Bitcoin Price Target for this Cycle Top

Prediction model

As a basis for my calculations, I will use my Halving-Corrected Puell Multiple indicator, which allows one to assign an overvalued threshold of 12.49 to the indicator.

Step 1: Predicting the Puell Multiple



Looking at the historical behaviour of the indicator, I came up with these three cases:

• Conservative case: 10.4: this was the value at peak (5), when there was a cycle top, but the indicator didn't reach the overvalued territory
  
• Base case: 12.5: just a bit above the overvalued line (12.49)
  
• Bull case: 13.61: the value at peak (3) from December 2013, when the indicator shot over the threshold by a good margin. It hasn't been there since, and it is unlikely to revisit that value.
  

The current correction factor, after the 4th halving, is 1,63^4 = 7.059. Dividing the above three cases by 7.059, I transformed them back to the original Puell Multiple's scale:

• Conservative case: 1.4733
• Base case: 1.7708
• Bull case: 1.9252

Step 2: Calculating the Miner Revenue from the Puell Multiple

The Puell Multiple is a ratio between the current (Daily) Miner Revenue ("Miner Revenue" from now on) and the 365-Day Moving Average of the Daily Miner Revenue. We know the ratio. In order to calculate either term of the ratio, we have to know the other one. Here, it is easier to predict the Moving Average, as its movement is much smoother and more predictable than the erratic raw Miner Revenue.

The 365-day Moving Average of the Mining Revenue is at 44.752M USD on the monthly chart at the time of writing. We can expect that it will go higher as the Miner Revenue goes higher while we are approaching the cycle top, so even the conservative case should be higher than the current value. My Miner Revenue MA estimates based on this, are (see picture below. Yellow line: Miner Revenue, Green line: Miner Revenue MA):

• Conservative case: 46.8M
• Base case: 50M
• Bull case: 52M

Multiplying the Miner Revenue MA values by the previously estimated Puell Multiples gives us nine (three times three) possible Miner Revenue values at the cycle tops. I leave the arithmetic to the reader.

Step 3: Calculating Bitcoin's price from Miner Revenue

Miners get their rewards in Bitcoin for their effort to secure the network. Since we have Miner Revenue estimations from the previous step in USD, we need to know (estimate) how many Bitcoin are issued daily, then it becomes a simple division:

Bitcoin price = Miner revenue / Bitcoin's daily issuance

Luckily, this data is publicly available. The Miner Revenue (and thus the Bitcoin issuance) consists of two parts:

1. The block reward: it is fixed and doesn't change between halvings
   
2. Transaction fees: depends on the network traffic
   

If you look up the Bitcoin issuance chart, you can see that it changes from day to day, and in the past one year

1. The highest value it hit was 575 Bitcoin (BTC)
   
2. 560 BTC was a well respected level, touched only 3 times
   
3. We can consider 520 BTC relatively high, with most of the days being below it
   
4. The average falls between 480 and 440 a day, so we can say that 480 is above average
   

When Bitcoin's price hits All-Time Highs (ATH), we can expect more attention from traders and investors, which translates to more transactions on the network, therefore I expect above average transaction fees issued. My estimates are:

• Conservative case: 480
• Base case: 520
• Bull case: 560

By dividing our Miner Revenue estimates by these daily issuance values, we will get three estimates for each.

Step 4: Putting it all together

As we have seen, in Steps 1, 2 and 3, we have three parameters of the equation that I had to estimate:

1. The Puell Multiple
   
2. Moving Average of the Miner Revenue
   
3. Daily Issuance
   

Bitcoin price = (Miner Revenue MA * Puell Multiple) / Bitcoin's daily issuance

I have estimated three cases (conservative, base and bull) for each of these parameters. Calculating all combinations yields 3x3x3 = 27 Bitcoin price estimations. Here are the highlights:

• The minimum estimated price is 123125.5 USD, which Bitcoin has already surpassed at the time of writing.
  
• The maximum estimated price is 208563.5 USD
  
• The average of all estimations is 165009 USD
  

Conclusion

I picked the average value of the result set, which is 165009 USD. I feel it realistic. The minimum is already out of the game, and the maximum feels unrealistically bullish.

Rounding it, my bottom line is 165000 USD for Bitcoin.