Cryptocurrency 2017 Recap

On Dec 5, I made a prediction for bitcoin to reach $60K on Jan 11, 2018. I can now safely say that is not going to happen. I was mistaken and won’t make any excuses here. The model did have goal posts along the way that prompted my exiting most of the positions. Here I’m going give a recap of my crypto activities in 2017, share a chart and some current thoughts.

I linked to a long-term BTC chart earlier. To the best of my knowledge, it originated here. I made my own chart with price data from CoinDesk.

This is a Log-Ln plot. The fit implies that BTC price has a time dependence of ~T^2.91. We sometimes refer to strong price action as “going parabolic”. No wonder bitcoin looks askance at all previous bubbles — its long term trendline is almost cubic! Clearly, this is not sustainable. The three prior notable vertical phases, labeled with green arrows, all culminated in exponential rises over a range of about e^4. That was the basis of my $60K prediction. Unfortunately, this time the price fell well short.

I bolted for the exit when it was clear the exponential rise wasn’t going to happen. In retrospect, I was too early, but probably still correct. The recent bounce to $17K was a much better selling opportunity. I believe that BTC has seen THE PEAK, based on signs of euphoria rather than any technical analysis. My tape reading, i.e. observation of the real-time price volume action, also confirms that view.

The table below captures my crypto activity from the original purchase in March for a scaled “100” or 0.6% of my portfolio at the time. By now I have cashed out more than 13 times the initial deposit. At one point in December, cryptos were about 9% of the portfolio.

At the end of 2017, I had only about 10% of my coins left. Obviously I could be wrong to top-call BTC and it can come back like it did many times before. I’ll keep an open mind and re-examine if BTC can make a new high. In the meantime, Ethereum has been acting strong and making new all time highs. I bought some more at $883. It’s the only crypto I hold today, at about 1% of my portfolio.

The total crypto market cap has also been making new highs, although it can be argued that many of the top coins are pre-mined, thinly traded, and with even less credible fundamentals than BTC. I’m of the opinion that the crypto party is ending in 2018. During the dot com bubble, the Dow and S&P stayed strong into September after the March peak in Nasdaq. During the housing bubble, house prices peaked in 05-06, two Lehman hedge funds collapsed in Feb’07 (on an Armstrong turn date), but the S&P didn’t peak until October’07. The time now feels like those in-between periods when the last bit of speculative money is funneling into adjacent avenues while distribution takes place.

I’m glad that I took a ride on the bitcoin train, and equally glad having gotten off. Besides writing two big checks to IRS and the CA franchise tax board, some of the proceeds is earmarked for buying gold, the real kind.