To investors,

Bitcoin’s price has been falling in recent weeks. This may be surprising to market participants that expected the digital currency to rise aggressively after the halving, but those of you reading this letter daily probably had a different viewpoint.

As I wrote to you on April 19th, Bitwise research analyst Juan Leon pointed out that bitcoin’s price action in the month after the halving would not be impressive according to historical data:

“On average, the price of bitcoin has risen 19.03% in the month preceding the halving, versus 1.70% in the month following the halving. Zooming out, however, the reverse is true: On average, bitcoin has risen 3,224% in the year following the halving, versus 185% in the year preceding it.”

So we are seeing history repeat in the first month after the halving, but the big question is whether we will see the significant price increase in the first year after the halving. There are still 11.5 months left until we have that answer.

In the meantime, there are many people asking me why bitcoin’s price has dropped 10% in the last 5 days and 17% in the last month.

One argument is that the halving was a “sell the news” event, but that seems too easy and naive of an answer. Instead, it is more likely that bitcoin is acting as the global alarm system once again.

Jeroen Blokland explains one theory:

“Yikes! Bitcoin is down a whopping 12% from its peak yesterday. It's another confirmation investors are forced to abandon their goldilocks scenario of decent GDP growth, slowing inflation, and a series of central bank rate cuts on the horizon. The US GDP number, which was significantly lower than expected, combined with a significantly higher PCE core deflator, seems to have pushed investors over the 'hopium' edge. Equities, bonds, gold, oil, and Bitcoin are all selling off. Let's see if and how Powell takes recent developments into account.”

If Blokland is correct, which I tend to think that he is, then the drawdown we are seeing in bitcoin having nothing to do with the digital network or asset, but everything to do with the macro backdrop the asset is trading in.

The network looks very healthy. The number of on-chain wallet addresses with at least 0.1 bitcoin has not gone down.

Hash rate on the network remains strong and growing, signaling the blockchain is secure and resilient.

And the number of transactions continues to rise. Regardless of intra-month price movements, people around the world continue to find value in bitcoin’s peer-to-peer system.

I lay out this analysis because it is easy to lose emotional control when the price of an asset drops lower with such speed. But don’t forget, this is normal for a bitcoin bull market. You should expect multiple 30% drops along the way to hundreds of percent in price appreciation during the expansion periods.

Take a deep breath. Stay calm. The world isn’t ending. Bitcoin is not failing. Nothing has changed about the investment thesis. Our central bankers and politicians have just mismanaged the economy to the point that people are getting worried.

Bitcoiners have known this for years.

Hope you have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Nick Neuman is the Co-Founder & CEO of Casa, one of the preeminent custody providers in bitcoin and crypto industry.

In this conversation, we talk about what custody used to look like before the digital age, how Casa is solving problems around bitcoin custody, examples of why self-custody makes it more secure, brand new inheritance feature, risks, and future of self-custody.

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Casa CEO Nick Neuman Explains How The Rich Protect Their Bitcoin

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