So Bitcoin just dropped 20% today. Are you wondering if:
- This is the peak for this year?
- Has the world realized Bitcoin is a ponzi scheme and they’re all selling?
- Did someone raise the alarm that Bitcoin is overpriced, and if you don’t get your sell order out right away, you’ll be holding the bag?
All this assumes that a -20% drop is big. And for the stock market, a -20% drop would be considered big — it’s only happened once in the entire history of the S&P 500 (in 1987).
However, for Bitcoin, it’s just a drop in the bucket. Here is a list of the largest daily drops in Bitcoin since November 2014. (Remember, the volatility was much higher before November 2014, so this list is actually too short):
There has been a total of 23 days in the last 5+ years where the daily fall was about -20% or more. (Technically, this is the high to low price of the day, conditional on closing price being lower than opening)
If you’re to be a good HODLer of Bitcoin (and gain when it reaches the moon), you’ll have to deal with today or worse 23 more times in the next 5 years. Are you ready for that?
On one hand, if you want to be a HODLer, you need to get some psychological strength and last through today. Not just today, but in the future when drops can be as much as -40%, or double that of today!
On the other hand, if you know your psychology for sure, and today is too painful for you, it might be best to get out of the Bitcoin holding business. Not all assets are for everyone, and if a single -20% day causes heartburn, you’ll need a full bottle of antacids for the next years.