The bear market length has now matched previous cycles. How long with this crypto bear market last?
Every crypto bull is waiting for warmer days in the crypto market. For those new to space, the most recent bear market that began in 2022 has been a painful life lesson. And while no two bear markets are the same, understanding the history of Bitcoin’s price cycles is critical to becoming a more competent cryptocurrency trader and investor.
Since the dawn of cryptocurrencies in the wake of the 2008 financial crisis, Bitcoin has been the flagship token. As a result, we can generally understand the overall crypto market bear-bull cycles by focusing on Bitcoin’s price action. Essentially when Bitcoin suffers, altcoins also suffer.
This post will cover the five widely accepted crypto bear markets, providing insights into what caused the cycles and how long they lasted. We will also analyze the current bear market and question the potential impact of the next Bitcoin halving cycle on market sentiment.
1. Mt. Gox Collapses (2011-12)
BTC Price Drop from $32 to $0.1
The collapse of the Mt. Gox Bitcoin exchange created the first notable crypto bear market. In 2011 infrastructure around Bitcoin trading was extremely primitive, and Mt. Gox was responsible for a considerable chunk of the overall trading volume.
In June 2011, $BTC was trading at around $30, which many critics labeled as overvalued at the time. The market was gripped by euphoria as $BTC hit a new all-time high of $32 on June 8th, 2011.
As the token’s price moved into double figures, volume on the exchange began to balloon, and people began to speculate about a $100 Bitcoin.
Unfortunately, $100 would have to wait as a security breach at Mt. Gox resulted in 850,000 $BTC being stolen. The market panicked, and Mt. Gox collapsed. $BTC’s price went into freefall and dropped by over 90%.
The Mt.Gox collapse was a disaster for Bitcoin, and it didn’t reach a new all-time high until early 2013; therefore, the bear market lasted approximately 20 months.
2. Bad News from China and the U.S. (2013-15)
BTC Price Drop from $1,000 to $200
Following the Mt.Gox collapse, $BTC/$USDT remained in the doldrums for over a year until mid-2013, when Bitcoin finally hit $100. Breaking the psychological barrier for three figures generated market euphoria, and by the end of 2013, it was trading at $1,000.
The bull run was interrupted by U.S. law enforcement and Chinese regulators.
The Asian giant’s central bank introduced legislation that made it illegal for financial institutions to deal with Bitcoin transactions.
U.S. law enforcement shut down the Silk Road marketplace, which had become a huge source of $BTC demand.
Bitcoin’s price began to tumble shortly after hitting $1000 due to the combination of the developments in the two leading global economies. By April 2015, Bitcoin had shed well over 80% as it settled between a range of $200-300. The bear market came to an end as $BTC rallied in 2017 after roughly 35 months, making it one of the most painful bear markets to date.
3. Burst Bubble, ICO Troubles, and Regulations (2017-2020)
BTC Price Drop from $20,000 to $3,200
Bitcoin emerged from the 2013-15 bear market spectacularly. In 2017 it began to rally and hit an all-time high of around $20,000 in 2018. $BTC didn’t pause for a proper pullback between $1,000 and $20,000.
The crash that followed was as dramatic as the rise. A few months after clocking the all-time high, a 50% drop was recorded to below $10,000. The red days kept coming, and by January 2019, BTC was trading 84% below $20,000 at $3,200.
Although one single factor doesn’t explain the bear market that coined the term ‘crypto winter,’ three events appear to have been the most important:
Bubble: Bitcoin’s run up to $20,000 was fueled by speculative investors, and regardless of fundamentals, a pullback had become inevitable as investors took profits.
Initial Coin Offerings: ICOs became an integral part of the crypto economy in 2017, and the number of scam projects reached an untenable level for most regulators. A crackdown followed, which reduced crypto trading volume.
Regulations: U.S. regulators began rejecting applications for spot Bitcoin ETFs while South Korea, a crucial crypto hub then, introduced heavy-handed trading regulations.
The 2018 bear market continued for over two years, with the $20,000 all-time high becoming a distant dream for most investors. After recovering to around $10,000, Bitcoin traded sideways until late 2020. Finally, the 2020 Christmas rally pushed $BTC to a new all-time high, and as we moved into 2021, it reached $60,000.
4. Flash Crash (2021)
BTC Price Drop from $63,000 to $30,000
The Bitcoin rally that began in late 2020 peaked in April 2021 when it reached a new all-time high of $63,000. The explosive rise was followed by a short-lived flash crash that saw a 50% price drop to around $30,000.
The six-month slump resulted from profit-taking and growing concerns about the environmental impact of mining Proof-of-Work (PoW) cryptocurrencies like Bitcoin and pre-merge Ethereum.
The mid-2021 capitulation was quickly reversed in a monstrous rally that sent Bitcoin to $69,000, which remains the all-time high at the time of writing.
5. FTX, TerraUSD and Interest Rates (Present)
BTC Price Drop from $69,000 to ?
Since hitting an all-time high of $69,000 in late 2021, Bitcoin, and most altcoins, have been struggling. 2022 was marked by a series of Bitcoin flash crashes that bottomed out at around $16,000 in December following the FTX exchange collapse and the TerraUSD Classic (USTC) stablecoin de-pegging.
Although 2023 has been considerably more fruitful, $BTC is still well over 50% below its all-time high, and a trillion-dollar market cap feels like a distant memory. There's hope that black swan events like the FTX collapse are in the past as major exchanges like Binance have started to show proof of reserves.
However, regulatory issues continue to mount in the United States, China has doubled down on its anti-crypto standpoint, and the global economy is in uncharted waters as central banks continue to raise interest rates.
When Will this Bear Market end?
How long will this bear market last? No one knows. The five bear markets recorded to date lasted between five months to two years. If we accept that the most recent bear market began in early 2022, we are now almost a year and a half into the cycle.
It isn’t clear what will trigger the thawing of this crypto winter, but many analysts are hoping that the next Bitcoin halving event tilts the supply-demand scale in favor of the latter.
Could the 2024 Bitcoin Halving Cycle Kick Off the Bull Run?
During a Bitcoin halving cycle, the $BTC rewards paid out to miners are slashed in half, thus reducing the supply of new tokens. A halving event occurs roughly every four years, and there is some evidence to show that bull markets follow them, although it's hard to establish a direct link on such a short time scale.
The most recent halving occurred in May 2020, which coincided with a bull run. Interestingly all three halvings to date have been followed by a bull market, and to date, Bitcoin has hit a new all-time high within 18 months of every halving. However, the next halving isn’t expected to occur until May 2024, so the current bear market still has plenty of time to play out before mining rewards are slashed.
