Despite recent gains of nearly 15% this month, Bitcoin's price is still 40% below its all-time high, sparking concerns that the bear market that began in October is far from over. Some forecasters are predicting a potential drop to as low as $40,000, a 70% decline from its record high.
According to Bitcoin analyst James Check, such a move would be statistically extraordinary, albeit not impossible. Check points to the Bitcoin Mean Reversion Index, which averages key valuation metrics, including the 200-week moving average and volume-weighted average price measures. When modeled at $40,000, Bitcoin's price falls in the 0.4th percentile of all daily closes, a level that is historically weak and beyond typical correction ranges.
For perspective, Check notes that this would be equivalent to Bitcoin trading below $2 in 2011 on a relative basis. Currently, the price sits around the 31.5th percentile, which is weak but 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.