Bitcoin Crashed... To Prices We Saw Last Week

Recency bias is a hell of a concept. Just like humans struggle to zoom out and picture the future, they equally struggle to think back into the past. October 1st, 2024 the price of Bitcoin was hovering just above $60,000. Since then we have roared to new all-time highs and comfortably crossed the $100,000 mark for the first time in Bitcoin’s existence.

Today, the price is in the mid $90,000 and you would think the sky is falling! In reality, we have “crashed” to prices not seen since early December!

The fact that Bitcoin being above $90,000 or even above $100,000 is considered “normal” is ludicrous given where we were just two months ago. It’s amazing how quickly our brains can anchor themselves to a new mark as the days pass.

All this to say, I personally believe a healthy pullback is nothing to worry about. Currently, Bitcoin is down about 15% from the all-time high of around 108k we saw earlier this week. Yesterday, we also saw the biggest daily outflow from the Wall Street ETFs we have seen. This day of outflows comes after 15 successive days of healthy inflows.

Pullbacks have historically been extremely frequent in bull runs and cycle history can be used as a predictive measure until it can’t.

The last time I wrote about pullbacks and brought historical charts into play was on May 4th, 2024. The title of that newsletter was “When There is Blood, You Buy.” The price of Bitcoin on May 4th? About $63,000. Looking back, Bitcoin chopped sideways for a couple of months before exploding upwards.

In 2017, there were 13 pullbacks of more than 12% as Bitcoin moved to an all-time high at the end of the year. 8 of these were over 25% returns.

In 2020 to 2021, there were 13 different pullbacks of 10% or more.

Bringing it to the current bull market, the current price action isn’t even the worst pullback we have seen in 2023 to 2024.

Interestingly, in prior cycles we saw much bigger pullbacks over 30% and even 40%, marks we have not seen yet. The left side of the above chart shows 7 pullbacks of at least 30% in 2017. That isn’t to say they can’t, or won’t happen, but I also believe we are primed for a different sort of bull cycle this time around.

• Wall Street is sucking up Bitcoin daily with their spot ETF products at levels never before seen.

• Microstrategy keeps buying billions of dollars of Bitcoin.

• There are major murmurs about a United States Strategic Reserve of Bitcoin and multiple states have already proposed legislation to adopt individually.

It’s possible these factors, more worldwide adoption levels, and more limit the extremes of any pullbacks we see. But again, I cannot predict the future and will continue to use history as a guide until historical trends are broken. This cycle is where models may be broken, we shall see!

Any time there is a sizable pullback in Bitcoin is a reminder of the importance of education and understanding what you own. If you panic sell at the first sight of volatility, the chances are, and history proves this, you will lose.

If you are new to Bitcoin and experience fear, confusion, and anxiety, when you see the price going down, those are normal feelings. Everyone feels them, including myself. As I have personally experienced these pullbacks, and have done countless hours of researching, I get more excited to buy when the price goes down. The price doesn’t change how much I love the asset because I know what it is. With that lens, I know a cheaper price of Bitcoin means that every dollar gets me more of the asset I want to hold for the future.

I will not fall fate to the effect of human psychology that the below meme perfectly encapsulates and has been shared across social media through countless pullbacks.

Lastly, and this statement could be an entire post in itself: Volatility is a feature, not a bug.

For Bitcoin to reach the heights many people expect it to, it has to be volatile. Bitcoin is currently rapidly moving from a retail-level purchase to a corporation and nation-state-level purchase. That much money will make anything volatile.

Zoom out.

Think back to October and see how far we have come in just 2 months.

Keep learning.

Don’t over-leverage yourself.

The sky isn’t falling.

Stack SATs.

The views and opinions expressed here are for entertainment purposes only and should, in no way, be interpreted as financial or investment advice. Always conduct your own research when making an investment or trading decision, as each such move involves risk. I am not a financial advisor and do not claim to be qualified to convey information or advice that a registered financial advisor would convey to clients as guidance. Nothing contained in this e-mail/article constitutes, or shall be construed as, an offering of financial instruments, investment advice, or recommendations of an investment strategy. If you are seeking financial advice, find a professional who is right for you.