Bitcoin’s average pullback is 27% during bull markets

Traders and investors can look to history to assess what is common and what is out of the ordinary when it comes to Bitcoin price moves.

While the future may not play out exactly the same, the roadmap can still help fine-tune trading decisions, including when to get in and when to get out.

Cory Mitchell, an analyst with Trading.biz, has analyzed every bull market in Bitcoin over the last decade. “While most people know Bitcoin is volatile, they don’t understand how volatile it is, and that big drops are not only common, they are the norm, even during the bull market phase.”

Bitcoin is currently in a bull market or uptrend following the late 2022 bottom.

Past uptrends can be studied to look for tendencies. Here are some statistics from the last 11 years.

• Average pullback during a bull market: 27%
• Average rally following a pullback during a bull market: 91% (median 75%)

For example, Bitcoin has pulled back 19% from its recent high at $49,058. The current price is $39,698. According to Mitchell’s research, even during bull markets, there are too many drops of less than 20% to even bother counting. They are extremely common. Therefore, he only looked at pullbacks of more than 20% and found that the average pullback during a Bitcoin bull market is 27% before it was followed by at least a 20% rally (the average rally following was 91%).

In the bull market of 2023/24, so far the pullbacks have averaged 22%, and most of the pullbacks have been very close to that average.

In other bull markets, while the average is 27%, pullbacks typically range between 20% and 49% before continuing higher (by at least 20%). This helps narrow down the range of when to look for trade signals to buy, assuming the trader or investor believes the uptrend will continue following the pullback.

Following a pullback, the average rally before another 20% or greater decline, is 91% (median 75%).

In other words, the rallies that follow pullbacks tend to be three to four times as big as the pullback percentage, on average.

How does this help traders? While it is unknown if the uptrend will ultimately continue while the price is pulling back, traders can look for bottoming signals or reversal patterns once the price is nearing the common or average pullback level. The rallies that follow have a median rise of 75%, which can help establish profit targets and provide favorable reward versus risk trades.

Additionally, traders could study the cycles of Bitcoin to gain further insight. For example:

• Bitcoin has a 70% or greater decline every 1.8 years on average. These large drops are typically followed by big rallies, creating the major cycles in Bitcoin.

Averages are just that, averages. They don’t say exactly what will happen during this bull market or pullback, but they do provide some context.

A key takeaway is that Bitcoin is volatile. If expecting to hold for a 100% or greater rally, expect at least one, or sometimes more, 20% or greater declines along the way. And eventually one of those small pullbacks keeps dropping and leads to a decline of 70% or more. Even those big drops occur every couple of years.