Bitcoin’s recent price drawdowns – the percentage decline from peak to trough – shouldn’t come as a surprise for cryptocurrency traders used to volatility. But it could present opportunities to buy the dip, according to a new report by Stack Funds, a Singapore based digital asset investment firm.

The near 15% decline in the bitcoin price (BTC) earlier this week is on a par with previous drawdowns that took roughly five to 10 days to recover. “Drawdowns happen all the time, and crypto markets are no different from traditional markets,” wrote Stack Funds.

  • “The fundamental narrative for bitcoin to the upside has not changed," the analyst wrote, noting recent news items such as WeWork’s acceptance of cryptocurrencies as a form of payment and Venmo facilitating crypto transactions on its platform show increasing adoption by businesses and mainstream users.
  • “Hence, it might be good ... to turn this into a buying opportunity if [investors] are looking to increase exposure of digital assets in their portfolio,” wrote Stack Funds.
  • BTC drawdowns have occurred every month since the start of this year but most ended with sharp recoveries, achieving newer highs in the following month.
  • However, in a bear market drawdowns of more than 20% can last for several weeks or months.

According to Ecoinometrics, a cryptocurrency newsletter, the market dynamics are consistent with what might be expected in the year after a “halving” on the Bitcoin blockchain. A halving is when the blockchain automatically cuts the rate of issuance of new bitcoins by 50%, and it happens every four years. The last one was in May 2020.

“Right now, we are in another one of those drawdowns that commonly happens during a post-halving bull market: 20% drawdowns, five days, nothing special,” Ecoinometrics, wrote Wednesday. “Honestly, the current price action does not look like a bull market top for bitcoin.”

Chart shows size and duration of historical BTC drawdowns, organized by halving cycles.
Source: Ecoinmetrics
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