In the world, HODL means Hold On for Dear Life. It feels appropriate in times like this, when major crypto assets, like bitcoin, are dropping 30% almost overnight, and many other tokens are dropping much more.  One that I own, has recently dropped 75% in only a few weeks.

For most investors, this is not acceptable.  The blood pressure, the angst, the disappointment at losing what is real money is just too much.  In fact, I advise many people to stay away from crypto for this reason.  It’s easy to say, “It’s going to be a wild ride,” or, “It’s a roller coaster,” but to really feel and experience the major losses can be soul crushing.  There is a very emotional side to investing, and crypto is not right for many people, irrespective of the potential returns.

Bitcoin and other crypto currencies, have several times lost over 50% of their peak value, sometimes as much as 80%. There are many explanations as to why crashes occur — some technical having do with options being exercised, causing a cascade, while other reasons are external, like interest rates or regulation.  But, the core elements always comes back to supply and demand and the types of investors who own crypto assets. First, the investors themselves are generally retail, with some exceptions and rarely have defined strategies such as larger institutions.  In addition, there is emotional side and a quick desire to exit when things start to go down, only accelerating a downward trend.  And finally, there is the newness of the asset and the lack of understanding of what or if there is underlying value.  For example, a stock could be value on many metrics, such as cash flow/growth/EBITDA/etc. and an investor could look at trends over a hundred years+ and convince themselves that a stock is a bargain or inherently worth something.  And, while crashes do happen in other markets, it’s much tougher to convince yourself of underlying value in a bear market in crypto.

Finally, there is the size and newness of crypto.  The entire crypto market is smaller than Apple’s market capitalization, and half of that is bitcoin.  When other larger crypto assets are excluded (like Ethereum and Solana), it just leaves lots of very small tokens — which even small amounts of money into/out of can greatly affect prices.  And, crypto is still very new.  Satoshi Nakomoto’s seminal paper only launched 12 years ago.  This is still a nascent market when compared with, well, almost anything else.  Given this relative immaturity, there is often both great hope and disappointment, and a natural skittishness that is not found in other markets.

Given this, what can you do?  Well, in the past decade, crypto has been the best performing asset class if you can ride out the vicissitudes.