Drawdown from all-time high

What it is

The relative decline of the current price from the asset's all-time high (ATH)—the highest price it has ever reached.

How it is calculated

Drawdown = (Price - ATH) / ATH

Price — the current price of the asset.

ATH — the highest price recorded from the start of trading up to the current date.

The value is expressed as a negative fraction (or zero): 0 means the price is at its all-time high, while -0.5 means the price is 50% below it.

How to read it

0 — the asset is trading at its all-time high.

Shallow drawdown — a moderate pullback from the ATH, typical of normal corrections during an uptrend.

Deep drawdown — a severe decline from the ATH, characteristic of bear markets. Historically, the deepest drawdowns have coincided with long-term market bottoms.

What it is used for

Gauging market phase and downside risk, comparing the severity of corrections across cycles, and assessing how much the price must rise to reclaim its previous peak.

Limitations

The metric relies solely on price and provides no insight into fundamental value. In addition, percentage gains and losses are asymmetric: recovering from a -0.5 (50%) drawdown requires a 100% price increase.