It is said that one must study history because history repeats itself and this has made a lot of people to look into the past for answers about the future. This is especially true in the cyclical economy that we live in, studying past data can be very helpful. Especially when it comes to prices, historical data can sometimes be very helpful. Recently, a comparison of Bitcoin prices with silver and Lira came out, and surprisingly, they have a good correlation.
By comparing the price chart of turkish Lira vs Dollar against Bitcoin vs Dollar, a prominent crypto trader cryptowolf was able to show that Bitcoin could reach previous highs. The charts show similar peaks and through comparing the turkish Lira chart we can see that there is a rebound waiting to happen. The trend observed is short term, the comparison is about a time period just above one year. Assuming Bitcoin prices continue to follow the trend observed, we could see the price of Bitcoin moving past $20,000. Exciting right? Unfortunately the writer of the tweet said it was “pure hopium”.
Silver parabolic gain
Another interesting pattern observed was between the price of silver and Bitcoin in dollars, here the observation span years. Trading Room, a handle in Twitter, was able to point out this correlation, where silver after reaching record high suddenly fall. Only to reach its 200 week support and shortly afterwards hitting its 50 week resistance. A similar price drop was experienced by Bitcoin after it reached $20,000 suddenly, then it reached rock bottom prices. And currently it is unable to break resistance of $6,000.
There are basic assumptions that are wrong with the analysis, if one is to assume they will come true, history only has a chance of repeating itself. Even though the data is correct, there is a good chance that the prediction might not materialize. Secondly, silver and the Turkish currency has no relation with Bitcoin, there is no indirect connection between them. So, analysis of silver and Lira is not to be taken seriously, this is because we are missing an important principle of statistics, correlation doesn’t imply causation. There is no single reason other than the chart comparison why this is a reliable model and hence, is just a coincidence that should not be taken in for any kind of predictions.
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