charts are often shared at their best moment: a line going up and to the right, with a big green number next to it. What is rarely shared is the part where the same line fell by three quarters and stayed down for years. Both parts are normal for crypto. This lesson shows you the size of the falls, explains why they happen, and helps you decide how much of a fall you could live through.
Before we start: what do you think?
You buy a coin at $100 and it falls 80%. How much must it rise to get back to $100?
✗ An 80% fall leaves $20, and 80% of $20 is only $16, so you would reach $36.
✗ Doubling $20 gives $40, still far from $100.
✓ Right: $20 must grow by $80 to reach $100, and $80 is four times $20.
✗ Too much: $20 plus 800% would be $180.
What volatility means
Volatility is how much and how fast a price moves. A has almost none. Shares of a large company move a few percent in a normal month. Crypto can move that much in an hour.
works in both directions. The same force that makes a coin jump 30% in a week can make it fall 30% in a week. People who talk about crypto usually remember the jumps. Your account will remember both.
There is one more thing to understand: falls and rises are not equal. After a 50% fall, you need +100% to get back. After an 80% fall, you need +400%.
| Fall from the top | What is left of $1,000 | Rise needed to get back |
|---|---|---|
| −50% | $500 | +100% |
| −75% | $250 | +300% |
| −80% | $200 | +400% |
| −90% | $100 | +900% |
| −95% | $50 | +1,900% |
Quick check
A coin falls 90%. What rise does it need to get back to where it was?
The big falls of the past
These are round numbers for the oldest and most traded coin, bitcoin. We use it because its history is long and well recorded, not because we recommend it.
- In December 2017 its price was close to $20,000. A year later it briefly fell below $3,300. That is a fall of more than 80%.
- In November 2021 its price was above $68,000. In November 2022 it was below $16,000. That is a fall of more than 75%.
- It took until March 2024 for the price to set a new record above its 2021 high. That is more than two years of waiting for anyone who bought at the top.
Remember, this is the largest coin, with the most buyers and sellers. Smaller coins and often fall further. Some never recover at all, because their buyers simply leave.
Worked example: $1,000 bought near the 2021 top
Imagine you bought $1,000 of bitcoin when the price was $68,000.
- You own $1,000 ÷ $68,000 of one coin.
- A year later the price is $16,000.
- Your coins are now worth $1,000 × $16,000 ÷ $68,000 = about $235.
- That is a fall of about $765, or about 76.5%.
- To get back to $1,000, the price must rise from $16,000 to $68,000. That is a rise of +325%.
Nothing went "wrong" here. No exchange failed and no one was scammed. This was simply what the market did, and people who bought at the top had to sit through it, or sell at a large loss.
Why crypto moves so much
There is no single reason. Several of them push in the same direction.
- No cash to anchor the price. As the lesson What crypto is explains, most coins pay no profit or interest. With no cash to compare against, the price depends almost fully on mood.
- Thin markets. Many coins have few buyers and sellers. When there is little liquidity, a few large orders can move the price a long way.
- Borrowed money. Many traders use on crypto. When the price falls, their positions are closed by force, which means more selling, which pushes the price lower, which closes more positions. We explain this in Crypto futures and leverage.
- Hype and fear. Social media, influencers and news headlines can bring in many new buyers at once, and send them running just as fast.
- It never closes. Crypto trades 24 hours a day, 7 days a week. A big move can happen while you sleep, on a Sunday or on a holiday.
Quick check
Name two reasons why crypto prices move more than most shares.
How to size what you can live with
You cannot control the market, but you can control how much of your money is exposed to it. A simple test is to imagine the worst fall from history, before you buy.
Say you plan to put $2,000 into crypto. Ask yourself: "If this falls 80% and stays down for two years, I will have $400. Can I live with that, without selling in panic and without needing the money?"
If the honest answer is no, the amount is too big. Lower it until the answer is yes. Money you need for rent, bills, debts or your does not belong in something that can fall 80%.
Also be careful with charts you are shown. A two-week chart that goes straight up says nothing about the year around it. Ask to see the full history, and look for the deepest fall. (The same trick is used by , see What free signals don't show you.)
Quick check
What is a simple test before you buy crypto?
Key takeaways
- Volatility is how much and how fast a price moves. Crypto has a lot of it, in both directions.
- Falls and rises are not equal: after −80% you need +400% to get back.
- The largest coin has fallen more than 75% from its top at least twice. Smaller coins often fall further.
- Thin markets, leverage, hype and 24/7 trading all make the swings bigger.
- Decide how much you could lose in an 80% fall before you buy, not after.
Try this
Write down the amount you are thinking about putting into crypto. Multiply it by 0.2. That is what would be left after an 80% fall. Write both numbers on paper, and next to them, one honest sentence: "If I had only $ left for two years, I would feel ."