What is max drawdown? Formula and real Bitcoin examples
Max drawdown is the biggest fall from a high to a later low. How to calculate it step by step, and Bitcoin's drawdown inside each year from 2020 to 2026.
Max drawdown is the biggest fall from a high point to a later low point. To work it out, track the highest price so far, measure each day's drop below it, and keep the deepest one. On Binance, Bitcoin fell at least 20.01% from a high inside every calendar year from 2020 through October 2026, from -20.01% in 2023, the calmest year, to -66.94% in 2022. These are past cases, not a forecast.
For how long 10 big coins took to climb back after 2022, see Crypto drawdown recovery time.
What does max drawdown mean in plain words?
Picture a price climbing a hill and then sliding down. The top of the hill is the peak. The lowest point after the slide is the trough. The drawdown is how far the price slid, as a percent of the peak.
The formula is short: trough price divided by peak price, minus 1. For Binance Bitcoin in 2022, that is 15,773.0 divided by 47,704.35, which is about 0.33. Subtract 1 and you get -66.94%.
The max drawdown is the largest of all the falls in the period. A price can have many smaller slides. Only the worst one counts.
We use the daily close: the last price of each day. The tables below use Binance USDT perpetual contracts, or perps. A perp is a futures contract that follows a coin's price and never expires. USDT is a token made to track the US dollar.
How do you calculate max drawdown step by step?
You need a list of prices in time order. Then:
- Start with the first price as your running high.
- Move to the next day. If the price is above the running high, it becomes the new running high.
- Work out price divided by running high, minus 1. This is that day's drawdown. It is zero on a new high and negative on every other day.
- After the last day, take the most negative number. That is the max drawdown.
- Note the dates of the peak and the trough, so anyone can check the number.
One detail changes the answer. Many tools measure from the highest price ever seen. We reset the running high each January and report the biggest fall inside each calendar year. That makes years easy to compare, but it can be smaller. Bitcoin's January 1, 2022 close was already below its 2021 highs, so measured from the 2021 record, the fall would be larger than 66.94%.
Why is a big drop so hard to undo?
The math is lopsided. After a 50% fall, the price must rise 100% to get back. Falls need bigger gains than the falls themselves.
Bitcoin's 2022 fall of 66.94% left the price at about a third of its January level. To get back, the price had to roughly triple. That is why the wait was 446 days from the low, and 770 days from the peak.
Counting from the low measures the climb only. Counting from the peak includes the whole slide too. Always say which one you mean. We compare recovery times across ten coins in our crypto drawdown recovery study.
How deep were Bitcoin's falls in each year?
Here is the biggest fall inside each calendar year for Binance BTCUSDT, from daily closes. The data starts in September 2019, so we skip that partial year. 2026 runs through October 19.
| Year | Peak date | Low date | Max drawdown | Days from peak to recovery |
|---|---|---|---|---|
| 2020 | Feb 14 | Mar 12 | -54.00% | 164 |
| 2021 | Apr 13 | Jul 20 | -53.22% | 189 |
| 2022 | Jan 1 | Nov 21 | -66.94% | 770 |
| 2023 | Jul 13 | Sep 11 | -20.01% | 102 |
| 2024 | Mar 13 | Sep 6 | -26.26% | 238 |
| 2025 | Oct 6 | Nov 22 | -32.05% | Not yet |
| 2026 | Jan 14 | Jun 30 | -39.52% | Not yet |
Even the calmest year in the table, 2023, had a fall of about one fifth.
"Not yet" means no daily close through October 19, 2026 had reached that peak again. It does not mean it never will.
Which coins had the deepest worst year?
Only BNB's worst year was shallower than Bitcoin's. Here is each Binance coin's worst single-year fall in its own history, from daily closes through October 19, 2026.
| Binance market | Worst year | Max drawdown | Days from low to recovery |
|---|---|---|---|
| BTCUSDT | 2022 | -66.94% | 446 |
| ETHUSDT | 2022 | -74.02% | 628 |
| SOLUSDT | 2022 | -94.63% | 442 |
| XRPUSDT | 2021 | -71.26% | 1,229 |
| DOGEUSDT | 2021 | -77.27% | Not yet |
| ADAUSDT | 2022 | -84.77% | Not yet |
| AVAXUSDT | 2022 | -90.47% | Not yet |
| LINKUSDT | 2022 | -80.43% | 713 |
| BNBUSDT | 2020 | -64.93% | 184 |
| TRXUSDT | 2021 | -69.36% | 1,132 |
Every worst year fell by more than 60%. Three of the ten coins had not closed back at the peak of their worst year by October 19, 2026. The deepest fall (Solana, -94.63%) did not have the longest wait: XRP took 1,229 days from its low.
Coinbase spot Bitcoin has a longer history in our data. Its worst calendar year was 2018, at -81.38%, and it took 703 days from that low to close back at the 2018 peak.
Why does max drawdown matter more than average return?
Because two paths with the same ending can be very different along the way. Average return only shows where a price ended. Max drawdown shows the worst moment you would have had to sit through. Scores like the Sharpe ratio look at the ups and downs too, but they do not show the single worst fall.
We saw this in a test of 1,000 random trading rules on hourly Binance Bitcoin prices. The rule with the best training score gained 155.22% after fees from September 2019 through 2022. In that same stretch it still had a max drawdown of -60.22%. Kept unchanged, it lost 51.72% after fees from January 2023 to September 2026, and its worst fall in that period was -76.83%.
This shows two things. A winning total can hide a deep hole on the way. And the worst fall can be bigger than the final loss, because the path dipped lower before it ended. You can read the whole test in our 1,000 random rules study.
What does max drawdown not tell you?
- How long the fall lasted. Bitcoin's 2023 fall was recovered 42 days after the low. The 2022 fall took 446 days.
- How often it happens. It is one worst case, not a count. For how often Bitcoin fell 10% in a week, see our weekly drop study.
- What comes next. A deep past fall is not a prediction of another one.
- Falls inside a day. Daily closes can miss a low that happened between two closes.
- The effect of the start and end dates. Change the window and the number can change.
You can name the trough only after seeing later prices. In the middle of a fall, nobody knows if the lowest close has happened.
How we measured this
We used completed daily bars from Binance USDT perps. Start dates differ by coin (Bitcoin starts in September 2019), so the histories are not the same length. Each bar is labeled by its UTC date. For each calendar year we reset the running high and picked the most negative close divided by the running high, minus 1. Recovery is the first later close, in any year, at or above that peak. Missing closes were left missing.
The coins in these tables are large coins that still trade, so they are a selected group, not a random sample. We did not subtract trading costs in the drawdown tables. The strategy numbers use hourly bars and a fee of 0.05% on each side of a trade.
Try this in Comparand
Ask your connected AI agent: "Get daily bars for Binance BTCUSDT perps for 2022. Walk through the closes with a running high and tell me the biggest fall, with the peak date, the low date and the number of days to recover."
- venue_bars returns open, high, low, close and volume for each completed bar. Use the 1d bar size. It is free on every key.
- The tool returns prices only. Your agent does the running-high math, so ask it to show the peak and low prices and check them against the table above.
- Every answer says where its data came from and what the call cost.
You can also try 3 coins free to see past charts that look like today's, and the docs show how to connect your agent.
The short version
- Max drawdown is the biggest fall from a peak to a later low: low divided by peak, minus 1.
- Binance Bitcoin's biggest fall inside 2022 was -66.94%, and it took 446 days from the low to close back at the January high.
- In every calendar year we measured from 2020 through 2026, Bitcoin had a fall of at least 20%.
- Each of the ten Binance coins had a worst year of more than 60%, and three had not recovered by October 19, 2026.
- Max drawdown shows depth, not length, frequency or what happens next.
Questions people ask
What is max drawdown in simple words?
Max drawdown is the biggest fall from a high point to a later low point, shown as a percent. If a price goes from 100 to 40 and never falls further, the max drawdown is 60%. It looks at the worst fall, not the final result.
How do you calculate max drawdown?
Keep a running high as you walk through the prices. On each day, divide the price by that running high and subtract 1. The most negative result is the max drawdown. For Binance Bitcoin in 2022 it was 15,773.0 divided by 47,704.35, minus 1, which is -66.94%.
What was Bitcoin's max drawdown in 2022?
On Binance's BTCUSDT contract, the biggest fall inside 2022 was -66.94%, using daily closing prices. The high was 47,704.35 USDT on January 1 and the low was 15,773.0 USDT on November 21. Price first closed back at the January high 446 days after the low.
Is a smaller max drawdown always better?
Not by itself. It depends on the window you pick. Bitcoin's biggest fall was 20.01% inside 2023 and 66.94% inside 2022 on Binance. A calm window says little about the next one, and a short test period can hide a deep fall.
Does max drawdown tell you how long a recovery takes?
No. It tells you how deep the worst fall was, not how long it lasted. Binance Bitcoin fell 66.94% in 2022 and took 446 days from the low to recover, but a 20.01% fall in 2023 took only 42 days.