Will the Bitcoin Crash Be Similar to 2019 and 2020?

The price of Bitcoin has shown a largely steady level of around $29,000 over the past week, indicating limited activity and momentum in the market. This cautious stance could be due to investors’ reluctance to engage with the digital asset given the prevailing uncertainties.

The prevailing sentiment revolves around the expectation of another market crash before the continuation of the bull market. Yet, one crypto analyst challenges this conventional view and suggests reasons why historical expectations may be dashed.

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The 2020-2021 Bitcoin crash

If you recall before the bull market began in 2020-2021, Bitcoin experienced a turbulent period. The bear market did significant damage to the digital asset, causing its price to drop by more than 80% from its previous all-time high. These downturns continued well into 2020, forming a pattern that could potentially repeat itself in the eyes of some investors. To counter this viewpoint, a pseudonymous crypto analyst named “Tony The Bull” took to social media and used the concept of “recency bias” to undermine the likelihood of a similar scenario this time around.

Tony The Bull drew a comparison to a city that experienced an unforeseen flash flood, explaining that businesses that were unprepared for the event did not have flood insurance. However, after this incident, these businesses anticipated future flooding and purchased flood insurance to mitigate the risks. The analyst further elaborated on the idea of recency bias, explaining how the brain tends to prioritize readily available information, especially information that has had a significant impact recently.

This cognitive bias seems relevant in the context of Bitcoin, where investors might expect a repeat of the 2019-20 bear market due to its recency. Nevertheless, Tony The Bull argued that unique events such as the unprecedented pandemic have shaped recent market trends and that the likelihood of a repeat of the exact price movements of 2019 and 2020 is relatively low.

This perspective is supported by the observation that Bitcoin’s price behavior has deviated significantly from historical patterns during this market cycle

For example, although the asset experienced a decline of about 70% from its all-time high of $69,000, it rebounded and was down about 50% from that high. In comparison, a similar trend emerged in 2019, when the Bitcoin price rose to over $11,000 in the middle of the year, but gave back about half of those gains by the end of the year, with further losses occurring in early 2020.

If Bitcoin follows historical trends, it could potentially fall as low as $12,000 before the next bull market kicks in. However, the current situation remains a matter of watch and wait, as the future direction of the market remains uncertain. The analyst’s perspective underscores the complexity of predicting market behavior, especially when faced with unique events and cognitive biases that shape investor expectations.

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(Featured image by Mohamed_hassan via Pixabay)

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First published in  COIN KURIER. A third-party contributor translated and adapted the articles from the originals. In case of discrepancy, the originals will prevail.

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