The long good buy for bitcoin

Traditional metrics like the Sharpe and Sortino ratios assume returns follow a tidy “bell-curve,” where extreme swings are rare. Bitcoin doesn’t fit that model. Its returns exhibit fat tails, meaning massive price moves—both up and down—occur far more often than the bell curve allows. In traditional markets, a two-standard-deviation move might occur once in decades; in crypto, it can happen multiple times within a few years. That makes these metrics unreliable for capturing real crypto risk. On the bright side, Bitcoin offers a compelling long-term risk/reward profile.

The Bitcoin Rainbow Chart above captures how Bitcoin’s price tends to follow a power law, rises over time in a pattern of higher highs and higher lows. Despite wild short-term swings—from sharp crashes to explosive rallies—the long-term trajectory bends upward. Historically, buying near the cycle bottom (such as around 2 standard deviations below the mean price) has yielded strong returns, while selling toward the end of a halving cycle, when momentum peaks, often locks in outsized gains. For instance, following past halving events:

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• 2012 Halving ~9,308% gain over 13 months
• 2016 Halving ~2,861% over 17 months
• 2020 Halving ~620% in 11 months

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Bitcoin has consistently followed a 4-year cycle, with each halving sparking a run to new highs within about 480 days (16 months). Over the past decade, this rhythm has produced an average annual return of roughly 49%, and so far, the cycle has yet to be broken.

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In other words, while short-term volatility makes traditional risk ratios unreliable, the long-run potential makes Bitcoin a high-conviction, high-reward bet.

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In the book The Long Good Buy, the author writes, “over the long run, even accepting the fluctuation caused by cycles, investing can be extremely profitable.” Put simply, investing tends to be very rewarding over time, even with the inevitable ups and downs of market cycles.

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