Bitcoin is no stranger to volatility. It has had an incredible runup since it was created in 2009. In that year it had almost no value in measurements of fiat currency. In 2010 it was worth about $.003 a coin. Today it is worth just under $7000 a coin, but as recently as December 2017 it was worth just under $20,000.
Most investors do not understand that Bitcoin did not just go straight from $.003 to $20,000 in 7 years without any significant pullbacks. Bitcoin has had several major crashes. The 2013 Bitcoin crash is very similar to the runup and crash we have seen in Bitcoin the past 18 months. In order to understand what will happen to Bitcoin in the upcoming years we have to study how it behaved in the past after big crashes:
Bitcoin Crash of 2013
Bitcoin’s second most incredible run up occurred in late 2013. It ran from about $100 to $1200 in just under 2 months! You can see its’ monster runup on its daily chart below:
This was a monster move in an incredibly short period of time. You can see that a year later it was trading 75% lower from its recent highs. It retraced around 75% from its highs by December, just weeks after it hit all-time highs in the 1100’s. It bounced back in late December towards the $1000 mark, but then it got faded off. It then proceeded to gradually fade off for the next few years.
Bitcoin Crash of 2018
Bitcoin had a similar type of monster run up in 2017, which I am sure everyone reading this knows about. It ran from about $1000 to $20,000 in just under 12 months.
After peaking out at the 20k mark in December, BTC had a massive retracement in the following months.
You can see some similarities between the two bear markets. Although the 2013 run up happened in a much shorter period of time. There were a lot of bounces after the first major crashes that got people thinking it was heading back to all-time highs in both cases. However, once the top was in, all bounces were faded in the ensuing months.
What Will Happen To Bitcoin Next?
What happened after the 2014 bear market is a good indication of what we should expect after the crash this year. You can see what happened after the big runup in 2013:
It will take some time before Bitcoin will head back to all-time highs. It took around 3 years for Bitcoin to retest the 2013 highs again. It may take just as long for Bitcoin to recover and retest the 2017 highs as well. There are a ton of levels of supply between where we are now and the $20k mark. Big pullbacks take time to recover from. It will take awhile to get enough buyers to overcome all the recent bag holders from the 2017 run up.
However, unlike in 2013, there are tons of promising altcoins out there that have liquidity and range to trade. Bitcoin may not necessarily be the most dominant cryptocurrency of the future. The recent runup also attracted a lot more attention than the 2013 run-up. There is a ton of opportunity in the blockchain space right now. The recent runup has gotten governments to realize that blockchain technology and cryptocurrencies will play a pivotal role in the future. The main uncertainty surrounding the space is how governments will regulate these digital assets. The message from studying the last crash is clear: Bitcoin and other cryptocurrencies will probably need some time to recover before they will head back to all-time highs.