"This time it's different"...Bitcoin, a new bottom theory created by ETF and institutional buying despite a 36% correction

▲ Bitcoin (BTC)/ChatGPT generated image

Although Bitcoin (BTC) has fallen by about 36% from its all-time high, an analysis suggests that this downturn is showing a different pattern from previous cycles, with the decline being more limited than in past bear markets.

Decrypt reported on May 12 (local time) that Bitcoin, which recorded an all-time high of $126,080 in October, had fallen by approximately 36% and was trading around $80,500 at the time of writing. In past Bitcoin bear markets, declines of 40-50% from the peak were common, but this correction remains relatively shallow.

A recent rebound also contributed to the reduced decline. Bitcoin has risen 12.5% in the last 30 days and approximately 22% from April 1 to May 6. Pierre Rochard, CEO of The Bitcoin Bond Company, assessed that this fourth Bitcoin bear market is clearly separating from past cycles for the time being. He explained that a combination of corrections after a weak bull market, ETF inflows, and accumulation by Bitcoin treasury companies were at play.

Ryan Yoon, Senior Research Analyst at Tiger Research, analyzed that institutional funds such as ETFs and Strategy have created structural support lines that did not exist in the past. He stated that strong institutional capital is acting as a bottom for Bitcoin's price, causing Bitcoin to move differently from previous cycles.

Allen Ding, Head of Research at Bitfire, presented three structural changes as the background for this differentiation. He explained that the halving led to reduced supply, weakening miners' pricing power; long-term funds flowed in through regulated ETF products; and the custody structure, initially centered on early crypto holders, shifted towards institutional accounts. Ding believes these trends could become a new standard for the cryptocurrency market.

However, there is also a cautious view that it is difficult to say that the bear market is completely over. Illia Otychenko, Senior Analyst at CEX.IO, diagnosed that Bitcoin has not yet entered an irreversible upward trend. He pointed out that while Bitcoin has surpassed both the true market average (on-chain basis) and the short-term holder cost basis, there were instances in 2014, 2018, and 2022 where similar conditions were followed by a temporary rebound before the bear market resumed.

Otychenko also cited the fact that approximately 70% of short-term holder supply is currently in profit as a burden. This is the highest level since the all-time high in October, meaning holders have a greater incentive to realize profits. He also analyzed that if a significant price fluctuation occurs when Bitcoin's one-year volatility is near an all-time low, market shock could be amplified. The conflict between the US and Iran was also mentioned as a factor making Bitcoin more sensitive to macroeconomic variables.

Regarding the future path, conflicting scenarios were presented. Analyst Yoon suggested that if the stock market remains flat, a favorable trend of investor funds moving to Bitcoin could emerge. Conversely, he analyzed that if the AI bubble bursts, leading to a broader market shock, Bitcoin could retest lower price levels. Users of Decrypt's prediction market, Myriad, see an 88% chance that Bitcoin's next move will be towards $84,000.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*