Key facts:
Two years ago, bitcoin lost 40% of its market value in one day.
The war has increased the volatility of the market, but it seems to be tending to stabilize.
Today, two years ago, the world stopped. The World Health Organization (WHO) officially declared the entrance to the first pandemic in 100 years, in this case due to the coronavirus, and the markets reacted downwards.
Very abruptly, everything collapsed. Bitcoin was no exception, with a 40% drop during the day of March 12 of that year. That day, the cryptocurrency it happened in a matter of a few hours from nearly $8,000 to $4,400 at the close of the daily candle.
The next day, the beginning seemed even scarier: BTC even went as low as $3,700 at its lowest point, in data from CoinMarketCap. A market value that the cryptocurrency had not touched by that time in a year. Since the previous March.
The alarms were unleashed by these two data. The lowest price in a year, plus a 40% drop in one day, did not bode well for a market that, just weeks ago, had its sights set on the beginning of a new bullish cycle in which BTC will set new historical price highs.
At that time, everything looked very gray for the near future: not only bitcoin fell sharply. All cryptocurrencies followed the same pattern and the market lost, in a couple of days, almost half of its total capitalization. By then, from more than 220,000 to about 138,000 million dollarsas we reviewed in CriptoNoticias on that occasion.
Also the traditional markets behaved as if the world was going to end. Bitcoin fell, cryptocurrencies fell; but also oil, stock indices, oil, even gold.
Speedy recovery… the debacle in perspective
It seems crazy, seen two years later, that 1 full bitcoin could be bought for less than $4,000 so recently. Now, with falls below $40,000 per unit, the markets are scared. At that time, there was a dream of breaking the historical maximum that was in force: $20,000 was the mark to break.
The perspective has clearly changed, being 10 times above those prices. Right now it would be a debacle to see BTC at 20,000 again, because would imply another drop of more than 40%.
But it is that the recovery from the ravages of the pandemic was also rapid: by May, a month and a half after the fall, bitcoin had already exceeded the price it was at before the declaration of the pandemic. After that, he has not turned back to date.
A year ago we revisited the scenario at the beginning of the pandemic and we had already determined that the drop looked imperceptible in historical terms. The graphs showed as a small candle what that day was quite an event.
Now, although the cryptocurrency is even below the levels of a year ago, the great “crash” of 2020 still looks like little, put in a long-term perspective. For BTC to have such a bloody day, it would have to drop $15,000 or more in 24 hours.
A drop of $4,000 like the one in 2020 would mean “barely” around 10% of movement in the markets. Which brings us to our next point: the market “chaos” following the declaration of Russia’s military offensive in Ukraine.
War, the new “pandemic effect”?
Just by reviewing the price movements of the last few days and comparing them with those at the beginning of the pandemic, we can reach a direct and firm conclusion: bitcoin has resisted much more than on that occasion, just like traditional markets.
In principle, we could say that this is due to a clear difference between the two situations: the pandemic was a declaration that affected everyone, in the whole world, almost equally. Not completely, because each country has its own contexts, but the pandemic is a global phenomenon, so the response of the markets was also global.
On the contrary, and although there are those who present the scenario as a third world war, the truth is that the war scenario is currently reduced to Russian and Ukrainian territory, while the external stakeholders can be counted on their hands and their participation is restricted to political and economic field, not the military.
The war, for now, is not comparable. Bitcoin’s behavior supports that claim, despite having faltered a bit since the start of the military incursion into Ukraine.
As in a report that we published in CriptoNoticias a few days ago, the analyst Eduardo Gavotti considered that only in a large-scale war scenario would the markets fall significantly. In fact, among his assessments shared with this medium, he described the pandemic debacle as an event “perhaps unprecedented, unique in history.”
It’s not that bitcoin hasn’t suffered. Of course he has in recent weeks. Even proof of them is the volatility it has experienced, the highest in 6 months. But again, put into perspective, bitcoin is less volatile than during the events of March and April 2020. And, in general, the analysis data of firms such as Coin Metrics show that the cryptocurrency tends to stabilize.
The cryptocurrency remains in a range in which it had been moving before the conflict, between its new floor, around 36,000 and 37,000 dollars; and without being able to break its resistance, right now at $45,000.
Halving, bitcoin cycles and fulfilled forecasts
Finally, the other lesson about bitcoin that we got, looking back, in 2020, is that its market cycles are clear and start from its own configuration. As has been said in this medium and various analysts agree, the cycle of reduction of BTC issuance is decisive in its long-term market behavior.
That year, and to everyone’s expectation I was on in that reduction of rewards from months ago. And everything is written in the code, which is fully complied with in the Bitcoin network: the halving It is that mechanism that, every 210,000 blocks mined in Bitcoin, the rewards received by miners are reduced by half.
That is, every so often (approximately 4 years) less BTC begins to enter circulation. Supply shrinks while global demand seems to be on the rise.
The arrival of the pandemic marked a clear setback on that path towards the new highs that everyone expected for the halvingafter a promising start to the year. But it didn’t take long for him to get back on track and fulfill the prophecies.
Right now we are about halfway through the new cycle. In approximately May 2024, each block will be issued 3,125 BTC, compared to 6.25 today. The pandemic could not with bitcoin, neither has the war.
Would it then be possible to think that history will repeat itself? Will bitcoin enter a new bullish cycle during that year? Will there be any global event that will challenge its exponential growth in the market?