Despite Bitcoin's recent 15% gain this month, some industry experts remain unconvinced that the cryptocurrency has escaped the bear market that began in October, given it still lags 40% behind its record high. Some forecasters predict a potential drop to $40,000, a 70% decline from its all-time peak. Bitcoin analyst James Check considers such a move statistically remarkable, though not impossible. After reaching over $126,000 in October, Bitcoin plummeted more than 50% to around $60,000 in February before stabilizing, and was trading near $78,000 on Friday.
Check suggests that bearish predictions warrant closer examination, citing the Bitcoin Mean Reversion Index, which averages key valuation metrics and ranks Bitcoin's price historically. At $40,000, Bitcoin would register as a '0.4 event,' placing it in the 0.4th percentile of all daily closes, below any meaningful deviation.
Check notes this would be equivalent to Bitcoin trading below $2 in 2011 on a relative basis, compared to its current price sitting around the 31.5th percentile, historically weak but within normal correction ranges. Check concludes that while no market event has zero probability, a $40,000 Bitcoin price would be a nearly unprecedented outcome.