Bitcoin (BTC) market’s tendency to crash by over 80% after logging strong bull runs might come to an end.
That is according to a new report published by California-based hedge fund Pantera Capital. In detail, the report notes that the recent periods of BTC price drops have been less severe than in the past.
For instance, in 2013-15 and 2017-18, Bitcoin crashed by as much as 83% after topping out near $1,111 and $20,089, respectively. Similarly, the cryptocurrency’s bull run in 2019-20 and 2020-2021 led to massive price corrections. Nevertheless, the scales of their retracements afterward were -61% and -54%, respectively.
Bitcoin bull and bear markets across the history. Source: Pantera Capital
Dan Morehead, the chief executive at Pantera Capital, highlighted the consistent drop in selling sentiment after the 2013-15 and 2017-18 bearish cycles, noting that future bear markets would be “shallower.” He explained:
“I long advocated that as the market becomes broader, more valuable, and more institutional the amplitude of prices swings will moderate.”
The statements appeared as Bitcoin renewed its bullish strength to retest its current record high near $65,000.
BTC/USD rallied above $60,000 for the first time since early May as the U.S. Securities and Exchange Commission approved the first Bitcoin exchange-traded fund (ETF) after years of rejecting similar investment products.
The approval of ProShare’s Bitcoin Strategy ETF raised expectations that it would make it easier for institutional investors to gain exposure in the BTC market. That also helped Bitcoin wipe almost all the losses incurred during the April-July bear cycle as the BTC price doubled to reclaim levels above $60,000.
Bitcoin price cycles throughout the history. Source: Pantera Capital
BTC undervalued?
It’s becoming increasingly common to hear $100,000 valuations as Bitcoin grows to become a mainstream financial asset following its first ETF approval.
Related: $200K BTC price ‘programmed’ as Bitcoin heads toward 2nd RSI peak
Morehead cited the popular stock-to-flow model—which studies the impact of Bitcoin’s “halving” events on prices—to rule out a similar bullish outlook for the cryptocurrency. He noted that the first halving reduced the new Bitcoin issuance rate by 15% of the total outstanding supply (around 10.5 million BTC), leading to a 9,212% BTC price rally.
Reduction in Bitcoin supply after each halving. Source: Pantera Capital
Similarly, the second halving decreased the supply of new Bitcoin by one-third of the total outstanding Bitcoins (~15.75 million BTC). It led to a 2,910% bull run, almost a third of the previous one, thus showing a bit less impact on the Bitcoin price.
Post-Bitcoin halving rallies. Source: Pantera Capital
The last halving on record was on May 11, 2020, which further reduced the amount of new BTC against the circulating supply with Bitcoin rallying by over 720% since.
“The flipside of is we probably won’t see any more of the 100x-in-a-year rallies either,” said Morehead, adding:
The cycles shown logarithmically make today’s level look cheap to me.
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