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In my most recent monthly issues, I’ve looked at the overall investment landscape—crypto and beyond.
This month, I will only talk about cryptocurrency and the unique market conditions that exist today.
Namely, the price charts look like shit, everybody expects the bottom to fall out, some banks and governments have cut ties to the biggest crypto exchange on earth, and bitcoin’s on-chain data has only just started to shift in our favor (but not much).
At the same time, the only signs of a bear market come from trading patterns that we also see during bull markets, leaving pretty much everybody confused and uncertain about which way the market will go.
While my analysis is often 50/50, my decisions rarely are.
If you thought it was hard for me to sit on my hands from October to May, it’s even harder for me to buy into a market that’s bleeding.
I guess this is what Rothschild meant when he said “buy when there’s blood in the streets, even if it’s your own.”
Or as Warren Buffett said:
You pay a very high price for a cheery consensus.”
To everything there is a season
Are you still waiting for bitcoin’s price to drop below $20,000? Trying to get that “last dip before $100,000?”
At what price will you start to feel like the market is running away from you again?
Or do you think prices can only go up from here and the next altseason will “melt faces?” What will you do if it takes a little while for the market to start rolling again?
Maybe you spent all your money buying the most recent dip and you hope the price will stay low for long enough for you to get more money into the market? Perhaps you’re convinced crypto will spend the next year or two in a bear market?
Whatever you’re looking for, this market is volatile enough that any of those outcomes could realistically happen.
The question is—if you get the outcome you want, are you ready to take advantage of it?
For most of 2020, I encouraged everybody to buy into the market. Few listened.
Then bitcoin’s price started running—faster than I had expected and before it was ready to do so. I told people to buy altcoins. Few cared to.
Then altseason arrived and scammers couldn’t make shitcoins fast enough to satisfy everybody who wanted a piece of the action.
Before those explosions, we saw clear, positive trends that usually lead to higher prices. Nobody took action until after prices went up.
Did that mean prices had to go up just because those trends had formed?
No, but it was more than worth the risk to find out.
Not quite summer, not yet winter
Today, we see no such trends. If anything, the market’s giving mixed messages—lots of bullish and bearish data.
It reminds me of 2019, except the on-chain data looks a little better (but not much). Bitcoin’s price ended that year higher than it started (and never went lower), but people called it a bear market anyway.
Do you know why so many people took profits earlier this year? Because they had profits to take.
How did they get their profits?
They bought crypto during the bear market of 2018, the consolidation of late 2019, the black swan “bonus” crash of Spring 2020, and the altcoin collapse of September 2020, after DeFi summer.
In other words, they bought when everybody else sold.
You need to plant your seeds before the harvest—months earlier. You can’t wait until the weather turns.
Yes, just because you plant seeds doesn’t mean you’ll get a bumper crop, even if you get the timing just right. A lot can go wrong along the way.
Over the long run, the cryptocurrency market shows a clear, sustained uptrend. You can’t look at this chart of total market cap and come to any other conclusion.
Ideally, we will reap harvests for many more years to come. Up 200%, down 50%, up 200%, down 50%, up 200% and so on. You can do worse than 7x return on your investment over three years.
Maybe the market goes up 500%, down 55% like we just did? Can you imagine how great it would be if we do that every year? Six months up, six months down? And you only buy when it goes down? That’s as much as 9x growth over two years.
At that pace, you will never have to sell any crypto. Just use it, spend it, borrow against it, and enjoy your good fortune without ever having to think about an exit.
Or, you can wait until prices go up again and settle for 2-3x ROI after you pay taxes, fees, and hit your entry and exit targets. That’s safer, but not necessarily better.
A tortoise’s paradise
While I talk about “the next leg up,” it’s hard to see how prices can rise if new money isn’t coming into the market—and new money isn’t coming into the market yet.
If history repeats itself, that money will come. Bitcoin’s price just needs to go up long enough for people to think it will keep going up. Altcoins will follow. Everything will work out.
I can understand if that’s not your pace. Waiting sucks.
For me, that’s ok. I’m a tortoise. Slow and steady wins the race. With so much upside, there’s no need to chase prices. Get while the getting’s good and let time and markets do the rest.
Some people love the excitement of trading the market and the thrill of seeing their portfolio pump. They laugh about the rug-pulls and scams, FOMO into whatever’s making the rounds of Twitter and Reddit, and have no problem with the massive risks that come with it.
This market offers something for everybody.
I’m ok with the slow life. I’d rather take it easy. I know where this road leads. My portfolio will grow over time—and do so at a pace that will far exceed any other investment I can make right now. Up a lot, down a lot, and always up higher than down.
Very boring and the opposite of the degens, but I’m trying to build wealth through ownership of cryptocurrency. That’s hard to do during the parabolic booms.
Am I excited about buying crypto now?
I’m excited about its potential and lots of awesome projects building the financial networks of the future.
The problem is, to get the best results in this market, you have to buy now. You can’t wait for the market to start booming and zooming again, nor can you wait for “one last drop” that may never come.
Buy low and let the market grow, then HODL on the way up and wait for the next opportunity to buy more.
Slow money, for sure—but slow money is easy money.
When long positions get liquidated or traders sell low to buy lower, we accumulate for the next leg up. When casual “investors” decide they’ve made or lost enough money and it’s time to sell “before it goes to zero,” we take those worries off of their shoulders. While traders and their followers wait for confirmation of an uptrend, we’re already 2-3x ahead of them.
For that reason, I follow my plan.
This plan simplifies all buying decisions into three lines on a chart, backtested to identify the best times to buy bitcoin (and by extension, altcoins). It takes the fear, greed, and guesswork out of your decisions.
Does it catch the absolute bottoms?
Yes, but you will get most of your money in at a price higher than the bottom.
Sometimes, you will buy and watch your portfolio keep falling for a few months as you accumulate. Sometimes, you will buy and watch the market go nowhere but up.
So far, if you followed my plan, you’re somewhere between down 32% and up 600% (it depends on the exact prices at which you bought).
When the plan calls to buy bitcoin, it also forces you to buy altcoins. When you include altcoins, the outcomes range from down 80% to up 4,000% depending on what you bought, when you bought it, whether you staked it, and with what terms and fees.
Still, it feels like shit. Everybody else offers you milkshakes and a LaZboy. I’m selling healthy foods and exercise. Nobody wants that.
I’m looking for durable, long-term wealth. 50% ups and downs are part of the journey.
Take it easy
While it’s important to act, you don’t need to sell a kidney, turn tricks, or mortgage your house for money to buy crypto. A little goes a long way.
As long-time subscribers know, I keep a dollar of USDC, USDT, or short-term US treasuries for every dollar I put into crypto. When bitcoin’s price goes above the buying zone of my plan, I set aside new cash for the next buying opportunity.
For altcoins, I buy up to a specific allocation and not a penny more, averaging in and staking when feasible, regardless of market conditions. I never trade bitcoin for altcoins or vice versa. Bitcoin is a core portfolio holding, altcoins are speculative ventures.
This is my portfolio strategy.
At the height of altseason, a reader asked me where she should put her money for six months so she could buy a new house. I told her to consider depositing it into a Celsius account as USDC for 10% interest.
I never heard from her again.
Around the same time, another reader asked the best altcoin to get 100x before the end of the bull market. I told him it’s going to be tough to get that at this point in the cycle but it’s more than possible by the end of the next market cycle.
I never heard from him again.
Another reader thanked me for a 20x gain on one of my altcoin recommendations. I thanked him for the kind note and reminded him to look out for the inevitable drop. “What goes up . . .”
I never heard from him again.
Now, I’m getting nasty notes for encouraging you to buy into the market. Such is life.
It’s hard being a tortoise in a hare’s world, but over time, things work out. Trust the process. Nobody can make all the right decisions all of the time, but you can put the odds in your favor and accept that the markets will decide your fate.
A peak like no other, a bear market like no other?
People still claim we hit a market cycle peak in April and now we’re in a bear market.
While you can find some evidence supporting that view, you can’t ignore the evidence that we’re in a consolidation—one of those 5-7 month periods when the market goes down or sideways in the middle of a larger uptrend.
I’ve covered the data, patterns, and evidence at length in my updates of the past few months, including some of my public content, and won’t get into it here except to point out one more bit of perspective.
We’re still waiting for the price to drop to the levels we see after the market cycle peaks.
Yes, I know—it went down more than 50% from the peak, bitcoin’s price only does that after peaks, death cross means bear market, CME gap at $9,600 still needs to fill, etc.
A +50% drop does not mean a bear market. In 2012, bitcoin’s price dropped 50% twice. It happened again in April 2013, again from July to December 2019, and again in March 2020.
You can also include a similar drop in November 2010 but because the pricing data isn’t very precise for that time period, I don’t include that as an example.
Of all those drops, only the April 2013 crash bore any resemblance to anything we see at market cycle peaks.
(While I consider that a market cycle peak, nobody else does.)
Look at bitcoin’s price in context.
Whenever bitcoin’s price zooms and hits a market cycle peak, its price falls below the .618 Fibonacci level, a measurement of price relative to its previous opposite move.
Whenever bitcoin’s price zooms and does not hit a market cycle peak, its price falls to the .618 Fibonacci level or higher.
Big moves up end with big moves down, small moves up end with small moves down, but the proportion generally matches from one move to another.
Also, after every market cycle peak, the price drops way below the .618 level quickly.
Within 7 weeks of the December 2017 peak.
Within 3 weeks of the December 2013 peak.
Within 1 week of the April 2013 peak (that nobody else considers a peak).
Within 1 week or 9 weeks of the June 2011 peak, depending on whose pricing data you believe.
We’re three months removed from April’s all-time high of $65,000, yet still above the .618 level.
Does that mean we can expect the price to drop below the .618 level to match previous market cycle peaks and confirm the bear market?
Sure. It’s a realistic possibility. It may have already happened by the time you read this post.
Any price between $14,000 and $120,000 would fit within a realistic range of prices based on bitcoin’s history. Various data models give a range of $9,600 (CME gaps) to $288,000 (S2Fx).
The rest of the market will move in whatever direction bitcoin does.
What do I think about the CME gap theory?
I would put it in the same category as the S2F models. If you believe they’re true, that’s fine, I’m more inclined to believe the natural volatility of bitcoin’s price causes most CME gaps to fill and S2Fx can fit the price of pretty much any asset whose price goes up and to the right, meaning it goes up over time.
Pi Cycle Cross?
You can manipulate several combinations of moving averages to coincide with market cycle peaks. I created a few combinations on my own, all of which crossed the previous market cycle peaks but only some crossed at $65,000 in April.
Keep in mind, when the Pi Cycle crossed in April, everybody dismissed it—even people who claimed they believed in its validity. I didn’t dismiss it, but because not all permutations crossed, I can’t use it as a signal of market cycle peaks. It has too many false signals. But it’s one of several confirmations that the market had moved too fast for its own good. In time, perhaps it will be shown as a true peak signal. We shall see.
While it’s realistic to expect bitcoin’s price will collapse and send us into a true bear market, that hasn’t happened yet. Until it does, I can’t change my bias.
It’s not about right or wrong, it’s about mindset and perspective. I’m not going to psych myself out picking one or two fractals or data points while ignoring all the data that points in the opposite direction—or in this case, no direction.
In any event, it doesn’t matter. Bear markets are amazing times to buy assets.
If you’re reading this newsletter, you’re going to buy crypto at some point. Buy now and you won’t have to buy later. Keep some fresh cash or cheap credit handy in case prices fall further.
If you only buy bitcoin, put it into a crypto savings account for 3-5% interest. E.g., Celsius, BlockFi, Ledn, and others. Email me at firstname.lastname@example.org for referral links to get a little extra crypto bonus on your deposit.
For altcoins, stake the ones you can stake and if you want to take on more risk, you can lend them out on a DeFi platform or drop them into a liquidity pool for rewards.
Mark, you’re finally talking about altcoins?
Yes. I actually talk about altcoins more than people give me credit for!
Regarding altcoins, stake whenever you can. It’s free crypto with very little risk. While DeFi is notoriously buggy, staking contracts are very straightforward, pretty secure, and usually cost nothing (though they can sometimes demand a little extra technical knowledge).
I buy altcoins in two circumstances: when bitcoin’s price is in the buying zone of my plan OR when I find a good project that I think will reward me over time.
That doesn’t mean you shouldn’t try to make money or trade. There are certainly plenty of opportunities for that, whether the market’s up or down. Some people have a trading fund and an investment fund.
If you’re looking for projects, start with my altcoin reports.
Some of those reports are a little out-of-date and reflect a moment in time, but the substance hasn’t changed. Altcoins evolve and grow. Unless something happens that undermines my faith in the merits of the project, I leave the report “as is.”
It’s all relative
We know this market is volatile and the swings are massive. Normal moves range from 20% for bitcoin and 50% for altcoins. On average, we see drops of +50% for bitcoin and +80% for altcoins at least once each year.
That sucks, but with a silver lining: the upswings more than compensate you for the drops.
What other investment averages 200% returns year over year? In what other market can you realistically expect your investment to go up 6x (for bitcoin) or 20x (for altcoins) ever, much less within a year or two?
Most other assets will never give you those returns, no matter how long you HODL them.
Nobody can deny the risks of buying now. We could see a long bear market if bitcoin’s price falls below $29,000 and stays there for even a little while. There’s no reason price has to go back to its all-time high this year or even next year.
On the flip side, we could see the prices claw back to even within a few months.
Over the long term, the trend is clear and the potential gains are enormous.
And as long as you act now, you won’t have to do anything when the market goes up again. You can simply enjoy your good fortune and wait for the next opportunity. And if the market goes lower, you can accumulate more at lower prices.
You win either way.
If you wait for new all-time highs to confirm a bull market or negate your bearish fears, you will miss out on an amazing investment opportunity. And by that time, my plan will probably tell you not to buy anyway.
Most people who do well in this market buy when the prices are low, going down, or trending sideways. The rest are competent traders or lucky with their timing.
Are you a competent trader or lucky with your timing?
If not, you can choose to emulate the people who generally do well in this market without trading or getting lucky. Those people are buying now, recognizing that they’re almost certainly going to end up better off for doing so—even if prices keep going lower for longer than they expect.
Are they wrong?
We shall see.
Let’s hope we won’t have to wait until the market goes up again and those same people hype supercycles while they dump their crypto on you, er, I mean, “take profits” as you’re trying to catch up to a market that’s running away from you.
While you’re waiting for the perfect entry, read The 7th Property: Bitcoin and the Monetary Revolution. No book explains the value of bitcoin and its technology better. It’ll remind you of what this technology is all about and why everybody should have bitcoin and a few altcoins in their financial portfolio.
Down is the new up?
I realize my message today may seem like the opposite of what I was saying earlier this year.
From December to April, it was basically: “it’s too risky to buy now and see it all go to hell, and anyway, my plan says not to buy.”
From May to now, it’s basically: “it’s too risky not to buy now and see the market go up forever, and anyway, my plan says to buy.”
Ass backward, perhaps, but that’s how people win this market. It may not make sense, but it works.
Since May, we’ve started to see data to support that approach:
Accumulation by small buyers and OGs.
Large, stealthy buys via OTC desks (generally institutions and professional funds buying through brokers). Note, we’ve seen less of this activity in recent weeks.
Unusually low outflows from miners relative to historical selling patterns—even when accounting for spikes from certain mining pools, presumably forced selling from Chinese miners.
Lots of bitcoin moving off of exchanges, almost certainly to HODL or invest in a savings product.
A remarkably high proportion of stablecoins sitting on exchanges, savings platforms, and DeFi protocols.
This market is consolidating and the floor for bitcoin’s price continues to rise.
How high is that floor? What it will mean for altcoins? Will past behaviors persist into the future? Will bitcoin rebound and pull altcoins up with it?
Or has the market changed? Is it really different now, and the same patterns that signal “buy low” opportunities no longer hold true? Can we really expect another 4-5 months of sideways price action to match the consolidations we saw in 2012, 2013, 2015, 2016, and 2019? Or will we finally get that bear market that everybody’s calling for?
We shall see.
Either way, I follow my plan.
My analysis focuses more on keeping a level head and realistic expectations—two things you can’t get from a lot of crypto content creators.
I sometimes hear traders pejoratively dismiss “the herd” when explaining market psychology. Generally, you want to do the opposite of what feels safe and popular—whereas “the herd” prefers safe, popular decisions. “It’s going to go lower” seems like the popular consensus. It certainly feels safer than buying now.
Contrary to popular belief, sometimes the herd is right. It’s hard to look at the reality of the data and price action and feel good about putting money into this market now. We’re still a long way from the strong trends we established from the end of 2019 through most of 2020.
At the same time, we’ve seen this market do crazy things seemingly out of nowhere, often in defiance of logic, data, and sanity. You can make up for bad decisions, but complacency kills.
In investing (as in life), you can’t just wait for things to happen. You have to take advantage of opportunities when they present themselves and let the market do whatever the market is going to do. Put the odds in your favor, understand the bigger picture, and act decisively—not recklessly—when the situation calls for it.
This situation calls for it. Fortune favors the bold. Courage is not the absence of fear, but the ability to act in spite of it.
Be bold. Have courage. Act decisively.
Relax and enjoy the ride!