Plain English
Drawdown is the percentage decline from a peak. If Bitcoin hits $120K and falls to $72K, that is a 40% drawdown. Crypto has lived through multiple 70–90% drawdowns at the asset level and even larger ones at the altcoin level. Tolerating them is the price of being in the market.
How it actually works
Drawdowns are measured peak-to-trough, with full recovery defined as a new high. The “underwater chart” shows how long it took to climb back. Bitcoin’s 2018 drawdown was 84% from peak; it took nearly 3 years to fully recover. The 2022 drawdown was 77%; full recovery took about 2 years.
What it means for you
Sizing a position is really a bet on what drawdown you can survive emotionally and operationally. A 40% drawdown on 10% of net worth is irritating; on 80% of net worth it is a forced lifestyle change. Be honest about which one you are running before — not after — the next drawdown arrives.
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Educational content only. Not investment, tax, or legal advice.