MARKETPEOPLE

Bitwise: Historically, this sell-off is a good buying opportunity!

share
Bitwise: Historically, this sell-off is a good buying opportunity!

After several days of market slaughter, do you feel disheartened? Bitwise founder Matt Hougan is confident and believes that from historical perspective to present, this sell-off is a good buying opportunity!

This article is not investment advice, please DYOR

Table of Contents

Are You Experiencing Brutal Emotional Swings?

Matt Hougan mentioned that in the past few days, global capital markets have plummeted, with the Nikkei Index marking its worst day since 1987 on 8/5, US stocks plunging, VIX volatility soaring by 100%, and Bitcoin dropping by 20%. Most cryptocurrency investors are going through brutal emotional swings, including fear and despair, with anger being the most terrifying!

Hougan expressed that he also feels these emotions, but from his over six years of full-time cryptocurrency management experience, he sees something else—opportunity!

What Happened in 2020?

The last time global capital markets experienced such a collapse was on March 12, 2020— the day the world realized Covid was a big deal, and the markets were in extreme chaos! The Dow Jones Industrial Average dropped 2,353 points, tech stocks plummeted like free fall, and commodities crashed. Everyone thought the global economy was about to end, and there was good reason for it: the president declared a national emergency the next morning.

Among all assets, Bitcoin performed the worst, plummeting from $7,911 to $4,971, a 37% drop, which was staggering! It wiped out a year’s worth of gains within 24 hours. Honestly, at that time, it felt like we might never recover. As expected, the media claimed that Bitcoin had failed as a hedge asset.

However, in hindsight, March 12, 2020, was not a time of panic but rather the best buying opportunity for Bitcoin in a decade. Because fundamentally, nothing had changed for Bitcoin. The maximum number of Bitcoins that could exist on March 11 was the same as on March 12. Investors didn't need to rely on any bank, government, or company to store their Bitcoin wealth, and the Covid pandemic actually exacerbated the reasons for Bitcoin's long-term rise. It showed us that central banks around the world would come to the rescue at the first sign of trouble, revealing the limitations of centralized institutions.

History Repeating Itself?

Today, Hougan sees a similar situation. In these past few days, the Japanese stock market crashed, tensions between Israel and Iran escalated, and rough crypto news (Jump Trading's liquidation) created a perfect setting for a pullback. But fundamentally, Bitcoin has not changed.

Over the past few days, the probability of the Fed cutting rates by 50 basis points in September has increased from 11% to 98%. Some are even calling for an "emergency rate cut" before the September meeting. In other words, the printing press is about to start. Investors shouldn't be surprised, as it happened during Covid, after the 2010 Eurozone crisis, and in 2008.

One of the most expensive phrases on Wall Street is "this time is different," but historically, when we see this kind of global economic panic, cryptocurrencies initially drop, but a year later, their prices rise even higher.

So Hougan's bet is: this time will be the same!

This article is not investment advice, please DYOR.