Since I am talking about price:
This is not financial advice in any way. I am not a financial advisor. I am a Dragon.
Bitcoin goes up, and Bitcoin goes down.
With the cryptocurrency market currently in turmoil, I thought I would write a piece analyzing the major Bitcoin crashes so far. Whether you have been around Bitcoin for a couple weeks or a couple years, you probably have seen some noteworthy volatility in price. Through history, Bitcoin has experienced two price drops for -80% and we are currently witnessing our third from $20,000 USD to (as of right now) $3500. This current price decline puts us right around 80% since the all-time high. Since the genesis block, Bitcoin has experienced a lot of technical innovations, and infrastructure improvements. Each price decline has looked different and had a different duration, even though people enjoy drawing comparisons from 2014 all-time high and the current price decline from $20,000 USD, they are not overly similar yet.
While the price declines have been incredibly volatile, they all have been different. Above is the first “major” crash from April 2013 which we will call the “genesis crash”. The genesis crash only lasted 3 days, and Bitcoin moved from $259 to $45, an -83% decline. In 2013, Bitcoin averaged roughly 40,000 – 60,000 transactions per day and was only a 3-year-old piece of technology. This price decline was unprecedented, but luckily investors / hodlers did not have to worry long as this depreciation was finished within 3 days and then there was some relief.
The graphic above from https://howmuch.net/depicts every significant Bitcoin crash so far, even some -50% and -30% declines. Happened to find this visual when I was doing research for this article and felt It was worth including. Clearly, Bitcoin has crashed a couple of times. Interesting to look back on the 5 -30% corrections that Bitcoin went through in 2017, these did not stand out as much to me because Bitcoin was in an uptrend for most of 2017.
In 2014 the worst case scenario happened, where a popular exchange at the time, Mt Gox, lost roughly 740,000 Bitcoin in a hack. This was roughly 6% of the circuiting Bitcoin supply at the time and was worth roughly 460$ million at the time of the hack. In February 2014 Mt Gox suspended trading and closed its website. On top of this, they filed for bankruptcy and began liquidation proceedings in April 2014. To date, the Mt. Gox crash is Bitcoins worst crash. From $1,163 to $152 in roughly 400 days, this was one of the longest downtrends Bitcoin has ever experienced. This is one crash where there is a very clear defined narrative that “explains” the price drop.
Now looking at the madness that is 2018 so far. Recently, the $6,000 support fell out. After bouncing around $6,000 for months, the “bottom” fell out. Since this price drop, I have seen price predictions for a dip to $3,000, $1,800, and some talk of breaking $1,000. Why? No other reason than a textbook correction. The 2018 bubble is the first I have witnessed firsthand, and the sheer amount of time that this correction has taken has been enough to shake out many people of the cryptocurrency market. Currently sitting at an -80% decline since the all-time high of $20,000, Bitcoin actually is experiencing year-lows in price. While Bitcoin may be sitting at its lowest price throughout 2018, it has never had less than 150,000 transactions a day, more than double what it was averaging in 2014. For the majority of 2018 as well, Bitcoin has generally sustained over 200,000 transactions per day. This growth in average transactions per day is important to understand because while the price has not been proficient in 2018 network growth has been able to sustain itself. Whenever someone is in a great panic about the price of Bitcoin I just send over the average transactions per day and explain that price is not always a great indicator of performance (but is important from an investment standpoint). Transactions per day can be found here: https://www.blockchain.com/charts/n-transactions?timespan=all
The year 2018 has been monumental for the cryptocurrency space from SEC enforcement into some ICOs, to Bitmex turning out to sustaining the most daily volume by any cryptocurrency exchange by far. Binance almost does a billion dollars of volume daily, while Bitmex does three times this. Most altcoins have seen 90-99% retraces, with most ICOs re-visiting or floating around ICO price, some even having to issue refunds. Bitcoin, in turn, has also seen some carnage, especially recently visiting a $3,500 low. Unless you are a day trader or price action trader, the day to day Bitcoin moves should not concern you. Longer-term investors should have a plan of action, where they are looking to enter, exit some, and where they would cut their losses. While the emotions on Twitter throughout this drop have been high, this recent volatility has been amazing for price action traders. After moving through weak daily volatility for weeks, the volatility has finally taken off again, giving price action traders something to work with. Bitcoin volatility displayed below, recently taken off.
To wrap up, just wanted to do a piece about the Bitcoin price movements so far this year compared to those in history, because some new people to the space that I talk to tend to act like this 2018 crash is a first. It is not, and technically not even the worst crash (yet). Transactions per day are high, and institutional interest is there. 2019 may be a slow year coming up as well due to recent price crashes, but the next Bitcoin halving in 2020 is something to look forward to as a potential catalyst for positive price movement.
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