We are fresh off a 193-day-period between December 15, 2018 and June 26, 2019, wherein the price of bitcoin—in terms of U.S. dollars (USD)—soared 337 per cent from $3,200 to $14,000. A stellar return, no doubt. Why, then, are so many sentiment indicators flashing red at present? The widely referenced Crypto Fear & Greed Index, for example, last week crashed to levels not seen since the days preceding the above bitcoin bull run.
What gives? Well, as it turns out, violent swings between optimism and pessimism is simply part and parcel when it comes to the cryptocurrency market. Want proof? Look no further than 2017, a year that bitcoin investors would do well to reflect on in order to better contextualise 2019’s price action.
2017: A Year of Bitcoin Rallies and Corrections
You’re almost certainly aware of what bitcoin’s price did in December 2017, but did you know there were various other rallies—and corrections—in bitcoin’s price that year?
The first 2017 bull run worth honing in on is the 159-day period from when bitcoin was trading hands at $950 on March 26 to $5,000 on September 1. This 426-per-cent price rally was driven predominantly by the New York Agreement and news that Japan’s legislature had passed a law that formally recognised bitcoin as a payment method.
Following this was a sharp 40-per-cent decline in bitcoin’s price over the first half of September, prompted by the Chinese government’s banning of initial coin offerings and centralised cryptocurrency exchanges. The ruling was seen by many as a ‘death sentence’ for the cryptocurrency space largely because, prior to their forced closures, Chinese bitcoin exchanges—particularly OKCoin, BTC China, and Huobi—were responsible for the majority of the world’s cryptocurrency trading volumes.
Having bottomed at $3,000 on September 15, the price of bitcoin once more started to climb; surging 157 per cent to $7,700 on November 9. Following this was another strong sell-off—a 28-per-cent fall to $5,500 on November 12—driven by a wave of fear and uncertainty. You sensing a trend here? The selling was widely thought to have come from speculators who’d purchased bitcoin ahead of the (ultimately suspended) SegWit2x hard fork.
Of course, we all know what happened in the 35 days between November 12 and December 17: bitcoin rallied 262 per cent to an all-time high of $19,900—breaching the $20,000-mark on some exchanges!
Whilst the launch of bitcoin futures trading and other fundamental news helped to explain this particular bitcoin bull run, many would agree that it was largely the result of a global wave of retail-led fear of missing out (FOMO) fanned by a spike in mainstream media coverage.
Learning From Bitcoin’s Price History
If you are invested—or are looking to invest—in bitcoin, it’s imperative you know how to put market movements into context. Being able to do so will dramatically boost your ability to remain calm in times of significant price volatility.
In the broader scheme of things, bitcoin going on yet another bull run remains as possible as ever. Ultimately, though, it’s on you to decide whether or not to invest in bitcoin. Hopefully today’s reflection on 2017’s wild price action has emphasised the importance of taking a long-term view when making such a decision. By doing so, you lower the risk that you place too much weight on short-term news items—the vast majority of which have little to no bearing on the unique value proposition of bitcoin.