Bitcoin has been hovering around the $29,000 mark, indicating a lack of activity and momentum in the market. Many investors are hesitant to engage with the digital asset due to the expectation of another crash before the next bull market. However, a cryptocurrency analyst suggests that this time may be different.
Unlikely to Repeat the 2019-2020 Trend
In the period leading up to the current bull market, Bitcoin experienced a turbulent year. The bear market caused the digital asset’s price to plummet more than 80% from its all-time high, with subsequent crashes throughout 2020.
Considering Bitcoin’s tendency to follow previous trends, many investors anticipate a repeat of this pattern. However, pseudonymous crypto analyst “Tony The Bull” argues against this expectation, using the concept of “recency bias” to support his claim.
Using an analogy of a town experiencing its first flood, the analyst explains that businesses would be caught off guard without flood insurance. However, after the flood, the businesses would anticipate another one and take measures to protect themselves. The analyst states that the brain gravitates towards recent impactful events and labels this as “recency bias.”
Applying this concept to Bitcoin, investors’ expectation of a repeat of the 2019-2020 trend stems from the most recent bear market. However, the analyst suggests that the probability of experiencing a similar price action is low due to the unprecedented nature of the once-in-a-lifetime pandemic.
Bitcoin Price Deviating from Historical Trends
The analyst’s perspective is supported by the fact that Bitcoin has been deviating from historical trends during this cycle. For example, while the price did drop to about 70% below its all-time high of $69,000, it then recovered to approximately 50% below the ATH.
A similar trend occurred in 2019 when Bitcoin’s price rebounded above $11,000 mid-year but ultimately lost half of those gains by the end of the year, with the remaining gains wiped out in early 2020.
If Bitcoin does adhere to the previously established trend, its price could potentially fall as low as $12,000 before the next bull run commences. However, it remains uncertain which path the cryptocurrency will take.
1. Will the Bitcoin price crash again?
There is uncertainty regarding whether Bitcoin will experience another crash before the next bull market. While some investors anticipate a repeat of previous trends, others believe the unprecedented nature of the recent pandemic makes a similar price action less likely.
2. What is “recency bias”?
Recency bias is a psychological phenomenon where individuals give more weight to recent events when forming judgments or making decisions. In the context of Bitcoin, it refers to investors relying on the most recent bear market (2019-2020) to predict future price movements.
3. How has Bitcoin deviated from historical trends?
During the current cycle, Bitcoin has not strictly followed historical trends. While it experienced a significant price drop from its all-time high, it also recovered to a relatively higher level compared to previous cycles. This deviation raises doubt about whether the cryptocurrency will repeat its past patterns.
4. What is the potential price drop for Bitcoin?
If Bitcoin adheres to the previously established trend, its price could potentially fall as low as $12,000 before the next bull run begins. However, this prediction is speculative and uncertain, as the cryptocurrency market is known for its volatility.