2/ On this BVIX chart, I have labeled 8 peaks and 6 valleys:Blue Arrows = BVIX peaks
Pink Arrows = BVIX valley (right before slope increases)
First observation is that the oscillator length morphs starting Dec 2017 but overall shape stays intact
3/ On this BTC price chart, I have applied the blue and pink arrows accordingly so as to map them to price action.
Blue = BVIX peak
Pink = BVIX valley
I did not find any causation but I do believe there is a pattern, which may become obvious for anyone who was here for 2017
4/ The blue BVIX spike arrows tend to come a few days AFTER a period of what I would call “extreme certainty”.
This doesn’t mean everyone agrees – it means everyone is doing the same thing.
Another way to describe this is reflexivity, as coined by our friend George Soros 🙂
5/ An example of this can be seen in the first 3 blue arrows – think about the week after a price climax last year.
This was when people had the hardest time doing the same thing.
“Do I hold? Sell? Buy more?”
When it’s all going up, most people are buying (low BVIX)
6/ As we move further into the year, you see the Sept 28 blue arrow. This shows similar uncertainty, but instead of consolidation, it is followed by slow upward price movement.
Sept was the first time this happened, causing the highest ever BVIX. The stage was set.
7/ This added to the reflexivity, causing a STEEPER sell off than ever before, thus spiking the BVIX once again.
The cycle completed, as it always had, leading us to the Oct 1 blue arrow.
8/ The slope of the BTC price curve is now “parabolic”, accelerating the return for the avg investor to “extreme certainty”
You can see this in the chart – the slope down is essentially vertical.
In other words, people went back to being permabulls faster than ever before.
9/ Then comes the final November/December run where “extreme certainty” carried through even in the face of extreme risk.
The BVIX, while steadily increasing over time, did not spike until Dec 9, only to REALLY spike Jan 4th.
This is when it’s critical to recall the situation.
10/ While the price was going up/down $500/hour, the uncertainty level was through the roof.
This caused BVIX to hit all time highs but also reflected the level of risk people were willing to take.
It was a frenzy, but in opposite directions (unlike early December).
11/ We saw a retreat to the right shoulder of the BVIX chart on Feb 28th – a week after we had a price climax.
Again – days after we saw a price spike, the uncertainty grew.
12/ Finally, the price broke days after in tandem with the BVIX.
You can almost see the relief in the charts.
“Finally, at least we know what direction we’re going in” is what people were doing with their BTC (not necessarily their words)
13/ Now we find ourselves in a new valley of BVIX which (as history would tell us) should be getting ready to ramp at some point in the near future.
So what does that mean for price and for you?
14/ It means that in the coming days/weeks/months there will be another highly emotional moment when people are unsure of which direction the market is going.
You can sense it now. In fact I did a poll recently that showed a 50/50 split on directional bias.
15/ The BVIX, however, has not spiked because the prices have not pushed the extremes enough.
All the highs + lows are within our scope of comprehension. These prices are believable.
That will probably change.
16/ This analysis does not provide a direction, but it does provide us with indicators to be aware of the situation we are in.
We WILL see prices that make people uncertain, as the BVIX has enormous pent up energy right now.
The prices will push you to your emotional limit
17/ We are in the final stage before that happens. Could be days, could be weeks. But it’s close.
And if you are not mentally + strategically prepared to handle extreme prices, you will regret it.
This I can promise you.
18/ In my opinion, the best thing to do is to create systems that remove YOU from the decision process when the BVIX spikes.
Reflexive moments pray on emotion. Setup a system now that keeps you objective when you think BTC is going to $1K and when you think it’s going to $100K
19/ Also remember – the BVIX historically spikes AFTER the price climax.
If people think we’ve gone too high, the BVIX will push it higher once it consolidates.
If people think we’ve gone too low, the BVIX will push it lower once it dumps.
20/ Keep this in mind when you see the BTC price do something that puts you in disbelief. Go back to your system + rules of engagement.
It’s coming – be prepared.
*I would be remiss not to shout out @agurevich23 for this mental framework.
I recently saw an interview of his where he described Concurrent Necessity.
While BTC is relatively new, this concept has helped me immensely in both crypto, forex and macro investing. Thank you.