Bitwise chief investment officer (CIO) Matt Hougan says that Bitcoin (BTC) is potentially in the middle of a “dip and rip” price action scenario.
In a new note to investors, Hougan explains that in moments of crisis, Bitcoin often plunges deeper than the stock market, but then rallies harder on the recovery.
Hougan says the scenario is historically one of “the most consistent patterns in crypto” and stems from investors reacting to the concept of net present value, which is the difference between current cash inflows of an asset and the present value of cash outflows over a period of time.
While BTC doesn’t have cash flows, Hougan says the same principle applies and may be in play during President Trump’s tariff-driven market uncertainty.
Says Hougan,
“You might imagine that tariffs—by creating economic entropy—boost our long-term price target for bitcoin from $1 million to $1.1 million. At the same time, they increase the discount factor we use to calculate Bitcoin’s net present value from, say, 75% to 85%. Mathematically, this would cause the net present value of Bitcoin to fall from $122,633 to $109,521—despite the 10% rise in our 2029 price target.
So even though we’re more bullish than ever on Bitcoin, our short-term price target falls. That explains the pullback. But if the market stabilizes and it turns out the world’s not ending and the discount factor goes back from 85% to 75%, bitcoin will recover from the pullback and then some.
Dip then rip.”
The investor says that BTC – which he believes is experiencing a “short-term spike in the discount factor”– is presenting an opportunity to get in at a discount.
“From where I sit, I’ve never been more bullish.”
At time of writing, BTC is trading at $84,582, down 22% from its all-time high.
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