Bitcoin's Crisis Paradox Decoded: Bitwise CIO Explains 'Dip Then Rip' Phenomenon

Bitwise Chief Investment Officer Matt Hougan explained Bitcoin’s BTC/USD often contradictory behavior during market crises, despite its narrative as an inflation hedge.

What Happened: In a research note released Tuesday, Hougan said that short-term price dips that Bitcoin experiences during economic turbulence are due to increased market uncertainty. This uncertainty amplifies the perceived riskiness of the asset, leading to a temporary decrease in the asset’s value, also known as a “discount factor.”

Hougan used the example of tariff concerns, which have battered the apex cryptocurrency over the past month. While tariffs increase the riskiness in the short term, they increase the long-term price target owing to economic disorder.

“So even though we're more bullish than ever on Bitcoin, our short-term price target falls. That explains the pullback. But if the market stabilizes and it turns out the world's not ending and the discount factor goes back from 85% to 75%, Bitcoin will recover from the pullback,” Hougan said, describing it as a “Dip Then Rip” phenomenon.

Hougan said Bitwise remained optimistic about Bitcoin, reiterating the $1 million price target by 2029 he gave in December 2024.

See Also: Cathie Wood Believes Most Memecoins Will Face ‘Fearsome Declines,’ But They Could End Up Becoming Collector’s Items

Why It Matters: Bitcoin’s performance during market crises has been a topic of discussion among industry experts.  Robbie Mitchnick, BlackRock’s Digital Assets head, stated Wednesday that a potential U.S. recession could catalyze Bitcoin’s next bull cycle.

Meanwhile, Hougan said in a separate interview that Bitcoin could reach $200,000 by the end of 2025, if the Federal Reserve takes steps to stimulate the economy.

Price Action: At the time of writing, Bitcoin was exchanging hands at $85,876.49, up 3.42% in the last 24 hours, according to data from Benzinga Pro. Year-to-date, the coin has dipped 9%.

Image via Shutterstock

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.