Even as prices of many top cryptocurrencies have fallen 70 percent or more from their all-time highs in November 2021, the crypto market is cyclical, which means that it usually rebounds after a low. And in many cases, cryptocurrencies bounce back stronger and register new highs after a crash.
The current bear market has caused investors, traders, and crypto projects a lot of pain. Prices of many top cryptocurrencies have fallen 70 percent or more from their all-time highs in November 2021. As a result, countless individuals have lost their entire savings, and several crypto firms have come crashing down. However, there is hope at the end of the tunnel.
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The crypto market is cyclical. This means that it usually rebounds after a low. In many cases, cryptocurrencies bounce back stronger and register new highs after a crash. This can be hard to imagine given the current state of the market. However, this pattern has been observed in the past, and many experts believe it will repeat itself in the coming months. Tag along, as we look back at three crypto market crashes that led to new highs in the past.
The first bear market from 2011
Back in 2011, when most people were not even aware of cryptocurrencies, Bitcoin crashed from $32 to $2 between July 2011 and Jan 2012. That's a 93 percent nosedive in a matter of months. However, prices began to rally once again, eventually surpassing the previous ATH by 2013.
The bear market from 2014 to 2016
The next bear market came a couple of years later, toward the end of 2013. The price of BTC plummeted from $1,135 in December 2013 to $175 in January 2015. The sell-off was partly triggered when Mt Gox, the biggest Bitcoin exchange at the time, announced that it was hacked, and the attackers had gotten away with 850,000 Bitcoins. That amounts to a loss of nearly $17 billion at today's rates, making it the largest crypto hack to date.
The crypto market reacted poorly to the hack as BTC lost nearly 85 percent in value. Fortunately, the price of BTC began picking up again by August 2015, tracing its steps back to the $1,000 mark by Jan 2017, before registering a new high of $1,200 by April the same year.
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The 2018 bear market and its tremendous turnaround
The price of BTC dropped from $19,640 in Dec 2017 to $3,185 in Dec 2018. There were multiple reasons for the decline, including an attack on Coincheck, one of the largest Japanese crypto exchanges and the SEC's rejection of Bitcoin-based exchange-traded funds (ETFs). These factors combined resulted in BTC sinking nearly 84 percent within those 12 months.
Fortunately, like the other two crashes mentioned before, the price of BTC eventually recovered to the $20,000 mark by July 2020 before touching its current all-time high of $69,000 in November 2021.
The current bear market
The current bear market has lasted several months now, with BTC presently trading at $20,228 and the global market cap of the crypto industry languishing at $958 billion. That's less than one-third of its all-time high of $2.9 billion from 2021.
However, several experts, such as the CEO and co-founder of Binance, Changpeng Zhao, have stated that the bear market is 'healthy' for the crypto industry in the long term. Many investors and traders also believe such market corrections weed out all the dicey crypto projects and ensure that only the good ones survive. Moreover, they also give market participants a chance to buy their favourite cryptos while prices are low.
Further, this is the final week of September, which has been one of the worst months for cryptocurrencies over the last six years. The price of BTC has tumbled six times in the last 8 Septembers. As such, many investors have even nicknamed the month "Shocktember." Fortunately, October is a relatively good month for crypto, with prices often turning around and beginning to rally at this point of the year. It's one of the reasons traders refer to October as Uptober.
The crypto market may be highly volatile, but it does appear to follow a cycle of ups and downs. By this logic, a strong bull market should follow the current bear market. And if historical data is to be believed, we could be in for new highs in the coming months and years.
First Published: IST