Stock-to-Flow (S2F) proponent, PlanB, has been extending his analysis into Bitcoin difficulty adjustments. Predicting an estimated +4% adjustment due next week, following a large drop in difficulty last week, he suggests there is only one way for BTC price to go next.
First Round Analysis
In an early tweet yesterday, PlanB posted a chart of 7 years of Bitcoin difficulty adjustments. This showed that after every significant decrease in difficulty (identified by a blue dot), which was followed by a significant increase (identified by a red dot), price invariably went up.
Est. next #bitcoin difficulty adjustment Nov 21: +4%https://t.co/zMdxlteR6Z
Chart shows 7 years of diff adjustments, and what a red dot (positive diff adjustment) after a blue dot (negative diff adjustment) means for price. pic.twitter.com/WkxP1mMc7q
— PlanB (@100trillionUSD) November 12, 2019
Adjustments occur around every two weeks to ensure that blocks are mined every 10 minutes as desired. PlanB estimated that the next one would be on 21 Nov, and would be a 4% increase. This would create the desired pattern of a red dot following last weeks blue dot.
Second Round Revision
After being asked why there was a capitulation (blue dot) during the last bubble in late 2017, PlanB suggested that this) along with certain other occurrences, was not capitulation at all. Rather it was a blip in a bull market following huge hash-rate jumps, likely caused by old equipment being switched off after being replaced.
He then revised his chart, analysing 9 years worth of Bitcoin history, and coming up with a three phase pattern to the red dots following blue.
The red arrows indicate the first phase of the pattern and correspond to bottoms following significant crashes. The yellow arrows indicate the start of a serious bull run, following a period of growth and consolidation after the bottom. The green arrows correspond to these hypothesised ‘equipment turn off’ blips.
So it looks like our yellow arrow next week should signal the start of a significant bullish period.
Flaw in the Bitcoin Plan
Don’t get excited just yet, because there is just the tiniest flaw in this theory. Since PlanB’s first tweet, the expected difficulty adjustment has changed. Whilst it may have been +4% at the time, it has since fallen to around -0.8%.
This of course, will not give us a nice red dot to follow our blue, so doesn’t correspond to the pattern identified. Should the next difficulty adjustment provide another blue dot, then we can wait another 2 weeks and cross out fingers again.
Do you think Bitcoin will rally next week? Add your thoughts below!
Images via Shutterstock, Twiter @100trillionUSD
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