How Much Can Bitcoin Fall If a Bear Market Comes?

When we talk about volatility, we are actually talking about two issues: one is what currency unit we use to denominate it; the other is in which currency unit it is denominated, and how much it falls from the peak of the bull market to the trough of the bear market.

In terms of the current status of the U.S. dollar, it may be difficult for other currencies to replace it for a period of time.Therefore, in the foreseeable future, the pricing of Bitcoin will still be in US dollars.

And calculated in US dollars, what will the volatility of Bitcoin and Ethereum be like in the future? Will it become smaller and smaller? Let's first look at some targets in the existing investment market.

If we take the stock market as an example, generally speaking, in recent years, the relatively large volatility we have seen is about 50%-70%, which means that the total market value of the stock market may fall from the peak in a bear market. 50%-70%. From the perspective of the precious metals market, the relatively large volatility is probably around 50%-70%.

The deepest decline of Bitcoin and Ethereum in the bear market in previous years may exceed 90%. For example, in the last bull market, Ethereum fell from a peak of nearly 1,400 US dollars to a minimum of 80 US dollars, a drop of more than 90%.

And as rounds of bull markets gradually push up the market value of Bitcoin and Ethereum, on the one hand, there will be more and more long-term investors, so its bottom will become higher and higher; on the other hand, the amount of funds needed for its rise It will also get bigger and bigger, so it will be harder and harder to rise. So their future volatility (that is, the decline in a bear market) will be smaller under the action of this factor.

However, there is a new phenomenon in recent years that I think is very worthy of attention:This is the growing strength of the dollar to release water.

Judging from the experience of the U.S. releasing water from the financial crisis in 2008 to the present, whenever an economic or financial crisis occurs, the U.S. will release a large amount of water, and the intensity of the release is getting bigger and bigger, and the bottom line is getting lower and lower. Although we all know that this kind of game cannot be played forever, because it will seriously damage the credit of the dollar, but once this kind of game is addicted, it is difficult to quit, so this kind of game of water will probably continue to be played.

And every time the dollar is released, the biggest beneficiaries must be American institutional investors. When these institutional investors get the money, they will definitely use it to buy assets, and Bitcoin will definitely be the target of more and more institutional allocations in the future. This is a strong impetus to stimulate the rise of Bitcoin. Therefore, under the influence of this factor, the volatility of Bitcoin and Ethereum will increase again.

Therefore, the future volatility of Bitcoin and Ethereum will be affected by two important factors, one is their growing market value, and the other is the degree of release of the US dollar.

These two factors are contradictory, the former reduces volatility, while the latter raises their upside in a bull market which in turn increases volatility. The latter of these two factors is even more unpredictable, because we don't know how exaggerated the dollar's release will be in the future.

Therefore, in general,I think that the volatility of Bitcoin and Ethereum denominated in US dollars may become smaller in the future, but it may not be as small as many people estimate. I think that even if it is difficult to reach 90%, it may still reach 60%-80%.Because the strength of the dollar to release water may only become larger and not smaller.

While the U.S. dollar is issued without a bottom line, the credit of the U.S. dollar will definitely be hurt. Therefore, all U.S. dollar holders will definitely want to hedge in this process, and will look for a potentially more stable currency --- I think currently only the renminbi There is this potential. Therefore, I think that even if the RMB falls against the US dollar in the future, it is unlikely to fall much, and it may even start a slow appreciation trend.