Indeed, the best approach one should take toward any financial investment, if your time horizon is sufficiently long and your overall goals lofty enough, is, of course, to do nothing at all, except perhaps to routinely invest a little bit of money on a daily, weekly, or monthly basis into your financial vehicle of choice. This, of course, can be automated and need not be shepherded or altered to any significant degree until your goals are reached.
So simple in theory, but oh, how hard in practice!
In 2014, Fidelity did a study to discover which investment accounts performed best over a 20-year period. Their results: those who had been inactive during that period, which is to say, investors who forgot they had a trading account with the firm or had died. What's worse, even so-called "professional investors" seldom outperform the S&P.90% of actively managed hedge funds do not keep pace with the rate of return of the overall S&P. Simply dollar-cost averaging into an S&P index fund is far better than employing an expensive hedge fund to manage your money. If the professionals can't match average Dow returns, what hope does the common dumb-money investor? If this is true for the traditional markets, it is doubly true for cryptocurrencies, largely because of crypto's ease of use and its unregulated nature. Anyone with a Coinbase account can start crypto "trading" in an instant. And because few take this market and the money invested therein seriously, I doubt that 95% of those who currently own bitcoin, ether, dogecoin, etc., will have more in their investment account in a year or two than they do today.
As stated many times, Bitcoin is the crypto market. When it goes up, the rest follow suit. When it goes down, the market crashes and many projects do not survive protracted bear markets. The crypto equivalent of an S&P index fund is bitcoin, and possibly Ethereum, though the latter has not demonstrably "decoupled" from bitcoin since its inception. Sure, Eth outperforms Bitcoin at the end of bull runs, but it also plummets more violently and remains suppressed for a longer duration than the King. As it stands now, Ethereum should only be considered a speculative diversification vehicle to be invested into before or at the beginning of a bitcoin bull run. It should be systematically liquidated when certain price targets are met on the way up. For it will come down, just as Bitcoin will come down, and the opportunity to rebuy Ethereum during a bear market low will be obvious and apparent. My best investment decision was to gobble up a decent stash of Eth when it was below $200 last summer. Even with the market's recent doldrums, I am up over 10x from my initial investment, and 25x at the May peak. Perhaps ironically, the most difficult action in the coming months will be to liquidate my Ethereum holdings in the face of the massive psychological warfare that will be waged against market participants, warfare that will try to convince everyone that Ethereum will overtake Bitcoin as a store of value. While I do believe Ethereum's market cap, at the absolute height of the market, will eclipse Bitcoin's for a brief period, I don't think it will be long-lasting. The coming bear market - which I do not believe we've entered - will make history rhyme yet again, if not repeat, never mind the zealousness of Ethereum's proponents and the ignorance of so-called "experts" who will be rolled out in droves to display their ignorance. Don't say I didn't warn you.
Concerning the "market relief" over the last few days, that which has witnessed Bitcoin reclaim the $32k level, I personally do not trust it. Although most, if not all, of the leverage has been purged from the market over the last few months, I believe this is a sucker's rally and that we're in for one more large downturn before a true rebound ensues. How far it will go down is anyone's guess - maybe the mid-$20k level - but it will not present a more advantageous buying opportunity than the one we are in now. Thus, if you're looking for an entry better than $32k - don't. If and when we drop, it will be short-lived and a return to +$30k will be swift and decisive. If that doesn't happen, all the better.
I, for one, intend to miss such a move. As stated in my last newsletter, my month-long reprieve from the constant focus on the crypto market during my trip to Greece in June showed me that I have been far too myopic and compulsive with Bitcoin news and crypto developments in general. In reality, little happens from week to week and certainly day to day. Therefore, even though I plan to maintain this crypto investing newsletter, I will move from a three-day-a-week schedule to once-a-week, if that. Hopefully, this will demonstrate the best approach each one of us should take. The incessant focus on the bitcoin price, no matter how long-term one's thinking, will inevitably shorten one's time horizon and if not shorten, then add needless stress. In the coming weeks and months, I hope to relieve myself of the stress of the daily up and downs of Bitcoin which ultimately paralyzes investors, leading either to boredom, exhaustion, or capitulation.
As I've said, the market's doldrums since April prove, without a doubt, that crypto is still very much in its infancy. There will be no "supercycle" this time around, no significant diversion from its overall trend, no true surprise over the next 6 months, save for how high the price might go and at what time it will peak. Global adoption, while on the increase, is negligible. Large institutions are interested but not emphatic. Nation-states are adopting it as legal tender but not en masse. At least not yet. Regulative clarity is still uncertain, the market cap is still comparatively small, and this is still a meme-driven industry subject to billionaire influencers like Elon Musk. But all of that is changing, albeit slowly. Musk, in a recent panel with Twitter's Jack Dorsey- a huge Bitcoin proponent - stated he is personally invested in Bitcoin (as well as Eth and Doge). Further, he stated that Tesla will most likely start accepting Bitcoin as payment because of the promising advancements in green-powered bitcoin mining efforts. Dorsey also recently announced that Square (whom he also owns) is creating a company whose aim is to create Decentralized Finance (defi) on the Bitcoin blockchain. Eventually, every application that Ethereum currently provides will migrate in some form to Bitcoin because Bitcoin is the most stable, secure, distributed, and decentralized network bar none. As investors, do not forget this. China is continuing its clampdown on bitcoin mining which is sending more companies to set up shop in North America, Russia, and Europe. I believe we won't see a significant increase in Bitcoin's price until these new mining operations are up and running and the hash returns to pre-May levels. What's more, it appears that Chinese investors, no doubt in response to the CCP's crackdown on crypto which is paving the way for the digital Yuan, are systematically selling while the West is patiently buying. Until now, the East has been the main driver of the crypto revolution but now that seems to be shifting - all for the better. The East's loss is the West's gain. But the East's continual divestment and the West's adoption will take time, and so will price recovery.
Until then, automate your dollar cost average strategy and do nothing else. Again, the best-performing investments are those that are forgotten, neglected, and seldom considered. Daily focus inevitably shortens time horizons. I will personally try to live up to these truths as we move forward.
NSV
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