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By Daniel CreechJanuary 31, 2022

Bitcoin just dropped 50%… Here’s what to do

Bitcoin is crashing.

The largest and most popular cryptocurrency dropped 50% from its all-time highs around $67,000 just two months ago… before rallying back up to the $37,500 level.

Some folks are surprised by volatility. They’re likely wondering whether the price will go down further. But that’s not what investors should be focusing on. 

All investments go up and down. Even the most boring mutual fund sees its price go down 10%-plus during a bear market. 

I’m not saying you need to completely ignore the performance of your investments. However, you don’t need to scroll too far back on the Bitcoin chart to see that its price swings up and down a lot over time. 

Put simply, the extreme volatility is par for the course in crypto… which means crypto investors need to have some long-term perspective…

Experienced investors know revisiting their thesis is more important than simply checking prices. 

In other words, folks should be spending less time looking at crypto prices. Instead, they should consider the reasons for investing in this exciting (but volatile) asset class. 

As I’ll explain, if your thesis is still intact, there’s no need to panic. In fact, you should consider using the volatility to your advantage. 

The latest Bitcoin “crash” is nothing new

To be clear, I’m not shrugging off the recent Bitcoin volatility. A 50% drop in any investment is rough… and it’s downright brutal when it happens in just two months.

But we need to put the recent decline into perspective… Let’s take a quick look at Bitcoin’s history of booms and busts.

Below, I’ve compiled a short list of Bitcoin’s biggest moves in recent years. I only went back about five years—not even half of its lifespan. (As a reminder, Bitcoin began trading in January 2009.)

  • From July 14, 2017–August 30, 2017, BTC rose 135%… going from $2,000 to $4,700
  • From its August 2017 highs, BTC fell 34% in less than a month, hitting $3,150 on September 13
  • From its September 2017 lows, BTC rose 500%… topping $19,000 on December 17, 2017
  • BTC crashed 63% in less than two months, bottoming around $7,000 on February 4, 2018
  • BTC rallied above $10,000 the following month (March 2018)… only to fall more than 60% to $4,000 in December 2018
  • Between December 2018–March 2019, BTC bounced around the $4,000 level
  • Next, BTC rose 225% in about three months… hitting $13,000 on June 25, 2019 
  • From its June 2019 highs, BTC fell more than 64%—below $4,600—on March 16, 2020
  • From its pandemic lows, BTC soared more than 1,200% over the next year, topping $60,000 in April 2021
  • And over the past year, the price of BTC has dropped 50% twice: from April–July 2021… and from November 2021 to now 

At the risk of stating the obvious… Bitcoin is extremely volatile.

Put simply, these big swings are part of the nature of crypto.

Know your thesis

Since we know crypto will continue to be volatile, it’s critical to have a thesis behind your investment. If you’re not in it for the long term, you (hopefully) have a basic trading strategy. For example, you can aim for a certain amount of upside while using stop losses to limit your downside. 

But most of us aren’t traders. As I mentioned earlier, experienced investors have a thesis for every position in their portfolio. 

For Bitcoin, there are two well-known bullish cases: It’s a hedge against the declining value of fiat currencies… and it stands to benefit as adoption grows (and/or new uses develop). 

As far as crypto vs. fiat currency, Bitcoin has a solid, unchanging factor in its favor: There will only ever be 21 million total bitcoins… and investors value anything that has a limited supply. In other words, scarcity helps drive the value higher over time. 

Bitcoin’s limited supply is drastically different from fiat currencies, which are printed endlessly throughout the world. This constantly growing supply has the opposite effect of scarcity… It erodes the value of money.

Turning to the other bullish thesis for Bitcoin, institutions continue pouring into the space. And there’s plenty of room for long-term growth in adoption… since most companies haven’t made a serious push into the industry yet. 

Over the past year, I’ve highlighted plenty of examples of banks and other financial giants starting to focus on crypto. I’ve also noted how everyone—from governments like El Salvador to America’s largest city—is getting involved in Bitcoin. And a few weeks ago, I shared some examples of billionaires who were skeptical about Bitcoin… only to change their tune after learning more about it.

About a month ago, global investment giant KKR led a capital funding round for Anchorage Digital… valuing the firm at over $3 billion. Other investors include Wall Street heavyweights like Goldman Sachs and BlackRock, as well as crypto trail blazers like Sam Bankman-Fried’s Alameda Research and venture capitalist Adreessen Horowitz.

Anchorage Digital acts as a gateway for institutions to gain exposure to crypto. In January 2021, it became the first crypto firm to receive a bank charter from the U.S. Office of the Comptroller of the Currency. This kind of regulatory approval is a big step forward for crypto-related businesses. 

In short, if you’re a long-term Bitcoin investor, the thesis hasn’t changed much over the past few months. In fact, the only thing that’s changed much is the price.

What should investors take away from this?

Crypto volatility shouldn’t be feared. It should be expected… and managed. 

If you’ve been waiting for a pullback in crypto to start a position, it’s time to consider taking advantage of the volatility. In Crypto Intelligence, we start with small position sizes… and leave room to add to positions over time, especially on pullbacks.

Most importantly, you should have a thesis for your investment. Keep up to date on the developments in the crypto space. And don’t invest money that you might need in the short term. 

You can choose not to have exposure to this exciting industry. But the bullish arguments for Bitcoin (and the entire crypto industry) are still intact. 

You should expect continued volatility… and look to take advantage of it.

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Daniel Creech is a Curzio Research analyst with over a decade of experience. He writes on macro trends, large- and small-cap stocks, and digital securities. He’s a regular contributor to Wall Street Unplugged, Curzio Crypto, Curzio Research Advisory, and The Dollar Stock Club.

P.S. The market pullback is a great time to get access to our Crypto Intelligence portfolio… and start building crypto exposure.

Despite the volatility, this portfolio boasts gains as high as 2,500%-plus…

And there are plenty of opportunities to buy into some of the most exciting crypto trends taking shape—from “play-to-earn” gaming… to a market that could be 10x bigger than Bitcoin.

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