[2018] Bitcoin Drop: The Death Cross & 10+ Huge Historical Dives
Recently, financial analysts have been speculating whether Bitcoin will meet the dreaded “Death Cross.” A Death Cross would occur if the average closing price of Bitcoin over the past 50 days “crosses” (and dips below) the average closing price of Bitcoin over the past 200 days. Investors fear that this might result in the largest Bitcoin drop in history — and they say claim it might not ever recover from this cross. However, historically, this has not been the case. The Bitcoin market has experienced more devastating death crosses, and has always quickly recovered (here is a Coindesk article that covers worse Death Crosses that the market has quickly recovered from).
Despite the fear of the “Death Cross,” Bitcoin is becoming a more predictable currency. In fact, some financial analysts have discovered that the correlation between Bitcoin and certain Stock Market indexes have been increasing over the past few years.
First, this article is going to give a historical timeline of the biggest bitcoin drops in Bitcoin history. Then, we are going to show you some tools that can make investing in the Bitcoin market safer — and more predictable.
A History of Bitcoin Drop
January 3, 2009: The genesis block (or the initial block), which is known as the first bitcoin transaction, is recorded.
First Major Increase in the Price of Bitcoin: In July 2010, the price of bitcoin increased from $0.008 to $0.08 (a 900% increase!) over five days!
April 2011: Over the course of a month, the price of bitcoin becomes equal to $1. In the previous year, Bitcoin hovered below $0.10. In 2011, Bitcoin became more valuable than the US Dollar (and has remained above since!)
June 8, 2011: Bitcoin reaches a new all-time high of approximately $30. This marks the “First Bubble” of the Bitcoin Market. Then, the bubble “bursts” and the price of Bitcoin declines by about 95% from July to October 2011.
April 2013: The Biggest Daily Bitcoin Drop — Bitcoin Version 0.3 is released in March 2013, attracting more investors. From mid-March to the beginning of April the price of Bitcoin soared from $32 to a new record high of $263. On Wednesday, April 10th, 12:00 UTC, Bitcoin hit its highest recorded price of $263.48. Then, it plummeted throughout the rest of the day. At 18:00 UTC (6 hours after its peak!), Bitcoin fell to $126 (about 52%). For the next few days, Bitcoin remained at the mid-$100 level.
November 28, 2013: On the MtGox exchange, the price of Bitcoin soars to its highest price of $1,242.
Here are two significant events that increased the popularity of Bitcoin and encouraged large-scale investment in Fall 2013:
- 10 days before the major increase, on November 18th, the US Senate held a committee hearing called, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies” — Many Bitcoin traders were afraid that the U.S. was going to place restrictions on Bitcoin users, but the hearing actually turned out to be pretty positive and supportive of the development of cryptocurrencies. Watch it here.
- On November 18th, the People’s Bank of China declared that Chinese citizens were free to investment in cryptocurrencies. This led to a major growth in the Chinese Bitcoin market.
In February 2014, it was discovered that the price increase over October — December 2013 was partially due to large-scale hacking being carried out by two trading bots on the MtGox Exchange. The bots had been carrying out false trades of bitcoin, which led to major over-speculation (and loss of 800,000 Bitcoins on MtGox!). The price of Bitcoin plummeted over the rest of rest of Q1 2014 (The hacking also scared investors away).
On January 1, 2014 the price of Bitcoin was $770 (and lingered in the $800-$900 range for the rest of the month). At the beginning of February, the price began to quickly fall. On March 31, 2014, the price of Bitcoin had fallen to $458. This is one of the biggest quarterly bitcoin drops.
The two major drops in 2013 stalled the growing Bitcoin market. People became more hesitant to invest in Bitcoin because it was hacked and over-speculated on an exchange. As a result, the price of Bitcoin did not begin to significantly increase again until 2015…
In the 2nd half of 2016, the price of Bitcoin began to slowly rise from $400-$500… and managed to reach $1,000 again in January 2017.
From January to October 2017 the price of Bitcoin climbs to $5,000 (a 400% increase).
November 28, 2017: Bitcoin manages to surpass $10,000.
At one point, on Sunday, December 17, 2017: Bitcoin reaches a record high of $19,783 (reported by Coindesk), just falling short of $20,000.
Biggest Weekly Bitcoin Drop
Afterwards, the price of Bitcoin gradually falls… and the following week is regarded by many as one of Bitcoin’s most disappointing weeks. On Friday December 22nd, 2017 the price of Bitcoin closes at $13,857.15. This week, the price of Bitcoin fell approximately 30%.
Bitcoin’s Biggest Quarter Drop
Q1 of 2018 marks Bitcoin’s biggest quarterly drop. On January 1, 2018 Bitcoin was valued at $13,412. In the first week of January, the price increased to about $16,000. Then, the price gradually fell for most of the quarter (with the exception of a few minor up’s and down’s). On March 31, 2018, the price of Bitcoin was at $6,926 — that is almost a 50% Bitcoin drop for Q1 2018!
The Beginning/Ending Monthly Prices of Bitcoin for 2018:
January 1st: $13,412 — January 31st: $10,166
February 1st: $9,052 — February 28th: $10,309
March 1st: $10,907 — March 31st: $6,926
April 1st: $6,816.74 —April 30th: $9,209.27
What causes the Bitcoin Drop?
Since Bitcoin is decentralized, the price has been more volatile than currencies that are regulated by national governments.
However, we should note that the recent mainstream adoption of bitcoin has increased its correlation with the Stock Market.
In February 2018, researchers at Morgan Stanley observed (over the previous 90 days) that the correlation between the daily return of Bitcoin and the daily return of the S&P 500 was 0.3 or 33%.
The correlation between Bitcoin and the Stock Market is not perfect (1.00 or 100% = perfect correlation), but it has been increasing over the past year.
This may be due to the fact that cryptocurrency is becoming mainstream. Now, the same institutional investors that invest in the Stock Market are investing in cryptocurrencies. As Bitcoin continues to become popular, there is a good chance that institutional investors will continue to invest in cryptocurrency in the same way that they do with the Stock Market. This might have a positive effect on the volatility of Bitcoin prices. In fact, it could reduce the chance of a random Bitcoin drop occurring. Bitcoin is increasing its legitimacy as a currency that is being exchanged (and invested in) by millions of people across the world. Due to its increasing popularity, people are more confident investing in Bitcoin.
Major Point: Investing in Bitcoin is becoming more like investing in the Stock Market as its popularity increases— but remember that Bitcoin is different from the Stock Market: Bitcoin is a world-wide currency that is exchanged directly between people; it does not involve intermediary banking and financial institutions (and it is not regulated by a “central” entity). It will be interesting to see if the correlation between the Stock Market and the Bitcoin Market continues to increase!
Some Helpful Tools
If you are planning to invest in cryptocurrency, here are some tools that can help you assess your gains/losses.
- The Market Watch Dashboard — will allow you to compare the returns of Bitcoin with Stock Market Indexes (ex. use the “performance tool” to compare the daily return of Bitcoin with the daily return of the S&P 500 and Dow Jones)
- Coindesk’ s Calculator — for calculating the exchange rate between currencies
- Coindesk Price Index Charts — these track the price of Bitcoin in real-time. Furthermore, you can use the interactive chart tool to observe specific points of time.
- Daily Price Volatility Chart — Shows the volatility of the price of Bitcoin.
- There are additional interactive charts on the Bitcoin website, which can be used to analyze the current market.
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