Although volatility is a known facet of cryptocurrency, price declines still cause a significant stir among crypto traders, crypto enthusiasts, crypto critics and the general public.
The recent price decline in the cryptocurrency market caused a lot of ripples among traders, particularly in the wake of the LunaTerra debacle and Celsius liquidity issues.
This article looks at significant Bitcoin crashes that have occurred, how they compare to the current crypto crash, and how traders can navigate market crashes.
The 6 Biggest Bitcoin Crashes In Crypto History
Here are the most prominent Bitcoin crashes that have happened since its launch in 2009.
June 2011 - 99.9% Price Crash
The year was 2011. Mt. Gox was still a functional trading exchange and the primary platform to trade Bitcoin. In the first half of that year, BTC rose from $2 to $32. Then on June 19th, 2011, BTC was trading at $17.50 when Mt Gox was hacked, causing Bitcoin to be sold for a single penny.
This price crash of 99.9% was probably the worst in crypto history. Fortunately, it didn't last long, and by July 2011, BTC was trading at $31.
April 2013 - 83% Price Crash
Bitcoin had just entered the mainstream market as a significant new investment opportunity. Mt Gox experienced extremely high trading volumes that caused the platform to crash. Hackers then exploited the vulnerable state of the trading platform, causing Mt. Gox to shut down completely.
This unfortunate situation made BTC plummet from about $260 to $50.
December 2013 - 50% Price Crash
Bitcoin started out trading a little above $200 in November.
The price of BTC peaked at $1,151 on December 3rd. The price crashed by over half by the 17th of that same month. The main reason behind this price decline was China's first strike at crypto when it banned its banks from dealing in Bitcoin.
The following year, 2014, saw BTC fighting to stay afloat and failing to hit its December 3rd peak. In January 2015, BTC was still struggling but had managed to land under $200. BTC would take three more years to peak again at $1,191 on January 5th 2017.
December 2017 - 83% Price Crash
December 2017 is infamously known as the Crypto Winter.
From January to November 2017, BTC enjoyed a good price run. Its price went up nearly 20x, and the coin hit a new peak of $19,497 on December 15th. Six days afterwards, Bitcoin hit a 29% decline causing the price to fall to $13,831. This was the start of one of the most challenging times in crypto history.
In February 2018, the price of Bitcoin fell under $7,000, then swayed between $6,000 and $10,000 for the following nine months. By the second week of November, Bitcoin was trading at $6,359; in December, it fell even lower than $3,300.
The Crypto Winter lasted from December 2017 to December 2018, and Bitcoin fell a whopping 83% during that period.
March 2020 - 50% Price Crash
The COVID pandemic and the ensuing lockdowns sent world economies into a shutdown. The stock and crypto markets were hit with freezes as investors began hoarding financial assets. On March 10th, Bitcoin experienced a 37% price decline, going from .$7,911 to $4,970. As March came to an end, BTC was trading at $6,791.
May 2021 - 53% Price Crash
Bitcoin opened the year trading at $32,810 in January, reached a high of $41,946, and closed the month trading at $38,356. The crypto bubble seemed to hold firm despite being hit by the Crypto Winter and the COVID Pandemic effects. Investors, traders and founders were going full throttle in the early months of 2021, and the record high of $63,314 Bitcoin reached on April 14th was a sweet victory.
However, by May 22nd, BTC fell to $34,770. In addition, the overall crypto market cap lost more than one-third of its value, falling from $2.39 trillion to $1.58 trillion.
2022 Cryptocurrency Crashes So Far
On Monday, May 9th 2022, TerraUSD (UST) fell from $1 to $0.2998 after it was depegged. UST is an algorithmic Stablecoin supported by a system where traders swap between UST and LUNA when the value of UST goes under or above the 1:1 ratio to preserve its stability and equality to dollar value. The depegging of TerraUSD wiped out $500 billion from the cryptocurrency market. This was the first major crash of the year, and Bitcoin fell from $40,000 to $28,000.
This June, about $400 billion left the market, and the overall crypto market fell from $3 trillion to less than $1 trillion.
According to AnalyticsInsight, the recent crash is a result of macroeconomic forces. Inflation is at a high across world economies. The fiat stock market is also entering a bearish run.
On the crypto side of things, the freezing of $11 billion in assets by the crypto company Celsius Network and the lay of 18% of its full-time staff by Coinbase combined to plunge the market further down.
At the time of writing this article, Bitcoin was trading at $20,133.
How to Navigate Crypto Market Crashes
Markets need time to mature and evolve. The crypto market is no exception, particularly when one considers cryptocurrency a little over a decade old. Also, market declines/bearish runs tend to be followed by bull runs and booms. Conversely, market booms tend to be followed by steep falls. It is the market's way of balancing itself.
Over the past ten years, the innovation and inventions seen in the crypto/blockchain space are a solid pointer toward this industry's long-term potential. As the market grows, volatility is likely to lessen, and prices may stabilise. In the meantime, here are five ways to navigate a crypto market crash.
1. Apply Logic
It is natural for emotions to run high when a crypto crash of any kind happens. Nevertheless, being agitated and giving in to fear, uncertainty, and doubt can lead you to make imprudent decisions.
When the market crashes and prices fall, take a deep breath, calm yourself and check on your trading portfolio (this means the coins/tokens you bought or are holding). Look at the numbers and the trends. Spot a pattern, then set up an entry and exit strategy. Establish what point you're going to sell, what coins you will hold and when you will exit the market to protect your finances.
2. Monitor Onchain metrics
On-chain analysis is based on a technical analysis of significant cryptocurrency trends of a crypto coin or token and comparing different coins or tokens to gauge their value.
On-chain metrics offer an insight into the market devoid of sentiment, social media hype or market hearsay. Monitor these metrics consistently, whether the market is bullish or bearish. This will give you solid backing when choosing what coins to invest in, sell or hold.
3. Educate Yourself
Learn how Cryptocurrency, Blockchain and Defi work. Proper understanding of these concepts will help filter the noise from people who regard cryptocurrency as a "quick riches scheme" rather than a long-term economic investment.
There are countless resources online like this blog that explains different crypto concepts in simple terms. Social media can also be a good resource material. However, the hype and bias on these platforms can obscure whatever knowledge you may be searching for. Take whatever information you receive from places like Twitter and Reddit with a pinch of salt. Always do your research.
4. Use Dollar-Cost averaging
The main aim of dollar-cost averaging (DCA) is to ensure that bear markets are exploited without committing too many funds to one particular trade by taking advantage of market drops and then flipping that investment into a quick profit once the value climbs. Read more about how to use dollar-cost averaging here.
5. Pay attention to macroeconomic trends
Macroeconomics concentrates on the overall economic performance and analyses how the economic sectors interact. Macroeconomic trends evaluate variables such as inflation and unemployment. Paying attention to these trends helps you maximise whatever trading position you have taken in the crypto market.
Cryptocurrency market crashes are challenging to manoeuvre for both new and old traders. However, the trick to surviving a bear market without too many financial scars is to do your research, make a market plan and follow it. Don't take the social media hype, headlines and reactions to heart because they're mostly incendiary or clickbait.
The blockchain-crypto industry has its ups and downs like any other market. Dips and crashes are natural economic patterns for market growth. What matters is how the traders, investors and general crypto populace react to and their moves during and after crashes.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex Finance will not be held liable for your investment decisions.