Author: David Canellis
Translation: Plain Language Blockchain
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, there will inevitably be significant pullbacks that shatter our hopes, dreams, and wallet balances.
Therefore, it is completely understandable that we all think of Bitcoin suddenly plummeting 50% on its way to sprinting towards six-figure prices or even higher.
Does this expectation make sense?
First, it is important to clarify that Bitcoin indeed has a 'tradition' of plummeting about 80% from bull market peaks to bear market troughs. This has been the case in almost every cycle since Bitcoin first saw a 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 one 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 starting point (trough) to the historical 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 represents a comparative analysis over a three-month period.
The dashed line at the bottom represents the 50% retracement level. As shown, during the bull market from August 2015 to December 2017, such a large pullback never occurred.
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, there were three instances of pullbacks exceeding 50%.
One of these instances was the market crash triggered by the pandemic in March 2020, when the stock market experienced a series of 'Black Mondays.'
Bitcoin has fallen 50% or more in almost all time spans, with only the three-month time frame slightly below 50%, at 47%.
The other two significant pullbacks occurred in May and July 2021, when Bitcoin fell from a historical high of over $60,000 to $30,000. However, in the following four months, Bitcoin quickly rebounded to a new high near $69,000.
This pullback was relatively mild, with the most significant correction during the bull market occurring in the first week of August.
Bitcoin has fallen 30% over multiple time frames, dropping from a high of 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 markets will continue to be turbulent.
It is worth noting that historically, the most severe corrections often occur at the end of a bull market.
Therefore, the longer a bull market lasts without significant pullbacks, the more uncertain the future trend becomes, which adds to the unique 'thrill' of investing in Bitcoin.
