Benjamin Cowen Warns of a Potential ‘Windfall Incident’ that Could Devastate DeFi and Altcoin Markets

Crypto Regulations

Prominent cryptocurrency analyst Benjamin Cowen is issuing a cautionary signal about the potential for a significant downturn affecting the decentralized finance (DeFi) and altcoin markets in the near future.

During a recent discussion with Scott Melker, Cowen conveyed his belief that Bitcoin (BTC) is likely to undergo a retracement of the gains it achieved in the first half of the year, which could subsequently drag down both DeFi projects and various altcoins.

Cowen pointed out that in years leading up to Bitcoin halving events, there tends to be a pattern where Bitcoin sees upward movement for approximately half of the year followed by a decline in the latter half. He emphasized that this pattern tends to disrupt both bullish and bearish market sentiments.

He elaborated, “There’s currently an excess of liquidity circulating within the DeFi sector, making it susceptible to a loss of confidence and a potential abrupt event. Bitcoin has exhibited positive performance in the initial half of this year.”

Analyzing historical data, Cowen highlighted that in pre-halving years, the monthly returns of Bitcoin have typically displayed a trend of approximately six months of gains and six months of losses. Applying this to the present context, he noted that the initial six months of 2023 have shown similar growth as 2019 and 2011, with the following six months witnessing a decline in those prior years.

The underlying idea Cowen emphasized is the need for a market reset that impacts both bullish and bearish investors, ensuring a comprehensive shakeout.

Cowen further expressed concern about the performance of the altcoin market throughout this year, largely attributed to the increasing dominance of Bitcoin (BTC.D) in the overall market capitalization of digital assets. He projected that Bitcoin’s decline in value might coincide with a rise in its dominance, siphoning liquidity away from the alternative cryptocurrency markets.

He explained, “The altcoin market has been grappling with challenges throughout this year, despite Bitcoin’s notable gains. However, the critical issue arises if Bitcoin retraces any of these gains. This marks a particularly harsh phase of the market cycle, where Bitcoin’s dominance strengthens alongside a decrease in Bitcoin/USD value. Many individuals have yet to experience this phase, but I believe it’s on the horizon.”

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