Putting Bitcoin's Pullback in Perspective

“Many an optimist has become rich simply by buying out a pessimist.”

- Laurence J. Peter

No asset moves in a straight line.

It’s a jagged path full of peaks and valleys.

But this is easily forgotten by investors.

A market moves higher for an extended period of time, and they forget there can be drops. When those happen, they trigger panic and self-doubt.

At the same time, markets can go nowhere for a long time... much longer than you might think. Just look at Japan’s Nikkei from October 1989 to July 2012. Japanese investors fell into the trap that shares would never recover. And they eventually missed the boat when equities finally rebounded. There’s still skepticism today with the Nikkei trading at new all-time highs.

There’s a long-held belief in the country that, “Japanese stocks will make you poor.”

And for the better part of two decades, they did (though, it wasn’t a straight path lower).

But as I’ve stated in the past, the market ultimately moves in only one direction: Up.

There will be down days, down weeks, down months, and even down years. But eventually, markets return to their one true direction… Up.

This is why I’ve long embraced volatility. I see it as a friend and an ally. Not an enemy.

And this is a pivotal friendship in an arena like cryptocurrency.

On March 14, Bitcoin set new all-time highs.

Digital gold hit $73,750. And that marked a gain of 74.4%... just in 2024.

We know there are even higher highs on the horizon for Bitcoin. In just a matter of weeks, the world’s largest cryptocurrency will undergo its fourth reward-halving. This is something I’ve covered extensively here for more than a year.

But there’s anxiety bubbling to the surface in the crypto world. And that’s because Bitcoin slid 17.5% over a span of six days… from March 14 to March 20.

Yet, this always happens.

Let me repeat that… this always happens.

And every time it does people forget. But here’s why you shouldn’t worry. Instead, view this volatility as a friendly gift from the markets… especially if you’re late to the party.

Crypto’s Wobbly Legs

Here’s a headline you shouldn’t need…

Cryptocurrencies are extremely volatile.

And as we approach major catalysts – like Bitcoin’s reward-halving – the volatility can become downright maddening.

This is often when crypto investors see their mettle tested and the looky-loos are weeded out.

But don’t for a moment think this is a warning sign… this is in fact an opportunity. One we’ll see be offered again and again. Investors merely need the guts to act.

For example, in the months leading up to the reward halving on July 9, 2016, Bitcoin tumbled multiple times.

From January 7, 2016, to January 15, 2016, the cryptocurrency shed 20.5% of its value.

It bounced back, before slipping 12% from January 20, 2016, to February 3, 2016.

Again, Bitcoin’s price rallied before another 12% slide from February 21 to March 6.

It then soared to new highs that were rapidly sullied by a sharp 27.2% decline from June 16, 2016, to June 23, 2016.

That was followed by another rocket blast before a final dive of 13.1% from July 2, 2016, to July 7, 2016.

The reward halving then took place two days later.

But it would be smooth sailing from there, wouldn’t it?

Hahahahahahahaha!

No.

However, Bitcoin would rally 2,986% from its close on July 9, 2016, to a new all-time high on December 17, 2017.

We saw similar volatility in the lead-up to the reward halving in 2020.

Bitcoin lost 19% of its value from February 13, 2020, to March 1, 2020.

The world’s largest cryptocurrency rallied before cratering 50% from March 6, 2020, to March 16, 2020. Though, markets around the world were circling the drain at the same time.

But we’d have another massive move higher before Bitcoin shed 12% from April 7, 2020, to April 16, 2020.

This was followed by a huge move price increase before the crypto tumbled 17% from May 8, 2020, to May 10, 2020… the reward halving would then occur the very next day on May 11.

Of course, the volatility would continue.

But Bitcoin would soar 700% from its close on May 11, 2020, to a new all-time high on November 10, 2021.

Historically, Bitcoin has experienced double-digit declines over very short periods. Most only a matter of days. And keep in mind, we’re just looking at the months before reward halvings, not even the rest of the year.

But the takeaway here is, the current move in Bitcoin is in line with what we’ve seen leading up to past reward halvings. And remember, some of the steepest moves transpired in the days prior to the major crypto catalyst.

This isn’t a time to panic. It’s a time to prepare to take advantage of the opportunity. Once again, look to buy the dips.

Looking Beyond 2024

Bitcoin is the best-performing asset for a decade and a half.

And by more folds than an elephant seal’s chin.

That means every investor’s portfolio MUST have some exposure to crypto.

You’d be a fool not to.

Assets don’t move in straight lines. Their paths are full of jagged peaks and valleys. And the landscape of cryptocurrencies is shaped by these more than most.

So, embrace the volatility and take advantage of any near-term lows. Your future self will thank you. And already, Bitcoin is racing back toward $70,000.

Not crying over crypto,

Matthew