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Tackle Today: No Pain, No Gain

May 20, 2021

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What Elon giveth, Elon taketh.


Elon Musk’s tweets are to Bitcoin as earnings announcements are to a stock. This truth is one reason why many crypto fans are wishing the popular billionaire would stay in his lane. Stick to flying rockets and building sexy cars, Elon.

Musk doesn’t deserve all the blame for the recent tumult in Bitcoin, though. Volatility is the digital asset’s middle name. We’re not talking about a bond or a CD, for heaven’s sake.

As nasty as the swoon has been, it’s not exactly unique. Do you know how many times Bitcoin has fallen 30% from an all-time high since 2017?

Ten Times!

If you’re upset or surprised over the recent tumult, then you’re obviously unfamiliar with the nature of the beast. There’s a lesson in this – even if you don’t speculate in crypto.

You must familiarize yourself with the typical volatility exhibited by any asset you invest in. If you’re going to be a long-term investor in something, you must stomach the ups and downs along the way. Otherwise, you won’t make it to the pot of gold at the end of the rainbow. This is true if you’re buying stocks, bonds, commodities, real estate or crypto.

The inherent appeal to higher volatility assets is their opportunity for higher returns. Though bitcoin has declined more than 30% ten times over the past five years, it’s also up approximately 50x. Diversification and proper position sizing are the two things I’ve found most helpful when investing in something for the long haul.


Chart of the Day

Bitcoin Drawdowns

The drawdowns in Bitcoin have been insane along the way. Those that have ridden through the gut-wrenching roller coaster deserve their riches. Investing in stocks for the long run requires a similar willingness to look beyond the short-term volatility.

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