Bitcoin is already shrugging off the price dip caused by China’s ban on all exchanges and ICO’s. It did not take long for Bitcoin’s price to rebound; the end of the month saw the digital currency reach $4,000 once again. Despite all detractors crying “bubble” and “fraud” Bitcoin continues to grow in price and global adoption. To early adopters and veteran investors, the pattern of dip and recovery is a familiar one and hardly warrants the sensational headlines. They know that Bitcoin is on a path to greatness and the volatile price is merely part of the journey.
“Nobody can stop [Bitcoin] because nobody can control it. The idea that the government can put curbs on this is actually pretty specious.” – Venture capitalist and Facebook millionaire Chamath Palihapitiya
In fact, Bitcoin not only recovers from price dips, but it does so at an incredible rate. Since the September 22 price drop, the price rebounded up to $3,500 and then up to $4,430 in the span of two weeks. The market cap of bitcoin has increased from $59 billion to $73 billion, as its daily trading volume surpassed the $1.2 billion mark once again. Every sell off of Bitcoin has created an even greater recovery.
Take a look at our latest graphic illustrating how Bitcoin recovers from every fear-based sell-off and continues to grow.
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Recently a study conducted in South Korea found out that forum comments can be used to predict the variations in the price of Bitcoins to an accuracy of over 80%. The research paper is entitled “When Bitcoin encounters information in an online forum: Using text mining to analyze user opinions and predict value fluctuation”
The research paper was produced by five researchers from two universities in South Korea; Korea University and Kangnam University. The study which was supported by the Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science, ICT and Future Planning was also funded by the Korean government through the Institute for Information and Communication Technology promotion (IITP).
On a brief of the research and its significance in predicting Bitcoin prices, the authors mentioned in the research that;
“In order to predict the price fluctuation of Bitcoin, we analyze the comments posted in the Bitcoin online forum. Our approach involved extracting keywords from Bitcoin-related user comments posted on the online forum with the aim of analytically predicting the price and extent of transaction fluctuation of the currency.”
What method of data collection and analysis was used in this Research?
The accuracy of the findings of a research depends to a big extent on the methods used for data collection and analysis. According to the authors, the method used involved data extraction, data gathering, data analysis and development of models. Models would be tested to simulate how the prediction process works. The research main data involved keywords of user comments in major bitcoin forums and number of bitcoin transaction against their corresponding prices. The study covered data collected for a period of three years from 2013 to 2016. The study whose data was analyzed by an artificial intelligent model established the relationship between Bitcoin transaction count and price based on the extracted keywords and quantification.
High level of accuracy:
The study produced models with very high levels of accuracy in relating bitcoin price trends with the trends of the activities happening in Bitcoin Forums. The authors found out that online user postings influenced Bitcoin transaction which affects Bitcoin prices in return. The authors said in a statement that,
“We analyzed the user comments posted on a Bitcoin online forum to predict the fluctuation in the bitcoin price and transaction count. Based on the easily accessible online data, the proposed method predicted the bitcoin price fluctuation with an accuracy rate of over 80%.”
Do the models apply for all digital currencies?
The researchers were so confident that their models can be applied to predict the price of any digital currency. However, they suggested ways for improving the accuracy of the results. The researchers mainly emphasized the use of quantitative analysis on the search results or relevant content. This kind of research can also be adapted in other fields apart from digital currencies.
Anyone who has followed the Bitcoin price closely in recently would see a pattern Bitcoin prices have been following. From the second half of 2016, the month over month price of Bitcoin has been increasing steadily, irrespective of the type of negative fundamentals the currency had to deal with. Momentary price dips have been countered effectively to keep the Bull Run going up until the start of the New Year. However, the scenario changed from the start of 2017 with Bitcoin prices remaining predominantly sideways in between the $1000-$1250 range. Irrespective of the fundamental reasons, Bitcoin has consolidated enough in terms of volumes to prepare for a good run. Let’s look into how fundamentally and technically Bitcoin stands in terms of an impending run.
Bitcoin has been contained between $1000-$1250 by various fundamental factors which include the consecutive ETF rejection and the scalability debate. Now that the Bitcoin community seems to have come to some kind of compromise over the block size, the prices have stabilized. More importantly, the block size increase would now accelerate the transactions and increase the Bitcoin’s utility by a great margin. Things look more favorable now for a Bitcoin bull run owing to the dynamics in Japan and Mexico. Japan has legalized Bitcoin as a digital asset and a valid way of transfer starting from April 1st. With 260,000 Japanese vendors all set to accept the digital currency, things are looking very bullish for Bitcoin.
In the western part of the world, Mexico has introduced a bill to legalize Bitcoin which would in turn fire up the remittance market and increase cross-border Bitcoin transactions. With strong adoptive fundamental factors driving the prices, Bitcoin looks charged up for the run.
Technically, Bitcoin has been in a trend and has fallen into a temporary sideways pattern. While the market players are testing the $1200 psychological barrier (at the time of writing this article), the Bollinger bands suggest that a breakout can be expected, and, given the trend it can very well be in an upward direction. While the market still has the potential to drop till $1,100 before making a final launch, it would be wise not to short in such a market. Even the RSI Indicator is in the mid region showing that there is still buying potential in the market and it’s not advisable to short recklessly in the market.
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