Widely followed crypto analyst Benjamin Cowen is warning that the decentralized finance (DeFi) and altcoin markets could get caught up in a large capitulation event soon.
In a new interview with Scott Melker, Cowen says that Bitcoin (BTC) will likely retrace the gains it put up in the first half of the year, dragging DeFi and altcoins down with it.
Cowen notes in pre-halving years Bitcoin historically increases for about half the year and declines for the other half, “wrecking” both the bulls and bears.
“There’s a lot of excess liquidity just sort of like frothing around in the DeFi space and it wouldn’t take much for a lot of confidence to be lost there and there could be a windfall event. Bitcoin has gone up for the first half of the year.
And if you look at the monthly returns of Bitcoin in pre-halving years, every single pre-halving year to date, 2011, 2015 and 2019, we’ve spent about half the year going up and half the year going down. You get about six red months and six green months.
And this time in 2023, we’ve had about five of the first six months be green, the same thing we had in 2019, five of the first six were green. In 2011, five of the first six were green, but in both 2019 and 2011, five of the next six months were red.
And I still go back to this idea that in the pre-halving year, you have to wreck both the bulls and the bears, and that way we all get sufficiently wrecked.”
Cowen warns that the altcoin market has been struggling this year as Bitcoin’s dominance (BTC.D), which measures the king crypto’s share of the total market capitalization of all digital assets, has increased. He predicts Bitcoin declines in value while also increasing its dominance, draining the alt markets of more liquidity.
“The altcoin market has been struggling all year. I mean it really has. And Bitcoin has significantly outperformed, but the issue is that alts have struggled with Bitcoin doubling in value. So what happens to alts if Bitcoin retraces any of that move?
I think that is the bigger issue here and that is the most brutal part of the cycle because that’s the part of the cycle where the Bitcoin dominance goes up when Bitcoin/USD goes down, and a lot of people haven’t experienced that part yet, but I think it’s coming.”
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