BitBull Capital Sees Bitcoin Falling To $5k
Crypto fund of funds BitBull Capital believes that Bitcoin could fall to $5,000, the firm said in a research note, before recovering. It examines 3 previous periods when BTC lost more than 60% of its value. The note is republished below.
"2018 has been tumultuous for Bitcoin. As of today, the King of Crypto has lost over 66% of its value since setting an all-time high of about $20K on Dec 17. Recent “bull runs” have lacked momentum, leading to skittish markets and repeated testing of key support levels.
There are many approaches to identifying a bottom for Bitcoin’s price, and each is speculative. Rather than rehash existing opinions on what support level appears unbreachable, what is required for a breakout, or macroeconomic and correlative predictions, let’s look at what historical precedent tells us about the current downtrend.
Since 2013, there have been three periods where Bitcoin’s spot price shed greater than 60% of its value. The first began on April 10, 2013. By April 14, the price was down -60.87% from the all-time high. It would be an additional 209 days until a new all-time high was reached, during which Bitcoin bottomed out at -70.28%.
The second, and most notable, slump in Bitcoin’s history was from December 5, 2013 through May 12, 2017, with the spot price dipping below -60% on February 13, 2014, or 71 days into the correction. During the subsequent 1,184-day lull, Bitcoin’s price reached a low of -90.99% of its former glory and spent over 700 days below that -60% threshold.
The third notable dip – the one we are currently riding out – began on December 18, 2017, (when comparing opening prices from day to day) and broke below -60% for the first time on February 6, 2018. Since then, it has been 141 days of ebbs and flows that have taken us to a rock-bottom (thus far) of -69.9%.
It is impossible to say when Bitcoin will shake off its stupor and begin to recover; however, using past trends as a guidepost, we can propose different scenarios that would be within normal limits. If we revisit the loss percentages of the early-2013 cycle, Bitcoin’s price will bottom out around $5,750.
The brief dip below $6,000 on June 24th led to increased support at this threshold, which has remained unbroken since. The longer Bitcoin trades around this level with minimal upward movement, the more likely it is that we will exceed the losses of the early-2013 cycle.
If the second cycle of late 2013 through early 2017 were to repeat, Bitcoin’s price could decline as far as $1,743. While simply imagining that price point will turn the stomachs of many current Bitcoin investors, it’s important to note that we were celebrating similar prices only a little more than a year ago (for perspective, the opening price on May 10 th , 2017 was $1,752).
Of the given scenarios, we believe it is most probable that Bitcoin will drop to the $5,000 threshold prior to any bull run gaining steam. Every failed run-up in price seems to generate more negative sentiment, which then fuels the subsequent dip to new lows. If the sideways trading pattern that has established itself over the past several months continues, it’s only a matter of time before the negative sentiment breaks through the $6,000 support with enough momentum to carry us back to the $5,000 threshold.
While passive investors may want to wait for $5K pricing to buy in, many active managers of cryptocurrency hedge funds see opportunity now in profiting off of current market volatility and inefficiency. There are ways hedge funds can profit from the volatility, no matter which direction the markets head. Market-neutral strategies, such as arbitrage and short-term quantitative trading, are just
a couple of ways savvy investors are profiting from the volatility. Directional strategies like shorting, or early-stage investment, can also generate returns, if implemented appropriately.
Many crypto investors believe in the long-term price appreciation of Bitcoin, and we’ve seen price predictions as high as Tim Draper’s estimate of $250,000 in 2020. If you believe in the long-term potential of Bitcoin and other crypto assets, purchasing strategies such as dollar-cost averaging can be effective, as the bottom will be impossible to call exactly and we may be near a buy point now.
That said, we believe that volatile ride could include a price level as low as $5,000 in the near-term before appreciating."