Bitcoin’s (BTC) recent pullback may have less to do with crypto-specific weakness and more to do with macroeconomic fears, according to André Dragosch, Bitwise’s head of research for Europe.
In a social media post published Wednesday, Dragosch argued that the world’s largest cryptocurrency appears to be pricing in a potential deep U.S. recession. If that downturn ultimately fails to materialize, he suggested, Bitcoin could be positioned for a significant recovery.
Does Bitcoin Face a Quantum Risk Premium?
Dragosch described Bitcoin as fundamentally a macro-driven asset. Historically, he estimates that roughly 90% of its performance can be explained by broad economic forces such as growth expectations, global liquidity conditions and trends in monetary policy.
However, he acknowledged that there are periods when Bitcoin temporarily disconnects from these factors. According to him, the market may currently be in one of those transition phases.
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Some of the recent divergence, he noted, may stem from concerns unrelated to traditional macro factors. Some market participants have pointed to what Dragosch called a “quantity discount.”
This story suggests that sale of long-term holders and speculation about the eventual rise of quantum-resistant cryptography could weigh on Bitcoin’s valuation.
He noted that Bitcoin’s relative underperformance compared to Bitcoin Cash (BCH), which is considered to have a clearer near-term roadmap for quantum resilience, could reflect this thinking.
According to his rough estimate, markets could assign a probability of as much as 25% to quantum-related risks, while he believes a more realistic discount would be closer to 5%, given that any meaningful “Q-Day” threat is likely to remain far in the future.
Rare opportunity for macro disapproval
More recently, Dragosch said Bitcoin is susceptible to macroeconomic developments has started to rise again. That shift coincided with weakness in software stocks, putting further pressure on the cryptocurrency.
According to him, the latest correction has led to one of the biggest macro mispricings in Bitcoin history. He pointed to the residuals between forward-looking economic indicators and Bitcoin’s implied growth pricing, noting that the current gap is even wider than during the 2020 COVID-19 recession.
In practical terms, Dragosch believes Bitcoin’s current valuation reflects expectations of a deep US recession. Should such a downturn not materialize, he argues that the resulting situation could represent one of the more asymmetric risk-reward opportunities Bitcoin has seen to date.
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He also emphasized that macroeconomic signals are not unequivocally negative. Industrial commodity markets are showing early signs of renewed momentum, while US ISM data have returned to expansion territory.
Leading indicators such as the German Ifo survey and Taiwanese semiconductor export data are showing an upward trend. Moreover, global interest rate reduction cycles have historically preceded the stabilization of future growth expectations.
Taken together, these factors suggest that global growth prospects may not deteriorate as sharply as some fear. Such an environment, Dragosch noted, tends to support risky assets like Bitcoin, while relative demand for gold declines.
He emphasized that the BTC to gold The ratio is currently near levels that historically indicate disruption, which he sees as another potential sign of undervaluation.
At the time of writing, Bitcoin was trading at $67,591, which is about 46% lower than the all-time high of $126,000 reached during last year’s rally in October.
Featured image from OpenArt, chart from TradingView.com