What Future Awaits the Price of BTC 2023?

 

Historical behavior of Bitcoin prices

This study has an educational purpose, to help understand the behavior of the BTC price, over time (it is not investment advice). I will use two mathematical models:

  • Linear regression to forecast the price range.

  • The BTC deflationary emission model.

 

Procedure

We have the prices of Bitcoin in the years 2019, 2020, and 2021. BTC opening prices on the first of each month obtained from the  Investing.com site:

For each year we select the minimum, average and maximum prices.

Model 1: Linear regression method or least squares

Using the mathematical method of least squares (linear regression), to make the price projection for the year 2022.

Results:

  • The minimum price forecast for 2022 was USD 14,214, so far this year BTC has fallen to USD 16,000. This November.

  • The average price forecast for 2022 was 37,373 USD, so far this year the average BTC price has remained between 40,000 and 35,000 USD, in May.

  • The maximum price forecast for 2022 is 76,253 USD, at the beginning of the year (January) the price was 64,900 USD.

 

Monetary emission models of cryptocurrencies.

Inflationary model. - function where the amount of the token is the independent variable, a constant amount of the token will be issued over the years, no matter if the price goes up or down.

Deflationary model. - Price is the independent variable, in the long term we reduce the issuance of the token by half in each cycle or life stage of the token, so that we turn it into a scarce good.

 

BTC deflationary model through life cycles

  • On October 31, 2008, Satoshi Nakamoto gave birth to the first cryptocurrency, Bitcoin.

  • The BTC blockchain processes an average of 150 blocks per day.

  • Every 210,000 blocks processed, we change the reward for the miner who solves the proof of work and earns the BTC.

  • We are in cycle IV, which began on May 11, 2020, and will end in January 2024.

 

BTC Emission per Cycle

  • In the I cycle, 10 million 500 thousand BTC were issued.

  • In the II cycle, 5 million 250 thousand BTC were issued.

  • In the III cycle, 2 million 625 thousand BTC were issued.

  • As of November 11, 19 million 200 thousand BTC have been issued.

  • The total issuance will be 21 million BTC.

  • It means that only 1 million 800 thousand BTC remains to be issued, for the future life cycles of the BTC. 

  • Short-term behavior of BTC

One of the main characteristics of cryptocurrencies is their great volatility, which can make them rise or fall by a high percentage in periods of weeks or months (less than 1 year), in the last month, the BTC:

  • Increase from 19,000 USD to 21,000 USD.

  • Then the price fell to 16,000 USD.

 

Long-term behavior of BTC

In the long term, BTC has seen significant growth, let's see prices on a logarithmic scale from inception to 2022 on the Coinmarketcap website.

 

Analysis with average prices

  • If you buy BTC at an average price of 5,617 in 2019 and sell it at an average price of 37,373, you earn 31,755 which represents a 565% return over three years.

  • In two years 327% and in one year 30%.

 

Observations

  1. BTC is a digital asset that yields high returns when bought, stored and sold over periods longer than 2 and 3 years.

  2. Billionaire investor Warren Buffett advises two lessons, if you are not willing to own a stock for ten years, don't even think about owning it for ten minutes. Don't be afraid of market downturns, buy when the price goes down, sell when the price goes up.

  3. Like any investment, BTC also represents risks, by studying in detail and selecting an adequate strategy you will obtain higher returns than other tradable assets such as stocks, bonds, commodities (gold and oil), index funds, etc.

 
Carlos Sampson