Despite Bitcoin's recent 15% gain this month, some industry experts remain unconvinced that it has escaped the bear market that began in October, given that it still remains 40% below its record high. Some forecasters have predicted a significant drop to as low as $40,000, a 70% decline from its all-time high.
However, analyst James Check deems such a move statistically unlikely, albeit not impossible. Check's analysis is based on the Bitcoin Mean Reversion Index, which combines various key valuation metrics, including the 200-week moving average and volume-weighted average price measures. According to this index, a price of $40,000 would place Bitcoin in the 0.4th percentile of all daily closes, an extremely rare event. For perspective, Check notes that this would be equivalent to Bitcoin trading below $2 in 2011 on a relative basis.
In contrast, the current price is around the 31.5th percentile, which is historically weak but still within normal correction ranges. While Check acknowledges that there is no zero probability in markets, he believes that a drop to $40,000 would be a near-unprecedented outcome.