Bitcoin Signals Familiar COVID-Era Risk-Reward Setup Again: Insights from Bitwise Analyst

As Bitcoin navigates its current fluctuations, André Dragosch, the head of research at Bitwise Europe, observes that the cryptocurrency is displaying a risk-reward profile reminiscent of the COVID-19 era. With steep price declines and significant liquidations, Dragosch suggests that Bitcoin is factoring in a potential recession. He anticipates global economic recovery, which could pave the way for a Bitcoin resurgence.

Key Takeaways:

According to André Dragosch from Bitwise Europe, Bitcoin is showcasing a risk-reward profile akin to that of the COVID pandemic.
He posits that Bitcoin has already accounted for a recession-like scenario due to recent sell-offs and heavy liquidations.
Dragosch expects global economic growth to rebound as earlier stimulus measures take effect, potentially boosting Bitcoin’s value.

In a recent post on social media platform X, Dragosch indicated that the current market conditions reflect a risk-reward setup similar to the extreme volatility experienced in the early COVID pandemic.

“The last time I saw such an asymmetric risk-reward was during COVID,” Dragosch shared on X on Friday. He recalled the market turmoil of March 2020 when Bitcoin plummeted from approximately $8,000 to below $5,000 amid widespread panic.

Bitcoin Signals “COVID-Era” Risk-Reward Setup Again: Bitwise Analyst

Bitcoin Trading Signals Deep Economic Downturn

Dragosch highlighted that the cryptocurrency's behavior today mirrors that of a market already anticipating a significant downturn. He emphasized that Bitcoin seems to be “pricing in” a bearish outlook for global growth, which has persisted since 2022, marked by aggressive interest rate hikes from the US Federal Reserve and the collapse of FTX.

“Bitcoin is effectively reflecting a recessionary growth atmosphere,” he explained, noting that much of the bad news may already be absorbed by the market.

Recent trends back up this sentiment, as Bitcoin has seen a decline of over 17% in the past month, according to CoinMarketCap. Following a peak of $125,100 on October 5, Bitcoin faced a prolonged decline triggered by a $19 billion liquidation wave on October 10, coinciding with Donald Trump’s announcement of extensive tariffs on Chinese imports.

The situation worsened in mid-November when Bitcoin fell below the $100,000 mark, a figure traders viewed as a crucial psychological barrier. Although it dipped beneath $90,000 on November 20, swift buying activity raised hopes of establishing a support level.

Dragosch believes that the current pessimism could be unwarranted. He is optimistic that global growth might soon recover as previous monetary stimulus is absorbed, resembling the phase following the COVID crisis.

“I firmly believe we are witnessing a similar macro setup now,” he remarked.

Cathie Wood Predicts Liquidity Rebound for Crypto

Additionally, ARK Invest CEO Cathie Wood has predicted a rebound in liquidity affecting crypto and AI markets soon, driven by anticipated shifts in Federal Reserve policy by the end of the year.

Her firm continues to actively invest in cryptocurrency equities, recently channeling over $93 million into struggling digital asset stocks in just one day.

During ARK’s November market webinar, Wood pointed out three temporary liquidity constraints she expects to clear up quickly, thanks to changes in Federal Reserve policy and renewed government spending.

Wood anticipates that the Fed will conclude quantitative tightening at its meeting on December 10, which would alleviate one of the existing pressures. Additionally, the recent end of the government shutdown that had increased cash holdings in the Treasury General Account has returned funds to circulation.