DATA STORY: Bitcoin's slide earlier this year wasn't its steepest, it has been through more troubled waters

Representative Image: Bitcoin

The world’s most valuable cryptocurrency, bitcoin, after touching an all-time high of USD 20,089 on December 17, last year, slumped to a low of USD 6,048 on February 6. Meaning that the currency lost its 70 percent value in mere 50 days, according to CoinMarketCap.

The massive drop, however, is not its steepest. In its nine years of existence, bitcoin has seen a short-term correction of more than 70 percent at least once before. There have been numerous instances, more than two every year, when the currency has dived more than 30 percent only to recover later. In some instances, the value of bitcoin dived about 66 percent in a span of few days.

Volatility: The best friend of bitcoin

In its early days of existence, when the currency was still new and away from larger public imagination, bitcoin showed that volatility in its valuation is natural to its existence.

From June 9 to August 7 in 2011, bitcoin’s value eroded by 75.47 percent. The price of one bitcoin slumped from the then all-time high of USD 29.23 to USD 7.17 in less than two months, the data provided by bitcoin.com shows.

The year 2013 was marked by two slides of about 40 percent in its valuation. From January 8 to February 17, the value of bitcoin dropped by 40 percent. In August same year, in a span of four days, the valuation eroded by 37 percent.

Similarly, in 2013, in a span of six days in April, the price of bitcoin dropped from USD 198.62 to USD 67.20 — a drop of 66 percent. Again at the end of the year, the price slumped to nearly half of the then all-time high of USD 1,102. The first half of the year 2014 also saw a massive 59 percent correction — from USD 957 on January 6 to USD 387 on April 10.

All these slides are dwarfed by the long-term correction of over 82 percent which happened between November 2013 and January 2015.

These swings in its value were when the cryptocurrency was in a nascent stage, largely used by either tech enthusiasts who believed in the underlying technology or the people trading for illegal drugs and arms on dark web.

Year 2017

Year 2017 was a turnaround year for the cryptocurrency market, especially bitcoin. The interest in the currency grew manifold as the retail and institutional investor turned towards it. Many market and governments accepted its growing popularity and recognised it despite problems (anonymity, tax evasion, use in illegal trade) associated with it.

Also Read: Banks must use tech behind Bitcoin; cannot ignore digital currency: Former RBI official

A Google trends data registering the search volume for the term 'bitcoin' gives a glimpse into the surge in popularity for the currency. For example, in December 2017, 20 times more search volume for the cryptocurrency was processed by Google search engine compared to December 2016.

Interestingly, a bump can be observed in the graph coinciding with every correction mentioned in the article above. Source: Google Trends  

With the interest, the value of bitcoin also rocketed in 2017, however, not devoid of massive slides. On multiple occasions, the value of the currency dropped by over 25 percent, in some cases within two to three days.

What could happen next?

This is a question for which there is no concrete answer. Going by the precedent, bitcoin may recover and touch a new high. There are many financial experts who are bullish given the promising future of the technology it is based on. On the other hand, there is no dearth of skeptics who think that bitcoin is the biggest bubble in a century and it is time to bid adieu.

Whatever may be the case, given the extreme volatility, there is one advice which is coming from all quarters: Invest only what you can afford to lose.