History Shows Bitcoin's Volatility Is Net Positive

Today’s letter is brought to you by Bitcoin Investor Day!

I am hosting the first Bitcoin Investor Day in New York City on March 22nd this year. It is an annual meeting for sophisticated Wall Street investors who are interested in bitcoin.

Speakers include Cathie Wood, Mike Novogratz, Anthony Scaramucci, Mark Yusko, Head of Digital Assets at BlackRock, Bitwise CEO, Head of Research at Fidelity & VanEck, and many more.

Tickets are only $50 and the venue is incredible. This will be one of the highest quality bitcoin conferences of the year. See you there!

Get your ticket now

To investors,

Bitcoin briefly broke the previous all-time high of $69,000 yesterday. The digital currency then proceeded to drop more than 10% shortly after. This type of volatility is unheard of in traditional financial markets, but it is just a normal day in the world of cryptocurrencies.

Alex Thorn, the Head of Research at Galaxy Digital, correctly pointed out it is important to “remember that in December 2020, BTC touched its prior all-time high of ~$20k twice, then ranged and traded -11.3% lower over 15 days before definitively breaking ATH.

It is likely to look similar here, and some consolidation would be healthy after +62% YTD / +77% from YTD low (jan 23).”

Thorn went on to present an analysis of the volatility in the last two bull markets. First, he showed “bitcoin had 13 corrections of 10% or more between the March 12, 2020 covid-low ($3858) and the April 14, 2021 ATH ($64,899).”

If we go back to the 2017 bull market, “from January 1, 2017 to December 17, 2017 bitcoin ATH ($19,891) there were thirteen 12%+ drawdowns (of those, 12 were 15%+, and 8 were 25%+).”

Bitcoin is volatile. You need the volatility to get the upwards movement in price, so most holders view the thrashing of price to be a net positive over the long run. Now that bitcoin is larger than the entire US high-yield bond market, or larger than the entire silver market, some believed the volatility would subside.

Personally, I have even talked about volatility dampening over the long-run.

But bitcoin has not paid attention to those opinions in the short-term. The asset continues to oscillate in ranges of thousands of dollars per day. This is important to understand if you are buying bitcoin for the first time or if you have a weak stomach for volatility.

The good news is that “Bitcoin is not only the best performing asset class of 2024, up 62% YTD, it also has the highest Sharpe ratio at 2.1,” according to Zerohedge. This continues to reinforce the point that bitcoin is one of the best, if not the best, risk-return assets available in the market.

I write this to all of you because the market continues to be a little crazy. At the exact moment that the euphoria hits from breaking the all-time high, holders are immediately met with a 10% drawdown. It is easy for outsiders to say bitcoin holders “got lucky,” but the truth is that very few people in the world can hold an asset through this type of volatility.

I hope this helps as we go through the next few weeks. Talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Upgrade to paid

Mauricio Tovar is the Co-Founder at Tropykus.com and CEO at TRUWeb3. Tropykus Fiance offers simple digital loan and credit products focused on emerging economies.

In this conversation, we talk about bitcoin in Latin America, governments and leaders, benefits, risks, stablecoins, DeFi, Web3, and what the future may look like.

Listen on iTunes: Click here

Listen on Spotify: Click here

New Bitcoin All-Time High Leads To Price Doubling Quickly

Podcast Sponsors

Frec.com - Use tax-loss harvesting to save on your tax bill, while keeping the same investment exposure you already have.

BetOnline - Use crypto to bet on sports, casino games, horse racing, poker and more with promo code POMP100.

Espresso Displays - The world's thinnest touchscreen portable monitor. Expand your workspace and work from anywhere.

Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

Base - Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

ResiClub - Your data-driven gateway to the US housing market.

Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

You're currently a free subscriber to The Pomp Letter. For the full experience, upgrade your subscription.

Upgrade to paid

© 2024
548 Market Street PMB 72296, San Francisco, CA 94104
Unsubscribe