Bitcoin (CRYPTO: BTC) may not be as strong as it looks at first glance, according to a new Binance Research report published Monday.
Bitcoin’s Drawdown Looks Smaller but It Isn’t
Binance Research analysts Kim Lim, Ken Lam and Kexin Liu wrote that Bitcoin’s current drawdown of 54.2% looks much milder than the 86.9%, 84.1% and 77.6% declines in the three prior bear markets.
The analysts say that comparison is misleading, because each cycle’s volatility has also fallen, from 99% in 2013 to 2015 to just 47% today.
Adjusted for volatility, Bitcoin’s current decline works out to 1.94 standard deviations, almost identical to the 1.93 to 2.20 range from the three earlier bear markets.
Bitcoin is not falling less, the analysts argue. It is swinging less, and the drawdowns have simply shrunk along with it.
Why Past Bounces Like This Have Failed
Bitcoin closed at $84,880 on Oct. 1, up 46.9% from its July low near $57,800. Binance Research tested how often a rebound of that size, with price still well below the prior high, has gone on to hold.
The firm found seven such signals between 2011 and 2023, and the outcome split sharply by how deep the drawdown was beforehand:
- Deep drawdowns (67% to 76% below the high): 2 signals, both held and went on to set new highs
- Shallow drawdowns (30% to 38% below the high): 5 signals, 4 failed and broke back below the prior low within 43 days
The current signal fired on Sept. 3 with Bitcoin 35.6% below its high, which puts it inside the shallow range where most past bounces failed.
Binance Research flags one recent case that looked much the same: Bitcoin bottomed near $60,000 in February, then rallied 38% by May, only to break back below that low in June and fall further to $57,800.
October rate-hike odds fell from near 70% to below 30% after softer PCE and labor data, yet the 10-year Treasury yield remains near a 24-year high.
The analysts flag that gap as the main obstacle to Bitcoin extending its rebound through October, historically its strongest month.
One Bright Spot: Crypto Equity Flows Are Surging
Net equity inflows on Binance more than doubled to $163 million last week, the largest weekly total since early July.
Crypto-linked stocks led the pack, with Circle (NYSE:CRCL), Strategy (NASDAQ:MSTR) and BitMine (NYSE:BMNR) together pulling in $71.4 million, about 44% of the total. The analysts read that tilt as traders positioning for Bitcoin’s rebound to continue.
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