Not all investments lose value equally: A recovery period for digital assets

When investing in financial markets, people often underestimate the possibility that, over a period of time, the investment may lose its value, and it will take time to recover temporary losses. The deeper the loss becomes, the more energy required to recover the losses increases out of proportion. If I invest $100 and lose 10%, I end up with $90 (whether I keep the investment or liquidate it). So, to get back to $100, which returns do I have to make? I have to make 11% because, with a base of $90, if I make 10%, I end up with $99. This effect is amplified if I lose 20% — to get back from $80 to $100, I will have to make 25%.

So, the losses are not exactly symmetrical to the gains you must make to recover them. If I find myself having lost 50% of my investment, to get back to $100 from $50, I must double it, so it should be intuitive to the reader that the more the loss is amplified, the more energy required to recover.