The Bitcoin Crash

by JDH on May 22, 2021

That was epic.

On April 14 Bitcoin hit a new all-time high at just under $65,000 USD.  On April 25 it touched $47,000, for a drop of 28% in just under 12 days.


Then on May 10 Bitcoin traded at just under $60,000, before collapsing 50% to just over $30,000 less than 10 days later.

How’s that for volatility?

As I write this at 6:15 am on Saturday morning, May 22, Bitcoin has recovered to just over $37,000, so if you bought at the bottom two days ago you are up 25%.

What can we learn from these amusing anectodotes>

First, Bitcoin is volatile.  Very crazily volatile.  It is therefore not a suitable investment for widows, orphans, and arguably anyone else.  It is, at best, a speculation, and at worst, a gamble.

Second, if you want to play the swings, you can have some fun.  Or go crazy trying.  So is the bull market in Bitcoin over?

I have no idea, but my speculation is no, it isn’t, because Bitcoin is volatile and we’ve watched this movie before.  Between December 2017 and December 2018 Bitcoin dropped 85%, from $20,000 to $3,000.  It consolidated for two years, but by December 2020 it was back over $20,000, and then did a 3X from there in 120 days.  Bitcoin can crash, but it can also run.

How then should one play it?

The obvious answer is that you shouldn’t.  Stay away, put your money in GICs, and sleep at night.  But, if you are concerned that the feds are printing so much money that the dollar will eventually be worthless, and you want some protection, the obvious strategy is dollar cost averaging.

Today you could put buy orders in at price increments of $5,000 starting at $20,000 and going up from there.  In the event of another correction, you may get filled all the way down.  You then reverse the process all the way up.  So if you have no position today, you could buy at $35,000, $30,000, $25,000 and $20,000, and then start selling at $40,000, $45,000, and so on.

I doubt that Bitcoin will get down to $20,000, and I fully expect to see Bitcoin at $100,000 before the end of the year, because that’s just what it does, but I don’t know for sure, so govern yourselves accordingly.

I do not have a significant portion of my wealth in cryptos, because I’m not crazy, but I like to watch it to see the mood of the world, and it’s more fun than talking about the barely moving price of gold.

I continue to raise cash in anticipation of the next market crash, which feels imminent, but I’ve thought that for a while.

So, have fun, enjoy the long weekend here in most provinces in Canada, and we’ll chat again next week.