A Comparison of the 2018 Bear Market and 2022 Crypto Market Drawdown
CMC Research

A Comparison of the 2018 Bear Market and 2022 Crypto Market Drawdown

1 year ago

CoinMarketCap Academy takes a visual look at the differences during the 2018 bear market and the current market drawdown.

A Comparison of the 2018 Bear Market and 2022 Crypto Market Drawdown

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Is this your first bear market rodeo?

If so, this article takes a look at how things went down during the previous bear market in 2018, and how things are playing out during this current crypto meltdown. Learn about the key differences and what you could possibly expect in this market downturn.

Bitcoin Price During Bear Markets

In December 2017, Bitcoin reached a then all-time-high (ATH) value of $19.1K. Over the following year, it collapsed to a low of $3.2K — equivalent to a maximum drawdown of 83%.

So far, #Bitcoin has fallen 73% from its 2021 ATH. Should it match the drawdown seen in 2017, it could fall as low as $11.4K. Likewise, another 11 months of decline could be in the cards to match the 18-month bear market seen in 2018/19.

That said, according to data from Glassnode, Bitcoin's realized price currently sits at $23,340. This is the average price of every Bitcoin in the supply, valued at the last time it was spent on-chain. Bitcoin only rarely dips below this price and usually near the end of a bear market.

Bitcoin Realized Price

At its current value of $20,700, $BTC is trading at a roughly 11% discount to its realized price. It’s also trading at a similar discount to its average mining cost. This could be perceived as an indication that the bottom might not be far.

Moveover, according to Bitcoin's MVRV Z-score — a measure of the difference between the market value and realized value of BTC — Bitcoin can now be considered undervalued but did reach far lower levels in 2018 and 2020.

Looking at Bitcoin’s daily active user base, between the 2017 and 2021 peaks, the numbers increased by ~10% — growing from 966,701 daily active addresses in December 2021 to 1.041 million in April 2021. Comparatively, Bitcoin’s market cap increased 300% over the same period.

While the number of daily active addresses only increased by 10% between ATHs, the total number of Bitcoin addresses almost tripled over the same period — rising from 354M to 976.5M. This increase in both Bitcoin active and total addresses has contributed to the general network being more widely adopted and traded in this market cycle compared with 2017.

Bitcoin's Average Daily Volume is now close to $5-6B compared with 2017's level of around $0.8-0.9B.

Ethereum Price During Bear Markets

Ethereum fared far worse than Bitcoin in the previous bear market. $ETH collapsed from an ATH of $1,396 to a low of $86.54 between January and December 2018 — equivalent to a 93.8% decline.

For comparison, Ether is currently down 81% from its 2021 ATH after falling from $4,812 to $896 over the last 7 months.

Although Ethereum’s value increased by 244% between its 2018 and 2021 ATHs, the total value locked (TVL) in decentralized finance (DeFi) exploded to $66.7B, amidst a launch of DeFi apps on Ethereum such as Uniswap, Compound, Synthetix and Yearn (and hitting $184.5B at its highs), where majority of activity is concentrated on the Ethereum network. Meanwhile, the total number of tokens listed on CoinMarketCap climbed from 1,359 to almost 20,000.

If Ether were to match its drawdown in the 2018 bear market (93.8%), then it could be set to fall to as low as $292. To put this into perspective, that would entail a further 67% drop from its current all-time low of $896.11.

Tokens Listed on CoinMarketCap During Bear Markets

While current investors may believe that DCA-ing into some or all of the top 10 cryptocurrencies will best balance risk, it should be noted that almost half of 2017s top 10 crypto tokens by market cap failed to recapture their former glory.

Indeed Bitcoin Cash (BCH), NEM, Stellar (XLM) and IOTA (MIOTA) no longer hold a position among the top 10, having fallen as follows: BCH (previously rank 4, now rank 27); NEM (previously rank 6, now rank 102); XLM (previously rank 9, now rank 24); MIOTA (previously rank 10, now rank 63).

All four of these cryptocurrencies failed to break their 2017 ATHs in the 2021 bull run, despite seeing a significant rally from their ATLs.

As always, predicting exactly how a bear market will play out is always a tricky task — particularly given today’s sketchy macro-economic climate. Nonetheless, it is widely acknowledged that those that make the right moves now will be the ones who benefit most if/when the market recovers.

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