What This Chart Shows
This model treats Bitcoin's price as a damped harmonic oscillator — a physics concept where each successive cycle has diminishing amplitude. As Bitcoin matures, its booms and busts are becoming less extreme, and this model captures that mathematically through a decaying envelope centered on a power-law equilibrium.
The top panel shows Bitcoin's price on a log scale with the harmonic center line (cyan) and the power law equilibrium (dashed). The colored bands represent the oscillation envelope — the theoretical range of how far price can deviate from center. The info box shows price, fair value, deviation, oscillator reading, and historical 1-year forward return for the current zone.
The middle panel is the Harmonic Oscillator, ranging from -100 (maximum deviation below center, i.e. capitulation) to +100 (maximum deviation above, i.e. euphoria). The Cycle Energy line (blue, right axis) tracks the amplitude of the oscillation over time, showing the long-term dampening trend.
The bottom bar chart breaks down median 1-year forward returns by oscillator zone. Capitulation readings (-75 to -100) have historically delivered +135% median returns with a 100% win rate. Euphoria zones show -37% median returns with only a 29% win rate.
How to Read It
The oscillator reading is everything. At -100 (capitulation), the model is saying price has reached the maximum plausible downside deviation for this stage of Bitcoin's lifecycle. The 2-year fair value projection near the bottom of the price chart gives you a forward target. When the oscillator is in capitulation territory, the historical forward returns speak for themselves.
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