Deja vu? What Bitcoin’s past patterns reveal about its post-black Monday future

What Bitcoin’s history can tell us about its potential post-Black Monday: Examining patterns to predict the future.

August 5 was a chaotic day for investors as global financial markets faced sharp declines. Concerns about rising interest rates, upcoming elections, inflation, geopolitical tensions and the threat of a looming recession came to a head.

Japan’s index fell more than 12 percent in its worst decline since 1987, the Dow Jones fell more than 1,000 points (down 2.6 percent) and the Nasdaq fell 3.5 percent.

Even the technology giants Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla suffered an incredible loss of $650 billion in total market value.

The crypto market was not immune to the turmoil either, with Bitcoin (BTC) falling below $50,000 to reach $49,578, a level not seen since February 2024. However, BTC quickly recovered and reached $56,000 by August 6 before settling around $55,000.

BTC 4-month price chart | Source: TradingView

The cryptocurrency market in general has also seen an increase in buying, with market value increasing by nearly 8% in the last 24 hours, reaching $1.96 trillion as of August 6.

Let’s examine how Bitcoin has responded to similar macroeconomic conditions in the past and what experts predict for its future amid this market turbulence.

The resilience of cryptocurrencies in the face of adversity

In March 2020, the world faced an unprecedented financial storm. The COVID-19 pandemic sent shockwaves through global markets, leading to massive sell-offs and wild volatility. The crash began in mid-February and worsened through mid-March, with several severe daily declines.

Although central banks and reserves around the world lowered interest rates and provided support to investors and markets, US stock markets experienced their biggest daily percentage decline since 1987 on March 12. Additionally, global markets fell 12-13 percent on March 16, known as ‘Black Monday II’.

Bitcoin and the entire crypto market were not immune to chaos during this period. Trading around $10,000 in February 2020, BTC fell to $9,000 in early March and fell to around $5,000 on March 13. This sharp decline reflected panic in traditional markets.

But Bitcoin’s recovery story was remarkable. By June 2020, BTC had regained the $10,000 level and continued to rise, closing the year around $28,000.

The uptrend didn’t stop there. Amid the volatility in 2021, BTC reached a new high of $69,000 in November, nearly 14 times its March 2020 low.

BTC price chart: February 2020 – November 2021 | Source: TradingView

Fast forward to today and we are seeing another wave of financial turbulence. After months of worrying about various economic triggers, investors have seen their fears come true as global stock markets plunge.

However, when we look at Bitcoin’s historical performance, we see a recovery pattern.

During the COVID-19 crisis, many projects have maintained interest and investment, continuing to develop and release new features.

Similarly, the growth of decentralized finance (DeFi) platforms has contributed to the market recovery by providing new avenues for investment and income generation.

Therefore, the ability of the cryptocurrency market to adapt and recover despite the ongoing challenges suggests that it will eventually rebound and continue its journey of growth and innovation.

What do the experts think?

As the dust settles from the recent market crash, experts are discussing what could happen next.

Popular crypto analyst Michaël van de Poppe believes that quantitative easing (QE) is happening behind the scenes, although it’s not widely known. QE is when central banks buy government bonds to pump more money into the economy.

It hasn’t been fully publicised, but QE is happening.

Approximately $30 billion will be added each month through the Treasury’s bond repurchase operations.

Global Liquidity Is Quietly Increasing.#Bitcoin reply. pic.twitter.com/KXuco1fW9C

— Michaël van de Poppe (@CryptoMichNL) August 6, 2024

Van de Poppe says about $30 billion will be added each month through Treasury Repurchase Operations. More money in the system generally means lower interest rates and more investment in riskier assets like Bitcoin, helping it bounce back from the current state of volatility and uncertainty.

Meanwhile, Real Vision co-founder and CEO Raoul Pal offers another perspective. He attributes the current market volatility to major supply shifts from past cycles and various entities selling off their assets. These include FTX property, Mt. Gox, Germany, GBTC, and Jump, as well as new project unlocks and tokens.

This large, scattered gap in the majors is actually due to a large amount of supply turnover from issues last cycle (and even earlier): FTX property, Mt Gox, Germany, GBTC and now Jump, as well as new project unlocks/tokens.

This too shall pass, and all the major protrusions will soon be digested.

— Raoul Pal (@RaoulGMI) August 4, 2024

Pal remains generally optimistic, suggesting that the market will eventually digest these excesses and things will get better once these old problems are resolved.

Amidst these developments, Ethereum (ETH) co-founder Vitalik Buterin shared the positive developments in the Ethereum ecosystem.

I think people will be surprised at how quickly “L2 interoperability issues” will cease to be a problem and lead to a seamless user experience across the entire ethereum universe (including L1, rollups, validums, even sidechains). I see a lot of energy and enthusiasm to make this happen.

— vitalik.eth (@VitalikButerin) August 5, 2024

He believes that issues with cross-L2 interoperability (essentially the ability for different layers of the Ethereum network to work together seamlessly) are close to being resolved, and that this could lead to a better user experience across the entire Ethereum network, including Layer 1, rollups, and even sidechains.

Now, the important points to note are as follows.

Firstly, the covert implementation of quantitative easing could inject much-needed liquidity into the market and encourage investment in cryptocurrencies.

Second, current volatility may soon stabilize as past cycle issues resolve, allowing the market to recover.

Finally, technical advancements in major crypto networks like Ethereum can improve user experience and drive greater adoption.

While the market is experiencing turbulence, there are strong signs of potential recovery and growth. However, nothing is guaranteed in the crypto market, so trade and invest wisely. Always do your own research and never invest more than you can afford to lose.