Bitcoin hit a two-month high earlier today following amendments to a spot ETF application by Fidelity, but some forecasts still see the alpha cryptocurrency dropping considerably in the coming months before the next halving. Renowned crypto YouTuber Benjamin Cowen doesn’t rule out a 50% Bitcoin price correction based on historical patterns.
Bitcoin On Verge Of 50% Crash: Analyst
If you are expecting Bitcoin to soar in the lead-up to the halving, you’re in for a rude shock.
In his latest interview with Scott Melker, analyst Benjamin Cowen pointed out that BTC has historically plummeted by 50% before going through a halving event.
Roughly every four years, the Bitcoin rewards the miners receive for successfully mining a block are slashed in half as a way of controlling the blockchain’s supply economics. This event is known as the halving and is often considered a positive catalyst for the price of Bitcoin as it lessens inflationary pressure on the benchmark crypto. The next halving is set to happen around April 2024.
While he didn’t explicitly forecast a 50% retracement, historical data doesn’t favor BTC bulls:
“Look, last cycle, what we always see, everyone talks about the Bitcoin halving. I’ve seen this for the last several cycles. Everyone talks about it and what normally happens is Bitcoin halves [in price] before the halving and then people are like, ‘Oh, well, that’s what the halving meant.”’
Cowen highlights previous market cycles to support his point, noting the drop that happened ahead of the pandemic and the one before that. During these instances, the price of Bitcoin saw a 50% drawdown before commencing a parabolic bull run.
The similarity of these declines, especially the ones that began in the summer, led Cowen to contemplate whether the current market could be on the brink of a 50% fall. If so, traders should prepare for more pain as BTC can potentially nosedive to $15,000 levels.
One of the main reasons behind Cowen’s gloomy prediction is the waning liquidity within the crypto market and most risk assets markets.
“And that’s my concern for Bitcoin, is that liquidity is leaving the altcoin market. The purchasing power of these altcoins are going down and at some point, I think that affects Bitcoin. Look at the total market cap. If there were a lot of new money coming into the space, why is the total market cap the same as it was back in February and the same as it was back in August 2022?
As liquidity diminishes, Bitcoin can become more vulnerable to steep drops. This has historically been a harbinger of huge market movements, and the crypto influencer and founder of IntoTheCryptoverse thinks this time will be no different.
Cowen’s warning comes at a time when the crypto market has been characterized by increased volatility, particularly after the fake ETF approval debacle, and market participants are keenly observing the movements of the world’s largest cryptocurrency by market value.