tl;dr: I love crashes. It means I can buy more.
In the chart below we can see Bitcoin outpacing the 2016-2018 cycle. Several mathematical and economic theories suggest that this shouldn't happen. You could call what's happening unsustainable growth—growth that is influenced greatly by external forces: COVID-19, mass fiat printing, institutional involvement, and social media influencers among others.
The same happened in 2012-2013 as the market outpaced the 2009-2010 cycle. Again, this type of growth is unsustainable, so what happened in 2012-2013 to cause a bubble?
- (March 16, 2013) Residents of Cyprus struggled to gain access to cash and the situation caused doubts of the banking system all over Europe. Bitcoin was a safe haven to many.
- (March 11-12, 2013) Between these dates, trading was halted on Bitcoin's largest exchange at that time, Mt. Gox.
This was due to events occurring in Greece related to their monetary policy. In Bitcoin's early days, news like this was enough to force a bubble. Today, Bitcoin rises and falls at much smaller degrees but may still be susceptible to the same laws that make sense of the world, humans, and markets. We could see it continue to correct or rise from here onwards.
Current Bitcoin Cycle Compared to Previous Cycles
On a personal note: I like to think a big correction would be a good thing. Lots of people were getting into the market with the notion that they'll be rich in a matter of days. People who didn't realize this quickly enough moved on to more volatile coins—hence, Bitcoin's three-month consolidation. Going as low as ~$43k, Bitcoin is now reentering a price when Elon first mentioned his involvement (~$38k). Elon's influence is leaving Bitcoin and so will a bulk of his followers. Old money who wanted out, and new panic holders, they are gone.
But someone needs to buy their sell orders, who buys them?
Adopters, holders, believers in this space and technology. People who have wanted in for a while. These people aren't selling anytime soon, because they believe that this thing is going to revolutionize the world. Every crash brings more of these people in and removes more panic sellers. A decrease in the number of people waiting to jump off the ship; a new floor is established.
Now a higher percentage of holders believe in the product they are holding
And they are unwilling to sell for the panic prices of the last week—less volatility and more sensibility. This is why crypto keeps bouncing back from pullbacks and reaches new higher ceilings and floors each time.
Rather than seeing the correction as a disaster see it as a time to start fresh.
If you have been FOMO-ing and losing money, now is a time to start a systematic long-term approach to investing rather than gambling. Not a financial advisor; but, yes, this is life advice.
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