General
You might be aware of the last Bitcoin correction, following the latest halving we discussed in this article. Such corrections are normal and part of the natural market cycles.
In early July, Bitcoin surged to $65,000, especially during Asian market hours, signaling that investors are taking advantage of the buying opportunity presented by the cryptocurrency’s largest correction since it hit a low of $16,500 in December 2022. This is reflected in Bitcoin spot ETFs, which have seen their highest inflows in 30 days.
The decline in Bitcoin’s price from $73,836 on March 15 to $53,917 on July 5, represents a 27% correction, a level not seen since 2022.
- Below, we explain in detail how Bitcoin has historically behaved to help you better understand the mechanism and develop a skillful and patient trading strategy.
- In this recent article, we discuss the 10 Key factors to boost your DeFi trading with DEXTools. Keep them in mind to take advantage of crypto market changes and adjustments, in which opportunities always arise.
Let’s dive in!
What is the difference between a crypto drop and a correction?
- To distinguish between the two, we should note that a crypto drop typically involves a sudden pullback of more than 10% in a single day due to abrupt market changes. On the other hand, a correction refers to a gradual decline in price that exceeds 10% over several days.
- To detect a crypto drop or a correction, we can appeal to technical analysis. Moving averages, MACD and RSI, among other indicators, can be useful to guess the fluctuations in crypto market prices.
Bitcoin’s recent volatility: a market overview
- Bitcoin tends to surge after bear markets. For instance, after the one in 2018, Bitcoin rallied from around $3,000 to over $60,000 in 2021.
- Factors driving this behavior include reduced supply due to halvings, increased institutional interest, and growing adoption.
- Bitcoin’s recent drop has been influenced by several factors. Key events include Mt. Gox repayments, which increased market supply, government movements of large Bitcoin amounts sparking uncertainty, and Bitcoin Core’s new policies aimed at improving security.
- Historical analysis suggests Bitcoin might be in an accumulation phase before a significant rise, potentially reaching $148,000 by mid-2025 according to optimistic forecasts.
Bitcoin halving events, occurring approximately every four years, often precede significant price increases, followed by corrections. Notable corrections occurred in the post-halving periods of 2012, 2016, and 2020.
Let’s now examine some figures and their chronological development over time.
Behavior at All-Time Highs Post-Bear Markets
When Bitcoin approaches previous ATHs after severe bear markets, it often experiences significant volatility. Historically, these fluctuations range between 15% and 34%, typically persisting for a month or more.
- Post-2016 Halving: Bitcoin experienced an 84% decline after peaking in December 2017. The bear market persisted through 2018, culminating in a bottom in early 2019.
- 2017: As Bitcoin neared its 2013 high, it saw a 34% drop before a major rally.
- Late 2020: Upon reaching the 2017 ATH, Bitcoin faced a 16% pullback before continuing upward.
- Post-2020 Halving: After the May 2020 halving, Bitcoin surged to an ATH of $69,000 in November 2021, followed by a severe 78% correction, bottoming out at $16.500 in December, 2022.
Such volatility is a hallmark of Bitcoin’s recovery process, often leading to higher prices once fluctuations stabilize. Understanding these patterns can help investors navigate market uncertainties effectively.
2021 All-Time High and subsequent volatility
- The all-time high (ATH) of $69,000 in late 2021 stood until 2024. This level was marginally breached on March 5, 2024, before Bitcoin quickly fell by 15% and then recovered, showcasing the whipsaws and volatility near ATHs following a severe bear market.
Percentage Gains and Losses in Major Bull and Bear Markets
Since late 2022, Bitcoin surged 330% after a 78% drop from its 2021 ATH of $69,000 to a 2022 low of $16.500. Historically, significant rallies have followed 70% or greater declines.
Bitcoin Pullbacks Since the 2022 Bear Market Bottom (negative percentages):
-23% (February 2023)
-21% (April/May 2023)
-22% (July/September 2023)
-21% (January 2024)
-23.6% (April/May 2024)
-21% (June 2024)
(Average retracement in this cycle is -22%).
Key takeaways for trading or investing in Bitcoin
- Volatility: Expect 20% or greater drops every few months, even during bull markets.
- Declines: 50% or greater declines usually signal bear markets.
- Holding: Be prepared for multiple 20-40% declines during bull markets.
- Buy and Hold: Not the only strategy; understand price dynamics for better entry and exit points.
- Small Moves: Sub-20% moves are common and worth analyzing separately.
- Acceleration Phase: Consider waiting for this phase to avoid early trend volatility and confirm new uptrends.
Long-Term Investing and Passive Strategies
Learn to passively invest to leverage long-term compounding. Even traders should consider passive investment for balanced risk management.
- Position and learn: This is an ideal time to deepen your knowledge about Bitcoin (and crypto) and its market cycles. Continuous education will enable you to make more informed and strategic decisions.
- Patience is key: History has shown that those who are patient tend to be rewarded. Maintaining a long-term vision and not getting swayed by daily fluctuations is essential.
In summary: consider the natural market cycles, avoid FUD (Fear, Uncertainty, and Doubt) and Do Your Own Research (DYOR).
- Develop a wise strategy. And for DeFi trading, rely on the best functionalities that DEXTools continually improves based on your feedback.
- Also, don’t forget to educate yourself through our Academy on YouTube. Thank you, and trade safe!
