A buddy in a slack group posted a video of an guy saying the "fair value" of BTC is 4000 based on a previous period of consolidation. I said this is nonsense and was asked to elaborate. So here we go:
Video:
Transcript:
00:00
okay third touch driver chords this is
00:02
the charm so this is in response to a
00:06
buddy of mine in a private slack group
00:08
posted a video and what the video is
00:12
argument was was that in order to find
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where bitcoin is going to drop to then
00:19
you have to find what's what the analyst
00:21
was calling the fair market value and
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the way he defined that was to look at
00:27
where there had been periods of
00:28
consolidation in the past and he picked
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this one right here which was about two
00:34
weeks and he said ok and that's a that's
00:37
a fair market value but problem with
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that is that it wasn't long enough there
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wasn't enough the consolidation didn't
00:42
last long enough in time in order to
00:45
count so then he went back a little bit
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further and then he said oh well you
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know we've got this area here which kind
00:52
of oscillated between three and five
00:54
thousands of call it fours but the
00:56
difference and that was a two month
00:58
period and that that was better the
01:01
problem with this kind of analysis the I
01:04
mean there's a couple problems with it
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but the main problem with it is that it
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is 100% completely subjective so why is
01:12
this okay and this okay even though the
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percentage difference here is almost a
01:18
hundred percent I mean let's look at a
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log chart
01:21
oh this is a log chart actually yeah it
01:25
looks his case looks more convincing
01:27
here you know you can see it here and
01:28
there you can say that oh well you know
01:31
it looks it looks pretty consolidated so
01:34
that must mean that people agreed which
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isn't really what consolidation means
01:38
but but if when we look at it on a log
01:41
chart we can see that well you know the
01:46
low in this here was thirty six hundred
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the high up here was just a hair under
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five thousand some thirty six hundred to
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five thousand that's that's a 50% range
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from low so that's not consolidation
02:04
really at all it just looks that way
02:06
because when you look on a linear chart
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is it because the you know big blow up
02:12
so much
02:13
that you know it looks relatively flat
02:15
but why is it that and why is it not
02:17
this thing over here and or this part
02:20
over here or how about you know this
02:24
part over here so I mean this is about
02:27
two months also and I had a similar kind
02:29
of actually at a tighter range went from
02:32
6700 down to 5500 so that was a 1200
02:38
range on a higher starting point so the
02:40
percentage change was did was lower so
02:42
you know it's just it's it's just
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complete cherry picking and that that's
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the problem that's kind of Nelson it's
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the same thing where you know Elliott
02:51
Wave people are just talking out of
02:53
their ass because they're thinking
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things post-hoc and making it fit their
02:58
own narrative so you know it's it's just
03:01
it's just not a reliable way to do
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technical analysis so you know when when
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you're doing technical analysis I'll try
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to heat this brief what you're looking
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for is patterns in psychology because
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there's really just buying and selling
03:19
and you know when it happened and how
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much of it was there so it's it's not
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rocket science you're just trying to
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anticipate where other people are going
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to go and you know it's it's a it's sort
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of an arms race because the other people
03:38
trying to anticipate you and you have to
03:40
do you know go beyond them and so forth
03:43
and so on
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millions of market participants are all
03:46
trying to do the same thing so here is
03:50
here's what I see when I look at this
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chart and something they have some
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drawing tools here we have this range
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here I wanted there we go so there
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that's close enough
04:09
so we have this support range where you
04:13
know we've bounced one two three and now
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we're at a fourth time and then we have
04:23
this over here okay so what we were
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seeing here is that at this roughly the
04:35
same price buyers have stepped into the
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market and and the money coming in has
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been greater than the money flowing out
04:42
and so prices in tourism and you know at
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those points and then the points where
04:47
we have turn around the other way the
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money going out has been greater than
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the money coming in which causes the
04:52
price to fall and so you know that's
04:57
what creates you know a turnover when
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those one of those trans change but the
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important part here is that the point at
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which the sellers have taken control the
05:09
market has beat has been sooner and
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sooner and sooner into these rallies you
05:15
know in terms of price so you know
05:18
people have been giving up hope earlier
05:21
and earlier basically and that does not
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bode well for you know this right here
05:27
because we're at that support line here
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so typically when you have a wedge
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pattern which is what this is whichever
05:34
whichever side is sloped is gonna be the
05:39
one that wins because you know if you're
05:41
going the other way we would say the
05:43
buyers are coming in you know earlier
05:45
and earlier into into declines and so
05:47
they're becoming stronger and stronger
05:48
more confident here we're seeing the
05:50
sellers becoming more confident as
05:51
they're willing to sell faster and and
05:55
harder into into these rallies so
05:59
typically you know those patterns
06:01
continue and so this is more likely it's
06:06
not a guarantee there's just likelihoods
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that's all technical analysis good.you
06:11
likelihood is that this support line
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will break you know maybe not this time
06:17
maybe next time or maybe will be this
06:19
time and then we will see go down
06:23
to the next leg and the next leg you
06:25
know what what people do and this is you
06:27
know sort of the self-fulfilling
06:28
prophecy portion is they do look back at
06:31
previous supports just because people
06:34
like to make patterns out of things so
06:37
you know we might see some some support
06:42
and you know at these lower levels get
06:45
this straight you know but you can see
06:53
that on a percentage difference these
06:57
are these are almost equally far apart
07:01
but when you look at it on there we go
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there we go so on a log we could say
07:12
that there are they're almost exactly
07:14
evenly spaced which is which is
07:16
interesting that looks a little bit a
07:17
little bit more skewed on a on a linear
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chart and yeah so and you know then we
07:26
also see if they've Adachi patterns
07:28
which were you could leave
07:29
self-fulfilling prophecies as far as I'm
07:31
concerned but yeah so the problem with
07:35
that kind of analysis like I was saying
07:36
is the is the cherry-picking nature of
07:40
it that is simply done just to fit
07:43
preconceived notions it's not based on
07:46
anything real because like I said we can
07:48
look at this I mean this is let's say
07:51
715 all the way back to 612 so over a
07:56
month very tight range and then we had
08:00
that similar kind of range here or you
08:03
know if if we like two months you know
08:05
why not let's go back to linear so it
08:08
looks better you know why not this you
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know at 750 you know we had three months
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there and you know in other months there
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so you know when you when you do
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technical analysis it just has to be
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based in something and that's why those
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kinds of turnkey analysis techniques are
08:30
nonsense I mean it's like it's a coin
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flip maybe you're right maybe wrong but
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you're not really stacking
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the probabilities in your favor which is
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kind of the entire point of of TA
Problem isn't cherry picking charts, it's using charts at all. Trying to do the impossible (predict future), by looking a chart seem like an incredible waste of time.
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