Scott Melker, the host of The Wolf of All Streets podcast and crypto trader, has cautioned investors against getting too excited by Bitcoin’s recent pump, suggesting that the crypto asset could still plunge lower.
In a newsletter to more than 800k Twitter followers, the pundit attempted to measure the asset’s “possible bottom” by illustrating five of the worst Bitcoin corrections in history. These included the Nov 2013 – Jan 2015 (-86.9%); Dec 2017 – Dec 2018 (-84.12%); Apr 2013 (-82.65%); June 2019 – Mar 2020 (-72.26%) and the April 2021 – June 2021(-55.95%) bear markets.
According to him, considering Bitcoin’s price has dropped by approximately 76.59% in the past year, it would have to drop another 48.84% to reach April 2013 bear market levels. This would mean $220B, or half of the current Bitcoin market capitalization, being wiped from the market, which he said was “unlikely”.
“For Bitcoin to go an inch lower than the current bottom at $15,800, it would need to drop 31.2% from current levels. Still a sizeable drop.” He added.
Not Too Fast
The pundit warned investors against getting too excited, commenting on this month’s pump, urging them to drop the “Bitcoin up only” assumption.
“Still, I don’t think it is time to get too excited yet. We are only in the first month of the year and we know that corrections will come and that the biggest rallies often come in bear markets,” he said.
On Jan 25, Bitcoin surged as high as $23,800 before tracing its move to settle below the $23,250 resistance.
According to Melker, that resistance could pose a tough hurdle for the price, with a vast wick up on the 4-hour chart suggesting the area was “a liquidity grab for shorts”.
“I would proceed with caution,” he noted, emphasizing that there was little to do unless candles close above or below that resistance. “While it may not happen, I am still looking for a correction,” he went on.
Bitcoin’s Resilience Is Improving
Melker noted that Bitcoin had become more resilient over the years, considering the sheer number of catalysts and market-related contagions behind its drop compared to other bear markets. He also noted that the pioneer cryptocurrency had attracted a floor of die-hard believers who would increasingly make it harder to drive Bitcoin’s price drastically by offering adequate liquidity.
In his words;
“If we are being honest with ourselves, we should feel lucky if Bitcoin does not drop more than it did in 2017…The catalysts for this current correction are far more serious. This proves that Bitcoin is strengthening over time and will probably continue to soften its gains and losses in each cycle.
At press time, Bitcoin (BTC) was exchanging hands at $23,181, up 0.61% in the past 24 hours.