The trend in which the Bitcoin market has plunged more than 80% after a strong bull run may be coming to an end.
That's the conclusion of a new report from California-based hedge fund Pantera Capital. Specifically, the report notes that the recent drop in bitcoin prices has been less severe than in the past.
For example, in 2013-15 and 2017-18, Bitcoin plummeted 83% after reaching peaks near $1,111 and $20,089, respectively. Likewise, Bitcoin’s bull run in 2019-20 and 2020-2021 led to massive price corrections. Nonetheless, they have since retraced -61% and -54%, respectively.
Bull and Bear Markets in Bitcoin History Source: Pantera Capital
Dan Morehead, chief executive of Pantera Capital, highlighted the continued decline in sell-off sentiment following the bear market cycles of 2013-15 and 2017-18, noting that future bear market losses will be "smaller". He explained:
"I've always believed that as the market becomes broader, more valuable and more institutionalized, the magnitude of the price swings will moderate."
The statements come as Bitcoin resumes its bullish momentum, retesting its current record high near $65,000.
BTC/USD topped $60,000 for the first time since early May as the U.S. Securities and Exchange Commission (SEC) approved the first bitcoin exchange-traded fund (ETF) after years of rejecting similar investment products.
The approval of ProShare's bitcoin strategy ETF has raised expectations that it will make it easier for institutional investors to gain exposure to the bitcoin market. It also helped Bitcoin erase almost all of its losses from the April-July bear market cycle as its price doubled and returned to levels above $60,000.
Price Cycles in Bitcoin History Source: Pantera Capital
As Bitcoin becomes a mainstream financial asset following the approval of the first ETF, it is becoming more common to hear valuations of $100,000.
Morehead cited the popular S2F model — which studies the price impact of Bitcoin’s “halving” event — to rule out a similarly bullish outlook for Bitcoin. He pointed out that the first halving reduced the issuance rate of new Bitcoins by 15% (approximately 10.5 million BTCs), leading to a 9212% increase in Bitcoin prices.
Bitcoin supply reduction after each halving Source: Pantera Capital
Likewise, the second halving reduced the supply of new bitcoins by a third (approximately 15.75 million BTC). This resulted in a 2,910% increase, almost a third of the previous one, and thus had less of an impact on the price of Bitcoin.
Bitcoin’s post-halving gains. Source: Pantera Capital
The last halving took place on May 11, 2020, which further reduced the number of new Bitcoins relative to the circulating supply, and Bitcoin is up more than 720% since then.
"On the other hand, we probably won't see 100x gains in a year," Morehead said, adding:
The period displayed logarithmically makes me think today's price is cheap.
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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