Amidst the frenzy of the current crypto bull market fueled by massive capital inflows and memecoin explosion, seasoned traders are sounding the alarm on an underappreciated risk—severe market pullbacks. Pullbacks are part of market cycles, especially with crypto and related assets. The drawdowns, sometimes monumental, are hard-wired into the volatile asset class's DNA.

Chart: Bitcoin's 2016-2017 bull cycle

The chart reveals Bitcoin, arguably the most stable crypto product not linked to fiat, experienced a staggering 12 pullbacks exceeding 20%. The 2020-2021 bull run saw 9 such plunges. And in this nascent 2024 upswing, Bitcoin has already retracted over 20% on 4 separate occasions.

More dire were its 87%, 84% and 78% peak-to-trough meltdowns when previous bulls turned to ferocious bears.

As for the rest of the crypto universe? Analysts warn the pullbacks for smaller market cap tokens are even more extreme than Bitcoin's slides.

The prospect of such losses would be unthinkable for traditional asset allocators. But for crypto diehards, these cycles of speculative boom and bust are simply the inevitable boundaries they operate within.

With the 2024 bull market currently sweeping euphoria across the space, there are concerns that droves of new investors are naively ignoring these boom-and-bust dynamics until it's too late. Analysts are quantifying the potential slides in stark terms: A 30% crypto pullback would wipe out $30,000 from a $100,000 portfolio. A 50% plunge erases half those holdings. And a 90% crash - far from unprecedented for this asset class - could drain $90,000 in a blink, shaking out even sharks.

With crypto's total market cap now hovering around $2.8 trillion, extreme downside risk is hardly just a theoretical notion for isolated gamblers. Whether gambling for decentralisation or outsized gains, cavalier disregard for crypto's downside is no longer an option.