Bitcoin's Rebound Isn't as Strong as It Seems: Watch These Warning Signs

Bitcoin (CRYPTO: BTC) may not be as strong as it looks at first glance, according to a new Binance Research report published Monday.

Bitcoin’s Drawdown Looks Smaller but It Isn’t

Binance Research analysts Kim Lim, Ken Lam and Kexin Liu wrote that Bitcoin’s current drawdown of 54.2% looks much milder than the 86.9%, 84.1% and 77.6% declines in the three prior bear markets. 

The analysts say that comparison is misleading, because each cycle’s volatility has also fallen, from 99% in 2013 to 2015 to just 47% today.

Adjusted for volatility, Bitcoin’s current decline works out to 1.94 standard deviations, almost identical to the 1.93 to 2.20 range from the three earlier bear markets. 

Bitcoin is not falling less, the analysts argue. It is swinging less, and the drawdowns have simply shrunk along with it.

Why Past Bounces Like This Have Failed

Bitcoin closed at $84,880 on Oct. 1, up 46.9% from its July low near $57,800. Binance Research tested how often a rebound of that size, with price still well below the prior high, has gone on to hold.

The firm found seven such signals between 2011 and 2023, and the outcome split sharply by how deep the drawdown was beforehand:

• Deep drawdowns (67% to 76% below the high): 2 signals, both held and went on to set new highs
• Shallow drawdowns (30% to 38% below the high): 5 signals, 4 failed and broke back below the prior low within 43 days