As the bitcoin ETF in the United States finally becomes a reality this week, some believe that bitcoin will soon set new records, while others predict that investors will “sell the reality” after “buying a rumor.”
In fact, this would not be the first time that bitcoin has risen in anticipation of a major event to begin to decline as soon as that event becomes a reality. This was the case with the launch of CME Bitcoin futures in 2017 and most recently the IPO of Coinbase (NASDAQ: NASDAQ: COIN) earlier this year.
So the question for prudent investors is how much Bitcoin could fix if history repeats itself.
Bitcoin is expected to make a minor correction this time around
In this context, we can note the very relevant comments of the Pantera Capital Fund through its CEO Dan Morehead in a report published earlier this month.
In particular, he recalled that during the first two major correction phases of Bitcoin in 2013-15 and 2017-18, bitcoin fell by more than 80% after new highs.
However, he also pointed out that the corrections after the peaks of 2019-20 and 2020-2021 were much less severe, namely -61% and -54%.
Therefore, we can expect that if Bitcoin enters the bear market after the launch of Bitcoin ETFs in the US, the losses are unlikely to exceed 50%. However, this would bring the digital coin back to almost $ 30,000.
“I have long argued that as the market becomes larger, more valuable and more institutional, the extent of price fluctuations will ease,” he explained, justifying the increasingly shallow bear markets.
Bitcoin rallies will also be less and less massive
However, Morehead pointed out that the flip side of the coin is that bull rally cryptocurrencies will also be smaller and smaller, pointing out that the bull effect of the various halves that have taken place in Bitcoin’s history has resulted in smaller and small dips.
According to him, the first half reduction of Bitcoin led to a 9212% increase in cryptocurrency, while the second resulted in a 2910% increase. The third, which took place last year in May 2020, has so far brought the rally “only” 720%.
It halves the remuneration of bitcoin miners by about half every four years, which corresponds to a reduction in supply with a mechanically bullish impact on the price of bitcoin.