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To investors,

Bitcoin has fallen from $106,000 to about $93,000 this morning. People are freaking out. The public narrative was bitcoin would go higher through the end of the year and markets don’t like surprises.

But everyone should calm down — this is a bitcoin drawdown for ants.

Earlier this year, we saw bitcoin fall from $72,000 to $61,000 in a matter of days. I wrote on March 20th “bitcoin is currently experiencing a drawdown of ~ 15% from the recent high. While this may seem like a large percentage, it is actually quite small compared to what we have seen in previous bull markets.”

It is important to understand the same thing is happening right now. Bitcoin has fallen about 15%, but that is actually a much more muted drawdown than we have seen in past bull markets.

Alex Thorn, Head of Research at Galaxy, has pointed out that the last two bull markets have consistently seen many similar drawdowns. In 2017, there were 13 different drawdowns of more than 12% as the price increased ~ 20x throughout the year.

In the 2020-2021 bull market, there were at least 13 different drawdowns of 10% or more.

To take the analysis even further, this current drawdown is not even the worst drawdown of the current bull market. You can see in this chart from analyst Jelle that there have been four drawdowns of at least 20% so far in 2023 - 2024.

On the left side of the chart above, there were 7 pullbacks of at least 30% in the 2017 bull market. In the middle, there were four drawdowns of 23% or more. And the average drawdown in each bull market, including the current one, is 21% or higher.

Bitcoin is a volatile asset. If you want to enjoy volatility to the upside, you have to stomach the volatility to the downside.

Wall Street is being introduced to a truly free market asset. There are no hours of operation. There are no circuit breakers. This asset trades based on global supply and demand. It goes up a lot. It goes down a lot. But over time, it has continued to outperform almost every other asset in the world.

A common phrase in finance is to “know what you buy.” Bitcoin isn’t your grandpa’s stock index. This is a new digital asset that is being re-priced by hundreds of millions of investors around the world.

Volatility is necessary to get to where we are going.

And the best part? The great investors seek out volatility. They understand that asset prices don’t go up in a straight line. It is understood that you don’t try to trade assets like this. You simply buy them and hold on.

And that has been a great strategy for bitcoin over the years. I don’t see that changing any time soon.

Take a deep breath. Drawdowns are normal. This one is a drawdown for ants. The world will keep spinning. Bitcoin will keep producing block-after-block of transactions. And we’ll likely be back to new all-time highs before you know it.

Hope everyone has a great end to their week. I’ll talk to everyone on Monday.

-Anthony Pompliano

Founder & CEO, Professional Capital Management

Phil Rosen & Anthony Pompliano The Fed & Bitcoin

Phil Rosen, the Co-Founder of Opening Bell Daily, and Anthony Pompliano, Author of ‘How To Live An Extraordinary Life’ and CEO of Professional Capital Management, discuss bitcoin, federal reserve, housing regulations, home affordability, why the market is telling the fed what to do, and why you need to become an investor.

Enjoy!

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