How I Decide What Counts as Evidence
During a drawdown, every argument is available and most of them are noise. Three tests separate the ones worth acting on.
The difficulty is not finding arguments. During any decline there are dozens, all articulate, some correct.
The difficulty is deciding which ones constitute evidence about the thing I hold, rather than evidence about the mood of the market.
Test one: would this have concerned me at the peak?
If the concern being raised is one I would have dismissed when the price was high, then I am not responding to the argument. I am responding to the price.
This test eliminates most of what arrives during a decline. The risks of holding a volatile asset were fully known before it fell. A decline does not add risk; it makes existing risk vivid.
Test two: is this new information or new salience?
Related and distinct. Salience is when something that was always true becomes prominent.
Example: energy consumption, custody risk, regulatory uncertainty. All permanently true, all periodically the subject of a wave of coverage, none of them new.
New information is a change: a successful attack, an issuance change, a legal reclassification, a measurable collapse in usage. Those are events. The others are the same facts arriving with more emphasis.
Test three: is it measurable, and has it persisted?
An argument I can check against data is worth more than one I cannot.
Usage, development activity, supply distribution, listing status: all measurable, all published, all checkable in an afternoon.
And it must persist. A single quarter of declining usage is noise. Two consecutive quarters is a signal. The slowness is deliberate, because a test that can be triggered by one bad month will be triggered by one bad month.
What passes all three
Very little. In five years, one position has produced a signal that passed all three tests, and acting on it was harder than any decision to hold has ever been.
That ratio is the point. A framework that frequently tells you to act is a framework that has been calibrated to your discomfort rather than to the evidence.
What I do with the arguments that fail
Write them down.
The document of arguments I found compelling during previous drawdowns, and did not act on, is the most useful thing I own. Reading it back is the only reliable calibration available: a page of confident reasoning from month three of 2022, and knowledge of what happened next.
The uncomfortable implication
This framework will occasionally keep me in something that should have been exited, because the deterioration was real and slow and did not produce a measurable signal in time.
I accept that. The alternative framework, which acts on arguments that feel compelling, has a worse record in my own notes, and the notes are the only evidence I have about my own judgement.
This is a personal account of holding through market cycles. It describes what one person did and why. It is not a recommendation, and past cycles do not predict future ones.