Bitcoin's Power Law Floor: A Regime Change Imminent?

The Bitcoin Power Law model has been a widely followed indicator for the cryptocurrency's long-term price trajectory. However, with the current price near $67,000, some analysts are warning that a floor break is imminent. The model predicts that if the price stays flat through the fall, the floor will catch up by mid-December.

The Power Law model assumes continuous compounding and treats Bitcoin's long-run price path as a power curve in time. However, real markets have discontinuities, such as risk-off episodes and ETF flow changes, that can create 'gap risk' relative to a smooth trendline. If the price stays near current levels, the floor will continue to rise, shrinking the cushion between the price and the floor.

A break in the Power Law floor would not invalidate Bitcoin, but rather signal a regime change versus the historical fit. It would also hand critics a clean narrative, as some have argued that power-law fits to Bitcoin are spurious correlations driven by sample window sensitivity. However, the debate is becoming more scientific again, with recent academic research finding different slopes and adjusting the time axis for volatility and transaction volume.