Historically, the most severe pullbacks often occur at the end of bull markets.
Author: David Canellis
Translation: Blockchain in Plain Language
The extreme volatility of Bitcoin has long taught us to 'go with the flow'.
We seem to have become accustomed to this expectation: even in a powerful bull market, significant pullbacks are inevitable, shattering our hopes, dreams, and wallet balances.
Therefore, we all find it completely understandable that Bitcoin could suddenly drop 50% while sprinting towards six figures or even higher.
Is such an expectation reasonable?
First, it is important to clarify that Bitcoin does indeed have a 'tradition' of plummeting about 80% from bull market peaks to bear market troughs. Since Bitcoin first experienced significant rises in 2011, every cycle has almost without exception followed this pattern.
However, this article does not discuss pullbacks during bear markets (for this, you can refer to our previous analysis). Instead, we focus on pullbacks during bull markets, just like the situation we are currently experiencing.
The chart below shows Bitcoin's price performance across 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 (summit).
Each line represents a time span. For example, the dark purple line indicates the percentage difference between each daily low and the opening price three days ago, while the green line represents a comparison over a three-month period.
The dashed line at the bottom represents the 50% pullback level. As shown, there has never been such a significant pullback during the bull market from August 2015 to December 2017.
In this cycle, the largest pullback occurred near the end of September 2017, with a 40% drop within two weeks.
However, during the subsequent bull market from 2018 to 2021, there were three significant pullbacks of over 50%.
One of the instances 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 in almost all time spans, with the only exception being the three-month time span, which is slightly below 50% at 47%.
Additionally, two other significant pullbacks occurred in May and July 2021, when Bitcoin fell from over $60,000 to $30,000. However, in the following four months, Bitcoin quickly rebounded to nearly $69,000.
This pullback is relatively mild, with the most significant correction in the bull market occurring in the first week of August.
Bitcoin has dropped 30% across multiple timeframes, 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 trends will be ups and downs.
It is worth noting that historically, the most severe pullbacks often occur at the end of bull markets.
Therefore, the longer the bull market lasts without significant corrections, the more uncertainty about future trends makes people feel uneasy—this is also the unique 'excitement' of investing in Bitcoin.
Article link: https://www.hellobtc.com/kp/du/12/5564.html
Source: https://blockworks.co/news/bitcoin-bull-market-drawdowns
