When it Comes to Bitcoin’s Price, You’re Confusing ‘Extreme’ and ‘Normal’

How many bull and bear markets have we had in 2021?

Mark Helfman

Dec 15, 2021

What do you call an asset that’s up 22% on the year, 7% in the past six months, and 6% since October?

The S&P 500. Bull market. Heading to new all-time highs. Only the Fed can stop it. Prepare for liftoff!

What do you call an asset that’s up 60% on the year, 33% in the past six months, and 6% since October?

Bitcoin. It’s dead. Bear market. Death cross approaching. Price could drop 50% at any moment.

Your mind is playing tricks on you

In October—er, “UPtober”—seemingly everybody thought bitcoin and the wider crypto market would go straight up to a supercycle supernova moonshot lambo and maybe even market cycle peak.

Instead, bitcoin rose 10% to its November peak of $69,000, then dropped 30% to today’s price of $48,000.

Quite the contrast.

Perhaps that’s why people feel terrible about a $48,000 bitcoin and an altcoin market that’s up 66% since July 1, 2021. The S&P 500 has never made those moves.

Nothing changed except the price

Mark Helfman @mkhelfman

I love crypto because things most people consider normal, we consider as extreme, and things most people consider extreme, we consider normal. #bitcoin

And yet, when you look at the actual behaviors of people in this market, hardly anything changed from October to December. This market is just as strong as it was in October. Stronger in some ways—accumulation patterns and movements of bitcoin match what we see at the beginning not end of bull markets. I’ve discussed at length for premium subscribers of my Crypto is Easy newsletter.

Why did the price drop since November?

For the same reason it rises. Sh!t happens. Markets go up and down.

At any moment, only a small number of people dictate the price. Of 18 million bitcoins, only about 600,000 exchange hands each day. Of $1.25 trillion worth of altcoins, less than $80 billion exchange hands on any given day (and that includes volume from wash trading).

It doesn’t take much money to push prices up and down.

Usually, when the price goes down 30% it means nothing for the overall market. Eventually you run out of sellers. Within a few weeks or months, the market adjusts.

Likewise, when the price goes up 30% it usually means nothing for the overall market. Eventually you run out of buyers. Within a few weeks or months, the market adjusts.

For highly-traded assets like those in the S&P 500, you usually have a lot buyers and sellers relative to the amount of stocks on the market. For individual stocks, it varies a lot from one stock to another. For the overall market, it’s a lot of people making a lot of deals at any given time.

As a result, it takes more money to move prices significantly. For the S&P 500’s $40 trillion market cap, that’s a lot of money. For crypto’s $2.5 trillion market cap, that’s a lot less.

Volatility, thy name is bitcoin

Just how extreme is “extreme” in the crypto market?

Let’s look at bitcoin.

Bitcoin’s price never stays below its 200-week moving average.

Today, that price is $18,000. Not only can bitcoin’s price drop to that price, it has dropped that low before. At least four times, according to the circles in this chart.

Also, bitcoin’s price never stays near the top of its logarithmic growth curve.

Today, that price is $145,000. Not only can bitcoin’s price go that high, it has gone that high before. See the circles below.

All the prices between those extremes?

Just “normal” volatility we’ve seen for the entirety of bitcoin’s history. For altcoins, the extremes are even wider.

The moment you say bitcoin can’t do something, it does

At the beginning of November, everybody said bitcoin’s price will hit $100,000 by the end of the year.

At the end of November, everybody said bitcoin’s price can’t hit $100,000 by the end of the year.

At the time, I posted this video.

If you roll me with “that aged well,” you missed my point. In fact, you made my point. When you dismiss bitcoin’s ability to go up or down from any price at any moment, you lose. Your complacency will kill you.

Never bet against history

So bitcoin’s price is up 60% on the year. Nice, but a whole year is a long time to wait, much longer than most people want to stick around for.

Let’s set the limit at two months. How many times has bitcoin’s price gone up 60% in less than two months?

February 6, 2018 - February 20, 2018 (100% in 14 days)
April 1, 2018 - May 5, 2018 (57% in 35 days—close enough)
April 25, 2019 - May 30, 2019 (83% in 35 days)
June 4, 2019 - June 26, 2019 (87% in 22 days)
December 18, 2019 - February 12, 2020 (64% in 57 days)
March 13, 2020 - May 7, 2020 (161% in 55 days)
November 26, 2020 - Jan 8, 2021 (160% in 47 days)
January 27, 2021 - February 7, 2021 (100% in 25 days)
Jul 14, 2021 - September 4, 2021 (81% in 47 days)
Sep 21, 2021 - November 10, 2021 (75% in 15 days)

I’ll stop there with a note that the first nine years of bitcoin saw even more examples. Too many to list here.

Those zooms happened in bull markets and bear markets. Are you saying bitcoin can’t do that now? That it can’t do what it’s done time and time again, regardless of market conditions?

And that’s only the upside. Let’s not even talk about the crashes—dozens of crashes of 30% or more, in both bull and bear markets.

Volatility is the norm. Don’t let it cloud your judgment.

Better yet?

Embrace it. You will find this market far, far easier to handle.

Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.