Expert: Bitcoin's 'Dip Then Rip' Model Signals a 190% Rise After Market Collapse

The collapse of Bitcoin often leads to a 190% recovery, making Bitwise more optimistic than ever as the market turmoil signals a major setup for a bullish breakout. Bitwise CIO Says Bitcoin's 'Dip Then Rip' Model Is Flashing a 190% Bullish Setup Matt Hougan, the chief investment officer at Bitwise Asset Management, used his memo from March 17 to explain why bitcoin tends to decline during times of financial stress—even though it is considered a hedge. Based on research from colleague Juan Leon, Hougan noted that when the S&P 500 drops more than 2% in a day, bitcoin tends to perform worse, averaging a decline of about 2.6%. "But Juan's research shows a different thing: If you continue to invest—or buy more after the pullback—you will do very well. On average, in the year following these steep pullbacks, Bitcoin has increased by 190%, far outperforming all other assets," Hougan said. Describing this trend, he stated: I call this model 'Dip Then Rip' and historically, it is one of the most consistent models in cryptocurrency. Hougan believes that this behavior stems from how investors determine the value of assets by using future expectations and risk assumptions—principles borrowed from discounted cash flow analysis. Although bitcoin has no cash flow, he has applied a similar model based on expected value and discount rates. He explained: For example, at Bitwise, we believe that Bitcoin will be worth 1 million dollars by 2029. "So you might ask, how much do we think it is worth today? It depends on the discount rate—that is, the risk you assign to it. If you discount back at 50% a year, the net present value is $218,604. If you use a discount rate of 75%, the net present value is $122,633," the executive elaborated. Hougan emphasized that geopolitical disruptions such as tariffs could temporarily raise risk awareness, increase discount rates, and reduce bitcoin valuations in the short term, even as long-term forecasts improve.

To illustrate the latest downturn due to tariff concerns, Hougan cited a comment from cryptocurrency service company NYDIG: "What does Bitcoin have to do with the trade war? Nothing at all, other than the fact that it is a highly liquid asset, available globally and traded 24/7." "If anything, Bitcoin will benefit from the increase in global entropy, the political and economic chaos created by the authorities." According to Hougan, such market chaos could be a strategic opportunity. He concludes: If you are a long-term investor, these short-term bullish spikes in this discount rate are opportunities to participate at a discount. In my view, I have never been more optimistic than this.