Bitcoin has fallen to levels not seen since November, with investors remaining cautious about further declines.
While uncertainty about the direction of BTC continues, CoinShares analyst argued that Bitcoin could quickly recover from the drop by following the trend of the US stock market.
CoinShares analyst Christopher Bendiksen noted in a blog post that Bitcoin could experience a rapid recovery after a sharp drop, as it did during the COVID-19 market crash.
The analyst noted that BTC’s current situation could repeat the 2020 pattern of sharp decline and recovery.
The analyst noted that in 2020, BTC plummeted by more than 50% before experiencing a rapid recovery largely driven by stimulus measures.
The analyst said that despite the current macroeconomic uncertainty and increased market volatility, a rapid recovery similar to 2020 could be experienced thanks to the possible policy easing of the Fed and pro-liquidity measures under the Donald Trump administration.
Bendiksen also noted that the BTC price has a lag of about 90 days relative to global M2 money supply growth, which he warned could send BTC to $60,000 or lower, meaning there is still further downside risk before a possible recovery.
“The current cryptocurrency market is very similar to that of 2020. And the conditions suggest that Bitcoin could follow the US stock market and then recover quickly.
Since Bitcoin is a highly liquid asset, it tends to be more volatile in the early stages of a major market turbulence.
But when things get going, they quickly stabilize. We have seen this phenomenon in the past during the COVID-19 crisis.
Bitcoin fell by more than 50% in a short period of time, but quickly recovered within a few weeks.
The subsequent bull market began as central banks around the world began printing money, pushing Bitcoin to new highs in 2021.
Now, if Trump’s fiscal easing policies play out as planned, his policies could set the stage for a full-fledged bull market. Also, since the Fed’s return in 2022, Bitcoin has tended to follow the movement of global M2 (broad money supply) with a lag of about 90 days. If this pattern repeats, an explosive recovery is also in order. Given the low interest rates and quantitative easing environment that prevailed in 2020, a serious bull market could be in the works.
On the other hand, if my prediction is wrong, we may have entered a reversal phase where the market is already trending downward.
There could be a significant additional decline until demand and price come into balance, and the price of BTC could fall to $60,000 or even lower.”
*This is not investment advice.
