Next Bitcoin price crash will be ‘shallower’ than 80%, says Pantera Capital CEO

The Bitcoin (BTC) market’s tendency to crash may end up over 80% after posting strong rally.

This is according to a new report published by California-based hedge fund Pantera Capital. In detail, the report notes that recent periods of bitcoin’s price decline have been less severe than in the past.

For example, in 2013-2015 and 2017-2018, bitcoin collapsed by as much as 83% after topping nearly $1,111 and $20,089, respectively. Similarly, the cryptocurrency’s bullish trend in 2019-20 and 2020-2021 led to massive price corrections. With that said, the measures of their declines after that were -61% and -54%, respectively.

Bitcoin bulls and bears throughout its history. Source: Pantera Capital

Dan Morehead, CEO of Pantera Capital, highlighted the continued decline in selling sentiment after the 2013-2015 and 2017-2018 bear cycles, noting that future bear markets will be “shallow.” It is to explain:

“I have always argued that as the market becomes broader, more valuable, and more institutionalized, the breadth of price volatility will decrease.”

The data emerged as Bitcoin renewed its bullish strength to retest its current record high near $65,000.

The BTC/USD pair rose above $60,000 for the first time since early May as the US Securities and Exchange Commission approved the first Bitcoin-traded fund (ETF) after years of rejecting similar investment products.

The approval of the ETF for ProShare’s Bitcoin strategy has raised expectations that it will make it easier for institutional investors to get exposure in the BTC market. It also helped Bitcoin wipe out almost all of the losses it took during the April-July bear cycle as BTC price doubled to reclaim levels above $60,000.

Bitcoin price cycles through history. Source: Pantera Capital

BTC undervalued?

It’s becoming increasingly common to hear $100,000 valuations as Bitcoin grows into a mainstream financial asset, and it looks like the first approval of an ETF is about to happen.

Related: $200,000 BTC Price ‘Programmed’ as Bitcoin Heads to Second RSI Peak

Morehead cited the popular stock-to-flow model, which studies the impact of Bitcoin “halving” events on prices, to dismiss a similar bullish view of the cryptocurrency. He noted that the first halving reduced the rate of new bitcoin issuance by 15% of the total outstanding supply (about 10.5 million bitcoins), resulting in a bitcoin price increase of 9,212%.

The supply of bitcoin decreases after each halving. Source: Pantera Capital

Similarly, the second halving reduced the supply of new bitcoin by a third of the total bitcoin outstanding (about 15.75 million BTC). This led to a 2,910% rise, almost a third of the previous rally, showing less impact on the bitcoin price.

Post-Bitcoin halving rallies. Source: Pantera Capital

The last halving was on May 11, 2020, which reduced the amount of new BTC in circulation against the supply, with Bitcoin up more than 720% since then.

“The flip side is that we probably won’t see more progressions of 100 times a year either,” Moorhead said, adding:

“The logarithmically presented courses make today’s level look cheap to me.”

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