Bitcoin’s parabolic increase well above its previous all-time-high has many experiencing déjà vu from 2017 and a number of analysts are concerned the market is overdue for a sizable correction.
On Jan. 8 With Bitcoin (BTC) price reached a new all-time high at $41,940 and this week’s 28% collapse to $31,076 had professional and retail investors afraid that a strong trend reversal was in the making.
BTC/USDT 4-hour chart. Source: TradingView
Bitcoin’s historical data shows that rapid parabolic ascents are usually followed by equally catastrophic corrections like the one seen after the 2017 bull run. Because of this, the current market’s similarities to the euphoric mania of 2017 to 2018 bull run have not gone unnoticed.
Cane Island global macro investment manager Timothy Peterson recently pointed out that:
“Bitcoin’s risk is approaching 2017 levels. Investors that buy at this price can expect to lose 40% of their investment sometime in the future. However, the typical maximum drawdown is 30%, so this risk is only modestly elevated from the average.”