The recent bull market in crypto and equities was largely driven by extraordinary government and central bank stimulus, and investors should consider that a long repricing period may follow if liquidity is withdrawn and stimulus is not repeated.
• Bitcoin peaked around $20,000 in 2017, fell to $3,000 in 2018, and recovered to $12,000–$14,000 in 2019, with a fair market estimate around $6,000 pre-COVID. • Massive stimulus during COVID injected over $10 trillion into markets, driving assets like crypto, meme coins, and high-risk equities to unprecedented highs, e.g., Bitcoin over $69,000. • Current pressures include recession reducing retail investment, quantitative tightening (U.S.: $47–$95B/month withdrawn), and rising interest rates, which collectively remove liquidity from markets. • Historical analogies, such as the dot-com bubble (2000) and the 1929 crash, show that markets can take 10+ years to regain previous peaks; prior winners may be irrelevant in future cycles. • Buying after deep drawdowns (90–95%) historically offered strong upside, but anchoring to last-cycle highs risks overestimating potential returns.
Takeaway: Investors should assess whether previous highs were liquidity-driven, consider pre-stimulus fair values, and avoid assuming rapid recovery; durable value, survival potential, and long-term fundamentals are more reliable guides than past peak prices.
