Can Bitcoin crashes be predicted? Short answer: yes. Long answer: assuming that Bitcoin prices follow an exponential growth pattern we can apply statistical regression analysis to forecast data. Regression means to fit the data to the most accurate model. This allows to predict the chance of a crash by looking at how much Bitcoin’s prices differ from statistically expected values. Bitcoin’s current (November 2013) prices overshoot expected values by 100%. A price correction seems imminent.
I predict that the price will drop substantially in November 2013. However… according to the same model, by end of 2014 Bitcoin prices may be at over $1,600!
Attached is my analysis as an Excel sheet. Based on an example called S-Curve Forecasting Theory by Professor Stephen R. Lawrence of the University of Colorado. I have used BitcoinCharts’ historic weekly opening price data for Bitstamp (2011 to date). Because I trade at Bitstamp myself. Feel free to improve the Excel data sheet and try to predict Bitcoin prices yourself.
Bitcoin prediction for 2013-2014
See the image at the top of the article. The blue bar represents real data from BitcoinCharts. The statistical model forecast is in orange. According to the model the following can be said:
- The entire April 2013 crash stayed well above the statistically expected values. Holding on to expensive coins eventually paid off.
- The current November 2013 price spike signals an over priced Bitcoin. I predict the price will drop to between $150 and $200 (expected value range for November 2013). TIme to scoop up some new coins?
- However, if the model is correct, Bitcoin prices will be over $1,600 by December 2014.
- Vertical S-curve growth won’t even begin to happen until 2015 when prices could rise over $5,000 and up.
Of course, unless Bitcoin is replaced by something better. In that case Bitcoin value will drop to $0. Here’s a bonus graph with logarithmic scale. This shows more clearly what Bitcoin is doing:
Bitcoin is like a snake crawling up a tree. It’s a slow and slippery climb, but patience may bring great profits.