Why Does Bitcoin Drop First and Then Rise During Crisis Moments? Answer from Bitwise! - Coin Bulletin

The valuation methods used by Wall Street are behind Bitcoin's tendency to experience sharp drops during major crisis periods, followed by strong rises.

Matt Hougan, Chief Investment Officer of Bitwise Asset Management (CIO), stated that Bitcoin's response during crisis moments in the market of "first get dumped, then rise" is directly related to the functioning of financial markets. Hougan mentioned that the recent tariffs announced by President Trump have revived the drop-rise pattern in Bitcoin due to the turmoil in the markets.

According to the research conducted by the company, Hougan stated that Bitcoin has historically lost an average of 30% more value during significant declines in the S&P 500, but has risen around 190% during the recovery process. Hougan described this movement as "dip then rip". The basis of this behavior lies in the way Wall Street values assets.

Hougan stated that Wall Street analysts calculate a company's value by discounting the cash flows it will generate in the future to the present. This calculation method is called "discounted cash flow" analysis. The more uncertain or risky the future value of an asset is, the lower its present value becomes. In Bitcoin, since there is no cash flow, analysts apply a high degree of uncertainty to future price predictions.

For example, Bitwise's Bitcoin price target for 2029 is around 1 million dollars. However, this value is currently calculated much lower due to the uncertainty rate that varies depending on market conditions. When the valuation rate of Bitcoin increased in the uncertainty environment created by Trump's tariffs, there was a sharp get dumped in the short term. However, when the market normalizes and uncertainty decreases, Bitcoin is expected to rise again.

Hougan, referring to the analysis of NYDIG, stated that although tariffs may get dumped on Bitcoin's price in the short term, in the long term, economic and political uncertainties will benefit Bitcoin. He also added that government initiatives to accumulate Bitcoin reserves could suddenly and sharply drive prices up, saying, "These crisis moments create unique buying opportunities for long-term investors."