Crypto is Easy - Monthly Issue, November 2020
Congratulations! Bitcoin’s nearing all-time highs and altcoins have started to follow. Everything’s going to plan.
Let’s look beyond the day-to-day and focus on what really matters—things far more important than a 70% pump in bitcoin’s price.
In this issue, I will talk about the potential impact of the US presidential election on cryptocurrency, the overall global economic environment, the new investment paradigm central banks and governments have created, and what this means for cryptocurrency.
But first, a question: where is the great depression?
After nine months of financial crisis and pandemic disease, aren’t we supposed to be in worldwide economic freefall with massive inflation? Especially with new COVID-19 restrictions in some countries. Why hasn’t unemployment killed more people than COVID-19?
Instead, we have shrinking unemployment in many places, along with growth and record profits for many segments of the economy in many parts of the world, even in some places that have tamped down on social gatherings and high-risk activities or seen big spikes in hospitalizations.
While that’s no comfort to you if you’re living under lockdowns or worried about your job, life, or business, it’s the present reality. Much of the world has started to recover. Hopefully, you will, too.
Has anything really changed since March?
Debt markets are still out of whack. Government debt keeps piling up. Many people are again living with lockdowns and curfews.
In the U.S., COVID-19 outbreaks have put so many people in hospitals in some parts of the country, their schools and businesses have had to shut down voluntarily (too many workers sick and dying). Supply chain disruptions have started winding their way through the economy, resulting in backlogs, shortages, and higher prices for many goods.
Government assistance for unprofitable businesses, delinquent tenants, and mortgage holders will soon end. About 30% of businesses and households are late on their rent payments. Business bankruptcies remain near record levels and many economists predict personal bankruptcy rates will skyrocket as governments lift financial protections and medical costs go up. Rents in big city centers have crashed, along with urban property values.
Maybe it’s like that where you live?
I realize nobody talks about these things anymore, because the stock markets have recovered and home values are rising.
It’s amazing how people’s perspectives change when prices go up.
Do you realize nobody’s really fixed any of the underlying problems that caused the financial crisis in the first place? We just printed money and hoped the markets would work everything out.
Perhaps that was enough?
Think out of both sides of your head
Lockdowns will end. We have a vaccine and at least one more on the way, with several treatments ready for mass production. Asset prices continue to rise. Businesses have started growing again (in many cases, they never shrunk).
At every moment, so many things can go wrong, but humanity remains creative, talented, resilient, industrious, and persistent.
Markets adjust. People cope.
If you want crypto to succeed, the recovery must continue. Crypto Twitter and bitcoin maximalists may disagree. I’m sure they still have plenty of reasons to see doom in the financial system and this nascent economic recovery. BRRR, bubbles, banks, all that.
Of course, it’s hard to tell because every Tweet is about the price or how some Wall Street guy bought bitcoin.
It’s amazing how people’s perspectives change when prices go up.
Still, I suspect they believe what they have always believed: the traditional financial system is bankrupt, bloated, and destined to collapse. Now, we wait for the other shoe to fall. Hyperinflation, where are ye?
True, the traditional financial system might yet fail, but nobody seems to care anymore. Bitcoin’s going to the moon!
But COVID-19 . . .
Some economies are growing under COVID-19, others are shrinking. Some people lost jobs and businesses, others found new careers and record profits. Some countries prospered despite oppressive mask mandates, soul-killing social distancing, costly expansions of hospital capacity, and expensive, invasive “test, trace, and treat” strategies. Other countries still struggle despite doing none of those things.
Imagine a fire ripped through your neighborhood. Every house caught fire. Some burned down, others didn’t. Some homeowners rebuilt and repaired, others did not.
At what point do you start to wonder why only some houses burned down and only some homeowners rebuilt them? When do you start to question whether the fire’s really what’s keeping you down?
Did you know that in the U.S., the manufacturing sector spent all of 2019 in a recession? Real wages were flat since 2016? A trade war with China was crushing exporters?
Did you know the Fed started flooding the system with money as early as fall 2019 with interventions in obscure parts of the financial system like the repo and short-term bond markets? Google “QE lite.” Or that overall growth had started going south by February?
All that was happening before any lockdowns.
Makes you wonder what else people weren’t talking about because everybody looked at the stock market and thought “best economy ever.”
COVID-19 or not, money always goes wherever it can get the best returns.
Pandemic countermeasures drive money and investment into businesses that support those responses. Delivery, takeout, and remote services thrive. People migrate to activities they can do with masks, or intentionally avoid masks totally and spend money on other things. Consumers buy more household goods and subscriptions to streaming platforms.
Some lose, some win.
Cruel, perhaps, but inevitable.
Small consolation for everybody suffering under curfews and stay-at-home orders. Even worse for those hospitalized and dead from COVID-19.
This will get better soon.
Of course, the moment bitcoin crashes again, or the stock market drops, or some bad economic news comes out, people will start blaming COVID-19. Half the people will say governments didn’t do enough, the other half will say governments did too much.
As an investor, none of that matters.
New investment paradigm
I’ll let the economic historians have the final say on COVID-19’s impact. Time will tell whether massive, coordinated, unprecedented government interventions saved the system or delayed its inevitable collapse.
(PS—buy bitcoin so you’re protected either way.)
One consequence is clear:
Central banks and governments destroyed the value of safe, low-risk assets. In doing so, they created a new investment paradigm.
Cash yields nothing (and sometimes costs you money). Most bonds can’t cover the rate of inflation. Bonds that do cover inflation come with a high risk of default. Corporations have slashed dividends. P/E ratios have skyrocketed. IPOs now fetch outlandish valuations they can’t possibly sustain over the long term.
When you account for risk, every asset has a poor return on investment.
True, if the dollar continues to fall, you can make good risk-adjusted returns in emerging market debt and commodity markets. And investment properties always deliver great returns if you know how to manage real estate. But few people have access to those investments or know how to use them (and I’m not sure you ever want to bet against the U.S. dollar over the long term).
On the flip side, U.S. investment firms have $26 trillion in assets under management and U.S. households have more than $18 trillion in cash, savings, and money market accounts.
A similar situation exists in other countries, too, albeit on a smaller scale.
On top of that, global funds, foreign investors, and offshore accounts hold upwards of $40 trillion. Nobody knows how much sits in corporate treasuries and business reserves.
So far, that money has mostly NOT gone into crypto. Of the $10 trillion in new money governments printed earlier this year, less than .1% entered the crypto markets.
Guess what’s changed since then?
Except prices have gone up for a while.
In fact, cryptocurrency returns have far outpaced those of every other asset class.
No wonder institutional investors, rich people, and a few corporations have started putting some money into bitcoin. Nobody has the patience and discipline to continue losing money with cash, stocks, gold, and bonds while bitcoin’s price explodes.
At some point, once altcoins get large and liquid enough for big money to buy in any substantial amount, these same investors will add some exposure to the alts.
They will do this because that’s how humans think about money.
It’s amazing how people’s perspectives change when prices go up.
While Google Searches for Cryptocurrency suggest normal people haven’t noticed yet, they will soon. Rich people and insiders have made it seem safe, entrepreneurs have made it easy to access, governments have made it regulated and legitimate, and bitcoin’s price has made new highs.
We have all the ingredients for a massive boom.
Traditional assets have more risks and less upside than ever before, while cryptocurrency has fewer risks and more upside than ever before.
Where do you think people will put their money?
Remember the investment thesis
Still, we can’t get ahead of ourselves. For the same reason we need to stay grounded as prices rise, we need to make sure we have a clear investment thesis.
In the short-run, any asset’s price can go up, sometimes for much longer than you expect.
That doesn’t mean it’s a good investment or a good time to buy.
One trick I learned from studying how professionals invest: always have an investment thesis, a reason to expect prices will go up in the future.
For example, my investment thesis for bitcoin is simple: price always goes up and it works when the financial system doesn't. Factually correct, easy to prove, easy to understand.
If that seems too simple, you’re probably right. When you have compelling evidence, facts, data, and history on an asset and its technology, you don’t need to complicate things.
I also happen to believe everybody should have a source of wealth and a way to do business that doesn’t depend on the traditional financial system. Good luck getting anybody to agree with me :0)
What’s your investment thesis?
Geeze, Mark, always about bitcoin. What about altcoins?
Right, altcoins. Everybody wants every altcoin to go back to its all-time high yesterday.
Cryptocurrency is the only asset class where investors get disappointed about 500% returns. It’s the only market where you can triple your money in a matter of weeks, suffer a 50% market crash in a matter of days, then go up another 6x a few months later . . . and still feel like you lost money.
As long as you stay smart and disciplined, the gains will come. Volume and price will continue to grow. Long-term patterns have started to signal a shift in momentum from bitcoin to altcoins.
I’ve shared the specific data with premium subscribers and won’t get into it here, but the data is very clear about what’s happening in the altcoin market once you dig beneath the hype and look beyond the daily price swings.
The alts may seem subdued because lots of people lost money in DeFi and lots of altcoins have inflationary tokenomics, which means their token prices don’t necessarily rise as their market caps grow.
For premium subscribers, I have offered eight altcoin recommendations that do not fall into those traps. With my altcoin recommendations, you would have doubled your investment even with this most recent, brutal pullback in the altcoin market.
At their peaks, some of my recommendations went up 900% and all of them have plenty more room to run. Tap this button to read my reports:
I’ll share more altcoin reports occasionally. As far as further recommendations, I started a new service, Altcoin Insights. With Altcoin Insights, you get a full report with my investment thesis, assessment of risks, and projection of potential returns, all timed to make sure we get in before everybody else does.
I have already published my latest recommendation in Altcoin Insights and I plan to have another recommendation soon.
Stay tuned for next month’s issue for more about this service. For now, feel free to check it out, subscribe if it seems like a good fit for you, and email me with any questions.
Cryptocurrency won the presidential election
You may think the U.S. election is under dispute.
The president’s team claims fraud and tweets all sorts of evidence, but they don’t present any of that evidence in court. Even their “independent advisors” found no fraud.
They really should put up or shut up. Let the lawsuits and recounts proceed, present the evidence, find out the truth, and if there is any fraud, deal with it in accordance with the law.
So far, all the suits have been thrown out or tackled minor points of law, for example, the scope of election officials’ responsibilities, how closely somebody needs to stand next to a ballot-counter to be considered an “observer,” whether to accept ballots filled out with permanent marker, things like that.
After recounts and audits, you can expect we’ll find mistakes. That happens with every election. If you listen to the people who do this stuff for a living, those mistakes cancel each other out. Some in favor of one candidate, some in favor of the other.
Will we find enough mistakes to change the results?
We shall see.
Given Trump is now raising money for his next campaign, I get the sense even he accepts the result, despite his public statements. Either that or he’s ripping off his contributors and supporters.
Since it’s Trump, you never know—but it’s never a good sign when your Secretary of State has to stifle a chuckle when talking about a transition to your second term.
Bottom line: unless something changes drastically, the U.S. will have a new president in January.
What does this mean for crypto?
Considering the Trump administration’s public and well-documented disdain for cryptocurrency, I would expect a new administration to take a more favorable view. Not sure it could get any worse.
Keep in mind, presidents don’t make laws. That’s Congress’s job. U.S. regulations come from financial laws that are 50 to 86 years old. Until the laws change, there’s not much any president can do about cryptocurrency. He can issue regulatory approvals and guidance, perhaps a few executive orders. Significant actions but hardly game-changers.
So it really depends on how much emphasis the new administration puts on cryptocurrency and pushing Congress for crypto legislation.
That’s a realistic possibility. Some of the new president’s biggest donors have strong ties to crypto. Silicon Valley has a lot of influence in Democratic Party circles and Wall Street has its hands in both parties’ pockets.
If you believe the rumors about who Biden will appoint as cabinet officials and top advisors, you will find a slew of pro-crypto, pro-blockchain appointees, including his likely securities regulator, Treasury Secretary, and Secretary of Labor.
Bitcoin ETF, anybody? Safe harbor for small investors? Sane tax guidance and regulations? Money for blockchain projects? Those things are a lot more likely with this administration than the outgoing one.
Also, the Democratic Party skews younger, both in absolute numbers and as a proportion of people who register as Democrats compared to Republicans. Many surveys show young people have more positive opinions of cryptocurrency than old people.
If we’re speculating on hypotheticals, I can imagine an interesting dynamic could play out within the Democratic Party. This party has a lot of pro-Wall Street people and a lot of anti-Wall Street people. The pro-Wall Street people want institutional and government involvement to clean up the cryptocurrency industry and let them make money from it, while the anti-Wall Street people think cryptocurrency can destroy what they see as an unfair system that rewards rich people for ripping off poor people and small businesses.
Maybe they’ll find kindred spirits with Republicans that value free markets, individual liberties, small government, and low taxes. As a result, the U.S. will finally get sensible cryptocurrency laws.
Or not. It’s fun to speculate.
In any event, cryptocurrency is a bipartisan issue—namely, neither party cares about it much. It may rise in prominence as the market attracts more investment and prices go up, but it’s anybody’s guess how Washington will respond.
Will Biden lock down the U.S.?
Until January 20, 2021, Biden can’t do anything. A lot can change in two months.
Whatever happens, I doubt it will affect crypto. The entire market doubled during our previous lockdown and big money gobbled up tons of bitcoin. It continues to rise despite lockdowns in some parts of the world and new restrictions in some parts of the U.S.
I can’t see why another lockdown would get a different result.
Let’s hope we don’t have to find out.
Plan ahead and stick to the plan
While everything seems like the stars are aligning for crypto, many still struggle to make ends meet. The recovery is fragile. Government support programs will expire soon. Probably 1/3 of people will refuse to take a COVID-19 vaccine, and even if they do, we have a long way to go before we get back to normal.
None of that seems to matter for crypto.
For the past twelve years, we have seen certain patterns and correlations repeat regardless of the global financial, economic, or political situation.
We can’t predict the future, but we can use this data to prepare for the most realistic outcomes. With that in mind, I created a plan for bitcoin’s bull market. This plan applies to altcoins, too, because they move in the same direction as bitcoin (just at a different speed).
As premium subscribers know, my plan focuses on catching dips. Not only do we buy crypto when prices are not likely to go much lower for much longer, but we also get in before prices start going up again.
That makes it easy to resist stressful FOMO.
If you had followed my plan, you would have bought bitcoin and altcoins when bitcoin’s price was between $5,400 and $7,800, then again from $9,800 to $10,100. Sometimes, you would have scooped up altcoins at discounts of 50% or more.
Today, with prices going up, you would have an easy decision. It’s all in the plan, based on data, history, and market psychology wrapped into three lines on a chart and me updating you whenever we need to act.
Avoid the shillers
Does that mean we will always buy at the absolute lowest price at all times?
No. Nobody can do that, no matter what they tell you.
You can’t worry about the price. Focus on the opportunity.
As long as we get in before the pumps, we don’t have to stress about them or worry about the crashes. We don’t have to check prices and charts all day because we know our investments will go up over time. And, we will know in advance when the bull market will end, so we can get out with as much of our wealth as possible.
My plan makes this very easy.
If you’re not a paid subscriber, you may want to think about upgrading to a premium subscription. You get access to my plan, exclusive commentary, and market analysis.
Another opportunity will come soon, and it will be an opportunity of a lifetime. You don’t want to miss it.
See with your mind, not your eyes
In the short run, anything can happen.
In the long run, certain patterns and trends always play out the same way. In fact, they’re often so compelling, you can’t deny them—even though others will.
Today, we have the highest bitcoin price in years, continuous growth in altcoins (prices and technology), a positive macroeconomic environment, a traditional financial system increasingly unable to deliver the returns people expect, tons of money sitting in bank accounts and underperforming investment funds, and a COVID-19 vaccine (with more coming by the end of this year).
Fundamentally, nothing has changed in the past six months. Same risks, same opportunities. It sure feels different, though—doesn’t it?
It’s amazing how people’s perspectives change when prices go up.
Who knows what will happen tomorrow?
If prices fall to certain levels, my plan will force us to sell. Most likely, at a big loss. Are you prepared for that?
What about all the other risks? This is a speculative market built on technology that hasn’t found any mainstream applications yet. Most people still believe it’s a fad, scam, and destined to fail. Some governments want to crush it or take it from their people.
You dream about 5,000% returns. In this market, those returns are not only possible, they are realistic.
But you will never get all of that.
Nobody buys the absolute low and sells the absolute high.
Sometimes, it’s OK to plan for a few outcomes, then take it as it comes. You can’t stress about every up and down or obsess about every swing in prices. You can’t get upset about *only* a 1,000% return.
We know this market is going up. Everything else is just details: the best tokens to buy, the best time to buy, the best time to sell, and how to go about it so you have the best chance of getting the most value from those decisions.
Hopefully, my newsletter helps you do that. Upgrade to a premium subscription to figure out what details matter and how you can squeeze extra value from the bull market.
Appreciate this moment
As prices rise, you may feel like you should’ve put more money when prices were lower.
No matter how much you put into the market, it will never feel like it’s enough.
It’s ok to feel good about what you already have in the market. You can use your good fortune for other investments, or perhaps start a business or some other way to build wealth and boost your financial fortunes.
Remember that old stock market adage: bulls get fed, bears get fed, pigs get slaughtered.
Reality usually does not change when prices do. No opportunity this massive comes without equally massive risks.
Stick with the plan, don’t sweat the dips, don’t FOMO the pumps, and find really good altcoins (not “safe” large caps that aren’t really safe).
There are a lot of things to worry about. Look at the bright side: in the midst of pandemic disease, political uncertainty, and economic distress, you have the time, money, and good fortune to buy a stake in the financial networks of the future—and get rewarded for doing so.
We have so much to look forward to.
Relax and enjoy the ride!