Article source: Plain Blockchain
Author: David Canellis
Translation: Plain 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, we cannot avoid significant pullbacks that shatter our hopes, dreams, and wallet balances.
Therefore, it is entirely understandable that we all believe Bitcoin could suddenly drop 50% while sprinting towards six-digit or even higher price levels.
Is such an expectation reasonable?
First, it should be clarified that Bitcoin does indeed have a 'tradition' of dropping about 80% from the peak of a bull market to the trough of a bear market. Since Bitcoin first experienced a major rise in 2011, there has been almost no exception in each cycle.
However, this article does not discuss pullbacks during bear markets (for that, please refer to our previous analysis). Instead, we focus on pullbacks during bull markets, such as 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 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 ago, while the green line shows 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, there was never such a severe pullback.
In this cycle, the largest pullback occurred near the end of September 2017, with a 40% drop over two weeks.
However, during the subsequent bull market from 2018 to 2021, there were three significant pullbacks of over 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 fallen by 50% or more across almost all time spans, with only the three-month time span slightly below 50%, at 47%.
The other two significant pullbacks occurred in May and July 2021, when Bitcoin fell from its historical high of over $60,000 to $30,000. However, in the following four months, Bitcoin quickly rebounded to nearly $69,000, a new high.
This pullback was relatively mild, with the most significant correction during the bull market occurring in the first week of August.
Bitcoin fell by 30% across multiple time periods, dropping 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 trends will continue to fluctuate.
It is worth noting that historically, the most severe pullbacks often occur at the end of a bull market.
Therefore, the longer the bull market lasts without a significant pullback, the more unsettling the uncertainty about future trends becomes—this is also the unique 'thrill' of investing in Bitcoin.
