Bitcoin traders should keep in mind that the digital currency has a history of significant volatility. More specifically, there have been several instances where the world's largest cryptocurrency by market capitalisation (market cap) experienced very aggressive bull and bear markets where it either gained or lost more than 80% of its value.
In other words, if investors are thinking about getting involved with the digital currency at a time when it has fallen substantially from its latest high, they can benefit from remembering that periods of sharp gains and losses are nothing new for Bitcoin.
This piece will review some of these historical market cycles to explore times when the digital currency experienced notable gains and losses.
2011 Market History
The first units of Bitcoin were mined in January 2009. A few years later, in 2011, the digital currency experienced a strong rally where its price climbed from US$0.30 to US$35 in a few months, a return of more than 11,000%. These gains were followed by a precipitous drop when the digital currency fell back to US$2.30, a decline of more than 90%.
2013-2015 Price Fluctuations
In 2013, Bitcoin enjoyed two notable price rallies.
- The first brought the digital currency to US$259 on 10 April. In less than one week, the cryptocurrency had plummeted back to US$43, however, losing more than 82% of its value.
- By 30 November, Bitcoin prices had recovered all of these losses and more, rising to a peak of US$1,163.
After climbing to this level, the digital currency suffered a bear market far more drawn-out than the previous ones. It didn't bottom out until it reached a low of US$152 on 14 January 2015. By falling to this level, Bitcoin lost roughly 87% of its value when compared to its then all-time high.
After bottoming out in early 2015, Bitcoin's price enjoyed another notable upward movement, climbing to nearly US$20,000 in December 2017. During this rally, the digital currency appreciated more than 3,000%.
After rising to nearly US$20,000, Bitcoin started to drop and would fall to roughly US$3,100 nearly one year later in December 2018. By falling from US$19,783.21 to US$3,122.34, Bitcoin lost more than 84% of its value.
Following the sharp drop it experienced in 2018, Bitcoin started pushing higher, nearly doubling in 2019 and finishing the year at US$7,251.28. The digital currency continued to gain in 2020, finishing the year at US $29,111.52.
The following year had a strong start, as Bitcoin rose from roughly US$29,000 to more than US$58,300 in February.
Traders should remember that at the end of the day, all we know for certain are the facts. What that means is that if Bitcoin prices rise on a certain day, all we know for sure is just that: the price increased. Analysts regularly offer explanations for why a digital currency either increased or decreased in value, but it is impossible to know what influenced the decisions of all the investors who helped determine the price of a specific asset. Fortunately, looking at an asset's price history provides information that is less open to interpretation.
This article was last updated on 4th March 2021.
Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…