The drawback with the bitcoin drop is that it reminds everybody they will lose cash rapidly

Everyone who has been in markets long enough has held an asset that looks like this.

It’s not fun.

Maybe you’re an autistic, unfeeling robot but if you’re not, it’s brutal. Losing money in financial markets is a sure way to make you feel like an idiot. As the losses mount, you lose sleep and feel even worse.

Then a day like today comes along with another 10% loss and you can’t take it anymore an puke out whatever you have, oftentimes at the bottom.

For whatever reason, this is the business we’re in. The highs are nice and sometimes even fun, but the lows are ghastly.

If you have held bitcoin since the high of $126,210 then I’m sorry. That’s a nearly 50% loss in just over four months.

For everyone else, bitcoin’s drop serves as a warning that markets run both ways. There is a track record here and the last big rout was from November 2021 to November 2022 and it fell 77%. A similar kind of drawdown today would take it to $29,000 and in bitcoin, anything is possible. In fact, the huge head-and-shoulders pattern on the chart points even lower, to about $23,000.

But the point I’m trying to make is that when bitcoin imploded in 2021-22, it didn’t go down alone and not only in crypto. Shares of Meta dove two months later and ultimately fell to $88 from $348 at the time of bitcoin’s peak, or nearly 75%. From Jan 2022 to Oct 2022, the Nasdaq fell 33%.

We’ve been writing for months that a shakeout in the AI trade was inevitable at some point, it’s looking more and more like it’s the case. Anthropic is cooking the software companies and earnings reports over the past two weeks shows the market is fed up with high capex. Worse yet, there are signs that AI is coming for the jobs market.

When you see these kinds of moves in bitcoin along with Microsoft falling 12% in a day and then continuing lower, it makes the average investor wince. Bonds are bid today and a 10-year at 4.20% starts to look alluring.