There have been two plunges of more than 80% in history. Will history repeat itself?

Affected by the geopolitical tensions in Ukraine, Bitcoin fell below the $37,000 mark today, with a daily drop of more than 6%, and other cryptocurrencies followed suit.

Text | Xu Cihao

Affected by the geopolitical tensions in Ukraine, Bitcoin fell below the $37,000 mark today, with a daily drop of more than 6%. As of press time, Bitcoin is quoted at around $36,800, and Ethereum has also fallen by more than 7% to $2,524, and other cryptocurrencies have followed suit.

According to third-party service provider Coin, 122,300 investment users’ positions were liquidated in the past 24 hours, and $442 million evaporated.

Zhao Wei, a senior researcher at the European Economic Research Institute, told the reporter of Blockchain Daily that the price of Bitcoin has been falling since Russia announced its withdrawal on February 16, but in the long run, whether the incident tends to be resolved satisfactorily or the conflict escalates, Bitcoin has the potential to "recover lost ground." If a local war occurs in the future, Bitcoin cannot be ruled out from a short-term upward trend.

However, in January, when cryptocurrencies plummeted, trading volume also shrank significantly. According to a report by CryptoCompare, total spot trading volume fell to $1.8 trillion in January, down more than 30% from the previous month. This is the lowest volume since the end of 2020.

Ed Hindi, chief investor and co-founder of Tyr Capital, said: "This is a very quiet, scary and uncertain period in cryptocurrencies. As people say, smart money doesn't sleep or take vacations. But retail investors in the cryptocurrency market do take breaks, especially when they are hurt."

Last year’s cryptocurrency boom had a very positive money-making effect, with a surge in jobs at startups and other companies eager to try out the technology and a lot of venture capital pouring in.

Hany Rashwan, co-founder and chief executive of 21Shares, which provides exchange-traded products investing in cryptocurrencies and manages about $2.5 billion in assets, said in an interview with the media that with many cryptocurrencies falling 50% or more in just a few months, companies in the industry are now much more cautious in implementing expansion plans.

"We expect wide range trading in 2022, limited by year-to-date intraday levels, with greater downside risk to Bitcoin through 2023 if the Fed continues to normalize policy in a 'standard' 2-year tightening cycle," said Barry Bannister, an analyst at Stifel Investment Advisors.

He also pointed out that Bitcoin still has a lot of room to fall and is currently facing three major macro unfavorable factors affecting its price, including global money supply, 10-year U.S. Treasury yields, and the equity risk premium of the S&P 500 index, and the Federal Reserve plans to tighten monetary policy in the form of raising interest rates and shrinking its balance sheet.

"The Bitcoin bull run is closely related to a process called halving, which occurs every few years." Huobi co-founder Du Jun said in an interview with the media that if past price cycles are any indication, Bitcoin may not see another bull run until the end of 2024 or early 2025.

The halving is written into bitcoin’s underlying code and cuts in half the rewards so-called miners receive for validating transactions on the cryptocurrency’s network. It occurs roughly every four years.

The last halving took place in May 2020, and in 2021, Bitcoin broke through its all-time high of over $69,000. A similar situation occurred during the halving in 2016. The following year, Bitcoin reached its then-all-time high of around $19,000.

How much further can Bitcoin fall? Bitcoin prices first peaked on November 29, 2013, at $1,137, and just one year later, on January 14, 2015, it fell 84% to $183.

This pattern was repeated four years later: it peaked at $19,041 on December 17, 2017, and bottomed at $3,204 a year later, a cumulative decline of 83%.

If this historical pattern is accurately reproduced, the price of Bitcoin, which reached an all-time high of $69,040 in November 2021, will fall to a low of $11,515 in November this year, a drop of 83% from its peak in November last year.

After the sharp drop in Bitcoin today, the price is $36,800, which means there is still room for a drop of $25,000.

Affected by the geopolitical tensions in Ukraine, Bitcoin fell below the $37,000 mark today, with a daily drop of more than 6%. As of press time, Bitcoin is quoted at around $36,800, and Ethereum has also fallen by more than 7% to $2,524, and other cryptocurrencies have followed suit.

According to third-party service provider Coin, 122,300 investment users’ positions were liquidated in the past 24 hours, and $442 million evaporated.

Zhao Wei, a senior researcher at the European Economic Research Institute, told the reporter of Blockchain Daily that the price of Bitcoin has been falling since Russia announced its withdrawal on February 16, but in the long run, whether the incident tends to be resolved satisfactorily or the conflict escalates, Bitcoin has the potential to "recover lost ground." If a local war occurs in the future, Bitcoin cannot be ruled out from a short-term upward trend.

However, in January, when cryptocurrencies plummeted, trading volume also shrank significantly. According to a report by CryptoCompare, total spot trading volume fell to $1.8 trillion in January, down more than 30% from the previous month. This is the lowest volume since the end of 2020.

Ed Hindi, chief investor and co-founder of Tyr Capital, said: "This is a very quiet, scary and uncertain period in cryptocurrencies. As people say, smart money doesn't sleep or take vacations. But retail investors in the cryptocurrency market do take breaks, especially when they are hurt."

Last year’s cryptocurrency boom had a very positive money-making effect, with a surge in jobs at startups and other companies eager to try out the technology and a lot of venture capital pouring in.

Hany Rashwan, co-founder and chief executive of 21Shares, which provides exchange-traded products investing in cryptocurrencies and manages about $2.5 billion in assets, said in an interview with the media that with many cryptocurrencies falling 50% or more in just a few months, companies in the industry are now much more cautious in implementing expansion plans.

"We expect wide range trading in 2022, limited by year-to-date intraday levels, with greater downside risk to Bitcoin through 2023 if the Fed continues to normalize policy in a 'standard' 2-year tightening cycle," said Barry Bannister, an analyst at Stifel Investment Advisors.

He also pointed out that Bitcoin still has a lot of room to fall and is currently facing three major macro unfavorable factors affecting its price, including global money supply, 10-year U.S. Treasury yields, and the equity risk premium of the S&P 500 index, and the Federal Reserve plans to tighten monetary policy in the form of raising interest rates and shrinking its balance sheet.

"The Bitcoin bull run is closely related to a process called halving, which occurs every few years." Huobi co-founder Du Jun said in an interview with the media that if past price cycles are any indication, Bitcoin may not see another bull run until the end of 2024 or early 2025.

The halving is written into bitcoin’s underlying code and cuts in half the rewards so-called miners receive for validating transactions on the cryptocurrency’s network. It occurs roughly every four years.

The last halving took place in May 2020, and in 2021, Bitcoin broke through its all-time high of over $69,000. A similar situation occurred during the halving in 2016. The following year, Bitcoin reached its then-all-time high of around $19,000.

How much further can Bitcoin fall? Bitcoin prices first peaked on November 29, 2013, at $1,137, and just one year later, on January 14, 2015, it fell 84% to $183.

This pattern was repeated four years later: it peaked at $19,041 on December 17, 2017, and bottomed at $3,204 a year later, a cumulative decline of 83%.

If this historical pattern is accurately reproduced, the price of Bitcoin, which reached an all-time high of $69,040 in November 2021, will fall to a low of $11,515 in November this year, a drop of 83% from its peak in November last year.

After the sharp drop in Bitcoin today, the price is $36,800, which means there is still room for a drop of $25,000.