Crypto Crash: According to Diego Vera of Buda.com, Bitcoin has gone through several cycles in the past and has always rebounded back with a vengeance.
Individual markets, such as cryptocurrencies, stocks or commodities, and the economy as a whole, experience cycles of expansion and contraction. It is like the economy is breathing. There are periods when practically everything goes up and others when almost everything goes down.
The economic crisis of 2008 took more than two years to stop hitting. The stock markets fell more than 50% in the main economies of the world. But then came 10 years of buoyant optimism.
The Nasdaq Composite stock index dropped 75% in 2000.
In the second image, the large decrease in the first image appears to be only a blip in the bottom left corner. Almost everything has been going up since 2002.
The same indicator has decreased by 14% this year.
However, we now wonder if the present stock market declines (25 percent so far this year) will be reversed soon, or if we are facing a more frightening catastrophe, similar to the one in 2008.
Since the beginning of the year, we’ve observed how virtually all assets in various economic areas have lost value.
•Netflix : -67%
•Bitcoin : -38%
•Nasdaq (index): -24%
•S&P 500 (index): -14%
And this is only a small sample. In certain circumstances, the drops are as high as 90%.
Why do we insist on long-term investing so much?
We may be witnessing a worldwide economic calamity more akin to an earthquake than a simple tremor. But the most essential thing is that you are certain that everything will work out. We have a terrible memory and forget things from the past, but we’ve been through this before. Without a doubt, the globe will recover.
-In the 1970s, the oil crisis triggered a global recession, which was exacerbated by the collapse of the Bretton Woods agreement (the end of the gold standard). The S&P 500 (another indicator) plummeted 50% in one year (1973-1974) on this date, only to recover 76 percent in two years and 133 percent in four.
-Oil had a role in another worldwide catastrophe in the mid-1980s. The S&P 500 plummeted over 30% this time, only to rebound 226 percent in five years.
-The global economy was devastated by the subprime crisis in 2008. In just over a year and a half, the S&P 500 had one of its worst drops: -58 percent. The index had tripled in price since the crisis’ bottom point five years prior. Even with the recent price decline, it is now worth more than 6 times what it was back then.
What about Bitcoin in the event of a crypto crash?
Bitcoin has gone through multiple cycles in the past, and has always bounced back, with a vengeance. In fact, in history, 100% of the people who have bought and waited 4 years or more, have seen their investment grow.
It is not necessary for history to repeat itself, but it is a useful precedent.
The length of the investment horizon is crucial. It’s impossible to predict what will happen tomorrow. There are physicists and mathematicians on Wall Street who attempt and almost always fail. However, as the time horizon is extended, the tendency becomes more predictable.