born siblings, Bitcoin Cash & Bitcoin Gold, hit $21,855 on 17th Dec ’17 — or 17.77x the 200 week simple moving average.]

My forecast from last year might well have been quite wrong in terms of time and price, but all was not lost. In Elliott Wave terms I was satisfied that the initial analysis was still in tact — the only difference being that we were heading much higher, much faster.

[And another. You’ll recall from my original post that I’m of the firm belief that the quasi-science called Technical Analysis will never be able to predict definitive outcomes (you’d be very disappointed if you think it can) but should, instead, be used as a tool to help skew the odds of the bet you’re about to make in your favour. It should only be used to help you define your entry and exit points for any given trade, both in terms of where to take projected profits as well as possible losses.]

With these few clues at our disposal, what could one start to deduce?

Firstly, the sharp rally of 2017 began on cue and still looked to be a fine candidate for being the Primary Wave 3 that I was looking out for. Along the way we’d seen these brief corrections (that also had me incorrectly calling a top on a few occasions) but none had ever lasted long enough to realistically be considered as a potential Primary Wave 4.

The previous Wave 4’s had lasted for about half the time their preceding Wave 2’s had, so we should reasonably be expecting something that lasts for ~12–15 months on that basis.

My incorrect calling of a possible multi-month pause within Primary Wave 3, although still a decent/lucky short-term call as the market sank to $3,000 during The Dimon Panic
Me still incorrectly predicting the Primary Wave 3 top would come in as per my original forecast

Secondly, the price was starting to get mighty close to the 18x 200 week simple moving average mark.

Deviation from 200 Week SMA in Dec 2017 (chart courtesy of

With those two things in mind, the odds were leaning heavily towards the actual start of Primary Wave 4 being pretty imminent. If so, history was hinting that it might resemble the prior 4th wave instances , with 2011’s Wave (iv) giving back ~40% of its Wave (iii) gains and 2013’s Wave iv retracing a full 80% of its Wave iii gains during its first leg down.

So, to complete the recap section of this article, we’re left with this current situation versus my analysis from Jan ‘17.

State of play since my Jan ’17 analysis

What next?

The market topped on 17th Dec ’17 before, as I’m sure you’re all well aware, turning sharply lower.

An initial collapse down to a low of $11,160 on 22nd Dec ’17 was followed by a sharp bounce back up to $17,200 by 5th Jan ’18.

Whilst bitcoin was failing to make yet another new all time high in late December, the “smallcap” insanity that is the alt coin market made its last hurrah, reaching new highs across the board — being responsible for the entirety of the final wave higher for the Total Market Cap of the crypto sector.

Chart courtesy of

In other markets this divergence in valuation between the benchmark index versus the lower quality equivalents would be considered a non-confirmation and would be construed as a possible indicator that the internal strength of the overall market might not match what its individual constituents were implying — i.e. a reverse indicator.

As expected, and if you look back on the structure of bitcoin’s previous significant 2nd and 4th Wave corrections which have generally followed a collapse>bounce>collapse-harder pattern, the market did indeed reverse again, heading quite sharply lower until we bounced off $5920 on the 6th Feb ’18 (a tad above the ~$5500 target in the original forecast — perhaps relevant in notional terms but quite different in percentage terms. Maybe just a coincidence).

Unlike the brief pull-backs in 2017, this correction is already over 8 weeks old giving us a much more acceptable indication that our Primary Wave 4 has now taken the first steps along its path— again, possibly looking to map out a 5 Wave Triangle pattern as alluded to in the final chart of the original analysis, something that I’d expected, and got, during 2013’s Wave iv.

These corrective patterns, messy and overlapping when compared to the 5 clean advancing waves within Impulse Waves, are typically labelled A, B, C, (D & E) and are usually formed in clusters of 3 or 5 waves — able to, according to Elliott, extend and append to each other in all sorts of mishy-mashy ways.

Unlike Impulse Waves, they clearly indicate indecision in the market where distribution takes place. Bulls and bears battle it out as they try to identify the next trend as weak (or smart) hands turn their booty over to stronger (or deluded) ones.

So far, the candidate for Primary Wave 4’s first (Wave A) leg down, with a current low at $5920, equates to a 69.9% correction from the all time high — bang in the middle of the 60–80% correction forecast in my 22nd Dec tweet (above) .

It’s certainly possible that this is as low as we go but it’s also too soon to rule out the possibility of a lower-low still to come. A full 80% retracement a-la-2013’s Wave iv would take the price down to ~$4000. Since the market is much more liquid than it was back then, a shallower correction is perhaps warranted but only time will tell.

When the facts change, I change my mind. What do you do, Sir? — John Maynard Keynes

Now, to finally get to the point that I imagine is the only thing you care about if you’ve bothered to read this far.

Where next?”

As I’ve said, there’s no guarantees that any of this will continue to pan out as I’m suggesting and we should only be using such analysis to try to skew odds in our favour before placing trades anyway.

Given that, I believe that one always need to keep their options open by having a preferred projection as well as secondary and tertiary ones too. If some facts change along the way, whilst your overall view stays in tact, then just be ready to either adapt your opinion or else cut you position accordingly.

In Elliott Wave terms, a valid pattern is paramount to the analysis. If the pattern remains valid then price targets and timeframes may just have to be adjusted should reality decide to wander off-course along the way.

Preferred projection

So, I’ll start with what remains as my preferred, less deviating, projection based upon the original dates that I’d extrapolated as potential key turning points in my original analysis.

Namely ~Oct ’18 and ~May ‘20.

I’ll start by accepting that I was most likely plain wrong in my original forecast which proposed that the high point of Primary Wave 3 would be reached in ~Oct ’18 rather what now looks like Dec ’17 (there is still an argument for this still becoming the case if we go on and make a further all time high by then but I’ll wait to see how things look nearer the time before confusing matters now with what would be my tertiary projection).

However, I’ll retain the opinion that May ’20 might still turn out to be a date where any forthcoming Primary Wave 5 marks a high.

With the facts having possibly changed regarding timings, I also have to account for the fact that the price target for Primary Wave 3 was definitely wrong too.

You’ll recall my target for the Primary Wave 5 high last year was $33,717 (+/- 20%).

Our current Primary Wave 3 candidate travelled a smidge over twice as far as expected so I’m now going to surmise that Primary Wave 5 will now also go twice as far, targeting $67,434 (+/- 20%).


An 8x move higher from current levels probably seems slightly less ridiculous from this vantage point than a greater than 30x forecast did this time last year.

On that basis, my new preferred projection looks like this:

New Preferred Projection as of Feb ‘18

[Brief aside. I mentioned above that I don’t think that technical and fundamental analysis mix that well but I did, nevertheless, have a think about possible “why’s” for these two dates last year. I’ll come onto the Oct ’18 date later, but I subsequently noticed that May ’20 also happens to be the month right before the date forecast for the next ~4-yearly bitcoin halving event (when the block reward will drop to 6.25 BTC from its current 12.5 BTC).

Previously, the 2012 and 2016 halvings woke the market up from long term slumbers and triggered major rallies rather than coinciding with significant highs as suggested in the chart above.

We’ll just have to see how the market reacts next time around.]

As the chart shows, the 5 wave triangle pattern is still their but I’ve simply (maybe lazily) spread it out over a longer timeframe than originally proposed. Primary Wave 5 might then still kick in and continue to target a revised high point in ~May ‘20.

N.B. 2013’s Wave iv triangle correction lasted 5.75 month between the 9th April $259.80 Wave iii high and the final Wave E low in late Sep ’13. This was just about half the duration of its preceding Wave ii which ran from June ’11 to June ’12. Likewise, the previous Wave (iv) in 2011 was just about half the duration of its preceding Wave (ii).

Primary Wave 2 ran from Dec ’13 through to June ’16 (or 30 months) — hence (on the chart) an estimated ~15 month duration for this possible forthcoming Primary Wave 4

This would take us from the Dec ’17 Primary Wave 3 high though to a completion date of ~March ‘19.

As mentioned, we can’t be certain that Wave A of this Primary Wave 4 candidate has yet reached its low. If we do make a new low, a range between the previously identified 80% retracement level at ~$4000 and the 50 week simple moving average (currently at ~$5420) should offer decent support.

Any expected triangle pattern would pretty much remain the same, simply evolving from a lower floor that suggested above.

Secondary Projection

Alternatively, one could speculate that both the ~Oct ’18 and ~May’20 dates might still remain relevant but in an alternative manner.

If so, how?

I never touched upon Fibonacci numbers and ratios last year. Although widely used by technical analysts to try to predict the depth of corrections, targets for new highs and also timeframes, their significance has been heavily debated and questioned over time.

Elliott himself started to look at the possible relevance of these so-called natural numbers during his original work. He hypothesised that, if these waves that he’d thought he’d identified really were simply a reflection of human/crowd behaviour, and by extension natural themselves, perhaps this sequence of numbers (and the ratios between them), that had first been purported to reveal themselves in nature some 1700+ years before before Fibonacci got to work on them, would reveal themselves within market chart patterns too.

After writing my post last year, and thinking about these two dates, I did start to consider other reasons as to why they might be significant.

With very little previous information to go on, I will caveat this by emphasising that this is purely speculative on my part. Without having anywhere near enough data to go on, it’s quite likely that the cognitive biases that we’re all susceptible to are kicking in and I’m simply trying to make something fit with little real evidence.

Let’s give it a go anyway and we can simply keep it in mind as and when things start mapping out over the next few years.

The first few numbers in the Fibonacci sequence are 1, 1, 2, 3, 5, 8, 13…..

Now I mentioned above that this candidate for Primary Wave 3 travelled twice as far and twice as fast as expected — reaching its peak in ~12 rather than ~22 months from the time of the original post.

As I said, purely speculative but the number “2” features there as two lonely data points as a multiplier (in terms of the 2x original price target) and divisor (in terms being achieved in half the time).

As you can see from the chart below, there happens to be a level of equality between the time it took bitcoin to reach its first Wave i high in June ’11 and the time it subsequently took to then reach its second Primary Wave 1 high in late November ’13 (if we can assume that bitcoins did actually have some infinitesimally small value the day the network was launched in Jan ‘09)

Proposed Fibonacci Timeframes

It basically took 30 months to go from zero in Jan ’09 to the Wave i high in June ’11 and just shy of another 30 months to go from the Wave i high in June ’11 to the Wave 1 high in late Nov ‘13.

Or a ratio of 1:1 in terms of time for each full cycle to complete as per the first two numbers in the Fibonacci sequence.

Irrespective of any relevance to these two timeframes, it’s obvious in hindsight that both June ’11 and Dec ’13 marked the completion of significant cycle highs for bitcoin.

Now, if we purely speculate that this sequence might play some role in bitcoin’s future price action, perhaps the next complete cycle will be due to take (a Fibonacci) 2x as long as the preceding two (along with the price ascending 2x as high as previous cycles might have suggested it would).

If so, this current full cycle might now take 60 months (2x 30 months) to complete instead — or Dec ’13 plus 60 months which equates to Nov ’18.

Not an exact match with the ~Oct ’18 turning point identified in my original projections but close enough to take note of given the overall 3 year timeframe of the analysis.

Now, if we put my preferred projection to one side for now, I discussed earlier how Primary Wave 3 seems like it might have travelled twice as far, twice as fast as originally predicted.

If we also carry this idea forward to this current candidate for Primary Wave 4, it might well also travel “twice as fast” as predicted too.

I explained above how the duration of the 4th waves during bubbles #1 and #2 were roughly half that of their preceding 2nd Wave’s which meant that any forthcoming Primary Wave 4 should take ~15 months based on the 30 months it took Primary Wave 2 to complete.

We only have last year’s rally to go on but, if this current wavelength also proves to be half as wide as preciously expected, then this candidate for Primary Wave 4 might now choose to only take ~7.5 months (rather than 15) to reach its journey’s end from the Dec ’17 high — taking us to around late July or early Aug ’18.

Should that transpire, the market could feasibly still then have time to form an earlier than expected Primary Wave 5, possibly targeting the same $67,434 level by ~Oct/Nov ’18 rather than May ’20 — not entirely outlandish given the speed at which the final stages of previous 3rd and 5th wave manias have travelled.

N.B. Although I’m making some pretty grand projections for possible targets for any forthcoming Primary Wave 5, in Elliott Wave terms, any 5th wave only needs to reach beyond the high-print made by its preceding 3rd wave i.e. beyond $19,666 to qualify.

We do know that all prior 5th waves thus far have been by far the longest of the 3 advancing waves but we just need to keep this in mind and, if long, have a sensible “scaled up” approach to selling.

Irrespective of how ambitious that might seem, what then about the May ’20 turning point?

Well, should Primary Wave 5 actually end up surprising us all in Oct or Nov ’18, we’d have to then seriously consider that, in doing so, it’s also completing Cycle Wave I at the same time (itself made up of Primary Waves 1, 2 , 3, 4 & 5).

Then, as you’re aware by now, we’ll possibly enter Cycle Wave II (perhaps crashing up to 80 or 90% as was the case in Wave ii (in 2011) and Wave 2 (between Dec ’13 and May ’16).

As a reminder, this is the table from the original article showing the time it took Wave ii and Wave 2 to each find their troughs (although I speculated that each full 2nd wave corrective pattern took some time longer to actually complete after reaching their lows).

What does that mean in terms of projecting how any future Cycle Wave II might pan out?

Intuitively, I guess we should expect it to be a longer affair than its prior Wave 2, especially if the timeframe for our next cycle does indeed end up following the proposed Fibonacci sequence.

Then again, we’re also on the lookout for the possibility that wavelengths are speeding up too.

Finally, we also have to consider the reference points of the two previous bitcoin block reward halving events whereby they each occurred at or near the end of a 2nd wave or early in a 3rd.

In short, we’ll just have to wait and see and consider options based on the course of events between now and then.

Under this purely speculative scenario, given that Primary Wave 2 lasted 30 months, and under the assumption that wavelengths might continue to occur over half the timeframe of their predecessors, then that would equate to Cycle Wave II taking only 15 months to complete from an Oct/Nov ’18 Cycle Wave I high — or in other words, by March ’20.

That may not be too far from the May ’20 date, by coincidence, but it seems somewhat short to me to be honest.

Taking all of the above into account, that would then produce something along the lines of this:

New Secondary Projection as of Feb ‘18


My preferred projection has to be, well, my preferred projection.

But with this crazy market being what it is, I’m going to obviously keep a very close eye on the secondary projection too.

If it looks like we have a clear candidate for a 5 Wave triangle pattern (or even something that does a good job of fitting the bill) completing by around July/August this year, perhaps my secondary projection will take over the driver’s seat for a few months whilst I keep a beady eye on what the market‘s doing.

I can always switch back if it fails to deliver whilst, at the same time, the overall valid Elliott Wave pattern remains in good health.

Of course, as is still entirely possible, if the market simply crashes from here and dips back below the proposed Dec ‘13 Primary Wave 1 high at $1163, then the entire wave-count I’ve been proposing across these two articles will become null & void.

[Remember, if potential 4th waves dip back below the high point of potential 1st waves, then all bets are off. Elliott’s golden rule for Impulse Waves will have been contravened, your stop losses will have been triggered (you did identify your exits before placing the trade didn’t you?) and it’s back to the drawing board and job centre for you and me.

4th waves, if they ultimately prove themselves to be just that, can offer an excellent opportunity to skew any risk/reward ratio in your favour. You know your stop-loss has to be just below (or above, in a down trend) any suspected prior 1st wave high (or else the Elliot Wave pattern invalidates itself) whilst having good reason to expect that any subsequent 5th wave will make a new all time high at the very least.

If you’d been lucky enough to buy-in at, or close to the $50 Wave iv low in 2013, your stop-loss order had to be placed just below the prior $31.90 Wave i high, with an expectation, that was ultimately realised, of a 10-20x reward vs a risk of less than 50% of your initial capital.]

Final thoughts

So that’s about it for another year. I’ll return in early 2019, either with egg dripping down my face or a big bag of I-told-you-so’s.

At the start of the first article, I stated that, whilst a fan of Elliott Wave Theory, I wasn’t at all certain (based on my own long term, and sometimes painful experience) that it could offer truly consistent returns in mature markets where cycles were so advanced that patterns, although still possible to identify in the rear view mirror, can take so long to form that they may exceed the years you’ve been allocated here by your maker.

The reason why I was most interested in looking closely at this from a bitcoin perspective was that we‘ve, rather uniquely, been given a rare opportunity to plot Elliott’s theory from the very birth of a brand new asset class.

Should my spurious-for-now thesis (that some correlation might prove to exist between; the time it’s taking cycles to complete; and the Fibonacci sequence) end up having any merit, in distant hindsight of course, then the next cycle may well last for 3x 30 months — or 7.5 years — and the one after that 5x 30 months— or 12.5 years.

I’m hoping that’s not a major deal-breaker for some of you reading this but I’m getting on a bit and and such timeframes will start to become somewhat less inspiring to me.

Many people will, and do, poo-poo technical analysis and, in the most part, I can’t blame them. Maybe it is just voodoo and all that I’ve written here along with the patterns I’ve tried to identify are either a) pure coincidence or b) me simply doing what humans are predisposed to do and look for patterns in everything in order to attempt to give ourselves some knowledge of, or comfort with, the dirty unknown future.

However, to finish up, and it may again just be pure coincidence, I thought I’d throw in a chart of what’s currently still the second most dominant crypto asset out there, Ether.

Obviously somewhat younger than bitcoin, we were able to start charting Ether’s price-action when the network launched on 30th July 2015.

It looks to me that Ether’s own formative cycle may have now completed at the same time that bitcoin reached a turning point somewhere within its third — taking a bitcoin-like 29 months to do so.

I’ve probably given enough examples by now for what one ought to be looking out for, so here’s a chart depicting Ether’s price-action (so far) overlaid with that first Elliott Wave-based forecast for bitcoin that I scribbled down, then threw away, way back in late 2011.

Am I deluding myself, and you, by trying to suggest that fractals exist within historical chart patterns? Most probably.

Or else, might we really just be bunch of idiot lemmings, destined to repeat our actions, both wise and stupid, in perpetuity?

I’ll let you draw your own conclusions.

Ether’s first full 5 wave bubble cycle overlaid with my original scribbled prediction for bitcoin in 2011. Thanks to for the data

Really final thoughts

If I could distill into a single line the most meaningful thing I’ve learned in the 6+ years that I’ve spent too much time thinking about this curious little technology, it would be this (thanks to Louis Smyth).

“Money is Technology”

If I were to expand on that at all, it would be to say that “Money is the best technology currently available to the community in which it’s employed to serve its desired purpose.”

Thinking of it as such has caused my mind to travel back and forth through time; to the first single-celled organisms on earth; through the ages of man and into the present day and beyond as I’ve tried, like many, to put my finger on what money actually is.

Perhaps I’ll write more about that another day but if I’ve learned anything useful in my 47 years here, it’s that perspective is your best friend.

Unless you take the 10 mile high view, you’ll always be blinded by what’s directly in front of and behind you.

Yes, looking at charts, making predictions and, perhaps, scalping a few winners along the way is certainly fun.

However, if you’re coming into this afresh, I can assure you that you’ll get a lot more satisfaction from this topic if you both; look back far enough to comprehend all that has come before (and more importantly, how and why it evolved the way it did) and also; use your imagination to wonder just what might be possible given enough time, ingenuity and, of course, perspective.

The small print

Whatever happens, have fun trading and investing. Still only invest what you can afford to lose. Please, please, please research and understand what it is you’re investing in before you pull the trigger and do all you can to avoid being scammed.

Past performance is still not an indicator of future outcomes.

These are still only the opinions of the author and do not constitute investment advice.

Your investments can still go down as well as up (or more often than not, down as well as down).

Until this time next year — may the forth (wave) be with you.

— — — — — — —

About Me

Paul Gordon

Formerly a derivatives trader for 20 years, I’ve been organising the UK’s largest bitcoin/blockchain meetup group, Coinscrum, since 2012.

Currently CEO at Quantave.

[edits — corrected error in the Fibonacci number sequence 21.03.18]