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After periodic drops of 20 percent, bitcoin tends to come back even stronger

  • The last four times bitcoin fell more than 20 percent this year, it gained an average 61.5 percent in the following four weeks, according to Genesis Global Trading.
  • Two weeks after such a drop, bitcoin gained an average 28 percent, the data showed.
  • Bitcoin swung wildly this weekend amid the latest debate among developers over the digital currency's future.

As dramatic as the downturn in bitcoin's price was over the weekend, history indicates future returns will likely be greater.

Bitcoin fell about 20 percent over the weekend before recovering much of its losses. The last four times bitcoin has fallen more than 20 percent this year, it has gained an average 28 percent in the two weeks following, according to digital currency trading firm Genesis Global Trading.

Four weeks out, the digital currency has gained an average 61.5 percent, the data showed.

Bitcoin performance in the weeks after a drop of more than 20%

Source: Genesis Global Trading

The digital currency plunged to a low of $5,507 this weekend amid uncertainty over bitcoin's future. Developers have disagreed over the best way to improve bitcoin's transaction speeds and costs, resulting in splits in the digital currency.

After some developers last Wednesday called off an upgrade proposal called SegWit2x, investors began buying "bitcoin cash," the bitcoin offshoot formed in August. Another alternative version of bitcoin, "bitcoin gold," launched Sunday in an effort to make the process of creating, or "mining," the digital currency less dependent on specialized hardware.

The original bitcoin has proved resilient so far this year. Bitcoin hit record highs after the August split into bitcoin and bitcoin cash. Bitcoin also more than recovered from a $2,000 drop in September after a Chinese crackdown on digital currencies. Digital currency enthusiasts attribute the gains to growing interest from institutional investors, especially as the planned launch of bitcoin futures later this year may allow other products such as a bitcoin exchange-traded fund to launch.

Bitcoin this year

Source: CoinDesk

Bitcoin traded more than 9 percent higher, near $6,392, Monday afternoon, according to CoinDesk.

Fundstrat's Tom Lee predicts bitcoin could hit $25,000 or more by 2022. Former Fortress hedge-fund manager Mike Novogratz also said on CNBC's "Fast Money" in October that bitcoin will likely top $10,000 in the next six to 10 months.

But that's no guarantee that bitcoin will keep rising.

Novogratz has also said the digital currency "is going to be the largest bubble of our lifetimes." He's just willing to bet on gains on the way up, before a crash.

— With reporting by CNBC's Seema Mody.

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