Trace Mayer tweeted that he believes Bitcoin is currently undervalued, and that his target price for this coming February (only four months away) is $27,395 per Bitcoin. He bases this prediction on the steady increase of Bitcoin’s 200 day moving average. Mayer is extrapolating the rise of the 200 day moving average, assuming it will reach $5,767 by February. If this is the case, he asserts that a per-coin value of 4.75 times the moving average, or $27,395, would be a “fair” price.
Who is he?
Trace Mayer, J.D., was one of the “first popular bloggers to publicly recommend Blockchain technology” according to his website. At the time, Mayer recommended that his followers purchase Bitcoin, the price per coin was just $0.25.
Like most Bitcoin early adopters, Mayer is extremely wealthy, having recently challenged Roger Ver to a 25,000 BTC wager. There are very few people in the world with enough juice to make $121 mln bets. In addition to his early adoption and recommendation of Bitcoin, Mayer provided seed money for Kraken, BitPay, and Armory.
On his website, Mayer describes himself as:
“An entrepreneur, investor, journalist, monetary scientist and ardent defender of the freedom of speech. Trace Mayer holds degrees in accounting and law. He studied Austrian economics focusing on Murray Rothbard and Ludwig von Mises.”
Mayer has long been concerned with privacy and regulation, fearing that IRS action and AML/KYC laws could hamper growth and incentivize bad behavior.
Technical analysis is the art of trying to determine the future price movement of an asset based on its history. While many derisively claim that it’s merely a pseudoscience, others believe that technical analysis has its roots in human psychology. Analysts are clear to point out that their work is based on probability, thus it’s possible to say that the price will likely go up or down, but the unpredictability of the markets keeps it from being a certainty.
According to Investopedia, a moving average is:
“A simple technical analysis tool that smooths out price data by creating a constantly updated average price...A moving average can help cut down the amount of ‘noise’ on a price chart...or act as support or resistance.”
The 200 day moving average that Mayer cites is simply the average price of Bitcoin over the last 200 days. Every day, the oldest day’s data is removed, the most recent day’s closing price is added, and the metric is recalculated. Because the 200 day moving average is weighted with such old price data, in a bull market it lags significantly behind the current price. The measure’s purpose is to show the general trend of price movement.
In Bitcoin’s case, the 200 day moving average continues to rise, indicating that we remain in a bull market (momentum is on the side of the bulls). Should the moving average falter, that would be a sign of weakness and possible reversal. The current price should remain within a certain range of the moving average. If the price goes too far above it, the gains are likely unsustainable.
Mayer is predicting that the 200 day moving average will continue to rise, and that Bitcoin will remain a reasonable level above the measure. Only time will tell if Mayer is right or wrong, but history certainly seems to be on his side. After all, I wouldn’t want to bet against a guy who has made at least $120 mln off Bitcoin’s growth.