Experienced cryptocurrency analyst and strategist Benjamin Cowen has warned investors that Bitcoin (BTC), the largest cryptocurrency, could potentially drop even further after experiencing a decline of over 15% from its highest level reached last month.
Secondary Fear Risk in Bitcoin
Cowen believes that the recent drop in the cryptocurrency market is in line with a model that occurs every four years due to Bitcoin’s halving of block rewards. The analyst points out the concept of secondary fear, stating, “The idea behind secondary fear in the cryptocurrency market comes from the fact that the S&P 500 stock index tends to drop in August or September of the year before the presidential election. So what’s happening right now is actually the S&P 500 making that drop I’m talking about.”
The S&P 500 index has dropped just over 5% since the beginning of August. Cowen points out that during previous periods of secondary fear, Bitcoin has dropped between 39% and 83%. He stated, “In 2019, when secondary fear started, a bearish candle was formed that pushed the price below the 20-week moving average, resulting in a 61% drop. In 2015, it dropped by around 40% or 39%. In 2011, before the bottom of the secondary fear, there was a 82.5% drop. In the three years before the election, the S&P 500 dropped in the third quarter of the year, and then Bitcoin’s price entered a downward trend for a while. We now have three examples. In the first of these examples, there was a drop of about 80%, in the second around 40%, and in the third, a drop of approximately 60%.”
Potential Bottom Level for Bitcoin at $17,500, According to Analyst
Based on past price trends of Bitcoin, Cowen highlighted three scenarios for how much it could drop. In his comment on the expected drop, the analyst stated, “If there is a similar 40% drop as in 2015, this means that it will reach $17,500 with the current prices. In this case, this level will be the bottom.”
The analyst also added, “This corresponds to the price movement in 2015. If there is a 61% drop as we experienced in 2019, the price of Bitcoin will drop to around $11,400. An 80% drop will pull the price much lower, but I don’t think it will drop that much.”
As of the time of writing this article, the largest cryptocurrency Bitcoin is trading at $25,916, experiencing a 2.08% decline in the past 24 hours.
