Crashes, Madness, and Panics - Raoul Pal
The market feels truly cruel right now. It feels hopeless, like it's over, like we've missed our chance, like we've screwed up again. Everyone is angry and confused. Those who predicted it are feeling satisfied, but we also know how much these price movements hurt so many. This feels like the worst time ever.
I've been in the markets for 38 years (today's crash feels like a birthday present, along with last night's food poisoning!), and I've experienced all sorts of crashes and panics.
They always feel the same. They're terrifying.
I've been in crypto since 2013, when I first bought Bitcoin at $200.
I bought it and it went up a bit, then fell 75%. And that was during a bull market that eventually went up 10x. I was a long-term investor and knew the risks, so I didn't sell.
Then, in the 2014 bear market, it fell another 87%.
Even during the bull market that continued into 2017, I experienced three plunges of -35% to -45%. It was incredibly difficult. Ultimately, I sold all my positions at $2,000, the peak in 2013, due to the BTC fork war.
I made a tenfold profit from my initial entry price. However, by the end of that year, it had risen another tenfold. (!!) Then, another massive bear market began.
I completely avoided that bear market and felt I had done well.
I bought back in at $6,500 during the coronavirus crash (3.5 times higher than my selling price).
I paid a very high price for trying to make the "right choice."
In 2021, BTC also fell by -50% from April to July. It was a similar market to today. The Twitter environment was truly bleak at the time. However, it wasn't as oversold as it is now.
But by November 2021, the market had returned to all-time highs.
SOL had risen 13x from its low, ETH had doubled, and BTC had surged 150% to new highs.
I've experienced it all firsthand. I've been through every horrific and gut-wrenching moment in a secular (long-term) bull market.
My initial entry was $200, and it's now $65,000. I mistimed the market midway through and missed the 3.5x mark.
The first key lesson I learned is that in long-term rising assets, doing nothing is the most powerful thing.
There's a reason HODL became a meme. It's more powerful than the four-year cycle meme.
The second lesson is to aggressively add to your holdings during a bear market.
Even if your timing isn't perfect, averaging down and increasing your position during a bear market can compound your long-term returns significantly. It's more powerful than a simple DCA.
I didn't always have the capacity to invest large sums, but I always bought a little, if only for psychological training.
The feeling is always the same: "I missed my chance, it'll never come back, it's over."
But that's not true.
Ask yourself two questions:
- Will tomorrow be more digital than today?
- Will the value of fiat currencies fall further than today?
If both are true, keep going.
Buy the dip (BTFD) and trust that staying in the market always beats timing. Adding to each significant decline lowers your average high. It makes a huge difference.
Stress, fear, and self-doubt are like taxes you pay along the way.
Position sizing should be tailored to your risk tolerance. Everyone feels "too big" on a downtrend, and "too small" on a uptrend. Manage your emotions and find your own balance.
Another important thing is not to rely on others' assurances. DYOR isn't just a saying.
If you don't build your own confidence, you'll never survive this phase.
Borrowing confidence is like leveraging. It'll eventually explode.
If you're blaming others, you're actually blaming yourself.
It may feel dark now, but the sun will rise again.
(Unless you leverage) This will only leave another scar afterward. Leverage leads to permanent capital loss. Don't lose your stake.
When will it end? I don't know. But I see this situation as similar to the panic during a bull market like the one from April to November 2021. I think it's likely to end soon. Even if I'm wrong, I won't change my actions. I'll continue to add cash whenever I have it.
But you can be different.
Create a "minimum regret portfolio." Can you withstand a further 50% loss? If not, reduce it now. Even if it feels foolish, survival comes first.
There are always market timers who can accurately predict a crash. There always are.
But the key is to always assume that a crash like this could happen at any time. That reduces stress. This is part of the story, not the whole story.
What am I doing now?
I'm buying a bit more digital art (and ETH, too), and I plan to increase my crypto holdings next week. I've done this every time the opportunity presents itself.
I bought the COVID crash, the 2021 dips, and the 2022, 2023, 2024, and 2025 dips. I'll do the same this time. My PnL always hits new highs before the market. It works like magic. Again… BTFD.
Good luck. It's never easy.
Volatility is the price of long-term compound returns. Embrace it.
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