Author: David Canellis
Translation: Popular Blockchain
Bitcoin's extreme volatility 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, there will inevitably be significant pullbacks that shatter our hopes, dreams, and wallet balances.
Therefore, it is entirely understandable that we all think Bitcoin could suddenly drop 50% while sprinting towards six-figure or even higher prices.
Does such an expectation make sense?
It is first necessary to clarify that Bitcoin indeed has a 'tradition' of dropping about 80% from bull market peaks to bear market troughs. Since Bitcoin's first significant rise in 2011, almost every cycle has been no exception.
However, this article does not discuss pullbacks during bear markets (for that, please refer to our previous analysis). Instead, we will focus on corrections 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 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 ago, 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, such a significant pullback had never occurred 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, there were three significant corrections of over 50%.
One of these was the market crash triggered by the pandemic in March 2020, during which the stock market experienced a series of 'Black Mondays'.
Bitcoin experienced a drop of 50% or more across almost all time spans, with the three-month span slightly below 50%, at 47%.
The other two significant pullbacks occurred in May and July 2021, when Bitcoin fell from over $60,000 historical 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 notable correction occurring in the first week of August.
Bitcoin dropped 30% across multiple time periods, 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 be turbulent.
It is worth noting that historically, the most severe corrections often occur at the end of a bull market.
Therefore, the longer the bull market lasts without significant pullbacks, the more uncertain the future trends become, which is also where the unique 'excitement' of investing in Bitcoin lies.
