Bitcoin Is Dropping Fast… $40K or Is the Bottom In?

Bitcoin is in a bear market.   So how low can its price go?   Historical market data going back over a decade  is pointing to around $40k or slightly under.   Here’s why several analysts  are in agreement with this,   and stay tuned till the end where we  lay out the potential bull case as well. To start, these two metrics have called  every Bitcoin bottom for over ten years.

The first one is realized price. It’s dynamic,  and right now that's sitting around $54,000.    It's basically the average price the market  actually paid for every Bitcoin in existence.    When Bitcoin's trading above that number,  the average holder is in profit. Below it,   underwater. The second one is balanced price,   and that's around $40,000 today. This one  adjusts for coins that have been sitting   still for years. If a Bitcoin hasn't moved  in five or six years, it's basically locked   supply and not part of the active market.   Balanced price weights those coins down,   and what you're left with is the true  cost basis of the coins actually trading. In every midterm year—2011, 2015, 2018,  2022—Bitcoin first breaks below realized price,   then drops to or below balanced price.   That's where bottoms form. In 2018,   balanced price was around $4,000 and  Bitcoin bottomed at $3,200. In 2022,   balanced price was $15,900 and  Bitcoin bottomed at $15,700.   At time of shooting Bitcoin had just rejected  off its 200D moving average at around 82k.    That's 20k+ above realized price and around 40k  above balanced price. In every midterm year,   it's broken below both before bottoming,  so keep an eye out for those levels.

There's more evidence pointing the same direction. Investment firm Stifel projected Bitcoin’s cycle   low at $38,000. Every Bitcoin cycle, the  peak-to-trough drop gets about 7% shallower.    2011 was down 93%, 2015 was down  84%, 2018 was 83%, and 2022 77%.   If the pattern keeps holding, this  cycle should bottom around 70% down,   which would be around $38,000—the same  zone the balanced price model landed on. As mentioned, Bitcoin also just rejected off  its 200d MA—the line that separates long-term   bullish and bearish regimes. In every bear  market, Bitcoin rallies up to the 200-day,   gets rejected, and breaks down from there.   This could be the pattern firing on schedule. There's also a timing element to this.   Analyst Ben Cowen found there was always   around 140 to 170 days before lows got taken  out in a bear market. With the previous low   formed on February 6th, that means bitcoin  might break below 60k by sometime July. And the order book is thinning out. In  March, MicroStrategy and the ETFs absorbed   94,000 Bitcoin. The rest of the market sold  157,000 Bitcoin into that demand. Net demand   was negative 63,000. So what's happening is  a handful of large institutions are catching   all the supply everyone else is dumping.   Price holds because the institutional bid   keeps absorbing. But if those buyers pause,  there's no second layer of demand underneath. The macro backdrop makes that pause more likely.   Warren Buffett's sitting on $397 billion in cash,   his biggest defensive position ever.   The last two times he did this were   pre-2000 and pre-2008. Both preceded  crashes. Tech took 81,000 layoffs in Q1,   the worst quarter in years. The Clarity Act  is stalling in the Senate. Oil's at over   $100 a barrel from the Iran war. None of this  is the kind of backdrop where institutional   capital expands its Bitcoin allocations.   If anything, it argues for trimming.

That's the bear case, but there are  also people who are more optimistic.   The argument from the bulls is  that this time is structurally   different. MicroStrategy has bought  over 140,000 Bitcoin this year. Spot Bitcoin ETFs hold $102 billion collectively. Whales accumulated 270,000 Bitcoin  in a single month earlier this year. Exchange reserves just hit a seven-year low—coins  are getting pulled off exchanges into long-term   storage, which means less supply available to  sell and less selling pressure overall. None of   that infrastructure existed in 2018 or 2022. The  buyer base has changed. And if the panic sellers   already got flushed in February, what's left  doesn't panic at the same prices retail does. Then on May 7th, two analysts suggested  the bear market could be over.   Tom Lee from Fundstrat pointed to what  he calls the three-month rule. In its 16   years of existence, Bitcoin has never closed three  consecutive positive months during a bear market.    March and April closed green, so if May is  up, this thesis says the bear market is done. The same day, John Bollinger—the technical  analyst behind the popular Bollinger Bands   indicator—said his model just flipped  bullish on Bitcoin, and went all in. MicroStrategy's Michael Saylor has  also called the bear market over,   pointing to the same institutional shift  as evidence the bottom's already in. So that's where we are. One side is going  to get proven wrong in the next few months.   By the time you’re watching this, if  Bitcoin has continued trending down   after its rejection off the 200D MA, that  may be a clue we’re going further down. If we’ve bounced, the bulls may  have their time. But what do you

think? How low can Bitcoin actually  go, or is the bottom already in?