Understanding Bitcoin's 'Dip Then Rip' Phenomenon Explained by Bitwise CIO

Bitcoin's behavior during times of economic uncertainty can often appear contradictory to its role as an inflation hedge. Matt Hougan, the Chief Investment Officer of Bitwise, has shed light on this phenomenon, particularly highlighting Bitcoin's tendency to dip in price before recovering sharply.

Context of Bitcoin's Price Movements: In a recent note, Hougan emphasized that Bitcoin often experiences short-term price declines in response to increased market uncertainty. This uncertainty raises the perceived risks associated with Bitcoin, leading to a temporary drop in its value, which Hougan describes as a "discount factor." Essentially, investors react to immediate concerns, causing the price to fall.

For instance, Hougan pointed to tariff-related worries that have negatively impacted Bitcoin's price over the past month. Although such tariffs heighten short-term risks, they also contribute to a favorable long-term outlook due to economic instability. "While we remain bullish on Bitcoin, our short-term price expectations may decline. This explains the recent pullback. However, if the market stabilizes and fears dissipate, Bitcoin's discount factor could improve, leading to a rebound," Hougan stated.

He tagged this phenomenon as the "Dip Then Rip" effect, where a temporary decline is eventually followed by a price increase when the market regains its footing.

Furthermore, Hougan reiterated Bitwise's optimistic outlook for Bitcoin, maintaining a substantial price target of $1 million by 2029 which he first presented in December 2024.

Importance of Recovery Projections: The discussion surrounding Bitcoin’s performance during market crises has drawn attention from various industry experts. Robbie Mitchnick, head of Digital Assets at BlackRock, hinted that a potential recession in the U.S. could trigger the next bullish phase for Bitcoin.

In a different conversation, Hougan speculated that Bitcoin could reach as high as $200,000 by the close of 2025, contingent upon the Federal Reserve implementing measures to stimulate economic growth.

Current Market Status: As of now, Bitcoin is trading at approximately $85,876.49, showcasing a rise of 3.42% over the previous 24 hours. However, the cryptocurrency has seen a decline of 9% year-to-date.

Bitcoin, Hougan, Market