While the financial markets are dealing with serious fluctuations, asset manager Bitwise sees a unique opportunity for Bitcoin (BTC).
Matt Hougan, Chief Investment Officer at Bitwise, points to a striking historical pattern that he believes in an explosive recovery of Bitcoin after hefty market drops. According to him, this can be the time for investors with a long breath.
‘Dip then RIP’ points to recovery after sharp decreases
In a memo of 17 March Hougan discusses the phenomenon that he calls ‘Dip Then Rip’. According to research by his colleague Juan Leon, Bitcoin falls on average 2.6 percent faster than the S&P 500 on days that this index drops more than 2 percent. Remarkably, a strong revival often follows this.
“If you stayed or bought after such a relapse, you did very well historically,” says Hougan. “On average, Bitcoin rose by no less than 190% in the year after such a sharp fall – and thus performed better than all other investment categories.”
Future forecast determines the value of Bitcoin
According to Hougan, the explanation behind this pattern lies in the way in which investors assign value to assets. Although Bitcoin does not produce cash flows, Bitwise believes that the asset can still be appreciated on the basis of future expectations.
“At Bitwise, for example, we think that Bitcoin can be worth a million dollars in 2029,” says Hougan. “The question then is: what is it worth today? That depends on the discount rate.”
The discount rate is the percentage with which future returns are returned to their current value. The higher this foot, the lower the current value. With an annual discount rate of 50 percent, the theoretical value of Bitcoin comes to $ 218,604. With a foot of 75 percent that is $ 122,633.
Geopolitical unrest creates entry opportunities
According to Hougan, geopolitical tensions temporarily lead to a higher discount rate, which puts the Bitcoin course under pressure. Yet in those moments he sees an excellent opportunity for long -term investors.
“For investors with a long breath, such temporary peaks are the time to step in with a discount,” says Hougan. “Personally, I have never been so optimistic about Bitcoin.”
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Source: https://newsbit.nl/bitcoin-koers-kan-stijgen-tot-218-000-volgens-bitwise-topman/
