- Bitcoin is on thin ice following its drop from $65,000
- The $65,000 top is lower than many people’s predictions, causing some to think that a 2013-style double bull run is on the cards
- What are the odds of repeating the Bitcoin bull run of 2013?
With some calling for a Bitcoin bear market, or at least a lengthy period of consolidation, thoughts are beginning to turn to what the future looks like in the medium term for Bitcoin, and the wider cryptocurrency ecosystem. One option being floated is that we are in for a repeat of the 2013 bull cycle in which Bitcoin experienced two bull runs within 13 months, so it is worth looking back at what happened eight years ago and assessing how feasible such a run is this time round.
Bitcoin’s Double Bull Run
In the lead up to the 2013 double bull run, Bitcoin has been stagnating for a year and a half following the topping out of the 2011 bull run in June of that year. The first 2013 bull run, which was prompted by a financial crisis in Cyprus, saw Bitcoin run from $7 in August 2012 to $260 in April 2013, a rise of over 3,000%.
A sudden drop to $44 convinced many that the run was over for another cycle, but following a six-month recovery period Bitcoin really got its skates on and shot from $84 to $1,167 in a little under two months, topping out November 30:
Were Bitcoin to repeat the 2013 double bull run we would be looking at something like the following:
As we can see, a direct repeat would see the price drop further to the prior high of $20,000, at which point it would see a 100% bounce before a few weeks of consolidation and another bull run in the winter. It could be argued that the wick to $30,000 represents the bottom, which case the rest of the year would look like this:
Whichever of the two paths Bitcoin takes, if 2021 is to be a repeat of 2013 this is the kind of path what we would expect Bitcoin to take, albeit potentially on a longer timeframe.
Will it Happen?
The big question of course is what are the chances of Bitcoin echoing the 2013 bull run. There are many factors we need to consider, with fundamentals coming into play as well as anything on the charts. The fact is that Bitcoin has been on a 14-month bull run, during which time it has gained over 1,600%, with many alts posting far higher returns than this. After such a mammoth run, can we really expect it to dust itself off inside a few weeks and drag the market up another 50%+? Markets don’t go up forever, they need time to breathe, and Bitcoin might need longer than four months or so to recover.
On a fundamental level, all the positivity about Bitcoin’s role as a hedge against inflation, and all the institutional buying that took place in the wake of it, has evaporated. Instead we have seen a slew of FUD from powerful individuals, companies, media outlets, and entire governments. Even the Pope has joined the anti-Bitcoin bandwagon. Can a market absorb such bad publicity and carry on posting positive numbers a few weeks later? There were also lots of signs that the market was topping out, signs that some read in advance while many did not. The last time such signs were out in force was in December 2017.
Accentuate the Positive
On the plus side we can look at previous bull runs to gauge where we might be in the broader cycle. The 2012-2013 cycle encompassed 17 months from start to finish, with the next one running from September 2015 to January 2018, a 27-month cycle. Were the Bitcoin cycle to finish here it would not only reverse the trend but would in fact represent the shortest cycle on record, which is the opposite of what we would expect in a growing asset class – cycles typically take longer to play out with reduced returns over time.
Had it not been for irresponsible margin traders causing a liquidation cascade, the Bitcoin price would have only dropped to $35,000 or so, a 46% drop from the top. Bitcoin typically dips up to 40% during a bull market, so while this is a bit on the extreme end, could the coordinated FUD have been an attempt for some big players to get their bids filled before a bigger runup?
The answer remains, of course, unknown – at least to non-whales. Whatever happens, whether Bitcoin roars to new heights in 2021 or spends the next months or even years in a bear market, one thing is for sure – we know it will come back stronger. Plan for both scenarios and adapt to the market.