Bitcoin HODL’ers Unfazed by New Bottom

Bitcoin briefly fell below $90,000 yesterday, hitting its lowest level since February in a drastic drop from its record high above $126,000 just six weeks ago. 

The dip has been deeper than some analysts expected. JPMorgan said last week that bitcoin’s fall would be stopped at $94,000, and investors would then buoy the coin to new all-time highs within the year. Nope. 

Though bitcoin slightly rebounded yesterday, crypto’s immediate future is unclear as investors feel the FUD. 

Fear, Uncertainty and Death Crosses

Bitcoin has entered “death cross” territory, meaning its 50-day moving average has fallen below its 200-day moving average. The dramatically named phenomenon illustrates some investors’ fears: Bitcoin spot ETF inflows have stalled in recent weeks, while corporate buyers have backed off aggressive buying. A Fear & Greed index for crypto on Monday hit its most fearful level since 2022. 

Experts, however, consider a death cross a lagging indicator that isn’t an accurate predictor of the future. And a quick scan of crypto forums on Reddit shows long-term bitcoin investors replying to panicking posters with variations of, “First bull run? Buckle up.”

• Bitcoin has historically had a four-year cycle of highs and lows, previously peaking in 2013, 2017 and 2021. Do the math, and 2025 would be the next peak in that cycle. Some analysts say it has become a self-fulfilling prophecy, helping spook investors after the coin rose to new highs last month. There’s debate about whether the last peak was truly the end of the cycle, whether the current dip will remain relatively shallow before rebounding, and whether the four-year cycle is still relevant. (Strategy co-founder and crypto-evangelist Michael Saylor said the cycle is dead.)
• Bitcoin has fallen about 27% from its last peak, which is still short of a typical downturn. Crypto dropped 45% twice in 2022, and a crypto researcher told CoinDesk this is the third 30% correction since spot bitcoin ETFs were introduced in the US last year. 

Hedge Trim: Pinning down the exact reason bitcoin’s in a slump now, from general economic fears to deleveraging and so on, is complicated and may be beside the point. Volatility isn’t uncommon in crypto, but it calls into question narratives about bitcoin being a hedge against the dollar and even digital gold. On the flip side, after bitcoin has historically fallen to lows, it has always eventually bounced back to new highs.