🩸 Blood in the Streets
FIRE BTC #20 - Taking advantage of market corrections
We did it, fam! We survived the great bear market of the last week of February, 2025. Well, we thought we did, but even a well-timed tweet from Trump couldn’t saved the price in the near term.
In the depths of this pullback, bitcoin fell almost 30% from the all-time high of $109k, hitting as low as $78k. So far. Many people have been freaking out, calling this the end of the post-halving cycle and the start of the next prolonged bear market.
While disconcerting, these types of swings are very common. Bitcoin is notorious for its price volatility, and then when it happens, people act like it’s the end of the world.
A more constructive reaction is to take a step back, remind yourself of the bigger picture, and recognize the opportunity being presented.
🌪️ Macro headwinds
What’s causing the price drop? In a word: uncertainty.
The first 40+ days of the Trump administration has been a whirlwind of executive orders, bombastic statements, and Elon Musk running roughshod over the mountain of fraud built into the federal bureaucracy.
Here are a few market-moving headlines from the last month and a half:
Tariffs on US trading partners, such as Mexico, Canada, and China
Reports of decelerating GDP in Q4 2024 and Q1 2025
DOGE threatening mass layoffs across federal agencies
Talks of sweeping tax changes, such as eliminating income tax requirements
Persistently high inflation readings, above the Fed’s 2% target
Record deficits and debt servicing costs
Markets, generally speaking, hate uncertainty. When so many large-scale questions are up in the air, the future becomes harder to predict. This makes valuing assets more difficult for investors, which causes a rebalancing of capital across different asset classes. It also makes cash and cash equivalents (like US treasuries) more valuable. That’s because holding money in larger amounts reduces uncertainty.
The result in the last couple of months has been a falling stock market (S&P 500 off ~6%) and falling yields (US 10y at 4.2% vs 4.8% when Trump took office) as investors sell risk assets and seek the “safety” of cash.
🧐 How will this affect bitcoin?
The fundamentals of bitcoin’s value as a fixed supply monetary asset for the digital age have never been stronger. The world has awoken to the fact that bitcoin is not going away and will play an increasingly important role in the global macroeconomic environment.
That said, bitcoin is not immune to the types of revaluations seen in other major markets. While its prospects for long-term mass adoption continue to grow more positive, bitcoin is still widely seen as a risk asset to be sold for cash in uncertain times. In fact, bitcoin is the only asset that has 24/7/365 liquidity across the world, enabling investors to discount economic news developments in real time, while legacy markets take a breather.
Additionally, there have been a few recent headlines in the crypto ecosystem added into the mix:
The recent memecoin bubble has burst.
The crypto exchange ByBit was hacked for $1.5 billion.
An announcement of a strategic reserve is expected crypto summit on Friday, March 7.
This type of volatility is common, but always short term. The world is still figuring out how to value bitcoin, and its perfectly inelastic supply means the only outlet for reflecting changes in demand is the price.
🛤️ Stick to the plan
As FIRE practitioners, our goal is to build a savings portfolio big enough to cover our annual expenses using the 4% rule as a guidepost. This is not something that happens overnight. But concerted, intentional effort makes it very achievable in a relatively short period of time. I think for most people, that means 5-10 years, if you’re starting from scratch.
FIRE is not a get-rich-quick scheme. It’s more of a get-wealthy-relatively-quickly plan.
That means the day to day, week to week, and even year to year gyrations of the market are not all that important. Your job is to find the right balance of intentional spending and to save the excess in assets that will grow in value over time relative to your expenses.
Following this simple formula is all it takes to reach FIRE. Simple, but not always easy. If you’d like to revisit FIRE fundamentals in more depth, I wrote about it here.
That’s it for this week. Thanks for reading!
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Until next time,
Trey ✌️