#bitcoin Archives

May 2, 2024May 2, 2024

6 Reasons Why You Should Own Some Bitcoin…

And 6 Reasons Why You Shouldn’t Own ANY Bitcoin

Yeah, that’s right. There are pros and cons to owning the King of Cryptos.

And because everyone’s investment risk profile is different, there is no “one size fits all” guaranteed investment philosophy for investing in Bitcoin. These are MY opinions – shared by plenty on both sides of the turf – but you’ll have to make up your own mind as to which make more sense for you.

It doesn’t matter where you are on your investment timeline.

Just beginning to accumulate or earnestly working to preserve, reallocate and grow what you already have as you enjoy your golden years, first up – here are six key reasons why Bitcoin is poised, once again, to exceed market expectations in the coming months and why YOU should own some.

Reason #1: Price Elasticity/Market Resilience

Put aside everything you think you know about cryptocurrency. What if I told you there was an asset that defied all expectations and has thrived amidst market chaos?

When markets sink and panicked investors scramble for a life preserver, Bitcoin has often emerged as a lifeline of safety.

Skeptical?

During the 2018 bear market, while the S&P 500 fell by 6%, Bitcoin’s price increased by 80%.

When COVID-19 hit and the market tanked in March 2020, although Bitcoin dropped alongside traditional markets it bounced back much faster. By the end of 2020, Bitcoin had surged over 300%, outperforming ALL other asset classes.

Now, I know what you’re thinking – 2022.

Bitcoin tanked along with the S&P 500 at the end of 2021 going down from an all-time high of $69,420 to a bottom in November of 2022 of $15,599 – a 78.82% drop – while the S&P lost only 19.44% in 2022.

That’s a huge difference! Imagine losing more than 3/4 of your nest egg!

Who wouldn’t panic?

Not to mention that the S&P recovered quickly and to-date (May 1st 2024) is back up by over 30%.

Bitcoin? Went from that $15.6K bottom to a new all-time high of $73,650 in March of 2024 and has now settled back down to just over $59,000 today – a 280% GAIN – almost 10X what the S&P did in the same timeframe.

Yep. Fortune favors the brave.

This undeniable resilience is due in part to Bitcoin’s decentralized ecosystem. It’s not tied to any particular economy or government, making it less susceptible to geopolitical events or monetary policy decisions that make traditional markets tremble and fall.

Volatile? Compared to the S&P? Heck yeah.

Yet, Bitcoin’s consistent recovery after market downturns is just the beginning of its story. As impressive as Bitcoin’s past performance has been, there’s an even more powerful change agent that could send Bitcoin’s price into rarified air once more: the ‘Halving’.

Reason #2: The Halving and Its Impact on Value

Imagine a built-in mechanism that periodically slashes the supply of a finite commodity, creating a shock of scarcity that ripples through the market.

And the timing of that shock wave is known well in advance.

That’s the power of each Bitcoin halving. Each halving cuts the reward that is handed to Bitcoin miners who solve the algorithmic riddle by half, thereby stemming inflation.

Bitcoin’s halving dates, which occur roughly every four years, have consistently been followed by hockey stick, God candle bull markets. The latest halving happened this past April 19th.

Take a look at halvings in the past and how Bitcoin’s price reacted:

First halving (November 2012): Bitcoin’s price increased from $12 to $1,184 in twelve months, a gain of 9,587%
Second halving (July 2016): Bitcoin increased from $651 to $19,326 within 18 months, a gain of 2,971%
Third halving (May 2020): BTC increased from $8,821 to $64,800 within a year, and to $69,420 just a few months later, a gain of 787%.
Fourth halving (April 2024) Bitcoin’s price on this most recent halving day was $63,844. Obviously, history suggests we could see Bitcoin’s price jump again.

Some analysts, like Plan B, who created the now well-known Bitcoin Stock-to-Flow model, predict Bitcoin could reach close to $300,000 or more by 2025, just shy of 5X the price on halving day.

Which makes perfect sense considering the diminishing returns that each cycle has shown as it matures.

However, further on, seven-figure price targets are also emerging. One of the most well-known is from Ark Invest’s CEO, Cathie Wood, who now sees a Bitcoin price of $1 million as too conservative by 2030.

But the halving isn’t the only factor driving Bitcoin’s growth. There’s a tidal wave of institutional money flowing into the market, and it has the potential to change the game entirely.

Reason #3: Increasing Institutional Adoption

From Wall Street to Main Street, the big dogs have finally awakened to Bitcoin’s potential. And following right behind are the “Average Joe” retail investors.

And they’re not just dipping their toes in the water — they’re diving in headfirst.

In 2020, MicroStrategy invested $425 million into Bitcoin, with CEO Michael Saylor calling it “the best money ever created.” MicroStrategy now holds approximately 214,246 BTC (worth $13.8 billion at current prices), which is more than 1% of ALL the 21 million bitcoin that will ever exist.

Square followed suit, allocating $50 million of its cash reserves to Bitcoin.

And in early 2021, Tesla made waves by purchasing $1.5 billion worth of Bitcoin.

But it’s not just corporations buying chunks of the Bitcoin pile. PayPal now allows its 350+ million users to buy, sell and hold cryptocurrencies.

And Visa has integrated Bitcoin into its global payment network. The new integration allows users to withdraw cryptocurrencies like Bitcoin directly from a wallet like MetaMask to a Visa debit card.

And nearly a dozen major financial institutions like BlackRock, Fidelity, Grayscale and other huge investment companies have launched various Bitcoin based ETFs for their clients. These Spot ETFs debuted in the U.S. on January 11 with much fanfare, promising to pull billions of dollars in institutional money.

To date, they’ve more than lived up to that hype, exceeding everyone’s expectations. BlackRock’s IBIT alone has amassed more than $15 billion, while the twenty-four other funds taken together have registered a net inflow of over $12 billion.

And an interesting aspect of Blackrock’s inflow’s in the first several months is that nearly 90% of that money has been coming from retail investors (John Q Public) not the huge pension funds, uber wealthy family offices and other big money managers…just yet.

According to renowned analyst Willy Woo, Bitcoin is on the verge of a monumental leap, expecting it to match the Internet’s growth trajectory from 1997 to 2005.

Woo believes this tectonic shift in adoption has been brewing for years.

“1 billion people will own Bitcoin by the end of this cycle,” Woo said.

He highlighted the digital currency’s accelerated adoption rate, which outpaces that of the early Internet.

The influx of institutional money is a game-changer. As result, we saw an unprecedented new all-time high just months before the halving. That’s NEVER happened. Not even close.

Now, Hong Kong just introduced its own crypto ETFs.

Considering the Asian cryptocurrency market is the size of the North and South American AND European crypto markets combined? That’s going to be an awful lot more money potentially flowing into the Bitcoin network.

As more institutional players enter the market, they bring increased liquidity, stability and mainstream credibility to Bitcoin. However, it’s not the only factor driving Bitcoin’s adoption. Behind the scenes, Bitcoin’s technology is evolving at a rapid pace.

Reason #4: Technological Advancements and Network Effects

Bitcoin isn’t just digital gold — it’s a living, breathing technology that’s constantly evolving.

And with each upgrade, Bitcoin becomes more valuable, useful, and unstoppable.

The 2021 Taproot upgrade was a significant improvement to the previous Bitcoin protocol that was activated in 2017. It demonstrated the ongoing evolution of the Bitcoin protocol to meet the growing demands and challenges of the digital currency ecosystem. This Taproot upgrade introduced improvements in privacy, efficiency and smart contract capabilities on the Bitcoin network.

Moreover, Bitcoin’s Lightning Network, a “layer two” payment protocol, enables near-instant, low-cost transactions, making Bitcoin a more serious contender for everyday purchases and micropayments, increasing its potential for further widespread adoption.

According to Metcalfe’s Law, a network’s value is proportional to the square of the number of its users.

With Bitcoin’s user base growing exponentially, from 35 million in 2018 to over 460 million in 2024, and the introduction of Spot Bitcoin ETFs in 2023, its value proposition has gone from a speculative asset to a core financial instrument.

If Willy Woo is right, Bitcoin will dramatically increase in value in the coming years.

Reason #5: The Bitcoin Cycle

What if I told you that I could predict, with uncanny certainty, when Bitcoin would reach new all-time highs and when it would drop like a stone off a cliff.

You’d think I was delusional, right?

But I can. And so can you!

Thanks to the ridiculously predictable timeline of returns that follow each halving date in Bitcoin and provide an annualized pattern of up, up, down, up each and every four years since it was first introduced 16 years ago.

Why do you think Larry Fink, CEO of Blackrock, who used to pan Bitcoin every chance he got, suddenly changed his tune and is now outspoken Bitcoin evangelist?

The answer? His highly paid analysts showed him four consecutive cycles of near to-the-day predictability of what Bitcoin will do at certain times within each four year cycle.

Up in price the year the halving occurs.

Up more the following year with a new all-time high close to the end of that year.

Down dramatically in the third year of the cycle, bottoming out quickly, often losing more than 70% of its value.

Then up again in the last year of the cycle as the recovery gains significant strength.

Will it continue to be that easy?

Maybe, but the ETFs could have an effect that may make the downturns even less. We’ll see come 2026. However, the most compelling reason to invest in Bitcoin is its ability to strengthen and diversify your investment portfolio.

Reason #6: Diversification Benefits in Investment Portfolios

In a world of economic uncertainty, Bitcoin is the ultimate hedge. It’s the One-Stop-Shop of assets, providing diversification, protection, and growth potential all in one.

Studies have shown that adding just a small amount of Bitcoin to a traditional 60/40 stock/bond portfolio can significantly improve risk-adjusted returns.

For example, from April 2017 to April 2024, Bitcoin’s ROI was 4,647% compared to the S&P 500’s 111% in the same timeframe, or Gold at 83%. And you’ll note that includes the year that Bitcoin crashed hard. This demonstrates Bitcoin’s potential to enhance any portfolio’s performance, even in small doses.

Longer term?

Had you invested even just 1% of your portfolio in Bitcoin in 2013, while the S&P 500 gained 218% in that Baker’s dozen of years, your 1% investment in Bitcoin would have grown by 45,261%.

Time IN the market versus TIMING the market works for Bitcoin as well.

So the New Mantra is: Don’t wait to buy Bitcoin. Buy Bitcoin and wait. Or is it?

The evidence is clear that Bitcoin is a force to be reckoned with. The stars have aligned once again for Bitcoin to make a massive move in the coming months. But wait a minute…here’s the other side of that coin – 6 reasons you shouldn’t buy any Bitcoin this year…or maybe ever.

Reason #1: It’s Too Expensive.

Bitcoin is fast becoming the Berkshire Hathaway A shares of cryptocurrency.

It’s been expensive for a while, but this year, it’s surged to record highs – breaking through the $70,000 mark for the first time in its history. Which means that to score just a 100% gain – a relatively small win by crypto standards – Bitcoin would have to go to nearly $150,000 per coin.

And of course that could happen – in fact, as mentioned before, there are plenty of pundits who think it’ll double that number and then some, but still, even a 300% gain is kinda small compared to what some other coins have done in the recent past.

For example Fetch AI (FET), an Ethereum token that powers Fetch.ai, a decentralized machine learning platform for applications such as asset trading, gig economy work, and energy grid optimization, is already up more than 4,000% from its last cycle low.

Which means, there are plenty of better opportunities to make MUCH BIGGER gains in crypto if you know where to look.

Another reason not to buy Bitcoin is its popularity.

Reason #2: It’s Too Mainstream

Everyone and their grandma knows about Bitcoin.

It’s now the cryptocurrency “industry standard” which is why it was the first crypto to garner ETF approval by the SEC.

And while that’s definitely a plus for the crypto market in terms of lending credibility to the cryptocurrency in general, that also means you’ll be competing for profits with millions of other people who ONLY know about Bitcoin. In almost every case of big money making cryptos, once it gets all sorts of publicity, the real millionaires have already been made.

Bitcoin’s been in the news for more than a decade. Seriously hard to make you into the next “crypto gazillionaire” that way, no?

Because it isn’t the only cryptocurrency available, looking into others and finding out which ones besides Bitcoin are doing well is essential.

Reason #3: It Lacks Utility

Updates don’t really matter if they’re never utilized.

What some people call “digital gold” others call an “imaginary coin” because it’s an intangible that only seems to have value because a group of zealous investors say it does.

While Bitcoin is an excellent form of decentralized finance, it doesn’t offer the same kind of widespread usability that other crypto tokens do.

For example, there are cryptos out there right now that are revolutionizing everything from payment processing to real estate, gaming and even recycling. Plus, they’re doing it far more cost effectively than Bitcoin.

The most obvious alternative to Bitcoin (aka an Alt coin) is the “Queen” of cryptos, Ethereum. ETH is a decentralized software platform that enables smart contracts and decentralized applications to be built and run without any downtime, fraud, control, or interference from a third party.

Another popular Alt coin is the native token for the XRP Ledger, created as a payment system by Ripple in 2012. Despite legal troubles here in the US, XRP is used by hundreds of international banks around the globe.

Another prime example is Solana (SOL), a blockchain platform designed to support decentralized applications (dApps). Sometimes referred to as an ‘Ethereum killer,’ Solana performs many more transactions per second than Ethereum. Additionally, it charges lower transaction fees than Ethereum.

Filecoin (FIL) is an alternative to cloud-based file storage.

Audius (AUDIO) is attempting to break down the walls in the music industry.

And the Basic Attention Coin (BAT) is incentivizing switching from Google to a new search engine called Brave, by rewarding its users for looking at advertising on Brave with BAT tokens.

Needless to say, the cryptocurrency marketplace has evolved far from what Satoshi thought it would become and the opportunities for other cryptos to become even more mainstream than Bitcoin is continually growing.

Reason #4: Bitcoin’s Dominance May END This Cycle.

While Bitcoin is still the world’s leading crypto, there’s a real chance it could be dethroned…as soon as next year. I admit that this one is longshot, but it’s still a possibility.

Not only are several cryptos much more useful than Bitcoin but people who actually use and develop applications on the blockchain using crypto are NOT doing it with Bitcoin.

If you’re going to buy cryptocurrencies in this cycle you should be doing research into which ones are the best bets for 1000% jumps in value based on actual usage, NOT because you read somewhere on the internet that this coin or that coin is going to be the “next Bitcoin”.

Reason #5: The Biggest Bitcoin Gains Have Already Been Made

The crypto market in its entirety is worth over $2.63 TRILLION dollars and Bitcoin ALONE makes up for $1.33 trillion of that – more than HALF of the value of ALL cryptocurrencies.

That means that if you wanted to actually profit big from Bitcoin, you should have done it a LONG time ago. The ‘turn $1 into $1 million’ opportunity bus left a long time ago and you weren’t on it. And if you’re standing at the station looking down the road?

Sorry to break it to you but it’s not coming back.

Reason #6: Bitcoin’s Rising Tide Floats All Boats

Despite all of the reasons NOT to buy Bitcoin, it’s still likely to surge much higher and just like has happened in every cycle before this one, the BIGGEST gains are going to come from the tiny cryptos that initially ride Bitcoins coattails and then leave it in the dust on their way to the moon in terms of percentage gains.

Take a look at Coinmarketcap’s list of the top 100 cryptocurrencies and that should give you plenty of ideas for alternative investment beyond Bitcoin.

Just please don’t buy into meme coin hype.

So, there you have it

Both sides of the cryptocurrency investment argument.

Either way, NOW is the time to position yourself for potentially life-changing gains in the years ahead.

Whether your investment is big or small, don’t miss this once-in-a-generation opportunity.

Full disclosure: Upwards of 60+% of my cryptocurrency portfolio is straight up Bitcoin, and give or take a few percentage points, around 20% is Ethereum, with the remaining 20% made up of various percentages of some 40+ different Alt coins. Truth be told I fully expect that a few of those will blow the doors off the ROI I’ll get from Bitcoin, but at this point, so early in the cycle, it’s a total question mark which ones.

If you want to know what Alt coins I’m investing heavily in, feel free to email me at john.logan@moneytree.ventures.

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August 12, 2023April 30, 2024

Investing in Bitcoin 101

Sometimes the big picture is hard to see

I’m a long time fan of James Bond, and Ian Fleming’s 1959 novel ‘Goldfinger’.

In the book (not the movie) after James Bond ‘coincidentally’ runs into the master villain Auric Goldfinger for the third time, Goldfinger says:

“Mr. Bond, they have a saying in Chicago: “Once is happenstance. Twice is coincidence. The third time it’s enemy action.”

Of course, what he’s saying is that he’s recognized a pattern of behavior. Having been in the insurance industry for many years I know that actuaries, who base their science on statistical patterns, have a similar saying. To paraphrase Mr. Fleming:

“Once is happenstance. Twice is coincidence. The third time is a pattern.”

If we apply that theory to Bitcoin then an easily recognizable pattern of behavior of the King of Crypto is not only clearly visible but undeniable.

I’ve heard people say time and time again that investing in any cryptocurrency is gambling, or worse, a Ponzi scheme. I can’t dispute that opinion for many Meme coins or the 10,000+ ‘alt’ coins now on the market, but where Bitcoin is concerned…applied correctly…it sure isn’t gambling.

It ain’t rocket science…

The reality is that anyone who takes the time to do the research on the history of Bitcoin, it’s price fluctuations from halving to halving, from all-time highs to crypto winter lows, and everything in between, the idea that Bitcoin is unpredictably volatile becomes simply the nonsense of the uninformed.

It turns out that Bitcoin highs and lows, while being very hard to predict in terms of pricing, are relatively easy to predict in terms of timing.

Of course, this theory flies in the face of traditional stock market investing in that any expert will tell you that time IN the market will result in a much better outcome than TIMING the market. The reality of stock market, real estate and commodity investing is that even the most expert of gurus can’t tell you when or how the next crash or bull run will be with any relative accuracy.

Looking back at the history of Bitcoin, almost the exact opposite is true.

I can tell you, with relative accuracy, when the next bull run on Bitcoin will occur, when it will crash, and when it will start to recover, and when that cycle will repeat again in the future.

That’s a bold statement, eh? And I know you’re saying to yourself “Either this guy is super cocky and full of shit, or he knows something I don’t”. I’m going to wager that if you don’t already know what I’m talking about then the latter is true.

I don’t claim to have a crystal ball. I will tell you point blank that I’m not very good at predicting all time high prices but I am pretty good at predicting bottoms and (so far for this cycle) interim pricing, but there’s a saying that ‘close’ only counts in horseshoes and hand grenades…and nuclear weapons.

However, ‘close‘, in terms of buying close to the bottom and selling close to the top with Bitcoin can make you extremely rich…IF you know when those bottoms and tops might occur.

I do.

And you can bet your britches that this is part and parcel why guys like Larry Fink, CEO of BlackRock, the world’s largest investment firm, went from panning Bitcoin just a few years ago to suddenly saying things like “Bitcoin is an asset that can revolutionize finance through increased tokenization and the democratization of investing“.

He knows. And if you continue reading, now, you will too.

What you do with this information is up to you.

So, let’s get into it.

This is known as the “Bitcoin Cycles Hypothesis” and it postulates that Bitcoin repeats a four-year cycle, give or take a couple weeks, since its beginning, from halving day to halving day. The key difference between Bitcoin and the stock market is that in mature traditional asset markets, the beginning and end of cycles are much harder to identify and usually last much longer than 4 years.

The short version of this theory is that Bitcoin’s prices will be – on an annual basis starting on its next halving date – up, up, down and up. And that it has done that since it was invented nearly 15 years ago.

That being the case, considering that the next halving date is currently projected to be April 17, 2024 (1,487 days from its previous halving date of May 11, 2020) we are currently in the last phase of the current cycle.

What does that mean?

Well, considering that as I write this on 8/12/2023, Bitcoin’s price is $29,432.34, for example: not buying Bitcoin @ <$30,000 (like NOW) is like not buying Bitcoin @ <$10,000 in 2019, or not buying Bitcoin @ <$500 in 2015, or not buying Bitcoin @ <$10 in 2011.

Here’s how I come to that conclusion.

Each 4-year Bitcoin cycle consists of 3 phases:

The (mature) bull market, which lasts about 1 year. Technically, that is initiated by the BTC halving, but in terms of the actual gate opening, this phase starts right around the last month of the halving year. This phase ends when the newest Bitcoin all-time high (ATH) is achieved, whether that is a double top (as in 2013 and 2021 and potentially 2025 – more on that later) or a single top (as in 2017).
The bear market, which lasts about 1 year. A bear market follows quickly after the ATH and a cliff drop of the BTC price marks the beginning of ‘crypto winter’. On average, Bitcoin loses well over 75% of its value during this phase of the cycle. The vast majority of new (and even some seasoned veterans who buy into the “this time is different” hype) investors lose hope…and their money…somewhere in here.
The recovery phase, AKA the early bull market, which lasts about 2 years. After the sharp declines and Bitcoin reaches a macro price bottom, there is a long phase of accumulation opportunity that defines the so-called ‘boredom’ of crypto winter. During this phase, Bitcoin goes up, but it does so very slowly with numerous corrections. And in some cycles, like 2012-16 and this one, trades in nearly flat patterns for months at a time.

Bigtime credit to well-known analyst @theratinalroot, who shares my opinion on this theory and has illustrated it so well in the following graph:

Source: Twitter

As you can see in the graph above, (at this writing) we are currently in Phase 3 of the Bitcoin cycle, the previous bottom being back on November 20, 2022 at $15,599.05. And we will likely not see any remarkable rocket-like pumps in price for the months to come, again, making this part of the cycle a perfect time to accumulate at a low price relative to the eventual new all-time high, estimated near the end of 2025.

How does the halving come into play and start this ball rolling?

First, you have to understand how Bitcoin mining works. Bitcoin is mined in what is referred to as “blocks”. Each block refers to a set of Bitcoin transactions from a certain time period. Blocks are “stacked” on top of each other in such a way that one block depends on, and is connected to, the previous block. Using this method, a ‘chain’ of blocks is created, and thus we come to the term “blockchain”.

A halving happens at every 210,000 blocks. The 2024 halving will happen on block number 840,000. It’s called a halving because the reward for mining each block is cut in half at that point, so each halving decreases the amount of new bitcoins generated per block. This means the supply of new bitcoins is less after each halving, making buying each Bitcoin more expensive due to the more limited supply.

In the practical application of the law of supply and demand, lower supply with steady demand typically leads to higher prices. Since the halving reduces the supply of new Bitcoins, and demand usually remains steady and has usually increased as the price goes up due to wider interest as the media regains its interest and we see more and more wild high price predictions, the halving has always been the bellwether of Bitcoin’s biggest bull runs.

Below, the long blue lines indicate the last three halvings (11/28/2012, 7/9/2016 and 5/11/2020). Note how the price jumped significantly shortly after each halving.

Source: https://buybitcoinworldwide.com/halving/

So, if this is true, why aren’t there more Bitcoin gazillionaires than ever? Why isn’t everyone doing this already?

Reread the first few paragraphs of this post. Everyone was expecting Bitcoin to be like gold or stocks. Unpredictable.

It’s not.

Notice that the spiral graph starts at 2013, NOT back in 2009 when Bitcoin was first invented. That’s because the first cycle, starting in January of 2009 and ending at the end of November in 2012 is considered an outlier, a potential fluke, so from an actuarial or analysis perspective it is ignored in terms of pattern recognition.

Hey…that repeated once. Okay. Yeah, so?

Then twice. Okay. Just a fluke though probably.

Third time’s the charm. Now you have my attention. Keep an eye on it.

The timing of this cycle’s bottom was technically the fourth proving point, which is why we’ve seen the ‘sudden’ switch in sentiment by many investment Big Dogs. It really isn’t sudden at all, they’ve just been waiting for confirmation because people kept saying…

“But this time will be different.”

Rug pulls. Big time hacks. Countries banning all cryptos. Failing exchanges. The SEC on a rampage. Whale manipulation. The government secretly aiming at CBDCs.

Now ETFs.

I’ve heard all the arguments that Bitcoin ‘cycles’ are simply coincidental, and nobody can predict its future.

Wanna bet?

The reality is that investor psychology comes into play here as well.

You may have seen this infographic before that shows the typical retail investor’s emotions as the stock market rises and falls.

Source: financialhorse.com

Again, thanks to @theratinalroot who created the Bitcoin spiral graph showing the same behaviors.

Source: bitcoinstrategyplatform.com

What are the odds that once the coming bull run gets into gear that new investors in crypto having FOMO will pile on like they did last cycle (without doing any research) not wanting to miss out the one to one million gains that get hyped every cycle?

Pretty darn good.

Just like in the stock market, many will buy in the ‘Thrill’ phase (high prices) and sell in the ‘Panic’ phase (low prices) and media pundits will decry that Bitcoin is “too volatile” for the average investor.

It just ain’t so.

If you’ve ever studied organizational behavior, or even history or politics, you’ve likely heard some variant of this list:

There are known knowns. These are things we know we know. Easy to identify.

There are known unknowns. These are things we know we don’t know. Still, mostly identifiable.

There are unknown unknowns. These are things we don’t know we don’t know. Almost impossible to identify.

And lastly there are unknown knowns. These are things we know, but we don’t realize we know them until someone (or some occurrence) points them out. Think of this last part as an explanation of ‘not seeing the forest for the trees’.

Consider this explanation of Bitcoin cycles as showing you the forest.

Big picture. There it is…right in front of you…the whole time. But you probably didn’t see it.

Granted, there are still plenty of unknowns of all kinds with crypto.

What impact will the ETFs have? Are more regulations ever going to be put in place? etc.

And, with the $100,000 price being a marker that Bitcoin may cross this coming cycle, being certainly a psychological target for long-term HODLERs – just like the $50,000 price point was likely the cause of the last double top in this cycle – will this coming bull market have a double top too?

Very likely. But I’ll save that discussion for another day.

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June 19, 2023June 19, 2023

It’s a Fraud, It’s a Ponzi, The Government Is Coming For Your Crypto

Ah….the naysayers

Something I deal with on a too regular basis (that I secretly enjoy) is responding to the Doubting Thomas’ of the investment community that includes the ranks of some otherwise pretty smart money managers. For example, as Bitcoin cratered near the bottom of its crypto winter cycle back in October of 2021, New York Magazine published an article entitled “Why the Big Short Guys Think Bitcoin Is a Bubble”.

In it, it has comments by such notables as:

“Hedge-fund mogul John Paulson, who was behind the “the greatest trade ever” — in 2007, he personally made $4 billion on his short of subprime mortgages — thinks cryptocurrencies are a bubble that will prove to be “worthless.””

And

“Michael Burry, the quirky hedge-fund manager made famous in The Big Short movie), …[for] months, he has been suggesting that bitcoin is on the precipice of collapse.”

And

“NYU professor Nassim Taleb, whose now-canonical book The Black Swan warned about the dangers of unpredictable events just ahead of the subprime crash, argues that bitcoin is functionally a Ponzi scheme.”

And

“[Paul] Singer, the founder of the $48 billion investment firm Elliott Management, thinks cryptocurrencies are a fraud, but is apparently tired of complaining about them. “Pulling out your hair is an option, though only if you have hair to spare,” the balding 77-year-old Singer wrote in his first-quarter letter to investors [in 2021] “We continue to press on for the day when we can say, ‘We told you so.’”

Are they wrong?

Well, now pushing two years later – apparently so. Given that Bitcoin is now 14.5 years old, that must be one BIG bubble, which just keeps getting bigger with more and more once haters – JPMorgan CEO Jamie Dimon comes to mind, who once told CNN viewers back in 2017 that “Bitcoin is a hyped-up fraud, it’s a pet rock” – who are developing their own cryptocurrencies and gearing up to offer a Blackrock sponsored Bitcoin ETF to wealthy clientele, I wonder what their sentiments are today?

I’m also often told that cryptocurrencies are manipulated by “Whales”, i.e., people who have millions of dollars’ worth of whatever crypto, and that the so-called ‘wild’ swings in prices are ALWAYS a result of these whales pumping and dumping whatever crypto they want to profit from, which often leaves the ‘average Joe’ investor holding the (empty) bag.

Sometimes, they are outright frauds. Rug pulls like the Squid Game coin. But more often the references are more in the line of meme coins like Dogecoin or the this cycle’s latest meme coin Pepe.

In reality, many of the Alt coins are indeed plagued by manipulation by whales – a good part of the reason that the SEC wants to regulate them. However, in the last decade, movements and trades (both buy and sell) by Alt whales have been more and more tightly monitored, scrutinized and called out to the degree that now, for those that pay attention at least, avoiding (or profiting from) those kinds of manipulations can be easily done.

For example, here are a couple articles that identify whale manipulation:

https://beincrypto.com/matic-rebounds-0-75-in-sight/

https://beincrypto.com/crypto-whales-buying-these-altcoins-2/

That said, the same is NOT true for Bitcoin or Ethereum.

The reason being two-fold:

a) The market for the king and queen of cryptos is now simply too big to manipulate to the extent that happens with alts.

For example, when Michael Saylor’s MicroStrategy (certainly one of the biggest Bitcoin whales of all now) purchased an additional 1,045 Bitcoin (BTC) for a total of $23.9 million, or an average price of $28,016, between March 23 and April 4, 2023, the price barely budged.

That’s because Bitcoin’s market cap is now north of $512 billion. It would likely take a single transaction in the hundreds of millions to make any significant jump happen with Bitcoin.

I will note, however, that Bitcoin did go up by $3K a week later when news of Saylor’s buy got out, but you can be sure that that was global wide retail buyers getting onto his coattails. No other Bitcoin whale movement was detected and the subsequent drop back down to $25k shortly thereafter certainly wasn’t the result of any whales selling any BTC!

Even the SEC has concluded that Bitcoin and ETH are decentralized enough that they are not easily controlled by anyone/group and are not being classified as securities. It’s highly likely though, that (in the US at least) they will eventually come under the admis of the Commodity & Futures Trading Commission (CFTC).

b) Whale movements of Bitcoin (and ETH) even simply from one wallet to another wallet owned by the same individual are highly publicized. And the vast majority of Bitcoin Whales are all HODLERs not active traders.

For example, here’s an article that points out exactly that.

https://decrypt.co/144786/Bitcoin-whale-moves-million-after-13-years

Then there’s also the continual rant that the US government simply won’t allow a non-government issued money to keep growing. Control over money is too central to the Fed’s survival for them to allow this, is the general argument, so they’ll step in somehow to make Bitcoin unattainable, useless, or illegal.

The problem with that claim is that Bitcoin’s decentralized nature makes it literally impossible for anyone, even governments, to fully kill it.

Given then that it will always exist and be legal somewhere, the dynamic becomes one of “jurisdictional arbitrage”; i.e., if one government makes owning Bitcoin fully illegal with harsh penalties, other governments will embrace the opportunity to become home to Bitcoin-related businesses, investors, etc. The implication being that if the US government were to take such a strong anti-crypto position, multiple billions of taxable dollars would flee the country making that kind of decision incredibly counterproductive.

More importantly, the idiomatic cat has been out of the bag for some time now. Being that several members of Congress already own Bitcoin, and the list of elected (and unelected) officials, including Presidential candidates, who take pro-Bitcoin stances publicly is getting longer every day.

Additionally, the false narrative that Bitcoin is most popular for illicit activity is being challenged by career US intelligence officials. Add to that in April 2021, US Speaker of the House of Representatives, Kevin McCarthy (then the US House Minority Leader) positioned Bitcoin as geo-politically important to the United States after Bitcoin miners moved en masse from China to the US.

That remains true today with the US being home to more Bitcoin miners than the next country in line (Kazakhstan) by a factor of 2x.

Additionally, adoption of Bitcoin and crypto assets continues to grow rapidly.

Statista.com finds that as of December 2022 there were 425 million unique identity-verified accounts at crypto service firms (exchanges, wallets) globally.

This is up from an estimated 5 million such accounts in 2016 when they first began keeping track and nearly double the amount of 221 million from just two years ago in June of 2021. Plus, since BTC is a bearer asset, and can be self-custodied, that means that users who exclusively hold their own Bitcoin and who don’t use services that require identity-verification will not show up on these studies, and may represent a very large portion of total Bitcoin users. The larger the portion of the electorate who has a stake in Bitcoin, the more politically difficult it becomes to attack it.

Finally, after the last Bitcoin halving and especially throughout 2021, there was a rapid broadening of Bitcoin exposure, and positive Bitcoin sentiments, coming from backers with deep-pocketed lobbying power.

These include numerous multi-billion-dollar, and even mutli-trillion-dollar, fund managers like Blackrock taking large BTC positions; corporations like MicroStrategy, Square, and Tesla putting BTC on their balance sheets, and major banks and financial services providers such as BNY Mellon, JPMorganChase, Fidelity, PayPal, Visa, and MasterCard offering Bitcoin-related services. Bitcoin is rapidly embedding itself into both the financial plumbing, as well as corporate and major funds’ balance sheets, thus making it far more politically difficult to attack too aggressively without upsetting the applecart in a big way.

And considering that Blackrock is now pushing for a Bitcoin ETF, this momentum shows no signs of slowing down any time in the foreseeable future.

The reality is that, on a long term basis, Bitcoin has far outperformed every other asset in the decade since its beginning.

While history shows that – from a percentage gain perspective – Bitcoin’s all time highs are getting lower each cycle as the market broadens, if the next cycle only has a 3x jump rather than a 10x jump are you really going to complain?

And just like Paul Singer, folks who were smart enough to jump on the Bitcoin wagon “continue to press for the day when we can say ‘We told you so.’” Only our “We told you so” will be the exact opposite of Singer’s hoped for expression of gleefully smug self-satisfaction.

Nevertheless, we know the naysayers will continue to say “time will tell”, and they’re absolutely right…but so far, time looks to be on the long term upside of Bitcoin.

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