Andrew Kang: We may see an extreme correction of Bitcoin to the $40,000 range

On July 4th, Andrew Kang, co-founder and partner of Mechanism Capital, a cryptocurrency venture capital firm, posted on social media that most market participants were not aware of the severity of a potential 4-month downturn in Bitcoin's volatility. The closest similar situation we can find is the range in May 2021 when Bitcoin and altcoins also experienced a parabolic rise.

In this case, leverage for cryptocurrencies over $50 billion is also close to historical highs (excluding CME), but in this situation, our range of time is longer (18 weeks vs 13 weeks), and extreme washouts have not yet occurred, unlike during the mid-bull market of 2020-2021 when we experienced several.

My initial estimate of a $50,000 low point may be too conservative, and we may see a more extreme pullback to the $40,000 range. Such a pullback could cause significant damage to the market and may require several months of shaking/downward trends (recovery period) before a reversal to an upward trend may occur.