- On 12 November bitcoin approached $90,000, driven by expectations of friendlier regulation in the United States.
- The push came from what the market expected to happen, more than from events already completed.
- The discipline of setting in advance how much to expose to a volatile asset avoids impulsive decisions.
On 12 November 2024, bitcoin approached $90,000. The push came from expectations of friendlier regulation in the United States after the presidential election, that is, from what the market expected to happen more than from events already completed. Within a few days the price had risen sharply, and the asset was again prominent in conversations about investing. Media attention is part of the phenomenon: the more a price rises, the more it is talked about, and the more people come near.
When a price moves this fast, many people naturally ask whether they should act. This note is not a recommendation to buy or sell: its purpose is to explain why rapid moves have a particular psychological effect, how expectations are formed and what is worth deciding before temptation arrives. It is also worth remembering that a volatile asset can rise and fall sharply in a short time.
What happened
Expectations weighed more than facts: the market acted on friendlier regulation that did not yet exist. Regulation influences who can buy, through what products and with what guarantees, and a clearer framework tends to attract more participants. But a clearer framework does not remove the asset’s volatility, which also depends on supply, demand and confidence.
But expectations are not decisions. Friendlier regulation has to go through processing and controversy before becoming reality, and its final content can differ from what was promised. When the price runs ahead of events that have not yet happened, it is exposed to abrupt adjustments if expectations are not met or are delayed. It is a risk inherent in markets that price in events in advance.
When it attracts newcomers
Such rapid moves attract new investors at the worst moment. When a price rises sharply, the temptation is to get in for fear of missing the opportunity, and that is precisely when one is most likely to buy without having assessed the risk. That fear of being left out is one of the emotions that most shape financial decisions.
The history of markets is full of assets that rose sharply and attracted many people in the final phases of the rise, just before a correction. It does not mean it will happen again, but it does mean that the speed of a rise is not a reason to act. If one does not clearly understand what one is buying, or why it is rising, it is wise to pause. Pausing is not giving up: it is giving time for reflection.
Discipline beforehand
The discipline of setting in advance how much to expose to a volatile asset avoids impulsive decisions. That decision should be made calmly, based on total wealth, time horizon and how much loss could be borne, preferably with an adviser’s support. If the price rises, it does not oblige one to increase exposure; if it falls, it does not oblige one to leave. A prior, reasoned decision avoids having to improvise under pressure.
A written plan, with clear limits and review dates, serves to take decisions when the market is calm and not under the pressure of the moment. It also helps distinguish the exposure one wants from that which has grown on its own because the asset has risen in value. Reviewing that proportion periodically, and not daily, is a simple way of staying in control. This note is general information and not investment advice; each situation requires its own analysis.
With volatile assets, the plan comes before the price.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
