Bitcoin (BTC) market development could collapse by more than 80% after a strong rally ends.
This is stated in a new report from the California hedge fund Pantera Capital. In detail, the report notes that recent periods of bitcoin price declines have been less severe than before.
For example, in 2013-15 and 2017-18, bitcoin fell 83% after surpassing $ 1,111 and $ 20,089, respectively. Likewise, the bullish gains in cryptocurrencies in 2019-20 and 2020-2021 led to significant price adjustments. However, the reversal rate was -61% and -54%, respectively.
Bitcoin bull and bear markets throughout history. Source: Pantera Capital
Dan Morehead, CEO of Pantera Capital, highlighted the continuing decline in sellers’ sentiment following the 2013-15 and 2017-18 bear cycles, and noted that bear markets will be “smaller” in the future. Explain:
“I have long argued that as the market becomes broader, more valuable and institutionalized, the degree of price volatility will decrease.”
The announcement came when Bitcoin resumed its gains to test the current high of around $ 65,000.
The BTC / USD pair climbed above $ 60,000 for the first time since early May, when the US Securities and Exchange Commission approved its first ETF after exiting similar investment products.
The ETF approval of the Bitcoin ProShare strategy has raised expectations that institutional investors will find it easier to access the BTC market. Bitcoin also helped erase nearly all of the losses incurred during the April-July bear cycle, when the price of BTC doubled again to levels above $ 60,000.
Bitcoin price cycles throughout history. Source: Pantera Capital
Is BTC undervalued?
There is increasing talk of a value of $ 100,000 as Bitcoin has become a major financial asset since the initial approval of the ETF.
Related Topics: BTC’s $ 200,000 price is “programmed” as Bitcoin moves towards other RSI peaks.
Moorehead cited a popular stock flow model that examines the impact of Bitcoin “halving” events on prices, to reject a similar optimistic view of cryptocurrency. He noted that the first bias reduced the release rate of new bitcoins by 15% of the total amount of bitcoins in circulation (roughly 10.5 million bitcoins), resulting in a 9212% increase in the price of bitcoins.
The supply of bitcoins is reduced after each cut in half. Source: Pantera Capital
Likewise, the second cut halved the supply of new bitcoins by a third of the total remaining bitcoins (roughly 15.75 million bitcoins). This resulted in an increase of 2,910%, nearly a third from the previous rally, with slightly less impact on the bitcoin price.
It has doubled in size following Bitcoin. Source: Pantera Capital
The last recorded halving occurred on May 11, 2020, resulting in a drop in the number of new bitcoins compared to trading volume, and bitcoin has grown by over 720% since then.
“The downside is that we will probably never see the 100th AGM again,” Moorehead said, adding:
The logarithmically shown episodes reduce the cost today.