January 25, 2022
Photo: Warner Bros. Television Distribution
Good morning! This Tuesday, it looks like we’re on the cusp of a cold crypto winter. But where do you think the term “HODL” originated from? I’m Benjamin Pimentel, and I played a Filipino gangster named Bongbong in the web crime series “Gold Mountain.”
The sharp drop in cryptocurrency prices has spurred fears that the notoriously volatile industry is about to go through another prolonged slump.
The market cycle has become such a predictable pattern — a steep decline in coin prices followed by a prolonged period of flat trading — that it even has a catchy name: crypto winter. “With this market drawdown, we are definitely in this similar territory of downturns we have seen in the past,” Chris McCann, a partner with Race Capital, told me.
Crypto has had dramatic ups and downs. The most recent crypto winter happened around 2018 when bitcoin rallied to about $20,000 before a roughly two-year slide that saw it fall to under $5,000.
Crypto has been sliding for about two months now. The total market value of all cryptocurrencies reached $3 trillion in November before heading south. It settled at around $1.6 trillion this week.
But key changes in crypto are worth noting. And they’re likely causing the heightened volatility.
That’s why they say “hold on for dear life.” For the crypto faithful, the sell-off is an accepted part of an industry where investors are encouraged to embrace the long view. “If you're going to invest in bitcoin, a short-time horizon is four years, a mid-time horizon is 10 years. The right time horizon is forever,” MicroStrategy CEO Michael Saylor told Bloomberg.
McCann of Race Capital argued that downturns are “usually the best time to build and invest because only the true believers can stick through this kind of volatility and focus on building.” “These times are what separates the wheat from the chaff,” he said.
— Benjamin Pimentel (email | twitter)
A version of this story first appeared on Protocol.com. Read it here.
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Correction: This was updated Jan. 25, 2022, to more accurately reflect the executive changes at Reddit.