Crypto is Easy Monthly Issue - December 2020
(Quick note before you read—I’m behind on emails/DMs. Will respond to all soon. Meanwhile, I hope you enjoy the monthly issue!)
A few days ago, bitcoin blasted past its previous all-time high and tapped $24,000.
Old friends started texting you about crypto again, for the first time in years. Wall Street Journal started reporting on bitcoin.
Bitcoin maximalists stopped talking about how “bitcoin fixes this” and started mocking gold bugs and talking about how much money they’re going to make selling their bitcoin for “fiat.”
Everybody says there are no more bitcoins left to sell. Institutions are buying straight from the miners because nobody’s selling through the exchanges and OTC desks. Technical analysis on trading charts show lines going up and triangles pointing in bullish directions.
Smells like 2017 all over again, right?
Better yet, the U.S. government will soon print another $900 billion and flood the world with even more dollars on top of the trillions it printed earlier this year.
Are you ready for the ride of your life?
I sure hope so. To get a great first-person view of the agony and ecstasy of the 2016-2017 bull market, buy Dan Conway’s fun book, Confessions of a Cryptocurrency Millionaire, so you’re in the right mental state. (Also read my interview with him).
For now, enjoy the holiday season and if you practice a different religion or you’re not into religion at all, take it easy and reflect on the good things you have.
In this month’s issue, I’ll talk about the transition from smart money and institutional investors to retail buyers and the general public.
After I publish this issue, I’m going to take a little break, plan for 2021, research some altcoins, and write some articles for some publications. Also, I’m going to get started on the two books I want to publish next year.
My emails are always open. I may even drop a video or update when something interesting happens—as it usually does.
For my thoughts on the macro global economic and financial environment and what it means for crypto, read or listen to last month’s issue. Nothing has substantively changed since then.
People are catching up to us
Since the day I created this newsletter, I have talked about the importance of patience and letting others come around to what’s going on. Facts and data usually don’t change people’s minds, they mostly confirm what people already want to believe.
This market will take off when bitcoin’s price goes up long enough for people to believe it will keep going up.
Some say it just did. They said that in July 2019, too—and we know how that turned out.
(Bad. Nine months of prices going down in a slow bleed.)
I doubt we will get that same outcome, but let’s not get ahead of ourselves. Big moves are the norm in this market.
If rumors, tweets, and my friends’ text messages are true, Aunt Sally and Uncle Morton finally put a little money into bitcoin and some large cap altcoins.
Not much, of course. Just nibbles. Testing the waters, or, for some, getting back into the pool after a long time out of the water.
It’ll take a little longer before they start moving serious money into the markets.
With Grayscale, PayPal, Square, Bitwise, Bakkt, banks, and other companies eager to make money from their interest in crypto, you can bet you’ll see more advertisements, promotions, and media placements. Everything will seem safe and fun.
“Only risk money you can afford to lose, of course, but buy now. You may never get another chance!”
Does that make your toes tingle and your heart flutter?
How would you feel if I told you this latest pump is just a tiny glimpse of what we have to look forward to?
As premium subscribers know, bitcoin’s price has gone a little too high, a little too fast for its own good. The market isn’t ready for such a powerful move.
Ideally, we would’ve cooled off at about $16,000. Since we didn’t, it’s now only a question of whether the market will catch up to the price before it falls, and what bitcoin’s price will be when that happens.
It’s all good, though. There’s never a bad time to buy bitcoin, it’s just that some times are better than others. For altcoins, they’re so volatile and we have little historical data, so you might as well average into them no matter what bitcoin’s doing.
Bottom line: in the short run, nothing should phase you.
While these past two weeks may seem like an explosion of interest in crypto, I’d encourage you to think much, much bigger.
This little pump only scratches the surface of what we have to look forward to over the next year or two (or three???)
This world has massive amounts of money searching for yield:
More than $19 trillion in cash, savings, and money market accounts for U.S. households alone. When you include savings from people in other countries, that amount goes much higher.
More than $100 trillion in global government debt.
Over $200 trillion in corporate and household debt.
At least $400 trillion in financial products like derivatives and collateralized loan obligations.
Hundreds of trillions of dollars in real assets like property, cars, and collectibles.
With DeFi platforms, crypto investment products, custody services, banking and insurance infrastructure, and innovations in blockchain technology, every penny can get tokenized, recorded on a blockchain, and exchanged using cryptocurrency.
With all we have to look forward to, you’re excited about a $20,000 bitcoin and an altcoin market that’s still 50% below its previous all-time high?
Just wait. You ain’t seen nothing yet.
From smart money to institutional investors
In the classic anatomy of a bubble chart, market cycles start with smart money and end with the general public. In between, prices explode.
It looks like this:
Smart money enters first.
That’s you and everybody else who’s been in this space for a while. We are the innovators, entrepreneurs, and individual investors who put our money into the market for all the right reasons. We saw the potential, understood the value, and took the time and effort to get in—even though it wasn’t a popular decision.
Next comes institutional investors—i.e., Wall Street, VCs, corporations, pensions, and big financial companies. Sometimes they buy assets for themselves, sometimes for clients and speculators. They’re looking to get in on “the next big thing.” While they might believe in crypto, they really just want to make money.
Next comes the general public, who mostly doesn’t care or believe in crypto, they just want a piece of the action.
That’s when everything goes crazy.
We’re getting close to that shift from institutions to the public.
Perhaps we’ll have that big sell-off / bear trap first? Or maybe that happened in March and we will continue big moves up with relatively small crashes along the way?
As we move through this transition into the next phase of the market cycle, only the strong hands will survive. Everybody else will either lose money, give up, or learn how to succeed in this market.
Regardless, the biggest gains will go to those who ignore the random three-week pump of some new DeFi token or FOMO into the latest shill they read on Telegram or Reddit.
Strong hands buy when it seems nobody else is buying—expecting the price to go lower and knowing that it’s the right decision to move in. They will sit on their hands when it seems like everybody’s buying—knowing the price will go up and knowing it’s the right decision to sit out.
They won’t get excited about buying 10% dips because they will have already bought the +25% crashes, and they will enjoy the pumps because they will have already caught the most recent bottom.
We are those people.
As long as we predominate the market, prices will go up. We will have money to buy when the market falls, raising the floor for prices. We will cool down the greed and delusion that always comes before the market cycle peaks, delaying the inevitable mania so the market can keep rising higher, longer, and stronger than anybody expects.
If we can do that, we will make new buyers feel comfortable with this market—and the money they put into it.
That way, they won’t stop at a $500 or $1,000 Coinbase deposit “just to see what this bit-currency thing is all about.”
Instead, they will commit good money to it. Financial institutions, insurance companies, and securities issuers will dabble with DeFi platforms and decentralized exchanges. Commercial investment funds will make small investments in pre-sale tokens or buy Aragon’s or Theta’s tokens for access to those platforms.
MicroStrategy, MassMutual, and Square won’t be the only businesses that announce they’ve put bitcoin into their treasuries.
All of them will.
Markets gonna do what markets gonna do
But nothing goes up in a straight line forever. Either the market crashes or it stalls out long enough to shake out the weak hands, fake believers, and speculators. Then we can sustain those rising prices for the long-term.
Traders love the swings because they can make a lot of money from changes in prices.
As investors, we want massive gains, durable wealth, and incredible windfalls, not 30% swing trades or 2x pumps. That means we depend on others to put their time, money, and faith into the assets we own.
For that reason, we need people to see prices go up long enough for people to believe they will keep going up.
Markets move fast, people don’t. When markets move too fast, people can’t keep up.
You’d think they’d FOMO in—and some do—but most get spooked. When something’s too good to be true, it usually is. Or the market crashes before they can buy. Or they get scammed. Or whatever.
When all you care about is making money from the price of bitcoin going up, what will you do once the price goes down?
As anybody still HODLing a DeFi token from July can attest, you won’t buy more.
Once price goes up, everything changes. There are no facts too outlandish for people to believe when they want to feel good about their money. Any justification will do.
And yet, as prices rise, nothing fundamentally changes. Bitcoin did not change as its price went from $10,000 to $24,000.
All is how it was. Progress and price never move in sync.
What matters most?
Trends. Momentum. The bigger picture.
Let the traders worry about price. We’re here for the opportunities.
Smart money always wins
Anybody who has had a paid subscription to Crypto is Easy for long enough will have bought bitcoin and altcoins when bitcoin’s price was between $5,400 to $7,800, and then again when its price was between $9,800 to $10,100.
We had the courage to invest when it seemed like everything would fall apart—knowing full well it could have done so. We had the patience to wait for the markets to push prices higher. We had the savvy to manage our risks and maximize our gains by buying the crashes and HODLing the pumps while everybody else HODLed the crashes and bought into the pumps.
Some of you may have the urge to trade your crypto to institutional investors and the public in exchange for more of your government’s money.
That time will come. Now is not that time.
On November 1, 2020, bear market bitcoin buyers held 39% of its total market value. In other words, 39% of the market sat in the wallets of people who bought bitcoin from 2017 to 2019.
Today, only 25% remains in their hands.
Over the same timespan, the portion held by new market entrants went from 58% to 67% and the share held by people who bought before 2017 doubled.
What does this mean?
More OGs are stacking sats as bitcoin flees from the people who have propped up the market for the past three years.
When you sold the September crash because you thought everything was going lower, who did you think was on the other end of that deal? When you took profits at $20k, who do you think gave you those profits?
Either somebody who has more faith in this market than you do, or somebody who has no interest in bitcoin and only wants to make money on “the fastest horse,” as investing legend Paul Tudor Jones said.
As long as we and the OGs stay committed to cryptocurrency, this market will keep going up.
We will not have to stress about any crashes because we will already be way up on our investment. We will not have to trade in and out of the market because we got in so early, we can let everybody else push up the value of our crypto for us.
We already put in the hard work. Now it’s everybody else’s turn.
Today, bitcoin’s price can go as low as $7,600 and as high as $80,000 and still hold its long-term, multiyear trend of rising prices (with lots of boom/bust cycles along the way). The total altcoin market could drop by 50% and still continue its upward trajectory.
As the market continues to rise, those numbers will rise, too.
Smart money always wins. If prices keep going up, we grow our wealth. If prices crash, we buy more at a discount.
With history as our guide, if the previous four market cycles play out the same way this fifth time around, we will eventually run out of people who have faith in the market.
OGs will see bitcoin’s price go so high, they will not be able to sit on their gains any longer. They will feel compelled to cash out. Talk to any OG who lived through the 2017 bull run, they’ll tell you the same thing.
As soon as the OGs leave, speculators will follow. Why stick around after you’ve made your money? Why buy when the market’s crashing?
As always, altcoins will follow bitcoin.
Once the true believers and speculators leave, the market will crash. New money will get spooked.
And then the next cycle will begin.
I suspect we’re a long way from that. With every crash that recovers, more people begin to believe in this asset class. With every altcoin project that weathers those inevitable, brutal 50% dumps, more people begin to think “maybe there’s something there.”
And for a small amount of risk, we get to benefit from all of that.
Prepare for the post COVID-19 boom (maybe?)
Looking at the bigger picture, we still have a delicate global economic and financial environment.
That will change, too.
Within months, we will have enough people vaccinated to turn COVID-19 from a public health emergency into a communicable disease that sometimes kills people (like many other diseases).
You can bet a lot of people will refuse to take the vaccine. Their actions probably won’t keep us from defeating COVID-19. Because the vaccines are so good, we might need as few as 2/3 of the population to get vaccinated. That’s a realistic goal.
Once we tamp down on COVID-19, the world’s economies will re-open. Supply chains will get fixed. Travel and service businesses will recover, and we will have generally more economic activity—as well as a shitload of cheap money sloshing around the world’s financial markets.
You will almost certainly see profits, wages, asset values, and everything else go up. Not immediately and not obviously, but in many ways over a long period of time.
That doesn’t mean we will see prosperity. We still have massive economic problems and fragile economies, not to mention social problems and growing financial inequality. I’m happy to see my property values go up—but so will my taxes, expenses, and everything else.
Already, we can see a reversal in the velocity of money, a measure of how fast people spent their cash. The faster they spend it, the faster it moves through the economy, the more wealth it creates.
Look at the velocity of money in the U.S., a proxy for the rest of the world’s economies:
As you can see from looking at the right side of that chart, velocity fell like crazy from fall 2019 to summer 2020. Now it’s turning up.
Sure, it could go down again, but it can’t get much lower.
Once this trend reverses, more money will flow from one person to another.
Ultimately, that money will end up where it always does: in the hands of Wall Street, corporate treasurers, landlords, rich people, banks, and business leaders.
Some of the money will go back into the real economy as growth, development, payments to workers and suppliers, and general everyday purchases.
Some of the money will go into the financial markets.
Meanwhile, the world’s central banks will happily keep interest rates artificially low for the foreseeable future. They’ve already said they will.
In this post-COVID world where cheap money abounds, you might get a bunch of people who look around, see money flowing to rich people and asset holders, and get pissed off. Then they’ll see crypto prices booming and zooming, feel the emotional tug of free, open, permissionless networks, and want to use those networks to get rich—just like the elites that use the traditional financial system to do the same thing.
They may see it as the last, best chance to stick it to “the man.”
Crypto is the ultimate “fuck you” money.
If you think this money will only flow into bitcoin, you missed the story of the last two years.
Wall Street may now dominate bitcoin, but most of their products are inaccessible to people who don’t have investment accounts.
Coinbase and Kraken are accessible to everybody—and they have altcoins.
The past two years have seen more and more money flow in and out of the altcoin market. Bitcoin’s dominance goes up and down but has continually weakened for a year and a half. Ethereum finally produced a product that has some mainstream utility (DeFi) and many altcoins have proven their resilience and use cases. New projects proliferate and some old ones keep getting better.
This momentum has built slowly, constantly, for months and months, along with new innovations in token design, blockchain technology, U/X, off-chain data connections, and decentralized apps.
All without the benefit of Wall Street’s on-ramps and institutional investors.
Now Bitwise BITW, 3iQ’s ETH fund, Grayscale’s Ethereum Trust, and smaller providers give large investors and financial advisors exposure to altcoins as part of a managed investment portfolio. They’re easy, regulated, and free of operational and legal risks.
You can bet we’ll see more altcoins get the same treatment once they grow large enough to facilitate big movements of institutional money in and out of their networks.
Once that money goes into alts, it will make bitcoin’s two-month pump seem like the opening scene of a Hallmark movie.
That time will come. Get ready now so you can make the most of it when it does. If you missed my most recent post, tap this button to read it now.
But not every project will win
Altcoins are great, but there are almost 8,000 of them.
At least 700 have legit teams, momentum, enthusiasm, and use cases that matter. Probably over 1,000 do.
Lots of great projects, awesome tech, bold visions, and strong communities (some more so than others).
Most of them will die.
Your goal can’t be to put money into only the ones that see their tokens go up and none of the ones that fail. That’s insane. Nobody can do that. Not even Teeka Tiwari (I’ve seen his list, SHHH), and certainly not that guy selling you a super-secret altcoin strategy or VIP trading service for $2,500 per year.
And if you’re trying to flip alts for bitcoin or cash, you’d better know what you’re doing. This is not the time or market to start playing day trader.
I prefer to find a few big winners and let them run. That means looking for smaller altcoins or big altcoins with massive potential.
Consider this analogy.
In baseball, the best-paid hitters get on base 25% of the time and strike out more than average.
If you don’t know how to play baseball, you might that that’s odd. Isn’t the point to get on base? I mean, it’s called baseball, right? Why pay top dollar for players who don’t do that very well?
Because the point of the game is not to get on base. The point is to score runs.
There’s no better way to accomplish that goal than to hit a home run.
For that reason, players that can hit a lot of home runs matter more than players who hit a bunch of singles and get stranded on second base.
Likewise, if you come into the market expecting every altcoin will win or give you 1,000% returns tomorrow (or ever), you will always be disappointed in the results. Even if you’re paying $2,000 or $5,000 a year to a guy who promises you’ll get 1,000% returns or he’ll give you a second year’s subscription for free.
The best advice I’ve gotten?
Think about altcoins like an early-stage investor or VC fund would.
You only need a few winners to make a huge return. In fact, the rest can go to zero and you’ll still come out ahead.
That means being selective in your choices and putting money into many projects.
Look at the math.
Imagine you put $10 into ten altcoins. They’re all listed on Coinbase and somebody you know tweeted about them. A few people wrote reviews about them, too. Maybe you saw some good things about them on Reddit or YouTube, or somebody mentioned them in your Telegram group. You don’t know anybody on the team or connected to it, never tried the products, services, or dapps that go along with the token, and won’t move your tokens off the exchange you bought them on.
If all those altcoins do 10x, you get 900% returns.
Insane gains. Incredible stuff. In any other market you’d be a hero, legend, mythical God, etc.
Now imagine you put that money into a different 10 altcoins. They’re all legit but you’ve never heard of half of them. To buy their tokens, you need to use obscure exchanges or Uniswap. They don’t seem to have much hype. They’re all fairly small and most of them are still in beta or not quite finished the main components of their network. The guy who told you about them says you should keep them off the exchanges, in private wallets that are sometimes hard to use.
By the end of this bull run, five will die. Three will stay the same price. One will do 10x. One will do 200x.
What’s your return?
Your portfolio more than doubled the returns of the guy who got those insane, seemingly impossible 1,000% windfalls on each of his altcoins.
That’s how I like to play this market. I want home runs, not singles.
Along the way, we will hit some doubles and triples. In the end, we will beat the overall market by a big margin—even if most of our projects fail (which they hopefully won’t).
I know many people will look at my list and those of other good analysts, see a few home runs and some strikeouts, and think I’m an idiot who got lucky a few times. And God forbid my latest recommendation doesn’t do 10x and all-time highs by Christmas, otherwise it’s a shitcoin and I’m a swindler.
Those same people will FOMO into the latest coin that’s getting hyped on YouTube or posted on their favorite social media site. Meanwhile, my portfolio will keep growing without you ever needing to check a price chart.
You win when you get in before everybody else does
Crypto is an insider’s game. You will always have a disadvantage. By the time you hear about a project, somebody else got the best opportunity to buy.
Worse, if you spend too much time on Twitter, you will always feel like you missed “the next big thing” because, out of 7,000 cryptos, all the attention that day went to that ONE altcoin that pumped and not the 6,999 other great projects that didn’t. Or, when that one legit alt drops 50% in a week, everybody dismisses it as a crappy project.
At this moment, with so much to look forward to, you can’t ever lose a moment’s sleep thinking about a 50% drop or chasing after a 300% pump. Good projects have lots of room to run, whether or not their prices went up or down this week. Opportunities abound.
You need to get in before everybody else does. If your crypto goes up just 100% before the rest of the world finds out about it, you turn a 100x gain into a 200x gain.
In 2017, I bought XRP at $.22, sold at $3, and felt like a genius. I didn’t know XRP had already done 4,000% gains before its 15x super-pump.
No complaints about a 15x, but it would’ve been nice to have gotten in sooner, right?
Here’s another example.
One of the research services I subscribe to mentioned one of my recommendations in a blurb for its subscribers:
Binance Lists [my recommendation]
We picked up Binance’s listing announcement for [my recommendation] on August 12th, alerting users as soon as the blog post was published on Binance’s website.
Its price more than doubled in the 2.5 hours following the alert.
Note: we also notified users of the OKEx listing several hours earlier, which proved to be a solid entry point to capture short-term gains.
In June, I recommended this same project at $1.35. You would already have had 2.5x gains before this service even alerted its subscribers.
If you bought this altcoin when this other service recommended it, you would be down about 20% right now, assuming you didn’t sell (btw they gave no sell alert).
If you bought this altcoin when I recommended it, you’d be up 150% right now.
Same great project, same upside, different results, simply because I got in and then waited for the price to go up, while these guys waited for the price to go up and then got in.
It’s all good. This project is one of my favorites. You’ll be alright in the end.
But wouldn’t you have liked to be up 150% instead of down 20% right now?
Past performance . . .
Does that mean I have a magic touch?
No, but I try to find really strong projects that are far smaller than their intended use and get into them before everybody else does. That means a few whiffs, or maybe many whiffs. You can’t hit home runs if you’re afraid to strike out.
So far, my recommendations have outpaced the overall altcoin market. That means getting in early, sometimes months early, averaging in, staking where possible, letting the team do its work, letting the community grow around the project, and waiting for everything to work out in our favor. Or, using their tokens, if its more than simply a financial investment.
Maybe. Depending on what day you look (sometimes what hour you look), my recommendations have outperformed the market by 32-60% since March.
It’s hard to get precise numbers because the market is so volatile, prices change a lot very quickly, but whether it’s 32% or 60% or something else at the exact moment you check, it’s great performance.
Those gains will compound over time, and if I get better at what I’m doing, my results will get better, too.
Can I guarantee that?
No. My future recommendations could do much better or much worse. This is the riskiest of risky markets, incredibly volatile, and totally speculative. Nobody can guarantee anything.
I can only promise to take the same approach that led to those earlier gains and hope the market reacts the same way it always has in the past.
Read through the altcoin reports I’ve shared in Crypto is Easy. They’re all great projects with big upsides, and you can get a sense of how I think about these investments from reading those reports. Each report tries to shrink ambitious and complicated projects into brief, accurate summaries.
If you like the reports, check out my research service, Altcoin Insights. I write my altcoin reports for informational purposes as part of the Crypto is Easy subscription. Altcoin Insights recommendations zoom in on the investment thesis, market analysis, and timing considerations.
You can do this!
While I’m grateful you find my content interesting and it’s nice that you appreciate my thoughts, please always have faith in yourself. This market is easy if you want it to be.
You already made the great choice to enter this market now. Trust that you’ll make more great choices as everything goes up.
We’re early. We don’t need to worry about missing the sub-$20,000 bitcoin (we just might get it anyway). We don’t need to stress about an altcoin that drops 50% the day after we bought it. We don’t need to sell after a 2x pump. A 25% swing doesn’t matter yet.
For those who just arrived, we could see prices drop a lot, quickly, soon. Or go up a bit more, then crash. Or maybe even rise sharply, quickly, before falling again. Or go sideways or slightly down for a while (but most likely, crash).
If you can wait for those awesome buying opportunities that I talk about, it’ll be worth the wait. But it’s not worth stressing over.
If you feel the urge to buy now, DO IT.
Just don’t put too much money in. Make sure you keep some fresh cash or cheap credit handy. When my plan calls for us to buy, it’s the opportunity of a lifetime. Price will not likely go much lower for much longer, and will very likely go higher forever.
Throughout bitcoin’s twelve years of history and the short history we have for altcoins, we see the same pattern over and over again: big moves up, big moves down. The bigger the move up, the bigger the move down and the longer it takes to move up again.
That’s just how markets work. It’s not different because institutions have entered or because retail has only just started to tip-toe back in. These patterns play out over months and years, not days and weeks.
And they will always happen because they reflect human nature. Bitcoin doesn’t buy and sell itself. Humans do.
Human nature never changes.
We’re at that moment when everybody else will start to see what we’ve seen all along. It may take weeks or months to realize that shift, but it will happen.
Get ready to make the most of it.
Happy New Year. Relax and enjoy the ride!