Editors Note: This article comes fromBlue Fox NotesEditors Note: This article comes from
Blue Fox Notes
Preface: I read a word called fractal while browsing casually. To put it simply, it is to describe the self-similarity of things themselves. For example, each petal of a snowflake shows an astonishing similarity to the original pattern after being enlarged. This phenomenon exists in abundance in nature. The English word for fractal is Fractal, created by BB Mandelbrot. The general definition is a rough or fragmented geometric shape that can be divided into several parts, and each part is (at least approximately) the overall reduced shape. . This is reminiscent of Bitcoin’s historical price trends, what does this tell us?
Bitcoin has a history of more than ten years, and its current market value is more than 60 billion U.S. dollars. In 2018, the total amount of Bitcoin transactions exceeded 1.3 trillion U.S. dollars, surpassing PayPal and DISCOVER.
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On the surface, it seems that the development of Bitcoin has reached a certain scale, but so far, Bitcoin is still a highly volatile currency. It experienced three major bubbles in 2011, 2013 and 2017, all of which fell by 80% above. This is almost unimaginable in other investment fields.
Bitcoin has experienced many bubbles in just ten years, showing some self-similar characteristics.
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The Fractal History of Bitcoin
To understand the future of Bitcoin, one can look at its history.
The past and the future are a whole, and all history, in the longer term, together with the future, form a whole. The so-called past, present and future are defined by people according to their own needs. And this whole has self-similarity of cycle. In fancy terms, fractals.
So, what does this have to do with Bitcoin?
As long as there are no fundamental problems in the foundation of Bitcoin itself, such as fatal code flaws, 51% attacks, etc., it has the opportunity to gradually enter the mainstream adoption like other technical products. Of course, if the solid foundation of Bitcoin itself fails, then the fractal phenomenon will cease to exist. This is the premise.
Here is the price trend 2 months before the price top on December 5, 2013:
(Source: coinmarketcap)
Here is the price trend 2 months before the price top on December 17, 2017:
(Source: coinmarketcap)
Here is the price trend over 1 year after the December 2013 bubble:
(Source: coinmarketcap)
Here is the price trend over a year after the December 2017 bubble:
(Source: coinmarketcap)
Here is the price trend chart from April 2013 to March 2019:
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2012 —$4
2013 — $65
2014 — $200
2015 —$185
2016 —$365
2017 — $780
2018 — $3200
(Source: coinmarketcap)
Even though bitcoin is highly volatile, its annual minimum price has a certain support (since the price of each exchange is not exactly the same, this minimum price may vary to a certain extent, but it can represent a rough range). If you are an investment genius or lucky enough, you can find a relatively low point every year when you enter, and you will not lose money in the second year. Of course, the probability of actually doing so is small.
The fractal repeating nature of Bitcoin exists in a cyclical fashion until its price eventually stabilizes. This fractal property is an intrinsic property that overrides the effects of short-term events (benefits or bulls). For example, the previous Mentougou incident, strict supervision and so on. Before it goes to the highest point, there will be a continuous process of steady growth, and once it breaks through the previous highest point, the development may accelerate.
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Bitcoin Fractals and Technology Adoption Curve
To realize the real value of Bitcoin, it cannot be limited to the investment circle, it must go to the mainstream crowd. Although the current daily active address exceeds 600,000, generally speaking, it is still in a very early stage. Just like an app, if there are more than 600,000 daily users, this is far from reaching the point of mainstream adoption.
The Technology Adoption Curve was first proposed in 1957 when Iowa State College analyzed the purchasing behavior of corn seeds, and it became well known through the book Diffusion of Innovation by Everett M. Rogers. Among them, 2.5% are innovators, 13.5% are early adopters, 34% are early majority, 34% are late majority, and 16% are laggards. According to the current population base, it is still in the stage of innovators, not yet the stage of early adopters. This means that there is still a lot of space in the future, and it also means that future price fluctuations will be large.
Therefore, this can also understand the wild fluctuations in the price of Bitcoin over the past decade. In the entire development process of its adoption, the current volatility is understandable. As a special commodity, currency starts from collectibles and speculative items and gradually moves towards the application scenarios of the public. It will take a long time for ordinary users to understand and adopt it. .
Bitcoins fractal phenomenon can be extremely volatile during the early 15% user adoption period. Each wave will have fractal-like characteristics, and as adoption grows, each of its fractals will lead to a new order of magnitude increase in price.
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Bitcoin Fractals and the Hype Cycle
Bitcoin fractals arise from human nature itself. Human nature has FOMO, worrying about missing good investment opportunities; there is also fear, worrying about returning to zero. This characteristic of emotional resonance has caused periodic ups and downs. There is a self-similarity in the process of the arrival and disappearance of each bubble, which is also one of the main reasons for the formation of Bitcoin fractals.
After the Bitcoin bubble burst in 2013, it entered a long period of silence. Although it began to grow steadily in 2015 and 2016, on the whole, it was just the start and brewing of the market. Until early 2017, many altcoins began to harvest dozens of With double the return, the market sentiment began to surge, and investors began to worry about missing out on great opportunities. Even the regulation in September could not stop the surge of the market. In the end, the initial coin offering caused the entire market to rise wildly and entered a real bubble period.
As long as you have a concept and white paper, a good team background, and an investment institution platform, it is basically hard to find a quota. Its utterly irrational madness, unsupported by any value. Bitcoin also shot up to nearly $20,000.
Immediately afterwards, those investors who entered early began to worry that this crazy situation was not sustainable, and began to sell assets in order to preserve profits, which started the bubble burst.
There is another type of force that fuels the flames. Many people who come in during the peak period are short-term speculators. They don’t care about the technology itself. Stampede the situation. Eventually the bull market breaks and enters a bear market.
When it falls to a certain extent, the chips of weak hands and early speculators have been thrown away, and long-term holders will not sell. At this time, the market enters a relatively balanced stage.
Once the market enters the balance stage, arbitrageurs and institutional investors will gradually enter the market, and a new round of growth will start.
However, it is worth noting that after the Bitcoin hype cycle has been brewing for a period of time, its emotions continue to accumulate during the start of the market. The most interesting point here is that it will not grow linearly. When it finally reaches the peak, it will come A steep curve with a quick turnaround in the short term.
in conclusion
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in conclusion
If you follow Bitcoins previous playbook, fractals are an important feature of price trends. This is related to its adoption level, hype cycle, etc. If there is no major problem with the basis of Bitcoin itself, it means that before the value of Bitcoin is truly stabilized, there will still be similar characteristics, that is, there will still be bubbles, and each bubble will have similar ups and downs, but At the same time, it brings a greater magnitude of improvement. It also means that, for some investors, this is a once-in-a-lifetime opportunity.
