Bitcoin just crashed 20% in a week — is now the time to buy the dip?

Bitcoin and Ethereum are experiencing their worst sell-off since the pandemic, with both cryptocurrencies down more than 20 percent in the past week.

It may seem odd, given the larger macroeconomic factors, that Japan’s stock market also suffered its worst day since 1987, falling 12% on Monday, but it appears that cryptocurrencies haven’t performed as badly as we might have expected, given their historical volatility.

The VIX, the market’s fear gauge, rose to its highest level since the pandemic after its biggest single-day jump in more than three decades. Given all this, many market commentators have turned up the volume on calls for the Fed to intervene with emergency rate cuts.

Bitcoin rose from levels below $50,000 to as high as $54,000 on Monday as the market digested the crash.

It’s worth noting that JPMorgan analysts noted in a research note dated July 18 that bitcoin is rallying ahead of its fair price. Using the volatility-adjusted price of gold as a proxy, JPMorgan analysts predicted that bitcoin’s fair price would be closer to $53,000.

“[T]“The Bitcoin price is currently too high,” JPMorgan analysts wrote weeks ago, comparing Bitcoin’s price to gold. “The metric … is indicating mean reversion around the zero line, which limits the long-term upside potential of Bitcoin prices.”

It’s an impressive call that hits almost exactly where Bitcoin is expected to trade relative to gold. Given the other price target to watch based on Bitcoin’s production costs of $43,000, it’s still not clear whether Bitcoin is out of the woods yet.

Expectations are changing rapidly, given that many market watchers, including Wharton Professor Jeremy Siegel, have called for an emergency Fed rate cut following the market carnage. On Monday, traders were predicting a roughly 85% chance of a 50 basis point cut at the Fed’s next policy meeting, up from an 11% probability a week ago.