2022 Outlook with Entropic Methods – Bitcoin Trading Ideas, Analysis

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Every year I post a perspective using entropic methods explained in the technical part of this blog. Here you can find the 2015, 2016, 2017, 2018, 2019, 2020 And 2021 forecast update, where you can find more information about this approach.

Updated values ​​for bitcoin (in brackets the values ​​of the last year) using daily data since August 2010 (average data from the 4 main exchanges when possible).

Growth factor G 1.00130 (1.00104)
Shannon P probability (see this as entropy) 0.5254 (0.5232)
Root Mean Square RMS (see this as volatility) 0.049 (0.055)

Entropic values ​​of Bitcoin against Usd improved in 2021, growth factor (G) reaches 1.00130% compounded daily or 160% per year, higher than 1 year ago. The optimal fraction of your total wealth to invest in bitcoin has increased to 5.1% (~0.5254*2=1.051 – 1 = 0.051 or 5.1% rounded to 5%).
Volatility continues to drop year after year and that’s normal as bitcoin gets bigger and bigger, therefore less prone to volatility.
The BTCUSD growth factor is much better than the conventional markets, except for the Shannon probability which still matches the US stock markets. (about 0.522); this means that over 100 days, an asset increases by 52 days and decreases by 48 days on average. I am not surprised at this because the same agents who trade in the conventional markets are more or less the same as those who trade in the crypto market, so they have the same entropy or mental disorder.

Price Prediction 2022 Fall historical volatility Half of historical volatility
Forecast using only g* ~$77,000 ~$77,000
Upper bound adding volatility ~$199,000 ~$123,000
Lower bound subtracting volatility ~$29,800 ~$48,000
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*77000 is obtained with January 1st as the starting price (about $48000) times (1.00130^365)=~1.6 | 48000*1.6=~77000, just change 365 to whatever number of days you prefer for a different forecast.

What happened in 2021?

A year ago I predicted a high of $121,000 using full volatility and around $72,000 using half historical volatility, the latter being more likely to be hit and that’s exactly what happened given a certain margin of error.
This market bottomed in June at $28,750, 10% above the expected support level of $25,000, again using half of historical volatility.
In 2022, I recommend holding your position until the upper limit of the next cycle defined by the upper monthly kama resistance bands ($80,000 – $130,000) in line with the forecast value of $123,000 using methods of entropy and a historical half-volatility.

As I said in the previous October update, I continue to believe that conditions in this market have changed since other halving cycles which typically saw a peak around 19 months after the halving date A half. I expect consolidation in 2022 with a slightly bullish sideways phase.
A very strong support area remains the $30,000-$48,000 price range which may be refined over the course of the year using the monthly Kama price ranges.
If there were to be excess volatility, I would advise you to take advantage of the event with profit taking between 120 and 200 thousand dollars; if the volatility pushes the price towards the $30,000-$48,000 support zone, do the opposite, buy 🙂

I am at your disposal for any questions; see you next update and happy new year!

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The cumulative volatility of Bitcoin as expected decreases each year and stabilizes towards a value still a little high compared to other traditional assets (stocks, gold, bonds ranging from 0.01 to 0.03) but the very high average returns of btc compensate for the high volatility. Values ​​represent the root mean square of logarithmic returns of daily Bitcoin data.
BTCUSD monthly chart with 2022 price predictions using the entropy method.
The first lower monthly kama average is likely to slowly reach the $30,000 level during the year 2022.
I expect to find similarities between the levels calculated in the Kama indicator I use and those used with this approach, the formulas for calculating the bands in my indicator are the same as those used in this update.


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