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According to the report, Bitcoin price increases will be less dramatic in the future.
The Bitcoin (BTC) market’s proclivity to crash by more than 80% after long bull runs may be coming to an end.
That is according to a new report published by California-based hedge fund Pantera Capital. In detail, the report notes that the recent periods of BTC price drops have been less severe than in the past.
For instance, in 2013-15 and 2017-18, Bitcoin crashed by as much as 83% after topping out near $1,111 and $20,089, respectively. Similarly, the cryptocurrency’s bull run in 2019-20 and 2020-2021 led to massive price corrections. Nevertheless, the scales of their retracements afterward were -61% and -54%, respectively.
Dan Morehead, the chief executive at Pantera Capital, highlighted the consistent drop in selling sentiment after the 2013-15 and 2017-18 bearish cycles, noting that future bear markets would be “shallower.” He explained:
“I long advocated that as the market becomes broader, more valuable, and more institutional the amplitude of prices swings will moderate.”
The statements came as Bitcoin regained its bullish momentum, threatening to retest its current record high near $65,000.
BTC/USD surpassed $60,000 for the first time since early May after the Securities and Exchange Commission approved the first Bitcoin exchange-traded fund (ETF) after years of rejecting similar investment products.
The approval of ProShare’s Bitcoin Strategy ETF raised hopes that it would make it easier for institutional investors to gain exposure to the cryptocurrency market. This also helped Bitcoin recoup nearly all of its losses from the April-July bear cycle, as the BTC price doubled to reclaim levels above $60,000.
As Bitcoin grows to become a mainstream financial asset following its first ETF approval, $100,000 valuations are becoming more common.
Morehead used the popular stock-to-flow model to rule out a similar bullish outlook for Bitcoin, which studies the impact of “halving” events on prices. He pointed out that the first halving reduced the new Bitcoin issuance rate by 15% of the total outstanding supply (approximately 10.5 million BTC), resulting in a 9,212 percent BTC price increase.
Similarly, the second halving decreased the supply of new Bitcoin by one-third of the total outstanding Bitcoins (~15.75 million BTC). It led to a 2,910% bull run, almost a third of the previous one, thus showing a bit less impact on the Bitcoin price.
The last halving on record was on May 11, 2020, which further reduced the amount of new BTC against the circulating supply with Bitcoin rallying by over 720% since.
“The flipside of is we probably won’t see any more of the 100x-in-a-year rallies either,” said Morehead, adding:
The cycles shown logarithmically make today’s level look cheap to me.