Article source: Plain Blockchain
Author: David Canellis
Translation: Plain Blockchain
The dramatic volatility of Bitcoin has long taught us to 'go with the flow.'
We seem to have become accustomed to such expectations: even in a roaring bull market, it is inevitable to encounter significant pullbacks that shatter our hopes, dreams, and wallet balances.
Therefore, it is entirely understandable that we all think Bitcoin could suddenly plunge 50% while sprinting towards six-figure prices or even higher.
Is such an expectation reasonable?
First, it is important to clarify that Bitcoin indeed has a 'tradition' of plunging about 80% from the peak of a bull market to the trough of a bear market. Since Bitcoin's first major rise in 2011, there has been almost no exception in each cycle.
However, this article does not discuss pullbacks during bear markets (for this, refer to our previous analysis). Instead, we focus on corrections during bull markets, much like what 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's starting point (trough) to the historical peak (summit).
Each line represents a time span. For example, the deep purple line represents the percentage difference between each daily low and the opening price three days prior, while the green line indicates a comparative analysis over a three-month period.
The dashed line at the bottom represents a 50% retracement level. As shown, during the bull market from August 2015 to December 2017, such a large pullback had never occurred.
During 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 exceeding 50%.
One of them 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 across almost all time spans, with only the three-month time span being slightly below 50%, at 47%.
The other two 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 near $69,000, a new high.
This pullback was relatively mild, with the most notable correction during 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 markets will continue to be turbulent.
It is worth noting that the most severe historical pullbacks often occur at the end of a bull market.
Therefore, the longer the bull market lasts without a significant correction, the more uncertainty about future trends makes people feel uneasy—this is also where the unique 'thrill' of investing in Bitcoin lies.
