Crypto longtimers are unfazed by bitcoin’s recent 38% drop. Here’s why they’re so zen – and how to find your own happy place.
Bitcoin and other cryptocurrencies are having a rough few weeks. Bitcoin is currently down more than 18% over the last 30 days. CoinGecko’s tabulation of the total crypto market cap shows a peak way back on Nov. 10, and steady declines since. The floor prices of some NFTs have also started to show hints of weakness.
For a truly stunning number of crypto newcomers, this may be something of a new experience. The past two years have seen incredible growth for platforms like Coinbase, where verified users rose from 37 million in the second quarter of 2020 to 68 million in the second quarter of 2021, then up to 73 million in Q3.
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That likely translates to tens of millions of crypto holders who have never experienced a true crypto bear market, much less an extended “crypto winter.” It’s not certain that we’re in for either of those, but both are possibilities – and for new entrants, it’s worth doing some psychological preparation.
First, some perspective. Bitcoin dropping towards $40,000 doesn’t exactly sound like the apocalypse for anyone who has been in the space for very long. BTC rose to that price for the very first time just one year ago, in January of 2021. It even dipped well below that barrier as recently as July, briefly breaking under $30,000. On a longer time span, BTC’s current 38% drawdown from a November peak doesn’t even rank among the token’s biggest crashes: As recently as 2018, BTC crashed 84% in just a few weeks.
In short, those who bought at moments of highest hype are probably feeling some pain right now, but a lot of other holders – those who looked for good entry points to accumulate – are still up big. That’s perhaps the most important lesson in crypto investing: because they are so accessible and liquid, these assets are subject to big, quick swings in sentiment leading to fragile blowoff tops. Even more than in equities, Warren Buffett’s timeless advice applies: Be fearful when others are greedy, and greedy when others are fearful.
As I laid out in my 2022 predictions, the rhythm of new ideas, integrations, and adoption (particularly by nation-states) is likely to remain high regardless of price action. That, along with the literally millions of new folks learning about, using, and even developing cryptosystems, will form a strong foundation for the next round of excitement and growth, whether that happens in three months or three years. Either scenario is possible right now. Position your portfolio – and your expectations – accordingly.
Disclosure
This is for information purposes only, Make your own decisions