After Bitcoin casually broke its 2017 price record of $20,000 a month ago and went on to climb as high as $41,000, it reignited the interest of various media outlets that had either declared it dead after 2017 or simply moved on to more sensational topics.
Yet, in late 2020, it became apparent to many that Bitcoin is back. As institutional investors increasingly took notice of the asset for its gold-like properties and capabilities as an inflation hedge, Bitcoin made its grand comeback in media publications around the world.
Thus, its first notable drawback since the recent upward journey has not gone by unnoticed. Following a drop from over $41,000 to $31,000 in a single day, CNN Business on Monday published an article titled “Bitcoin plunges more than 20% in three days. It’s now in a bear market.”
While the headline sounds worrying, the article itself reads less negative; it mentions the rally that preceded the drop and features a quote stating that “the bull run is not over yet.” Yet the author writes that since Bitcoin dropped 20 percent, it “is now in a bear market.”
Is it though?
The Old Ways Don’t Work With Bitcoin
Traditionally, drawbacks of 20 percent or more amid investor fear and pessimism are identified as bear markets.
While Bitcoin did drop 24 percent within a day, it has gained 200 percent in the last three months alone—it should be hard to find investors that feel fear and pessimism at the sight of the recent Bitcoin price chart.
If a continued downward trend was to follow the drop, implying a bear market would be more reasonable. At press time a day later, however, Bitcoin has already recovered to around $36,000, which means it is now only 12 percent down from its previous price of around $41,000.
Moreover, Bitcoin is anything but traditional, and as such, there is little use to applying traditional metrics which very obviously don’t work with an asset that has historically proven to be volatile.
During its 2017 bull run, Bitcoin experienced multiple drops of over 20 percent. In September that year, it dropped 25 percent, from $4,200 to $3,200. In November, it dropped 26 percent, from $7,500 to $5,500. In December, it dropped 27 percent, from $18,300 to $13,300.
Following those three “bear markets,” Bitcoin went on to rally to an all-time high just shy of $20,000.
Unlike stocks that trade exclusively on regulated platforms during set times of the day, Bitcoin trades globally around the clock and is driven by free market movement. Bitcoin is widely known for its volatility, and anyone who has been watching the price for any amount of time knows that large swings are part of the deal.
Within the Bitcoin space itself, the drop left users largely unimpressed, with many seeing a buying opportunity rather than a reason to worry.
In fact, long-term Bitcoin owners (HODLers) are likely used to double-digit drawbacks—especially when they follow triple-digit rallies.
CoinCorner marketing manager Molly Spiers pointed out on Sunday that “Bitcoin is up 343% in a year, 101% in a month, and 18% in a week. The only reason to worry about this dip is if you’re not buying.”
However, not everybody believes the price will recover soon. Guggenheim CIO Scott Minerd called a local top at $35,000 and wrote that it was “time to take some money off the table” as “Bitcoin‘s parabolic rise is unsustainable in the near term.”
Notably, Minerd stated in December that the investment firm’s fundamental work “shows that Bitcoin should be worth about $400,000.”
Where to Next for Bitcoin?
As always with Bitcoin, it might go up, down, or sideways.
The Investor’s Podcast Network co-founder Preston Pysh took to historic reference points on Monday, sharing a chart from 2017, when Bitcoin often spent no more than a few days in correction territory before bouncing back. That is not to say Bitcoin will behave the same way this time; it remains to be seen what the market does next.
But as Bitcoin’s recent price developments have been driven by accelerating institutional demand that shows no sign of slowing down, many remain optimistic. In a tweet on Tuesday, Gemini co-founder Tyler Winklevoss reinforced that sentiment, stating that “there is huge institutional demand and most of it is silent.”
Ultimately, calling a bear market when Bitcoin drops 20 percent following a rally of over 200 percent makes little sense—unless, of course, it’s for the purpose of clicks.