Analyst Models Bitcoin Price Movements With Difficulty Bottoms

Analyst Plan B models price cycles in relation to the local bottoms in difficulty levels. If past cycles are indicative of future cycles, the model would suggest we are still in the early phases of the current market cycle.

Bitcoin price modelled with difficulty bottoms

Analyst Plan B (@100trillionUSD) has modelled bitcoin price in relation to its price during local difficulty bottoms. The above logarithmic chart illustrates what percentage bitcoin price is trading at compared to the price it was trading at when the difficulty level reached its last low point. The graph also shows how much time has past since the last difficulty bottom. 

Bitcoin is currently trading at approximately 300% of the price it was at during its last difficulty bottom. The last difficulty bottom was observed on the 19th of December 2018 when the difficulty adjusted to 5.11 trillion. Bitcoin price on the 19th of December opened for trading at approximately $3,660 whereas current prices are trading at roughly $10,240 at the time of writing.

Less Pronounced Percentage Movements

There have been four major difficulty bottom price cycles since Bitcoin’s launch with each increase becoming less pronounced percentage-wise when compared to the previous. This makes sense as the large percentage increases observed in early market cycles would result in astronomical Bitcoin market valuations if they were observed at today’s prices.

For example, Bitcoin’s first cycle resulted in Bitcoin’s price increasing to in excess of 1,000,000 percent of what the price was at the first difficulty bottom. Such an increase observed today would result in Bitcoin’s market valuation being $1.84 quintillion, orders of magnitude greater than the market cap of every other asset in the world today

Where Are We In The Current Cycle?

The length of time between local difficulty bottoms has also been increasing as the market matures. If the past market cycles are indicative of future cycles, the stage of the current cycle remains at an early stage. The past two market cycles went approximately 200,000 blocks beyond the difficulty bottom before a new bottom was recorded whereas the current cycle is approximately 30,000 blocks beyond the last bottom.