Translation: Plain Language Blockchain
The extreme volatility of Bitcoin has long taught us to 'go with the flow'.
We seem to have grown accustomed to the expectation that even in a roaring bull market, significant corrections are inevitable, shattering our hopes, dreams, and wallet balances.
Therefore, it is entirely understandable that we all think about Bitcoin suddenly dropping 50% on its sprint to six figures or even higher.
Is such an expectation reasonable?
First, it is important to clarify that Bitcoin does indeed have a 'tradition' of dropping around 80% from bull market peaks to bear market troughs. This has been almost universally true since Bitcoin's first major rise in 2011.
However, this article does not discuss retracements during bear markets (for that, please refer to our previous analysis). Instead, we will focus on corrections during bull markets, such as the situation we are currently experiencing.
The chart below shows the price performance of Bitcoin over six different time spans, ranging from three days to three months, presented in a rolling manner from the cycle's starting point (trough) to the historical peak (summit).
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 similar comparison 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 significant retracement never occurred.
During this cycle, the largest retracement 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 significant corrections exceeding 50%.
One of them was the market crash triggered by the pandemic in March 2020, during which the stock market experienced a series of 'Black Mondays'.
Bitcoin has dropped 50% or more across almost all time spans, with the exception of the three-month span, which is slightly below 50% at 47%.
Two other significant retracements occurred in May and July 2021, when Bitcoin fell from over $60,000 at its historical peak to $30,000. However, in the following four months, Bitcoin quickly rebounded to nearly $69,000.
This correction was relatively mild, with the most significant adjustment in the bull market occurring in the first week of August.
Bitcoin has dropped 30% across 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 historically, the most severe retracements often occur at the tail end of bull markets.
Thus, the longer the bull market continues without a significant correction, the more unsettling the uncertainty about future trends becomes—this is also the unique 'thrill' of investing in Bitcoin.
