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Don’t panic, we’ve been there before

Crypto Crash: Bitcoin has gone through several cycles in the past and has always bounced back, with a vengeance, says Diego Vera of Buda.com.

Individual markets, such as cryptocurrencies, stocks, or commodities, and the economy as a whole, experience boom and bust cycles. It is as if the economy were breathing. There are periods when almost everything goes up and others when almost everything goes down.

The economic crisis of 2008 took more than two years to stop hitting. Stock markets fell by more than 50% in major economies around the world. But then came 10 years of sustained optimism.

In 2000, the Nasdaq Composite stock index fell 75%.

crypto crash
crypto crash

That big drop in the first image looks like a simple hiccup in the lower left corner of the second image. Since 2002, almost everything had increased.

This year, the same indicator fell by 14%.

crypto crash

But now we wonder if the current falls in the stock markets (25% so far this year), is something that will soon reverse, or are we facing a more worrying event, like the 2008.

Investments

We have seen how practically all investments in the various economic sectors have lost value since the beginning of the year.

•Netflix: -67%

• PayPal: -55%

•Facebook: -44%

• Tesla: -42%

• Bitcoins: -38%

•Amazon: -28%

•Nasdaq (index): -24%

• S&P 500 (index): -14%

And this is just a sample. The falls reach 90% in some cases.

Why do we insist so much on investing for the long term?

We may be witnessing a cataclysm in the global economy that is more like an earthquake than just a jolt. But the most important thing is that you know that everything will be fine. We have a bad memory and we forget the past, but we have experienced this many times before. The world will recover, no doubt.

-In the 1970s, the oil crisis adds to the end of the Bretton Woods agreements (the end of the gold standard) and triggers a global recession. On this date, the S&P 500 (another indicator) fell by 50% in one year (1973-1974), to rise by 76% in two years and by 133% in four.

-In the mid-1980s, oil again helped trigger another global crisis. This time, the S&P 500 fell nearly 30%, only to recover 226% in 5 years.

-In 2008, the subprime crisis hit the world economy. The S&P 500 has seen one of its biggest declines: -58% in just under a year and a half. 5 years later, the index had tripled its price since the low point of the crisis. Today, even taking into account the recent price drop, its value is more than 6 times what it was then.

Crash crypto: And in the case of Bitcoin?

Bitcoin has gone through several cycles in the past and has always bounced back, with a vengeance. Indeed, in history, 100% of people who bought and waited 4 years or more, saw their investment grow.

History does not have to repeat itself, but it is a very good precedent.

The investment horizon is essential. It is very difficult to know what will happen tomorrow. On Wall Street, there are physicists and mathematicians who almost always try and fail. But as we extend the time horizon, the trend is easier to predict.

About the Author

crypto diego vera crash

Diego Vera is Head of Communications at Buda.com. It aims to spread the Bitcoin philosophy and looks forward to the communicational transformation we are experiencing. He learns a little more about the world of cryptography every day.

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