Bitcoin price has largely held the $29,000 level for most of the week. This indicates low activity and momentum in the market, as well as an unwillingness to participate in the digital asset at this time. One reason for this reluctance is the expectation that the Bitcoin price will crash once more before the bull market starts again. However, this crypto analyst explains why expectations may be exceeded this time.
Bitcoin price may not see a repeat of 2019-2020
Before the 2020-2021 bull market began, the Bitcoin price had had a rollercoaster year. Most of the time, the bear market had devastated the digital asset, sending it down more than 80% below its all-time high, and the crashes would continue well into 2020.
Given the tendency of the Bitcoin price to follow previous trends, investors understandably expect a repeat of this trend. But pseudonymous crypto analyst”Tony de Taurustook to X (formerly Twitter) to use the ‘recency bias’ to explain why this may not be happening.
In the post, the crypto analyst used an analogy of a city that had never had a flood before and suddenly experienced a sudden thunderstorm. Since it had not happened before, companies without flood insurance were caught. However, in the future, the companies begin to expect another flood and as such they get flood insurance.
The analyst explained that while measures would be taken to reduce the likelihood of another flood, people continued to know about the effects of the flood. “It’s the brain’s way of dealing with the most easily accessible information, and that’s the one that has most recently affected you in a significant way,” the analyst said. “This is called recency bias.”
BTC movement over the last five years | Source: BTCUSD on Tradingview.com
This recency bias, applied to Bitcoin, shows that investors are expecting a 2019-2020 repeat as this is the most recent bear market. Therefore, investors operate with knowledge of the most recent impactful event.
“But just like the flood has never happened before, we had a once-in-a-lifetime pandemic. The chances are pretty slim that we will see the same price action as in 2019 and 2020,” explains Tony The Bull.
BTC price sticking to previous trends?
The analyst’s position is supported by the fact that Bitcoin price has continuously deviated from historical trends during this cycle. An example is that while the price of the digital asset fell to about 70% below its all-time high of $69,000, it recovered to nearly 50% below its ATH.
However, a similar trend was observed in 2019, when the price of BTC recovered above $11,000 midway through the year. But by the end of the year, about half of those gains had been lost. The rest of the profits will be wiped out in early 2020.
However, if BTC follows the previously established trend, the price of the digital asset could drop to $12,000 before the next bull run begins. However, it remains to be seen what will eventually happen.