Hey, did you see that the market dropped in price this week?

From Forbes:

“The largest digital currency slumped almost 10% and was trading at $7,930 at 8:57 a.m. in Hong Kong, its biggest retreat in about two weeks, according to consolidated Bloomberg pricing. Bitcoin touched a year-to-date high of almost $9,100 on May 30, the data show. The wider Bloomberg Galaxy Crypto Index also fell as alternative coins including Ether and Litecoin retreated.

“It just got a little bit extended, this is a healthy retracement,” said Timothy Tam, co-founder and chief executive at CoinFi, a cryptocurrency research firm in Hong Kong. “There’s quite a lot of volume going through, this is normal Bitcoin volatility. At the end of the day it still doesn’t take a lot of money to move these markets compared with traditional markets.”

Headwinds from the wider sell-off in global markets are also a factor, leading to “speculative flow” through alternative markets such as cryptocurrencies as well, Tam said.”

Oh wait, that’s from June 2019.

Here’s a breakdown of the recent crash from CNBC:

“The world’s largest cryptocurrency ended November down 37 percent, its worst drop since April 2011 when the cryptocurrency fell about 39 percent, according to data from CoinDesk.

Bitcoin hit a low of $3,878.66 Friday after starting November above the $6,300 mark. The digital currency is now down more than 70 percent since the start of 2018 and 80 percent from its all-time high hit late last year.”

Oh, just kidding. That’s from November 2018.

Here’s a breakdown from CCN:

“Once a price advance has rallied to a level that the market collective deems good for profit-taking, individual market participants begin selling their holdings and, in stages, the entire group herds into profit-taking behavior.

A sell-off (or crash) phase follows until some of the market participants deem the lower price to represent a bargain buying opportunity. This process can happen once or may repeat several times before the group’s mood shifts away from fear of additional decline toward renewed hope of a glorious rally.

And so it is with the Bitcoin speculative market.

Market corrections typically happen in three (or sometimes five) waves. These stages of decline can be seen to change their character in three pragmatic phases:

*Profit Taking

*Panic Selling

*Bargain Buying

Consensus has it that warnings and restrictions issued by authorities in China, on 5 December 2013, had caused (or triggered) the Bitcoin crash.

The Bitcoin price has been in decline for almost 10 months. The protracted decline had crashed in stages, accompanied by various news events and pivoting around the $500 price level and crossing over it several times during the past year.”

Oh, shoot, that’s from 2013.

I don’t know about you, but I think I spot a trend.

Sure, history doesn’t repeat, but it does rhyme. And Bitcoin’s price movements are simply cyclical:

Hype (Bakkt Announcement) -> Delayed Gratification (Bakkt Delay) -> Actuation of Hype (Bakkt Launch) -> Market Sale -> Repeat

Here’s the thing. We can learn from some investing legends to better articulate the opportunities in the chaos (and this is still valid even if they’re anti-Bitcoin).

Warren Buffett laid out a quiz in his 1997 letter to Berkshire Hathaway shareholders. If you can honestly pass this quiz, you’ll be on your way to doing well in the stock market. But most investors and most financial advisers would fail this little quiz, and that’s one of the reasons most people are poor investors. As Buffett wrote:

“If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities [stock market investments] in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices”

Vanguard’s John Bogle, who was named by Fortune magazine as one of the four investment giants of the twentieth century has this to say about market timing:

“After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.”

Legendary investor and self-made billionaire Kenneth Fisher, who has his own column in Forbes magazine, had this to say about market timing:

“Never forget how fast a market moves. Your annual return can come from just a few big moves. Do you know which days those will be? I sure don’t and I’ve been managing money for a third of a century.”

So, don’t get hung up on the details of the daily moves.

Do what Doc says. Employ risk management and understand that larger timelines dominate the trendlines.