Crash Rules Everything Around Me

I wrote the following last week:

If you’re invested in cryptocurrencies, you should expect to see 20% losses in a matter of minutes or 50% losses in a matter of days.

Well we didn’t have to wait long for this. There was carnage in the crypto markets today:

At one point this morning bitcoin was more than 50% off its highs from just a few short weeks ago. Ethereum was more than 50% off its highs from just a few short days ago. And everything else in the crypto landscape got massacred.

Prices did recover throughout the day but look at this waterfall from this morning:

Bitcoin briefly traded below $30k (after topping out at $64k last month). Ethereum touched $1,890 (after topping out at more than $4k in recent days).

This morning sure felt like a bunch of over-leveraged investors got margin called but who knows. I’m guessing it was some combination of panic, algorithms and margin calls.

If you’re an institutional investor who has been waiting for lower prices you finally got your chance.

But this is nothing new.

Last year in March bitcoin fell more than 50% in the span of two days during the Corona Crash. That one may have made more sense since everything else was crashing then too but the reasons don’t really matter when dealing with crypto.

This is an asset that is extremely volatile by its very nature. There is no federal reserve to calm the markets by lowering rates. There are no cash flows or income streams or earnings to speak of. Crypto is just code, innovation, expectations and emotions.

So you should expect these types of crashes on occasion. It’s par for the blockchain.1

These markets move lightning fast. And that’s what makes them equal parts exciting and terrifying as an investor. If you don’t have the intestinal fortitude to hold on, or dare I say, buy more, when this stuff is crashing, you have no business owning it.

It’s also interesting to note what else has been crashing of late:

SPACs are crashing.

Highly-priced growth stocks are crashing.

IPOs are crashing.

Even lumber futures are finally coming back down to earth.

Pretty much everything that worked last year has now crashed. If you want the big gains you have to learn to accept the big losses.

Bernard Baruch once said, “Become more humble as the market goes your way.”

If you don’t the market will eventually find a way to humble you.

Further Reading:
Sometimes You Just Have to Eat Your Losses in the Markets

1No one asked for this but here’s some crypto wordplay with traditional markets:

Buy when there are blocks in the street.

This is just a dead coin bounce.

The first rule of investing in crypto is don’t lose your password. The second rule of crypto is don’t forget rule number one more than 10 times in a row.

Be diamond hands when everyone else is paper hands and diamond hands when everyone else is diamond hands.

Our favorite hodling period is forever.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.