Just over a year ago, this happened:
- May 22: the price of Bitcoin briefly eclipsed $110,000–a fresh all-time high that lit the fuse
- May 23: BlackRock’s Bitcoin ETF ($IBIT) saw one of its biggest days of inflows ever
- May 24: The price of Bitcoin fell back below $110,000.
I have no price target for Bitcoin. In fact, this investment behavior around Bitcoin isn’t really about Bitcoin. It’s all about human nature.
When was the last time $IBIT saw a day of inflows like that? It was January 23, 2025. One day after Bitcoin’s previous all-time high.
- Jan 22: ATH
- Jan 23: Massive inflows
- Jan 24: Price drop
Four months apart, nearly identical sequence.
I’m not suggesting that all asset values follow the laws of physics: that what goes up must come down. Quite the opposite. In the stock market, we should expect to hit new all-time highs with some regularity. But what this pattern does suggest is that many investors base their buy and sell decisions strictly on past performance. And that’s about the most reliable way to join the ever-growing club of investors who achieve far worse returns than the very investments they hold.
Some might incorrectly assume that investors, who are hopefully forward-looking, will flock to what’s cheap and unloved. But that’s rarely true. Funds, sectors, asset classes, that have done well recently see funds pour in because of past results.
There’s a reason that Munger said, “the money is not in the buying and selling, but in the waiting.”
The irony is that Bitcoin’s volatility is extreme enough that the chase-the-high crowd gets shaken out repeatedly. The people who have actually made money in it weren’t buying the day after an all-time high. They were sitting still while everyone else was reacting.
That’s not a Bitcoin insight. It’s the same lesson the stock market has been teaching for a century. Whatever the asset (speculative or productive), the ATH → pour money in cycle is not a great recipe for success.
CONSIDER
“I would have written a shorter letter, but did not have the time.” – Mark Twain
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Let’s get after it this week!
Brooks
The examples provided are hypothetical and for illustrative purposes only. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The information presented should not be construed as investment advice or a recommendation to buy or sell any security or implement a particular strategy.
Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser.