One thing has been constant since the introduction of bitcoin in late 2009: the cryptocurrency market is very volatile. The best indicator of the crypto market is the price of Bitcoin since it has the largest market cap.
Bitcoin has experienced significant ups and downs over time. There have been instances when Bitcoin has crashed by more than 40%, and each time has come back stronger. Recently, Bitcoin reached a high of $68,000 in 2021 before dropping to $20,000 in June 2022. It is currently trading for $23,518.66 (a bounce-back from a 52-Week Low at $17,708.62). This year saw bitcoin suffer its worst quarterly loss in 11 years. Let us take a look at the crypto crashes and bear market scenarios over a period of time.
1. The First Bear Market: 2011-2012
Long before most of us were even aware that something like crypto existed, the worst bear market unfolded. In 2011, the price of Bitcoin had reached $32, only to fall to $2.10 in a few months’ time. Bitcoin plunged 93% in value!
But think about this: even at the all-time high (ATH) price of $30, purchasing bitcoin would have been great. Who wouldn’t want to stockpile some bitcoin for $30?
Over the past ten years, the perspective of bitcoin has changed as it transitioned from a geeky experiment to an inflation hedge and, possibly, the foundation of the following global monetary system. Early in 2013, the price broke through the previous ATH and never dropped below that mark again.
2. Bear Market 2.0: 2014-2016
Bitcoin reached $100 in April 2013 and $1,000 for the first time ever in November of the same year.
Later in December, though, the Chinese government forbade financial institutions from carrying out bitcoin transactions, claiming they were useless. As a result, on Bitcoin China, the biggest cryptocurrency exchange at the time, bitcoin’s price dropped from $1,000 to $700 in a single month. The Mt. Gox cryptocurrency exchange platform’s downfall is partly to blame for the 2014 crypto winter. The Japanese exchange filed for bankruptcy both in Tokyo and the United States.
Bitcoin’s price eventually fell during this bear market from $1,135 on December 4, 2013, to $175 on January 14, 2015. Before things started to turn around in August 2015, investors had lost faith in bitcoin. But Bitcoin bounced back at a price of $1,000 in January 2017.
3. Crypto Winter Chills: 2018-2020
A price drop from $19,640 on December 16, 2017, to $3,185 on December 15, 2018, followed by months of sideways movement, was one of the most well-known downfalls in Bitcoin’s history. On the one hand, Coincheck, one of the biggest Japanese cryptocurrency exchanges, was compromised. On the other hand, however, due to the uncontrolled nature of cryptocurrencies, the US Securities and Exchange Commission rejected applications for bitcoin exchange-traded funds in July 2018.
But again, bitcoin bounced back. After reaching $20,000, bitcoin started a new bull run in 2020. It reached $63k in April 2021. The market value of cryptocurrencies topped $1 trillion during the bullish wave.
4. Is the Winter here again?: 2022 Market Crash
Bitcoin is currently going through a dramatic crash. The price drops below $20,000 in July after reaching an ATH of $68,000 in November 2021. The collapse of TerraUSD Classic (USTC), a significant blockchain stablecoin, is what caused the market to drop. Instead of employing equal cash reserves, these stablecoins were pegged 1:1 to the US dollar using algorithms.
USTC lost its dollar peg in May. It had risen to the position of third-largest stablecoin at this point. However, following the de-pegging, the crypto community descended into anarchy as the ecosystem failed.
Investors began selling off their holdings, which increased uncertainty and sent the price of cryptocurrencies spiraling lower. Finally, Celsius’s cryptocurrency staking and the lending site stopped all withdrawals due to the terrible liquidity issue.
Bear markets are neither unexpected nor frightening. On the contrary, they contribute to the development of bitcoin as a universally accepted form of money. This seasonality of the crypto market explains a pattern of ups and downs. Most investors who have been in the market for a long term now understand that Bitcoin strikes back, and when it comes back, it comes back with a vengeance. Therefore, it is essential to remember that this isn’t the end; in fact, this might be the beginning of various upgrades and bolstering of crypto as an asset class.
Let’s keep BUIDLing for the upcoming bull run!
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.