Bull and bear from financial newspaper with charts on dark gray background
Bitcoin price stayed around the $29,000 level for most of the week. This indicates low activity and momentum in the market, as well as a reluctance to engage in digital assets at this time. One reason for this reluctance is the expectation that Bitcoin price will see another crash before the bull market resumes. However, this crypto analyst explains why expectations may be disappointed this time.
Bitcoin price may not see a repeat of 2019-2020
Before the 2020-2021 bull market kicked in, Bitcoin price experienced a rollercoaster ride. For the most part, the bear market had devastated the digital asset, dropping it more than 80% below its all-time high at the time, and the falls would continue well into 2020.
Given Bitcoin price’s tendency to follow previous trends, investors understandably expect this trend to repeat itself. But pseudonymous crypto analyst “Tony The Bull” reached out to X (formerly Twitter) to use “recency bias” to explain why that might not be the case.
In the post, the crypto analyst used an analogy of a city that hadn’t previously experienced flooding suddenly encountered a heavy downpour. Since this had never happened before, companies without flood insurance were caught off guard. However, companies expect another flood in the future and therefore take out flood insurance.
The analyst explained that while action would be taken to reduce the likelihood of such a flood reoccurring, people continued to act in the knowledge of the flood’s impact. “It’s the brain’s way of using the most accessible information that has had a significant impact on you lately,” the analyst said. “It’s called recency bias.”
BTC movement over the past five years | Source: BTCUSD on Tradingview.com
This recency bias, when applied to Bitcoin, shows that investors are anticipating a repeat of 2019-2020 as this is the most recent bear market. As a result, investors act with knowledge of the most recent disruptive event.
“But much like the flooding has never happened before, we had a once-in-a-lifetime pandemic. The likelihood is rather low that we will see the same price movement as in 2019 and 2020,” Tony explains to The Bull.
Will BTC price stick with previous trends?
The analyst’s position is supported by the fact that bitcoin price has continuously deviated from historical trends this cycle. One example is that while the price of the digital asset fell about 70% below its all-time high of $69,000, it has recovered to nearly 50% below its ATH.
However, a similar trend was seen in 2019 when the BTC price rallied above $11,000 mid-year. But by the end of the year, about half of those gains were lost. The rest of the profits will be wiped out in early 2020.
However, should BTC end up following the previously noted trend, the price of the digital asset could fall as low as $12,000 before the next bull market begins. Now, however, we have to wait and see what happens in the end.
Follow Best Owie on Twitter for market insights, updates and the occasional funny tweet… Featured image from iStock, chart from TradingView.com
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.