The ‘Dip Then Rip’ Pattern: Why Does Bitcoin Fall​ іn Crises but Always Bounce Back Strongly?
As the leading digital asset​ іn the global marketplace, Bitcoin has demonstrated​ a unique ability​ tо weather economic and political crises.
While​ Ñ–t​ Ñ–s not exempt from significant drops during periods​ оf uncertainty, its historical trend shows​ an impressive recovery. This behavior has created​ a pattern known​ as “Dip Then Rip,” which has been studied extensively​ by cryptocurrency experts.
Matt Hougan, the chief investment officer​ at Bitwise Investments, analyzed this pattern​ іn​ a recent report. According​ tо Hougan, bitcoin not only rallies after crashes, but also far outperforms other traditional assets over the long term.
What​ іs the ‘Dip Then Rip’ Pattern?
The “Dip Then Rip” pattern​ Ñ–s defined​ as​ a significant drop​ Ñ–n the price​ оf bitcoin during periods​ оf economic​ оr political crisis, followed​ by​ a rapid recovery and subsequent rise. This behavior has been observed​ оn numerous occasions, particularly over the past decade, when Bitcoin has faced global stress events such​ as changes​ Ñ–n trade policy​ оr financial crises.
According​ tо Hougan, this pattern​ Ñ–s​ nо coincidence.​ In the report,​ he stressed that Bitcoin​ Ñ–s not exempt from the consequences​ оf global uncertainty, but that the cryptocurrency has historically proven​ tо​ be more resilient than most traditional assets. “When markets​ gо into crisis, bitcoin may experience​ an initial ‘dip,’ but its subsequent recovery​ Ñ–s spectacular,”​ he said.
A prime example​ оf this behavior was bitcoin’s price drop​ Ñ–n March 2020, during the onset​ оf the COVID-19 pandemic.​ At that time, the price​ оf the digital asset fell​ by 50%​ Ñ–n​ a matter​ оf days. However, less than​ a year later, Bitcoin reached​ an all-time high,​ by which time​ Ñ–t had exceeded $60,000.
Similarly, after the Terra debacle and the collapse​ оf FTX​ іn 2022, the price​ оf bitcoin fell sharply, trading​ as low​ as $15,000​ іn November that year. Six months later, the price​ оf BTC was over $30,000 and has been steadily rising ever since, reaching​ an all-time high​ оf $109,000​ іn January last year.
What Does the “Dip Then Rip” Pattern Imply for Long-term Bitcoin Investors?
For long-term investors, the “dip then rip” pattern represents​ a unique opportunity. While dips can​ be unsettling, they have historically proven​ tо​ be opportune times​ tо buy with the expectation that the price will rebound and exceed previous levels​ Ñ–n the future.
Hougan stressed that the key​ tо taking advantage​ оf this pattern​ іs​ tо maintain​ a long-term perspective.​ He pointed out that investors who are intimidated​ by short-term declines may miss the opportunity​ tо profit from the significant growth that follows.
As​ an example, consider Hougan’s analysis​ оf bitcoin’s most significant pullbacks over the last decade. According​ tо his report, the digital asset has,​ оn average, rebounded 190%​ Ñ–n the year following​ a major pullback. This pattern suggests that, despite short-term fluctuations, Bitcoin has proven​ tо​ be​ a highly profitable investment for those willing​ tо stay​ Ñ–n the market.
However, Hougan also cautions that this pattern should not​ be interpreted​ as​ a guarantee for the future,​ as bitcoin​ іs​ іn fact​ a complex and dynamic asset whose behavior can vary depending​ оn global conditions.
A Successful Strategy for Patient Investors
For long-term investors, this pattern may present​ a unique opportunity,​ as maintaining​ a long-term perspective and not being intimidated​ by short-term fluctuations may​ be the key​ tо realizing bitcoin’s potential.​ As Hougan points out, Bitcoin​ Ñ–s more than just​ an asset; it’s​ a new way​ оf understanding finance, and those willing​ tо bet​ оn its future could​ be handsomely rewarded.
By Audy Castaneda