Original author: David Canellis
Translated by: Alvis, Mars Finance
The extreme volatility of Bitcoin has long taught us to 'go with the flow'.
We seem to have become accustomed to the expectation that even in a roaring bull market, significant pullbacks can shatter our hopes, dreams, and wallet balances.
Therefore, we all find it completely understandable that Bitcoin could suddenly drop 50% while sprinting towards six-figure or even higher prices.
Is this expectation reasonable?
It is essential to clarify that Bitcoin does have a 'tradition' of plummeting about 80% from bull market peaks to bear market troughs. This has been the case almost without exception since Bitcoin's first significant rise in 2011.
However, this article does not discuss pullbacks during bear markets (for that, you can refer to our previous analysis). Instead, we will focus on pullbacks during bull markets, like the situation we are currently experiencing.
The chart below shows Bitcoin's price performance over six different time spans, ranging from three days to three months, presented in a rolling manner from the cycle start point (trough) to the historic high (peak).
Each line represents a time span. For example, the deep purple line indicates the percentage difference between each daily low and the opening price three days prior, while the green line shows a similar comparison over a three-month period.
The dashed line at the bottom represents the 50% retracement level. As shown, there has never been such a significant retracement during the bull market from August 2015 to December 2017.
During this cycle, the largest pullback occurred near the end of September 2017, dropping 40% within two weeks.
However, during the subsequent bull market from 2018 to 2021, it experienced three pullbacks of over 50%.
One instance was the market crash triggered by the pandemic in March 2020, when the stock market experienced a series of 'Black Mondays'.
Bitcoin has dropped 50% or more during almost all time spans, with the only exception being a three-month time span that was slightly below 50%, at 47%.
The other two significant pullbacks occurred in May and July 2021, when Bitcoin fell from over $60,000 historic highs to $30,000. However, in the following four months, Bitcoin quickly rebounded to nearly $69,000 new highs.
This time, the pullback was relatively mild, with the most significant correction during the bull market occurring in the first week of August.
Bitcoin has dropped 30% over multiple time periods, falling from over $70,000 in June to a low of $49,200.
Of course, this does not mean that Bitcoin has lost its volatility. I still believe that future market conditions will continue to fluctuate.
It is worth noting that the most severe pullbacks in history often occur at the end of bull markets.
Therefore, the longer a bull market lasts without significant pullbacks, the more unsettling the uncertainty regarding future trends becomes—this is also the unique 'thrill' of investing in Bitcoin.
