As of this writing, Bitcoin is once again knocking on the $50,000 door, a price we haven't seen since mid-May. We have almost certainly experienced the worst this bull market could throw at us and I strongly believe that powerful upside moves are imminent and will occur at such a breakneck pace that many will be caught off-guard and be left on the sidelines. This will, of course, precipitate much "FOMO-like" anxiety and a lot of folks will jump back into the market at much higher and far riskier levels - I do not want this to be you. In April and May, when Bitcoin ranged within the $50k and $60k band, I said that was a good entry place for new investments and while I generally believe that to still be the case, I personally do not think we will remain in the $50k level for very long, a contrary view to be sure.
Because we are quickly hurtling toward a more volatile period in this cycle, I will do my best to increase the frequency of this newsletter so as to keep us focused on our overall goal: that being to take profits in either our Ethereum positions or our initial bitcoin investment at or near the "presumed" top. No one ever became poor by playing with one's winnings.
If the June - August market lull taught us anything, it is that we are still extremely early in bitcoin's overall adoption curve. I firmly believe this means that Bitcoin will continue to follow the price patterns and historical market activity it has hitherto demonstrated which, when one zooms out sufficiently and overlays the past cycles onto the present trajectory, changes very little in general shape from cycle to cycle. The amplitude of the gains might be dampened, but the opportunity is still there. June-August also proved that we can and will see 50% corrections (or more), even during a bull market, something that wasn't witnessed even in the 2017 bull phase. To think that we can go up to $300k in the next 6 months and "only" correct 30% is naive and foolish. No, there will be a brutal bear season filled with fear, uncertainty, doubt, government crackdowns of various kinds, threats of over-regulation, and continued attacks against the crypto ecosystem, both internally by bad actors and externally as well. And although Bitcoin is being adopted twice as fast as the internet (formerly the fastest technological adoption in world history), we are still at only 200 million active bitcoin users which is roughly 3% of the world's population. Because of this, combined with the fact that institutional - to say nothing of nation-state - adoption is still comparatively low, we can confidently say that these are indeed the early days for crypto. A physically settled bitcoin ETF is years from SEC approval. User experience (UX), proper bitcoin custody, major e-commerce businesses not accepting bitcoin, and regulatory uncertainty are still major hurdles to mass adoption, and sadly, few people view bitcoin investment with the necessary earnestness and seriousness that I believe it deserves. I blame altcoin hype and the YOLO ("You Only Live Once") approach that younger market participants take to investing. When this seriousness and market maturity does come, it will not necessarily be "too late" but the opportunity for life-changing wealth will have passed. What's more, though it seems unbelievable given Bitcoin's current market cap, crypto's rally since October has been primarily fueled, once again, by retail investors or at least those with modest amounts of money (much of which, presumably, came in the form of government stimulus checks). While a handful of noteworthy institutions and large corporations have entered the space, many of these have only done so with a comparatively meager amount of their overall reserves. Hedge funds and so-called "family offices" (i.e. portfolio managers who manage the funds of a few high net worth individuals and their dependents) are perhaps the largest cohort to make a decisive impact on this bull market. Regulative clarity, the slowness of corporate compliance, and bitcoin's volatility - combined with general crypto technological ignorance - are the main culprits. All this to be said, as mentioned above I am becoming more convinced each day that the current market cycle will closely mimic the previous cycles, inasmuch as we will witness a frenzied blow-off peak, followed by a maniacal "alt-coin season" which will precipitate a long and protracted bear market leading into the next Bitcoin Halving in 2024. One should expect bitcoin (and the rest of the market) to capitulate roughly a year after its peak, almost to the day. Depending on how high bitcoin goes over the next 6 months will dictate how low it will go, but I am anticipating sub $50,000 in the late fall of 2022. At that level, I will begin accumulating aggressively.
Many traditional stock market analysts are calling for a severe correction in equities within the next six months. Though these perma-bears are always calling for a market correction, such appears to be an unavoidable fast-approaching reality. No sector will be spared this correction and I am of the opinion that when the Bitcoin bubble pops this time around, it will be the catalyst for the market implosion. Of course, the reverse may happen as well, but I strongly believe bitcoin will have made most of its gains before this global market meltdown occurs. Further, and this is certainly a contrarian opinion amongst most analysts in this space, but I think we will hit a market peak sooner rather than later this cycle, specifically in the mid-November time period. Everyone assumes the "bitcoin lengthening cycle thesis" which says that current cycle peaks will occur progressively later in the year (i. e. later in the 4-year halving cycle) compared to that of the previous cycle, but I disagree. I believe the remainder of this cycle will stun participants in how high and fast it will move over the next 3 months. Markets are not meant to be "ultimately" predictable and if everyone is looking for cycle highs in January, no doubt it will happen either later or much sooner. I perhaps stand alone in thinking it will be sooner and I think it'll catch the whole market off-guard, especially those evil "day-traders". Cycle highs will be reached before Thanksgiving and this will fuel further speculation that the run will not stop and go even higher. By Christmas, altcoin season will be over and we'll be headed down. Of course, if this doesn't happen I won't be disappointed, nor should you - if you're a long-term holder. Either way, it'll be fun. We wade through 3.5 years of fear, uncertainty, stupidity, and doubt for a few months of fireworks. So be it - at least this is not equities or gold, that old barren metal that just sits there, shining, as if to and for itself.
To reiterate:
I recommend at least an 80% bitcoin portfolio allocation. No questions asked. I've explained the reasons ad nauseum in the past. Now, if you diversified into Eth six months ago and it currently makes up 35% of your portfolio, I don't think there is any reason to rebalance. If you're entering a position at this time, however, an 80/20 Bitcoin/Ethereum should be your approach, as always: 80% you never sell and 20% speculation.
"Why not add a few altcoins to that mix?" Again, I've covered this at length. I never recommend playing the altcoin game. You'll always lose in the end. Most new entrants don't know anything about this technology nor how best to evaluate a project, therefore, one will only hear about a project after it has pumped and the major gains have been made. Further, the average person will get their "insider knowledge" from either youtube or Reddit, and trust me, the only reason YT influencers pump certain projects is that they have been approached by the creators of a given project and offered an equity stake in exchange for promotion to their subscriber base. At the end of the day, YT influencers are running a business that depends on garnering as large an audience as possible so as to entice sponsorships. Period. They assume (correctly) that retail is generally dumb and looking to get rich quick and are therefore hungry to deal in shitcoin silliness. Listen, Ethereum is shitty enough. But I do not think it is at risk of going to zero in the next four to five years and it is undoubtedly the least risky of the altcoins and yet has a high potential to significantly outperform bitcoin this cycle, which it always does. And because of its proven track record, especially in relation to bitcoin, savvy investors can actually make certain price forecasts within a reasonable band of certainty. In fact, I think there is even the possibility that Eth will "flip" BTC for the top market cap spot this cycle. If this occurs, it will not be due to a rational market having deemed ETH a better store of value than BTC, but because of gross ignorance and market hysteria. Further, if you invest in alts, I must ask: "What's your target price?" "How do you plan to liquidate?" "Will you cash out those earnings or simply roll them into something worse?" Most people will do the latter and eventually, the music stops and you're left holding the bag. The bear market will bring all things back to their proper order, leading to the death of many projects and the dominance of bitcoin.
Concerning that bear market, I believe there will be a significant attack upon bitcoin and crypto more broadly by powerful nation-state actors. The best way to "hedge" against this non-zero possibility (but still a very low possibility) is to take personal custody of your coins in a hardware wallet like Ledger, to get out of Eth and altcoins completely, and to take profits in your initial investment - either through your Eth liquidation plan or by taking some bitcoin profits. That way, if bitcoin is made illegal by your government (which I do NOT think will happen, but it is still a black swan), then, in the end, you haven't lost anything. To reiterate, with every passing day I do not believe the US government will outlaw bitcoin - we have many pro-bitcoin congressmen, large institutions, and high net worth individuals who will protest such attempts by the government on top of the fact that more and more companies (and mortgage lenders) are accepting bitcoin payments (Wal-Mart is now openly hiring a blockchain expert) - but the threat of over-regulation looms. Besides, it's sound wisdom to pull out your initial investment so as to "play with the house's money" after your portfolio has appreciated to a certain point. Doing this enables you to become less emotional about your crypto portfolio.
Here is my plan for the next 4 years. I broadcast this so that you can imitate my moves according to your investment goals:
1) buckle up for the wild second leg of the bull run which could possibly reach the $300,000 level for BTC and $30,000 for Eth. I believe the market will surprise us by topping out earlier (November) rather than later (January/February) - be prepared for both scenarios.
2) Systematically liquidate my Eth position into the USDC stablecoin on the way up to $30,000. I'll let you know when I am doing this.
3) Keep my USDC in an interest-bearing account earning 9% annually.
4) Pay capital gains tax
5) Pay off all outstanding personal debt except for mortgage
6) Diversify 15% of my earnings into real estate and precious metals
7) Rebuy bitcoin 12 months from bull market peak
8) Rebuy an Eth speculative position in preparation for the 2024 bull run 10 months from Ethereum's peak.
Sounds simple in theory but it will doubtless be difficult in practice. Additionally, if and when my thesis for the remainder of this bull run plays out more or less in the way I have described, I will seek to monetize this newsletter by either making it a paid subscription or by starting my own portfolio management business or both. The fact that I offer this information for free is doing myself and the knowledge and experience I have acquired through hard-fought study and practice is doing myself and my time a huge disservice. To be honest, I should be charging many thousands of dollars for this newsletter and my investing and crypto ecosystem analysis, but I suppose I must prove such value first. If my thesis does not play out at least to a certain degree in the way I have described, I will be embarrassed before you all - my friends, family, and past and present colleagues.
Please understand, I am not telling anyone to go out and buy bitcoin or eth at the present time, quite the opposite. The $50,0000 price range is a good long-term entry, but if you haven't made up your mind on bitcoin at this time then simply wait. When prices move above $50k, it's only about the ride. Don't take out a crypto loan above $50k because you could easily get liquidated. Don't trade bitcoin because I guarantee you'll lose (as I've done). If you want to speculate on altcoins, you're on your own. You can stand to make a lot, but I promise you won't get out in time and you'll either kick yourself for selling too early or too late. Don't leverage your mortgage to buy bitcoin or buy crypto on credit. That might have been a reasonable decision in the $30k range, but no longer. Lastly, do your best to stay away from the crypto banter on YT, Twitter, or anywhere else, especially the mainstream media. SM influencers do not have your best interests in mind.
All to say: now is the time we sit back, buckle up and enjoy the crazy ride. The higher the market goes, the higher the ultimate floor and the more people, ideas, and business will be pulled into the space, laying the groundwork for a truly explosive 2024 season. I'll be equally happy if we go to $100k or $300k. I'm not selling my bitcoin anyway so it's all fun and games from here.
NSV
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