As Bitcoin (BTC) trades around 50% below its all-time high, investors are revisiting a crucial question: how long might it take for the cryptocurrency to recover? Market analyst Sam Daodu emphasizes that historical trends can shed light on this matter, particularly noting that Bitcoin has often experienced significant pullbacks without lasting damage in the long term.
Daodu points out that steep corrections are a recurring theme in Bitcoin’s history. Since 2011, the cryptocurrency has faced over 20 instances of declines greater than 40%. He explains that mid-cycle declines in the range of 35% to 50% typically serve to cool off overheated market rallies without permanently hindering long-term growth trajectories. In instances where there hasn’t been a systemic failure across the broader financial market, Bitcoin has historically reclaimed its prior highs in approximately 14 months.
This current environment stands in stark contrast to 2022, when the cryptocurrency sector was marked by multiple structural failures. At present, however, Daodu notes that there are no major collapses affecting the market. He highlights Bitcoin’s realized price, which is hovering near $55,000, as a potential psychological and technical support level. This price point is significant because long-term holders have typically amassed their coins around this valuation.
The future trajectory of Bitcoin’s price, whether it leads to a prolonged slump or a quicker recovery, will largely depend on global liquidity conditions and the overall sentiment of investors.
Reviewing past market corrections offers insights into potential recovery timelines. The 2021-2022 cycle exemplified a significant downturn, where Bitcoin peaked at $69,000 in November 2021 but plummeted to $15,500 by the following November, marking a staggering 77% drop. This decline was coincident with monetary tightening from the US Federal Reserve and the collapse of crucial market structures such as the Terra (Luna) ecosystem and the bankruptcy of FTX. Ultimately, Bitcoin took 28 months to surpass its former high again, which it achieved in March 2024. At the low point, long-term holders had begun to dominate the circulating supply, effectively absorbing coins from those forced to sell.
In contrast, during the 2020 COVID-19 crash, Bitcoin experienced a rapid rebound following a more contained decline of approximately 58%. The cryptocurrency fell from around $9,100 to $3,800 in March 2020 due to widespread liquidity shocks. However, it quickly reclaimed the $10,000 mark within six weeks and surpassed its previous high of $20,000 by December 2020, roughly nine months post-crash. The eventual surge to $69,000 in November 2021 occurred about 21 months later.
Another notable case is the 2018 bear market, which displayed a more drawn-out recovery. Bitcoin had reached $20,000 in December 2017 but collapsed by 84% to $3,200 by December 2018. The downturn was fueled by the fallout from the initial coin offering (ICO) boom, regulatory crackdowns, and a lack of institutional involvement. With active addresses declining by 70% and miners facing revenue pressures, Bitcoin required nearly three years to reach its peak valuation again.
Daodu suggests that the severity of the current downturn is significant but not indicative of full capitulation. Typically, corrections in the range of 40% to 50% take approximately nine to 14 months to correct, whereas declines exceeding 80% often necessitate three years or longer for a recovery. Given that Bitcoin is currently down about 50% from its peak, Daodu estimates that it could take 12 months or more for the cryptocurrency to return to its previous highs, with macroeconomic factors playing a pivotal role in the pace of this rebound.
As the market stands, Bitcoin was trading at $68,960, showing a slight recovery with a 5% increase on the preceding Friday and making an effort to break through short-term resistance around the $70,000 mark.
