Jackson (8 months old as of this writing) is ready to crawl. And I think it’ll happen in the next week or so!
This will be a big milestone because once he connects the dots on a number of pre-requisite skills he has been working on (like tummy time, flipping over, sitting up, etc), he’ll be more able to independently explore his surroundings.
Of course, this will wreck havoc on our apartment…but that is another story for another day!
When family and friends ask about his development, I realize I tend to talk about it as a smooth progression. For instance,
- at month 1, he became comfortable doing tummy time
- at month 3, he was able to flip over
- at month 6, he was able to sit up and stay balanced
- (and of course now) at 8 months, he is on the cusp of crawling
However, the reality is that his development has been anything but smooth – in fact, I’d say “volatile” is a much better word to describe it.
For instance, after he was finally able to flip over both from tummy-to-back and back-to-tummy, we thought we checked the box on completing that skill. He was doing it over and over again and seemed to commit it to muscle memory. But then randomly, for a brief period, he forgot how to flip over and became stuck anytime we put him down on his play mat.
The same goes for learning to sit up. Some days, he is steady and I can leave him on his play mat, clean up around the apartment, and come back to find him still happily playing with toys. But on other days, I put him down, turn my back for a minute, and find him toppled over like a log.
However, I am not concerned about the two steps forward and one step back progression.
Actually, the more I learn about his development, the more I understand this is perfectly normal and to be expected. His brain and body are being overloaded while he is learning new skills. And as he is rapidly growing and developing, there will good days and bad days too. If anything, I’m prepared and ready for this volatility to continue.
At the same time, I do pay attention to the long term trend. And that trend is “up and to the right” as Jackson continues to develop motor skills and interact with the world around him.
What does this have to do with bitcoin?
Volatility, of course!
The concept of volatility has been on my mind recently with both a big pull back in the price from $64k down to $30k, and then the current sharp rise up again from $30k to $50k. That’s because a friend, and fellow dad, told me he even though he was interested in bitcoin, he wasn’t comfortable to buy it.
Why? Because it was “too volatile”.
We talked about how stocks can be volatile. He was fine with that. We talked about how both our kids were volatile going through developmental leaps and regressions. And he understood that too. But when it came to volatility with bitcoin, he struggled with it.
I don’t blame him. When you first buy bitcoin, it feels weird to see it go up (or down) so much, especially when it happens in a short period of time. With stocks, a 3-5% move in one day, whether up or down, would be newsworthy.
However, when it comes to bitcoin, a 3-5% move each day is completely normal. Routinely, there are days / weeks / months when it just shoots up way more than that, and other times when it feels like it is nosediving with no end in sight.
The thing is, it is still very early in the grand scheme of things for bitcoin. For comparison, all of the bitcoin in circulation (ie. 18.5 million), put together, is worth just under $1 trillion (denominated in USD) right now. Compared to gold ($11 trillion), stocks ($95 trillion), bonds ($120 trillion), or real estate ($280 trillion), bitcoin is a small fish in a big pond.
But it is growing fast, having gone from:
- $1 billion market cap in 2013
- $250 billion market cap in 2017
- almost $1 trillion (aka $1,000 billion) market cap in 2021
During this period, even though these few data points might suggest it, it was not a smooth path to get to where it is today. Actually, there have been multiple times when the price of bitcoin fell by 50%. And even a few times when it fell by 80% or more.
And to set expectations, just like it wasn’t smooth getting to a $1 trillion market cap, it will also not be a smooth path going forward either.
Why? Because in the short run, the market acts more like a “voting machine”. But in the long run, it behaves much more like a “weighing machine”.
Let me explain.
At the highest level, in the short run, everyone is trying to figure out much bitcoin is worth. There will be periods where there are a flood of positive news, attracting more buyers in the market than sellers, which drives the price up. Other times, it’ll be the opposite. From this, we get the intense volatility in prices. Up. Down. Up. Down.
This is the short term voting machine in action. And because bitcoin is still small compared to other asset classes, you feel the volatility more.
I try and ignore all of these short term price changes. Put another way, as long as you aren’t trying to day trade bitcoin (and I strongly suggest you don’t), just treat volatility as noise.
But, extend the timeline out, and you’ll see the “weighing machine” in action. It’s a clear signal too – bitcoin has gone up on average by 200% per year, for the past 10 years. And it is on track to do it again this year. And if I had to bet, I would bet it will do it again next year too.
I believe this is happening because after each volatility cycle (no matter if it lasts for a day, week, month, or year), a subset of buyers start really learning about bitcoin. And as they go down the rabbit hole and have “ah ha” moments, they decide to hold (ie. not sell) their bitcoin, no matter what happens to the price. And when they do, the net effect is that the price trends upwards.
How to deal with the volatility (assuming you don’t own bitcoin yet):
- Accept that volatility is just part of the equation to own an asset that is growing 200% every single year
- Get off 0 bitcoin (even if that means buying just $5 of it). When you have some skin in the game, the volatility will feel more real and intense compared to someone who doesn’t own any bitcoin and is just watching on the sidelines
- Soak in the experience of feeling the volatility for a few days. Go ahead and refresh the price every few minutes! Set price alerts and get push notifications on your phone! Day dream a little about how great it would feel to buy a massive dip and how much money you could make in the process! (this is common when first buying bitcoin)
How to ignore the volatility (assuming you already own bitcoin):
- Set up a fixed frequency (ie. once a week or month) to buy bitcoin. This is called “dollar cost averaging” and it’ll help you get past the mindset of trying to time the market (ie. “I’ll buy when it dips”). Sometimes, you might end up buying when there is a dip. Other times, it may be in the middle of a big rise. But over time, it’ll average out, all without having to deal with the emotional rollercoaster of big price changes.
- Commit to hold bitcoin for at least 3-5 years (or longer). Once you buy, do not sell. There is a saying that it’s not about timing the market, but rather, “time in the market”. Simply put, the longer you are holding bitcoin, the more likely you’ll be making money on the investment.
- Stop checking the price! While it can be fun to see the price move up or down, it also causes heartache. Instead, anytime you want to sell, learn more about the DNA of bitcoin (ie. the attributes that make it what it is) – this will take you from having a loose opinion about bitcoin, to a belief, and finally to a deep level of conviction. Here is one video to get you started going down that rabbit hole: https://youtu.be/l1si5ZWLgy0
Conclusion
Ignore the short term price volatility. Focus on the signal – buy and hold bitcoin for the long term!