Over the last two months, we’ve seen lots of changes in the cryptocurrency market.
And that’s what’s so incredibly exciting about crypto. Two months in crypto is like two years in the stock market…
Take bitcoin, for example…
In early May, tweets from Elon Musk about the energy consumption of bitcoin miners sent BTC plunging 40% to around $32,000…
And while many investors panicked and sold off their crypto, I told my readers to view the pullback as a buying opportunity.
You DO NOT sell into weakness. That’s a no-no. That’s a sheep move. If you decide you want to trim some exposure (and I don’t recommend that), then you do it into strength.
The golden rule of bull markets is to sell into strength when you must and buy into weakness when you can. That’s the blueprint for how you get rich from a powerful trend.
I even said that we could see bitcoin continue to fall to the low end of $30,000 before things got better… and my timing couldn’t have been more exact.
The same day we published that essay… China announced it would ban financial institutions and payment companies from providing crypto-related services.
Again, I reminded readers to stay the course… and that when it came to crypto mass adoption, Elon Musk and China were nothing compared to the banks and brokerages buying up crypto and expanding customer access to this new asset.
I even said what has become a kind of crypto “mantra” around the PBRG office: “Volatility is the price of admission for life-changing crypto gains.”
From there (about mid-May), bitcoin bounced between about $30,000–40,000, while Ethereum hovered around $2,000 – down 54% from its all-time high of $4,362 in May.
Through it all, I advised my readers not to sell…
I told anyone within earshot that bitcoin miners would move to friendlier jurisdictions… And I continued to pound the drum on the case for mass adoption of crypto assets.
And all of that has come to pass…
We’re seeing bitcoin miners relocating to the United States, Canada, and Russia and restarting their profitable operations.
And according to the Crypto.com platform, the global number of crypto users more than doubled from 106 million in January to 203 million in May.
Let me repeat that again: The number of crypto users almost doubled in four months – despite the biggest drawdown in years.
Today, bitcoin and Ethereum are up 48% and 86%, respectively, from their June lows… and as much as 19% and 30% in just the last week.
And when bitcoin hits $500,000 in the coming years – as I predict – the 50% fall to about $30,000 will be little more than a blip.
Why These Pullbacks Are Healthy
Now, I’ll be the first to tell you that bitcoin and Ethereum could turn around and fall another 30–50% from here.
Will they? I don’t know… But if it happens, I’ll be greeting it with glee instead of fear.
Remember, markets climb a wall of worry. If everybody is super excited about an asset, it’s usually not a great time to buy it.
So, I love it when fear comes into the market… especially on news that I know will have little long-term impact on an asset’s growth.
And from a purely selfish standpoint, I loved seeing bitcoin dip into the $30,000s again.
First of all, it’s been great to have an opportunity to buy more bitcoin at a 50% discount…
Remember, I believe bitcoin will be at $500,000 within five years. Bitcoin’s recent 50% drop meant that my readers could buy twice the amount of bitcoin for the same amount of money.
So $10,000 worth of bitcoin bought at $30,000 turns into $166,666 when BTC hits $500,000…
That’s why it’s been smart to think of every 50% drop in bitcoin as an opportunity to double your long-term rate of return.
And it’s been true all through bitcoin’s 10-year volatile history. Buying the 50% dip has always boosted your long-term returns. I believe that will continue to be true for at least the next decade.
It’s also important to remember you need these horrific, scary selloffs to bring fear back into the market. These cooling-off periods give bitcoin time to breathe before it takes off again… just like we’re starting to see now.
I’ve said it before, but it bears repeating: We’re at the beginning of what will be a gigantic crypto bull market.
Wall Street’s Greed Hasn’t Abated
If you’ve been following me long enough, you know I’ve been betting on Wall Street’s greed for fees to drive them into crypto assets.
I worked on Wall Street for 15 years. And if I know anything, its fees are its lifeblood. And it’ll do anything to get a piece of the bitcoin pie.
Just take Square as an example. The financial payments company was an early adopter of bitcoin.
In its second-quarter shareholder letter, Square reported its Cash App service’s annual bitcoin revenue rose 200% to $2.72 billion. Meanwhile, bitcoin gross profit more than tripled to $55 million from $17 million.
Do you think other financial and payments firms will sit idly by and watch Square triple its fee revenue from bitcoin payments?
Just as important, Square and PayPal – another company giving its customers crypto access – have seen combined user growth of 85 million new customers over the past year.
This is creating a competitive advantage for them that Big Tech can’t ignore.
How long can Facebook ignore PayPal’s exploding userbase?
How long can Amazon look at Cash App’s growing crypto payment revenue before it says, “We’ve got to get a piece of the pie.”
Wall Street’s insatiable appetite for fees is one reason Bloomberg Intelligence’s August 2021 report suggests bitcoin’s price is on track for $100,000.
Know When to Hold and Not Fold
As you know by now, bitcoin doesn’t move in a straight line…
We saw it in the 2018 Crypto Winter when bitcoin plunged as much as 84%… only to rocket to new highs this year.
And we’ve seen it in just the last few months when bitcoin fell as much as 54% from its April high.
It’s naïve to think bitcoin (or any other asset for that matter) will go up in a straight line… But it will go up.
And as long as the long-term trends are intact (and there are plenty for bitcoin in particular and crypto overall), you shouldn’t worry about anything else.
So again – and I want you to say it with me – volatility is the price you must be willing to pay for life-changing gains in crypto.
Remember it. Repeat it out loud.
You won’t see these huge upcycles without some huge down cycles, too.
There are so many people who aren’t willing to pay that price. They bought bitcoin at $64,000… watched as it dropped to $30,000… and then sold it.
Those are the weak hands. But we’re playing the strong hand. And while they’re folding, we’ll continue to buy the dips and hold on all the way to $500,000.
Friends, it’s the unfortunate nature of most humans. They’re just not wired to make a lot of money from a volatile asset.
But you are…
If you’ve been with me over the long term, you know how I approach crypto.
We use small, uniform position sizes so we can deal with massive paper losses. That’s how we got through the Crypto Winter. And it’s how we’ll get through future pullbacks.
So don’t give up at the 1-yard line. Trust the research. Follow our risk management. And let time do the heavy lifting.
Let the Game Come to You!
Editor, Palm Beach Daily
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