3 Years Ago, Bitcoin’s Price Crashed 50% in One Day: Will This History Repeat Itself?
Exactly three years ago on March 12th, 2020, the world was experiencing a state of uncertainty and panic due to the rapid spread of the COVID-19 pandemic. The pandemic caused widespread disruption to many industries and markets, including the financial markets. During this period, the price of bitcoin crashed by 50% in just one day.
The bitcoin price drop caused a widespread liquidation cascade on the popular exchange BitMEX. In a matter of minutes, $750 million worth of bitcoin was liquidated. This caused many investors to panic and question the stability of bitcoin as an investment.
BitMEX, the popular exchange where the liquidation cascade occurred, was conveniently closed for “maintenance” after the crash. This raised suspicions and caused concerns among investors who wondered if the exchange was having technical difficulties or if it was a deliberate attempt to manipulate the market.
In addition to BitMEX, another popular exchange, Deribit, faced technical difficulties due to the crash. The sudden drop in bitcoin’s price caused widespread panic among investors who were unsure whether the price would recover or continue to decline.
Despite the panic and uncertainty, the price of bitcoin fully recovered within just two months. Bitcoin’s price proceeded to make new all-time highs later on, and investors who bought during the crash were able to profit significantly when the price rebounded.
Can Bitcoin’s History Repeat Itself? Insights from CryptoQuant’s MVRV Ratio
CryptoQuant data suggests that the current market value to realized value (MVRV) ratio of bitcoin is similar to the ratio during the 2018-2020 price cycle. During that period, after testing level one of the MVRV ratio, the bitcoin price entered a bull run and market profitability. Therefore, if the bitcoin price successfully tests level one of the MVRV ratio and goes back above EMA 100D of this metric, it could signal that bitcoin is back in the game.
The crash of March 12th, 2020, serves as a reminder that bitcoin is not immune to market volatility and external events. However, it also shows the resilience of bitcoin and its ability to recover from significant price drops. As with any investment, there are risks involved, but for those who have a long-term investment strategy and can weather short-term price fluctuations, there is the potential for significant profits.
In conclusion, the bitcoin price crash of March 12th, 2020, was a significant event that caused widespread panic and liquidation on popular exchanges like BitMEX. However, the price of bitcoin fully recovered within two months, and investors who bought during the crash were able to profit significantly later on.
With similar MVRV ratios to the 2018-2020 price cycle, there is optimism that bitcoin could enter another bull run if it successfully tests level one of the MVRV ratio and goes back above EMA 100D of this metric. As always, investors should approach bitcoin with caution and do their due diligence before investing.
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