With Bitcoin (BTC) trading about 50% below its all-time high, investors are once again asking the familiar question: How long does the recovery typically take? Market analyst Sam Daodu believes history offers valuable clues.
No systemic Bitcoin collapse this time?
Daodu notes that steep corrections are not unusual for Bitcoin. Since 2011, the cryptocurrency has undergone more than 20 pullbacks of more than 40%. Mid-cycle declines on the order of 35% to 50% have often cooled overheated rallies without permanently derailing longer-term uptrends.
In situations where there was no systemic slump in the broader market, Bitcoin has typically regained previous highs in about 14 months. He compares the current environment to 2022, when multiple structural failures rocked the crypto industry.
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There is currently no comparable collapse in the system. The analyst emphasized that The realized price of BTC– currently near $55,000 – could provide a psychological and technical floor, as long-term holders have historically accumulated coins around that level.
Whether the current downturn will develop into a prolonged slump or a shorter reset, Daodu suggests, will largely depend on global liquidity conditions and investor sentiment.
A look back at historic sellouts
During the 2021-2022 cycle, Bitcoin peaked at $69,000 in November 2021 before plummeting to $15,500 a year later, a decline of 77%. The downturn coincided with monetary tightening by the US Federal Reserve, in addition to the collapse of the Terra (Luna) ecosystem The bankruptcy of FTX.
It ultimately took 28 months for Bitcoin to surpass its previous high, which happened in March 2024. At the bottom of the market, long-term holders controlled about 60% of the circulating supply, absorbing coins from forced sellers.
The COVID-19 crash of 2020 played out very differently. In March of that year, Bitcoin plummeted by about 58%, falling from about $9,100 to $3,800, as global lockdowns caused a liquidity shock.
Bitcoin recovered quickly. It reached the $10,000 level within six weeks and regained the 2017 high of $20,000 in December 2020, about nine months after the low. The final increase to $69,000 in November 2021 came about 21 months after the crash.
The 2018 bear market offers yet another contrast. After reaching $20,000 in December 2017, Bitcoin collapsed 84% to $3,200 in December 2018. The implosion of the first coin offering (ICO) boom, combined with regulatory crackdowns and limited institutional participation, have sapped the speculative energy from the market.
The number of active addresses dropped by 70% and miners were forced to capitulate as revenues fell. Without significant new capital or a compelling growth story, Bitcoin took almost three years to regain its previous peak.
No capitulation yet
The depth of the drawdown itself plays a crucial role. Historically, corrections in the 40% to 50% range have taken roughly nine to 14 months to reverse, while collapses of more than 80% have taken three years or more.
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With Bitcoin down about 50% from its peak, the decline falls into what Daodu describes as a moderate to severe category – substantial, but not indicative of complete capitulation.
Based on previous episodes of similar magnitude, he estimates that a return to previous highs could take 12 months or more, with macroeconomic conditions ultimately determining the speed of that recovery.
At the time of writing, BTC was trading at $68,960, having recovered slightly on Friday with a 5% rise in an attempt to surpass its short-term resistance wall at $70,000.
Featured image from OpenArt, chart from TradingView.com