How does the Bitcoin crash compare to the stock market crashes?

Crypto crash - bitcoin vs S&P stock market crash

We’re living through a crazy moment of investing. There’s so much buzz around cryptocurrencies and meme stocks that more than ever the investing landscape seems like this big speculative gambling opportunity.‎

In the last 38 days, Bitcoin’s price has dropped from over $63,500 to under $39,500. When compared to the US stock market, that 38% drop ranks it among the worst crashes in history. And as this chart shows among the fastest drops.‎

When the stock market crashes (like it did fast and steep in March of 2020) I don’t worry too much. Last year I didn’t make a single trade in response to the crash. Because I know I still own my shares of thousands of companies that are continuing to produce goods, innovate, generate sales, and revenue. Over time, that productivity will always win out over any short-term volatility.‎

But with Bitcoin what are you left with after a crash? It has lots of benefits. It’s purely digital, has a limited supply, not created nor manipulated by central banks or governments, and maybe a store of value. I think there’s a strong case as a “better mousetrap” version of gold or even currencies. But here’s the problem with that: I don’t invest in gold or currencies because they’re not productive assets. I like owning all that productivity I mentioned above.‎

For full disclosure, just as a release valve to my FOMO, I am investing $100/month in crypto. My crypto portfolio is currently worth about $1,300 or 0.03% of my net worth. That means I’m 99.97% in index funds and real estate. ‎

I don’t know what’s going to happen to crypto in the future. But as the last 38 days have shown us it’s still an extremely volatile asset and fundamentally it’s not a productive asset (save your comments, I know about staking). So if you want to put some money into crypto, go for it, but remember it’s no guarantee it may go down from here on out and I’d keep it as a very small portion of your portfolio <5% max!‎ ‎

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎ ‎

-Jeremy‎ ‎

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If you’re newer to the investing world, you may have heard of the term “FI” or “FI/RE”. They stand for Financial Independence / Retire Early.