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That Was Quick... A Follow Up on Crypto

Well... that was quick. Since I dropped the last Beat on crypto just 3 days ago, Bitcoin has dropped more than 40%, at one point going as low as $30k at roughly 9AM this morning. Some store of value Huh Gordy?


It is also worth noting that the second largest cryptocurrency, Ethereum, is also down more than 20% today. What in the world is going on here!?


Well, to be short, nothing out of the ordinary. As I had mentioned in my last blog, the crypto space is extremely volatile. Bitcoin has had more than 7 pullbacks of 30% or more since 2017 alone. It is important to understand that this technology, and concept as an asset class, is still incredibly new to most investors. The large amount of speculation and money being thrown around at this space is providing hyper speed moves up in value, and gigantic crashes.


It is impossible to know for certain how many people are entering positions in Bitcoin because they either fundamentally believe in the investment theories such as it becoming a "Digital Gold", or simply they believe it is going up in the short term. While both can be possible, often times investors who have been invested to see the seismic shifts up in value often time need to take some off the table and cash out some gains. It is reported that 95% of all Bitcoin that is mined currently exists within 2% of all virtual wallets. This means that there are a few investors of Bitcoin that can significantly flood the market of Bitcoin if they choose to take some profits and sell. This could certainly be what we have been seeing in the last few days. Whether it be profit taking, Elon Musk tweets giving some investors the yips, or fears around government intervention, these types of moves are bound to happen.


Personally, nothing has happened fundamentally to the crypto space or Bitcoin in the last 3 days that has changed my mind on the potential of the technology, so I am staying invested for the long haul. I have also gone into my positions aware that I could see 50-80% of the position wiped out in a matter of 24 hours. That is why I have a very small position relative to my total portfolio, and I would recommend anyone else interested in getting invested into crypto to do the same.


No matter what happens next, The Beat Goes On.




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