Dr. Benjamin Cowen, a renowned crypto analyst with a rich background in Engineering, Computational Mathematics, and Programming, recently provided insights into Bitcoin’s current market behavior. With a substantial following of over 785K on his YouTube channel, Cowen delved into the patterns that Bitcoin seems to follow every four years, linking it to the behavior of the S&P 500 stock index.
The “Secondary Scare” Phenomenon
Cowen introduced the concept of the “secondary scare” in the crypto world, drawing parallels with the S&P 500’s tendency to experience corrections in August or September of its US pre-election year. Observing the patterns of 2023, Cowen pointed out that the S&P 500 is currently undergoing the anticipated correction, having declined by slightly over 5% since the beginning of August.
Bitcoin’s Historical Behavior
Drawing from historical data, Cowen highlighted that during past “secondary scares,” Bitcoin has witnessed significant drops ranging from 39% to a staggering 83%. He provided a breakdown of these occurrences:
- In 2019, Bitcoin experienced a decline of 61% once it fell below the 20-week moving average.
- In 2015, the drop was approximately 39%.
- The most drastic drop was in 2011, when Bitcoin plummeted by 82.5% before finally finding its bottom.
In all these instances, the S&P 500 experienced a drop in the third quarter of the pre-election year, which was subsequently followed by a Bitcoin downtrend.
Potential Scenarios for Bitcoin’s Decline
Based on the historical precedent, Cowen presented three potential scenarios for Bitcoin’s decline:
- A 40% drop (akin to the 2015 scenario) would place Bitcoin at approximately $17,500.
- A 61% decline, similar to the 2019 situation, would see Bitcoin valued at around $11,400.
- An 80% drop, which Cowen deems highly unlikely, would significantly lower Bitcoin’s value.
On the same, Cowen highlighted that XRP had lost all the gains it had made after Judge Analisa Torres ruled it as a non-security. Cowen emphasized that events like the SEC vs. Ripple case outcome are not lasting drivers for price hikes. He believes that the initial excitement surrounding such events is transient, and the cryptocurrency will eventually revert to its usual trajectory.
Cowen posits that the value of altcoins is more influenced by the presence of excess liquidity in the market than by individual events, such as court case outcomes. Excess liquidity indicates a surplus of investable funds, which, according to Cowen, could potentially push altcoin prices higher.