Bitcoin ARIMA 7-Day Forecast 1-19-2024

Despite all of the hype surrounding the Bitcoin ETFs, the price has not responded the way many on social media believed it would. Instead of a wall of cash coming into Bitcoin ETFs and lifting the price, the opposite happened as the price failed to close above $49,152 followed by a decline to $40,297.46 as of January 19, 2024. So, what should we expect over the coming days for the Bitcoin price?

One way we can help sort out what could happen with the Bitcoin price is to look at the Bitcoin ARIMA 7-Day Forecast. If you're interested in running the code yourself to see how it works, you can download Kinzcode's code. After running the code, here are the results.

Of note is the $11,000 spread between the bottom and the top of the 95% Confidence Interval for the Bitcoin price over the next seven days. That large spread reflects the volatility of Bitcoin but also means that the forecast is not very useful.

A somewhat better forecasting tool is the Bitcoin Prophet Forecast utilizing Facebook's open-source software.

This model is attempting to forecast 60 days out. The further out the forecast goes the wider the spread between the top and bottom of the uncertainty interval. However, the spread in the uncertainty interval is closer to $5,000 or $6,000 as you move closer to the current date. You may have noticed that the Bitcoin price recently dipped below the bottom of the forecast. This is fairly common with prices rising and falling above and below the forecast channel over time. More interesting, is adding a 20-period Bollinger Band to our forecast.

There are a few interesting things to note about the 20-period Bollinger Band when added to the forecast. First, when the lower band crosses over or near the forecasted price line, that is often a precursor to price dropping, sometimes outside the bottom of the forecast channel. There is often a touch of price on the lower 20-period Bollinger Band to mark a price bottom. The top of the Bollinger Band often nearly touches or crosses below the forecast line a few weeks before the price bottoms. There are some other interesting aspects, but we can save them for another day.

The price zones on the charts above are important and aren't randomly drawn lines. These price zones quite often act as either price support or resistance. One of my favorite hobbies is going on Twitter and seeing what people say about the price of Bitcoin. I often find people discussing psychological price levels or some inherently biased price levels while believing they hold some significance. Usually, the levels discussed aren't important. If you compare what prices people on Twitter are talking about as support or resistance and compare them to the price zones on the charts above, you'll discover how often people miss the levels where prices will reverse. It happens all the time because people draw arbitrary lines that reflect their own biases on their charts. They are more often than not based on hope and imagination as much as anything else.

I expect that, short of Bitcoin closing above $49,152 for the week, the price will be capped and we're likely to chop sideways to lower. If the top of the Bollinger Band continues to roll over then we're likely to see the Bitcoin price dip below $40,000 and test the $37,963 to $38,213 price zone.