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 that it still lags 40% behind its record high. Some forecasters are even predicting a potential drop to as low as $40,000, which would represent a 70% decline from its all-time peak. According to Bitcoin analyst James Check, such a drastic move, although not impossible, would be statistically extraordinary. After reaching over $126,000 in October and subsequently plummeting more than 50% to around $60,000 in February, Bitcoin stabilized and was trading near $78,000 on Friday.
Check argues that bearish predictions warrant a closer examination. Check references the Bitcoin Mean Reversion Index, a composite model that averages multiple key valuation metrics, including the 200-week moving average and volume-weighted average price measures, to rank Bitcoin's price on a historical percentile basis. At $40,000, Bitcoin would register as a '0.4 event,' signifying that it would fall within the 0.4th percentile of all daily closes, which Check notes is 'below any meaningful deviation across all major anchors.' To put this into perspective, Check compares this to Bitcoin trading below $2 in 2011 on a relative basis, whereas the current price is around the 31.5th percentile, historically weak but within normal correction ranges.
Check emphasizes that while there's no zero probability in markets, a drop to $40,000 would indeed be a near-unprecedented outcome.