This post started out as the answer to a comment on my previous post. Eventually, as my answers occasionally do, it became long enough to become a post in its own right. So... here it is.

I must start by giving credit to "Nolapowa", whose question prompted me to pen this response. Nolapowa is a LOOP user who asked a very valid question pertaining to my post "Bitcoin: 25% of the Way to Nowhere - The Tale of 2021 - and Beyond...". Great question Nolapowa, thank you very much for asking it.

Source: https://www.loop.markets/bitcoin-25-of-the-way-to-nowhere-the-tale-of-2021-and-beyond/

Before I answer the question, I want to take this opportunity to remind you all of something very important: nobody is infallible, not even Bit Brain. Even the best crypto minds make mistakes, just look on Twitter, you see it all the time! Just because you admire someone or generally trust them, does not mean that you should take everything they say at face value! You should absolutely hold crypto analysts accountable for what they say, because a prediction without a valid reason is not a prediction at all, it's a baseless guess. Any decent analyst should be able to say WHY they say or think something, using arguments which make logical sense.
By all means: follow people, but don't hero worship them, especially when it comes to issues which are beyond their fields of expertise.

Luckily for Bit Brain, he's a polymath, everything is his field of expertise! ;-)

Okay, time to answer the question:

Does Bitcoin HAVE to behave similarly to how it has in the past?

The short answer - for those who belong to the TLDR generation - is that Bitcoin does have to generally behave as it has in the past. Sort of. Thanks for reading TLDR guys, you can leave now. As for the rest of you, here is why I say that:

Beginning with the caveats: one must realise that with Bitcoin, we are still working with a statistically small dataset. Bitcoin has been through very few market cycles - I would say two proper ones preceded by a couple of "proto" ones (those which occurred prior to mid-2013.). That's not enough information to base accurate predictions upon, but it is enough to establish a general framework and long-term trends.

It is true that periods of extreme volatility could indeed push the price of Bitcoin beyond the trendline ranges which we have observed thus far, trendline ranges such as those seen in "Bitcoin: 25% of the Way to Nowhere - The Tale of 2021 - and Beyond... " (See below)

Indeed we have already seen Bitcoin depart these bounds; the black swan event market crash in March of 2020 being the most prominent example. (Thank you governments of the world. I'm SO GLAD you killed our economies even faster than usual! It was all so worth it because you guys did such a GREAT job of stopping Covid and saving lives, didn't you?)

It is therefore plausible that Bitcoin may again deviate from within the current trendlines. However, outside of future black swan events (such as a hyperinflationary general global market crash - which does look rather likely), it is my belief that Bitcoin will stay within the range - or at least something very similar to it (see the "Conclusion" section of Bitcoin: 25% of the Way to Nowhere).

I say this because:

Crypto is not like fiat markets.

There is no bailout money, no QE (direct or indirect), no fractional reserve banking, junk bond buying, overnight repo purchases, extended debt ceiling or helicopter money. There is nothing which fiat money does for crypto (at least not directly) to drive its price up - unlike what fiat money does for stock markets, the banking sector, companies/industries which are "too big to fail" and other fiat markets. For this reason, crypto growth is largely organic. Unlike fiat, it's not forced higher or chronically manipulated by the ultra wealthy. So the growth of crypto can be attributed to the performance of crypto itself, and crypto itself (Bitcoin in particular) has not really changed over the years.

Demand, Supply and Network Effects:

Since Bitcoin is limited in supply (unlike fiat) and since adoption of Bitcoin continues, it stands to reason that the price MUST continue to climb. The block rewards for Bitcoin change over time, but the algorithm that determines the rewards has remained the same since day one. That makes supply predictable, a supply which generally falls way short of demand.

I have long maintained that the price of Bitcoin is now far more affected by demand than it is by supply - the minute block rewards make little difference to overall trading volume, so supply can almost be considered to be fixed. See these posts for more information:

As long as more and more people want Bitcoin, the price will go up. All the evidence (media coverage, transaction fees, number of active addresses etc) points to a growing user base of people eager to add to their Bitcoin positions. Considering that fiat has failed the common man dismally, it is reasonable to expect the number of Bitcoin users to keep on growing. And thanks to network effects, Metacalfe's Law kicks in: the more new people get into Bitcoin, the more valuable it will become to us, and the more it's price will rise. I believe Bitcoin (and crypto in general) to be following the Technology Adoption Life Cycle, a cycle which suggests that adoption will only become increasingly rapid in years to come.

As long as the supply of new Bitcoin into the market remains miniscule (and it will) the price will go up. As long as adoption continues, then network effects will drive the value of Bitcoin up. And - above all - as long as demand for this scarce and valuable resource exists, the price of BTC will go up.

The VALUE of Bitcoin does not even have to change for the PRICE of Bitcoin to change.

Allow me to explain that seemingly strange statement:

Let's say that 1 BTC today can buy you a new entry-level 5-series BMW. Let's call the price of that 1 BTC $45000 in today's money.
Now let us hypothetically assume that the value of BTC does not climb at all over the next 5 years; then you'll probably still be able to buy a new 5-series BMW for about 1 BTC in early 2027.
So the value of 1 BTC did not change, we can still swap 1 BTC for 1 new 5-series. To us, 1 BTC is still worth the same as what it was five years ago: a 5-series.

But what will that BMW cost in dollar terms? It won't still be $45000! At current inflation levels, it will probably cost around $60 000.

So what I am saying is this: even when BTC stands still, the fiat markets continue to devalue themselves - always - which in turn drives up the price of BTC - always. So while our BTC did not change in value, it gained 33.3% in price.

We can therefore see that even if BTC stands still in value for five years (HIGHLY unlikely!), then the price of BTC will still climb by at least a minimum rate (the true inflation rate).

Humans are humans.

This is probably the most important point.

In posts written long ago, I spoke a little about the psychology of trading (psychology being another area of interest of Mr Polymath). I also formulated a few "Crypto Laws" in my early blogging days. Bit Brain's Fourth Law of Crypto reads as follows:

"Technical Analysis is a graphical representation of market psychology. It is a way to visualise the feelings of masses of people wrt trading."
https://hive.blog/cryptocurrency/@bitbrain/crypto-laws-of-bit-brain

That's right. What all those ups and downs on the charts actually are, are just the mass feelings of the trading herd expressed in a graphical format. It is their fears, excitement, doubts and greed which ultimately determine what happens on the charts - of any and all markets.

Since human psychology does not evolve perceptibly over the course of individual lifetimes, the basic forces of fear and greed which drive the markets invariably stay constant. It is this very property of human psychology that makes TA possible. It is the predictability of human nature itself which we are actually charting with our trendlines, indicators and other TA tools.

Conclusion

This post is not intended to be comprehensive. There may well be other factors affecting the general uptrend of BTC - and there probably are. I could have spoken about BTC's advantages over other crypto, or over fiat or gold - I didn't, but those could also be seen as valid reasons for its continued climb. I could have spoken about institutional adoption, governmental adoption or any number of related topics - but in order to keep this short and simple - I stuck to what I think are the most important points.

What I'm trying to demonstrate is that the general trend exists for a reason, the reason being a combined set of sub-reasons, all of which result in a fairly consistent long-term rise of BTC's price.

We can never say with certainty what will happen next, but we do know some things. We know how low BTC dipped during the Covid crisis, and how quickly it bounced back - that's a valuable barometer of the effects of extreme panic on market sentiment, which sets a benchmark for us for similar events in the future. The bounce-back from that event also served to confirm the position of "Fair Value" on the base trendline, further lending credence to the trendlines themselves.

Outliers will surely be encountered during future crises. I do not expect them to alter the trendlines fundamentally, though it is not impossible that a full global economic market collapse could have such an effect.

But even in the case that the worst happens tomorrow (a global economic collapse), and all our Bitcoin TA flies out the window, the fundamentals will remain. That value I spoke about will remain for as long as we are still able to access the internet and exchange BTC, and that value will always translate into price at the end of the day. And since the fundamentals of Bitcoin are so consistent, that price should always continue to climb - probably at roughly the same rate as my trendlines suggest.