Crypto is Easy: Insights for Profitable Investors
Crypto is Easy: Insights for Profitable Investors
Crypto is Easy - October 2021

Crypto is Easy - October 2021

Are you ready?

It’s nice to get a new all-time high, but not a surprise. We’ve expected this since May.

For the past many months, bitcoin’s price action and on-chain data most closely resembled what we saw during previous bull market consolidations. As such, it made sense to expect the market would take the same path—sideways or down for 5-7 months on average before going back to the most recent high.

We’re right on schedule.

You know what happens next, right?

No, and neither do I. But I know what we need to prepare for.

In this month’s issue, I’ll offer my perspective on the next phase of the bull market and review some conventional wisdom that’s sometimes not very wise.

If the embedded audio narration isn’t working properly or doesn’t sound good, tap this button to switch over to the podcast version.

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Not boring anymore

I played a lot of poker when I was young.

Poker and crypto don’t have a lot in common, but some basic principles apply to both.

For example, the importance of waiting for opportunities and acting decisively when they present themselves—even if you’re uncertain or scared about the consequences.

A certain level of faith in data, historical patterns, and your own observations—and an acute focus on knowing which data, patterns, and observations matter and which ones don’t.

An acceptance that bad decisions will happen, but also a reluctance to force yourself into making them.

Outcomes that depend on luck. You can do everything right and lose. You can do everything wrong and win. The cards don’t care about the odds. You do. Put them in your favor and let chips fall where they may.

Of all the sayings people have about poker, one always sticks with me: it’s a game of boredom punctuated by moments of terror and ecstasy.

Sounds a lot like crypto.

Most people only notice the terror and ecstasy, not the long stretches of boredom that come between them.

It’s a safe bet that we’re no longer in the “boredom” phase. What comes next—ecstasy or terror?

Everything changes when the price goes up

In January, bitcoin’s price hit $30,000. You could barely fight the urge to buy.

In May, bitcoin’s price hit $30,000. You could barely force yourself to buy.

In March, bitcoin’s price hit $55,000. The market was running out of gas but you probably thought it would go up forever.

Earlier this month, bitcoin’s price hit $55,000. The tank is as full as it’s ever been but you’re probably worried about the next drop.

Same prices, different feelings. What changed?

In January and March, the price had gone up long enough for you to think it would keep going up.

Outside of the March 2020 financial panic, bitcoin’s price rose for almost all of last year. By the time you came into the market, it felt pretty safe.

Since bottoming out at $28,500 on June 22, 2021, bitcoin’s price has gone up for more than 121 days.

Do you feel safe yet? If not, when will you feel safe again? How much higher does the price need to go? Perhaps another all-time high will make you feel better? If not, what will?

If you’re already happy, can you bottle up all those positive feelings and save them for the next time bitcoin’s price drops 50% or more? When everybody tells you “don’t catch a falling knife,” China bans everything again, social media algorithms plaster your feeds with bearish content, and the price seems like it keeps going down forever?

As premium subscribers know, I have a plan to make my buying and selling decisions easy. Three lines on a chart tell me when to buy, two signals tell me when to sell.

See My Plan for Bitcoin's Bull Market

My plan said to buy crypto from May 12 to August 7 and again in late September. Now, it says not to buy. As such, I’m not buying more crypto until bitcoin’s price goes back into the buying zone of my plan.

That time may come sooner than you expect. If the next few months go the way most people expect they will, you’ll want to make sure you’re ready for whatever happens next.

The parabola nobody’s talking about

Since December 2018, when this bull market started, bitcoin has followed a parabolic arc upward. You can see it on this price chart:

A series of higher lows for almost three years, each one higher at an accelerating pace, with a ton of volatility from one low to the next.

When you connect the lows and project that path forward, as you can see from the arrow above, you don’t get a lot of room for many more “higher lows” along that path. While the coming weeks could bring a wide range of outcomes, one of two things will have to happen over the coming months:

  1. Price accelerates to a blow-off top. This will end the bull market.

  2. Price drops or goes sideways to break the parabola. This will continue the bull market.

Blow-off top will bring ecstasy, then terror. Bitcoin’s price will go up quickly. We’ll get altseason. The market will overheat, lots of people will sell, buyers will run out of money, and crypto will collapse into a bear market as it has done four times before.

Breaking the parabola will bring terror, then ecstasy. Bitcoin’s price will go down or sideways, possibly for months. Altcoins will bleed. The market will cool off, lots of people will buy, sellers will run out of crypto, and the market will consolidate for its next leg up as it has done seven times before.

The only question is which comes first—the terror or the ecstasy.

Are you ready?

Whatever way the market goes, you need to brace yourself for an emotional and financial rollercoaster.

If you joined crypto early this year, you came into the market halfway through a seven-month boom, after bitcoin’s price had tripled from its September 2020 low and altcoins had just started their altseason.

It may have seemed exhilarating to watch everything go “only up.”

It was probably terrifying when everything fell down.

Now you’re in at the ground floor of the next boom, and it’s a whole different experience.

Look at your portfolio. Imagine in two months, it’s worth three times more than it’s worth today. Some of your altcoins will do 10x or better over that time.

How does that make you feel? What will you do when bitcoin starts to run and altcoins can’t keep pace? Will you sell your altcoins for bitcoin when Twitter and Reddit tell you they’re dead?

A few weeks later, when altcoins catch up to bitcoin, what will you do when the price of your favorite altcoin triples in one week? Will you take profits? Trade it for more bitcoin? Trade it for another altcoin? Take back your original investment and let the rest ride? Buy more?

When will you sell? Will you sell at all? What happens when you “take profits” on that 3x winner, only to watch it triple above where you sold it, while the rest of the market seems to run away from you?

What do you consider a “dip” worth buying? Is it a 10% drop? What about a 30% drop? Is 50% too much? Do you wait for that dip? If so, what will you do if the market doubles before that dip hits? Will you buy at that higher price or wait longer, in the hopes that the price falls back to where you expected it would drop in the first place?

How high will you let the fees go before you decide it’s not worth buying more crypto? Do you spend $50 in fees to buy $50 worth of crypto?

Ponder these questions now.

If this market does what everybody else thinks it will, you’ll have to answer them soon anyway. Why wait until you’re in the middle of FOMO? At that point, every decision will get harder. More urgent. More risky.

Telegram and Reddit will feed your greed, Twitter and YouTube will stoke your fears. You’ll force yourself into making a bad decision.

Find a plan that feels comfortable for you, then stick to it. You’ll probably be better off for doing so, and if you do end up making some bad decisions despite planning ahead, at least you won’t force yourself into them.

Three truths and a lie

When you’re wrapped up in the ecstasy of the FOMO, perspective will get harder and harder to find.

Social media algorithms will bury bearish content because it doesn’t get as much engagement as “supercycle / only up.” In any event, you probably will dismiss any bearish viewpoint as FUD.

The underlying data and on-chain metrics will not match the price movement. The price will go up even after the market turns against you. Good analysis will seem out-of-sync with the reality you see.

As Robert Kiyosaki says, see with your mind’s eye. Price simply reflects the actions of buyers and sellers at any given moment, it tells you nothing about the investment opportunity. Analysis and observation won’t help you time the market, but they will help you set realistic expectations and make the best decisions.

Certain trends and patterns reveal truths you will never see if you look only at what’s going on today or what makes sense to you in the moment. Weathermen are more accurate than people think.

You don’t want to buy into everything people tell you, but choose carefully what you believe. It’s easy to dismiss the truth when it doesn’t make sense or people don’t seem to agree with it.

Do so at your own peril.

For example, three truths most people dismiss and one lie most people think is true.

Truth #1: when bitcoin runs, altcoins always follow.

For more than six years, people have called altcoins dead whenever bitcoin’s price starts to go higher before altcoins do.

Look at this chart of bitcoin’s dominance. It shows what percentage of the market is captured as bitcoin vs. altcoins.

When the line goes up, bitcoin leads the market. When the line goes down, altcoins lead the market. Shaded regions reflect the times when bitcoin’s price went up and its dominance went up, too.

What happened every time bitcoin’s price and dominance went up at the same time?

Altseason followed. Sometimes within months, sometimes weeks, but every single time, the same result.

The moment everybody thinks altcoins are dead, they come alive. Why would we expect a different result this time? What’s changed since those previous altseasons?

When people start telling you altcoins are dead, you need to start buying them. Altseason will come sooner or later.

Truth #2: never take profits unless you have to.

Sometimes, you need to sell crypto.

If so, do it. Why should you risk your quality of life or neglect important, urgent expenses? You will always have opportunities to make money, it doesn’t have to come from crypto.

Just reflect on the risks of selling before the market peaks.

A lot of people sold from January to May of this year. Some bought back in later, most didn’t, and now the prices of bitcoin and many altcoins are higher than when they sold.

They weren’t wrong for selling. Data showed the market losing strength for the first four months of 2021, even as prices rose. It’s never a bad idea to realize 5-10x gains if you’re worried you’ll never get those gains back.

At the same time, this market moves in extremes. For bitcoin, up 5x, down 50% is normal. For altcoins, up 10x, down 80% is typical. In the end, you’re still double on your money.

You’re never going to sell the exact peak or buy the exact bottom. When you sell, you risk losing out on all the growth that comes in the future. When you take profits, you often take them from yourself.

We’re in the middle of a multi-year parabolic uptrend. Why fight it? When we need to sell, I’ll tell you.

Truth #3: there is no altcoin cycle, only altseason and non-altseason.

A lot of people think money flows through the crypto market in a cycle from bitcoin > high cap altcoins > mid cap altcoins > low cap altcoins > micro cap altcoins and then back to bitcoin.

There is no evidence of this.

While that may fit your personal journey, that journey has nothing to do with the market as a whole.

I compared price charts for dozens of cryptos, way more than any sane person would ever want to look at. If this cycle theory were true, I should have found a pattern: large caps pop, then middle, then small, then micro.

I could find no combination of altcoins that showed anything resembling that pattern.

In fact, I found only one pattern, consistently and regardless of what combination of altcoins I selected. That pattern looked roughly the same across all altcoins, with modest variations. Look at this chart comparing seven altcoins of different sizes.

They all follow the same general path, more or less, as shown at the top of the chart.

Some move a little earlier, some a little later, some a little higher, some a little lower, but in the same direction without regard to the size of the altcoin.

As best I can tell, a rising tide floats all ships. For example, one altcoin goes up on Tuesday, the next one goes up on Thursday, another on Saturday goes up 3x, then Sunday, a different one pumps 10x.

You can find differences in their performances over time, but not the path they take.

For example, winners tend to pump harder and dump less than others, consistently and over a long period of time. Some altcoins languish for a long time, then start running and never look back. Other altcoins dominate for long stretches of time and then fade away.

That’s the natural evolution of the market and the competition for investment, not an altcoin cycle. Your altcoins may seem to pump and dump in a cyclical pattern, but the market as a whole does not.

In any event, they all go up during altseason, even the dead ones.

Lie #1: this market will go up forever

Look at history and you’ll see every bull run comes to an end.

Even within bull runs, you get really big crashes and long consolidations. Prices can go down or sideways for months.

Each time the price recovers, a few more people get the idea that the bull market will never end. After all, if Facebook, China, COVID-19, financial crisis, crashes, and [fill in the blank] can’t stop this market from going up, nothing can, right? Everybody will borrow against their bitcoin, never sell. Now that everybody uses on-chain data, we will never have bull and bear markets, just ups and downs.

What’s the one thing that can always crush this market?


More specifically, our greed and complacency.

The glee with which we dump our crypto on others, I mean, “take profits.” The satisfaction that comes with putting lasers in our eyes so everybody else will NGMI and have fun being poor. All the people who rush in as the market goes parabolic, trying to flip a quick 2x or hop on that super-hot secret altcoin that’s about to pump.

Our complacency in celebrating every new all-time high with a little purchase of bitcoin because “it has to go up.” The cavalier way we call out FUD whenever somebody says something we don’t want to hear. Our reliance on data models for security and comfort—but only the data models that confirm what we want to believe, not the ones that suggest something we don’t want to believe.

At some point, we will see signs of a market cycle peak.

The signals are very clear, do not depend on any data model, and have nothing to do with time or price. They reflect behaviors we only see as the market approaches its peaks, as evidenced by the movements of bitcoins on the blockchain and among entities that use bitcoin.

Most of the time, this market simply goes up and down in extremes. You may think these are bull and bear markets, but they’re just normal volatility.

We have seen market cycles peak only four times in history, only for a few weeks each time. Three of those peaks led to one- and two-year bear markets that dropped bitcoin’s price +85% and sunk the altcoins 95% or more. One of those peaks led to an 83% drop and six months of bleeding.

Today, we don’t even need to think about the peak. It’s too far off.

While it’s nice to have data models, they all contradict each other. Let’s see where the market takes us and what people do as prices go up, if they go up at all. I’ll keep you posted on what I see as we get closer to the peak.

Neglect cash at your own peril

I know I’m supposed to say “cash is trash.”

To be honest, it’s not. I could spend hours giving you all the reasons to keep fresh cash handy. I guess the most obvious reason is it’s useful.

Yes, you pay a steep price for the utility of cash. At times, your government makes the holding costs seem usurious. Such is the cost of flexibility. You can deploy cash for almost any opportunity very quickly, and in your country, everybody has to accept it as payment for whatever you want to buy.

While you wait for those opportunities, convert your cash into stablecoins and deposit them with a crypto savings platform. While you lose a little flexibility, you get much higher rates than your bank for only a slightly greater risk.

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What if you don’t have enough crypto?

You may prefer to throw money into the market now. Everybody says it’s about to boom and you don’t want to get left behind.

When this market booms, it won’t matter how much money you’ve invested. It will never feel like enough.

When bitcoin’s price hits $100,000, you will regret not buying more at $60,000, $70,000, $80,000, and every other price along the way.

Always remember: what goes up must come down. What happens if the price drops to $42,000 and takes another four months to get back to $65,000?

Still an upward trajectory, rising market, and we’d finish the year way higher than we started it—but you’d miss the last, best chance to buy cheap crypto because you tried to catch the market as it ran away from you.

What happens if Tether implodes? While it’s nice to think everybody will sell USDT for bitcoin, that’s simply not a realistic expectation. It’s far more likely we’ll see people sell USDT for cash or whatever they can get for it, likely at a massive discount, for pennies on the dollar. The market will crash hard and probably take at least a year to recover.

What if China’s secretly pumping the price of bitcoin to rug-pull the rest of the world at $150,000 and run off with their money? Does that qualify as “countries are using bitcoin?” What if this summer’s ban on crypto and crypto mining was to protect its citizens from the massive pump-and-dump the Chinese government has planned?

Also, think about risks that have nothing to do with crypto.

What happens if China’s financial problems spiral out of control? If US fiscal and monetary policies fail? If Eurozone interest rates shoot up? If emerging market economies default on dollar-denominated debt as the price of USD keeps rising?

You will always have another chance to put money into this market, likely at a much better opportunity than today.

If you wait for that opportunity, it’ll be the easiest investment you’ll ever make and probably the most lucrative. You risk whatever hypothetical gains you could make between now and then, but you’ll have the cash to take advantage of the opportunity when it arrives.

Institutions don’t matter

I still hear people talk about the “wall of institutional money.” As if $70-110 billion already reported isn’t enough.

Yes, institutional investors continue to buy, HODL, and accumulate, just not with the same pace and urgency of 2020. We see this in the data. Most pensions have no crypto. Others have trivial amounts.

Sure, $25 million here, $25 million there, it adds up. One or two years ago, that would’ve been a lot of money.

Today, it’s trivial. The market’s gotten so big that institutional money doesn’t make as much of a difference.

It’s likely institutions will keep putting money into the market at an even slower pace as the price goes up. Some will sell, as they did from February to April of this year.

Many institutions don’t need—or even want—to hold crypto for years. Maybe the fund managers will do this with their personal funds, but not their clients’ money. Most institutions just want to make money selling bitcoin for more than they bought it for. They’re not generally dollar-cost averaging and usually rotate out of profitable investments once the returns meet whatever internal target they set.

In any event, they have different motivations. When you’re a professional money manager, you don’t need to get amazing returns. You don’t even have to be better than the other guys. You just need to make your clients happy.

For the most part, investors will stick with an underperforming asset manager they like, but they’ll cut bait with a money loser the moment they see a negative sign on their account statement.

In the traditional investment world, a 20% annualized return makes you a superstar.

In crypto, a 20% annualized return makes you a failure. God knows what people will say about you on Reddit.

Also, when you manage somebody else’s money, you usually have a fiduciary responsibility to protect and grow their investments. Your reputation and career ambitions depend on this. Often, you risk getting sued for investing in risky assets or holding them when they fail.

You may even have strict investment guidelines from your clients or the fund’s allocation strategy. Some pensions, for example, can’t buy certain assets that fall outside of established risk parameters. Some family offices and endowments take a very conservative approach, too.

As a result, you tend to err on the side of caution, even at the risk of missing out on gains. You’ll take those risks with your own money, not your clients’ money.

At the end of the day, institutional investors want to generate cash for business operations, shareholder rewards, or beneficiaries that want to grow their wealth. Crypto is just a way to get that result. The moment bitcoin does 2x, they may sell half of their investment, or perhaps remove all of their capital at risk and let the rest ride.

They may not even wait for that 2x. A 50% gain in one month is good enough.

It’s tough for this market to grow too much for too long when so many entities are always looking to sell.

For more perspective on how a crypto fund manager looks at the market, listen to my interview with Ace Quants CEO Hanna Hajjar from way back.

Listen to the Interview

Look out for yourself

Anyway, do you really want institutions to dominate this market?

That happened in 2020—remember “institutions will never let the market crash?”

Guess what? They let the market crash. We know many corporations and funds sold some or all of their bitcoin from February to April.

As you bought, they sold.

Do you really want these guys back in the market? They’re not in it to grow your wealth or build the industry. They’re certainly not looking out for you, bitcoin, or whatever altcoin your Telegram group’s hyping today.

Telsa made more money selling bitcoin in one quarter than it made in its first 17 years as a company. When the price goes to $100,000 or $200,000, do you think Elon won’t take a little more off the table? Imagine 1,000 Elon Musks, all taking $100 million out of the market all at the same time, just as you’re stacking a celebratory sat for that new all-time high.

Fuck the institutions. Protect yourself.

Understand the movements of this market. Act decisively when opportunities present themselves. Accept that not everything will work out the way you expect. Find comfort in data, historical patterns, and your own observations.

Where do the opportunities lay for you? Are you trying to protect your wealth from a global monetary system hell-bent on destroying its value? Are you trying to retire early? Buy Lambos? Ride moonshots?

Perhaps you’re more interested in the technology and its potential uses? Maybe you’re building a crypto app, product, or service? Are you looking to trade your way to fortune?

Many people choose to dollar-cost average. They don’t have to think about the opportunities or risks, they just buy.

Some trade the market. If you can do that well, you’ll make a ton of money. When we get close to a peak, you’ll ask “Why so FUD, Mark?” and ask me what altcoin will give you the best gains “in the next five weeks.”

You might do great with that approach.

What will I do? Whatever my plan tells me to do.

See My Plan for Bitcoin's Bull Market

Today, that means sitting on my hands, doing nothing. Tomorrow, who knows?

At any given moment, the USD value of my portfolio will go up or down but over weeks and months, my return on investment will keep going up forever. As a result, I don’t need to take profits or trade.

If you’ve followed my plan, you’re up between 37% to 1,100% on your bitcoin, depending on when you bought it. With altcoins, you’re somewhere between down 78% to up more than 10,000% depending on what you bought and when you bought it.

You can do better following a different approach. I can only guarantee you that my plan beats dollar-cost averaging without any extra effort or trying to time the market. Just make the most of the opportunities when they come, then enjoy the rest of your life.

On any day, this market can move in extreme and unpredictable ways. Step outside the day-to-day, look at the bigger trends and behaviors that tend to move the market, and set realistic expectations. Do that, and this market gets very easy. You can prepare for whatever comes next.

That way, you will not have to chase after this market as it seems to run away from you. You won’t have to worry about losing swing trades or wonder why your token went up “only” 10% while somebody else’s token went up 50% in the same day.

Instead, you can appreciate your good fortune, sleep easy, let the market grow your wealth for you, and prepare for the next opportunity to buy—whether that’s after a crash or during the next bear market, whichever comes first.

Relax and enjoy the ride!

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Crypto is Easy: Insights for Profitable Investors
Crypto is Easy: Insights for Profitable Investors
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