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You could be forgiven for thinking that the price of Bitcoin is hard to predict. We should know. Longtime readers may recall our January 2018 cover story, headlined “How High Will Bitcoin Go?” which Robert Hackett and I were writing as the Bitcoin price touched $20,000 for the first time. As we went to press less than a week later, Bitcoin was already crashing. Such is the life of a magazine journalist trying to keep up with digital technology.
Today Bitcoin is hovering around $55,000, after breaking $60,000 for the first time over the weekend. But for all the seemingly capricious moves that Bitcoin makes—sometimes it goes up when stocks do but sometimes it goes down; sometimes people trade it the way they trade Tesla but sometimes they trade it the way they trade GameStop—there is one reliable signal for whether it’s going up or down.
It’s a pattern as old as time: the Fibonacci sequence—as central to mathematics as it is to nature, dictating the way seashells spiral and the way petals grow on a flower—can also help predict the price of Bitcoin.
Fibonacci works likes this: Each new number in the sequence is the sum of the two preceding figures. Starting with 0, it goes 1, 1, 2, 3, 5, 8, 13, and so on. (The sequence derives from a thought experiment about rabbit breeding from 12th century Italian mathematician Leonardo Pisano, a.k.a. Fibonacci.)
JC Parets, an expert in technical analysis of markets who for the last decade has also run a research service called All Star Charts, has found a way to apply this pattern to Bitcoin.
Back in 2017, Parets first blew my mind with this revelation when he correctly predicted that Bitcoin would surpass $6,500, then go on to rise above $7,400 (a bullish trend that kept on going at the time).
Parets figured this out by breaking down Bitcoin’s price movements into segments. After a crash, if the price recovered nearly 62%, then went on to regain 100% of its old high, Bitcoin was likely to bounce further, 162% off the low. After that, if Bitcoin didn’t fall back to the previous level, it was likely to rise to nearly 262% from the last bottom (because 262 is the sum of the previous two percentage figures: 100+162=262).
This led Parets to predict in mid-December, when Bitcoin was trading just below $20,000, that Bitcoin $30,000 was nigh; it hit $30,000 in the early days of 2021. His next prediction was about $45,000, which Bitcoin surpassed on Feb. 8.
Now, because Bitcoin is holding above that level, Parets is targeting $70,000 next.
If the math is hard to follow, Parets’s chart sketches it out:
It’s not exactly clear why this pattern works so well. At its root, technical analysis is intended to measure and predict shorter-term market sentiment, in contrast to fundamental analysis focused on long-term underlying value. And Parets’ Fibonacci pattern certainly echoes the boom-and-bust cycle of the crypto market.
Bitcoin also bounces around between its big moves, and may hover above or below the key thresholds in the meantime. (“Think of it like a mattress,” Parets says. “Supporting and resistance levels have some give to [them].”) But as long as Bitcoin stays above $45,000, he thinks there’s reason to be bullish.
Watch out, though, if things turn the other way: “A break that holds below $45,000 could send it back towards $30,000 or lower,” Parets adds.
For those considering whether it’s a good time to buy Bitcoin, the Fibonacci sequence can be useful; Parets says of his clients alone, several hundred firms include the technique in their investment processes—though they likely combine Fibonacci with other indicators and strategies “to come up with a favorable risk vs. reward proposition,” he explains.
With an asset as unique and volatile as Bitcoin, any guidance helps.
Says Parets, “I don’t know how anyone looks at these assets without those tools.”
***
With this missive, I bid The Ledger a bittersweet goodbye. I am leaving Fortune at the end of the month to be a features writer at New York magazine, where I’ll be covering business, technology, Wall Street, and yes, cryptocurrency.
Creating The Ledger with Robert and Jeff more than three-and-a-half years ago and building it—together with the newer addition to the family, David—into what you see and read today has been one of the great privileges of my career to date.
When we started this back in 2017, we didn’t exactly predict that Tesla would buy Bitcoin or that PayPal would start trading it, but we figured something like that was inevitable, and here we are. We planted a flag at Fortune in the world of cryptocurrency that our editors generously embraced—even over their own skepticism at the time—and which has flourished into so much more.
As I leave The Ledger in Robert and David’s talented hands, I also look forward to reading and watching where they (along with a growing team) take it from here.
I’ll be at the new gig in a few weeks; in the meantime, find me on Twitter.
Jen Wieczner
DECENTRALIZED NEWS
Credits
Stripe valuation hits $95 billion... Bitcoin hits $60,000 (then rapidly tanks) ... Beeple NFT artwork sells for $69 million ... Visa and Mastercard delay merchant fee hikes ... Tesla CFO Zach Kirkhorn gets new title: 'Master of Coin' ... Applications for a Bitcoin ETF are surging ... Alternative data providers headed for a boom as market metrics shift ... Coinbase files next steps for stock offering under the ticker $COIN ... Converting his salary to Bitcoin went very well for Panthers tackle Russell Okung ... JPMorgan hires new innovation head for wholesale payments ... Mastercard inks League of Legends deal in esports play ... Young investors will put 50% of their stimulus checks into stocks.
Debits
China censors 'stock market' mentions on Weibo as indexes plunge ... Former BitMEX CEO Arthur Hayes offers to surrender to U.S. authorities ... NFTs are not a new kind of intellectual property ... China's fintech clampdown extends to Tencent ... SEC probe touches Ripple executives' personal finances ... U.K. standards authority blocks 'irresponsible' Bitcoin ad ... Ja Rule selling Fyre Festival NFT ... Pressure rises to disclose corporate 'dark money' ... Ripple advisor's crypto connections kill Comptroller nomination ... Bankrupt crypto lender Cred hired U.K. fugitive to lead fundraising ... Apple will not reinstate Parler to the App Store.
FOMO NO MO
The value of the art is in the value of the community. This is fascinating, and I think it gets to the heart of NFT mania ... People buy products and consume content to be part of something. It seems absurd to read about the $600,000 sale of a GIF of a cat with a cherry poptart for a body, flying through outer space and leaving behind a rainbow trail ... It seems (slightly) less absurd when you view it in the context of human nature and our desire to belong. Yes, owning art may be about a love of the work or the artist. Yes, part of it is certainly about status. But there’s also a meaningful component that’s about the desire to be part of a community, movement, moment.
From "The Memeification of American Capitalism," the latest essay from Index Ventures investor Rex Woodbury, whose new Digital Native newsletter is quickly proving itself an essential read for anyone asking big questions about technology and community. Woodbury's insightful and somewhat disturbing argument is that a broad drop in people's sense of agency and independence has pushed our deep need for belonging towards digital communities. This long predates the pandemic, with Woodbury focusing on diminished economic prospects and declining cultural institutions (some might add the long-term decline in religious affiliation).
NFTs, Woodbury argues, are valued because they let (mostly rich) people affirm their status in these communities–an emotion-driven explanation of the phenomenon that's as compelling as anything more strictly rational. What's less clear is whether these digital communities can actually fill the hole left by bowling leagues and other neighborhood groups.
BUBBLE-O-METER
$8,330,000 per minute
The rate at which Bitcoin long leveraged positions – bets that the price would go up – were forced to liquidate during one record-setting hour on March 15. $500 million in long positions got nuked in a single hour that morning as Bitcoin dropped by 12.5%: a new record, according to blockchain analytics firm Glassnode.
THE LEDGER'S LATEST
Stocks flat ahead of Fed interest rate meeting - Bernhard Warner (Bull Sheet)
Stripe loses ex–Goldman Sachs exec to corporate card startup - Robert Hackett
Elon Musk says he'll sell tweets as NFTs - Chris Morris
Analyst thinks stimulus could take Bitcoin even higher - Lance Lambert
Report: A digital Euro would threaten banks and fintechs - Adrian Croft
Famed economist Jeffrey Sachs rails against Bitcoin: Highly polluting and ‘almost like counterfeiting’ - Shawn Tully
Pressure rises to disclose corporate ‘dark money’ political spending - Rey Mashayekhi
Higher interest rates are coming 'sooner than people think' - Anne Sraders
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
MEMES AND MUMBLES
This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com.
Correction: This piece originally identified Arthur Hayes as CEO of BitMEX. He is the former CEO, having stepped down from his prior role in October after the U.S. CFTC charged Hayes and other company leaders with an array of financial violations. We regret the error.
