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Key Points
Coinbase's CEO, Brian Armstrong, thinks that Bitcoin won't drop below $60,000.
The coin's newest group of holders, financial institutions, are unlikely to get skittish and sell it.
That's a substantial departure from the asset's historical state.
Bitcoin (CRYPTO: BTC) is near $67,000, 47% below its all-time high of $126,198 set last October, and Coinbase Global CEO Brian Armstrong thinks the worst is behind us. On June 15, he predicted that $60,000 was the price floor and that the coin would be much higher by 2030.
Armstrong is probably right on both counts here. But, being the CEO of Coinbase, he also has a huge incentive to talk about his book, so let's critically evaluate his rationale and understand why he believes what he does.
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Historical data backs the estimate... somewhat
Armstrong's argument is mostly structured around Bitcoin's four-year halving schedule, which is the primary mechanism that constrains the coin's supply over time, and which also leads to its four-year market cycles.
Each peak-to-trough drawdown has been shallower than the last, with a decline of 86% in 2015, 84% in 2018, and 77% in 2022. Today's decline of 47% from the October high technically does fit the same pattern, albeit significantly more moderated than what one might predict based on the prior trend.
If history repeats itself closer to that trend rather than deviating from it as it does now, there will be more downside from here. A repeat of 2022's 77% drop would put Bitcoin's price near $29,000, whereas a 65% drawdown would leave it at around $44,000.
But the mechanism of the declining intensity of the drawdowns is almost certainly Bitcoin's institutionalization.
Spot Bitcoin exchange-traded funds (ETFs), corporate Bitcoin treasuries, and sovereign countries have all soaked up a lot of supply -- 18.2% of all the Bitcoin that can ever exist, as of July 20 -- and they aren't stopping just because the asset is priced at a discount relative to before. So the odds of those deeper drawdowns happening at this point are quite low, and Armstrong's $60,000 target for the Bitcoin bear market bottom is probably going to prove to be correct within a quarter or so.
What to do
The risk of a deeper drawdown in Bitcoin specifically is not a good reason to sit out for now. If Armstrong is right, those buying now will likely not get the opportunity to buy at better prices for at least four years, if they ever do.
The best time to buy cryptocurrency is when you can stomach your position experiencing another leg down, and a dollar-cost averaging (DCA) strategy started today will get you Bitcoin exposure while it's fairly cheap, even if it could get a bit cheaper.
If the $60,000 price holds, you'll own more than you would have by staying sidelined, which would be rewarding if the price recovers. If the coin's price chops for a while or goes down more, DCAing will just mean accumulating it even cheaper.
Whether or not Armstrong is proven right, Bitcoin's fundamentals today are precisely as they were during its prior price cycles, and, given that financial institutions are buying a lot of it, its price has quite a few tailwinds in play. If the halving cycle pattern holds, it should be worth substantially more by 2030.
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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.
