Nick’s Note: Everyone invested in cryptocurrencies knows there has been massive volatility in the market. But my colleague and resident cryptocurrency expert, Palm Beach Letter editor Teeka Tiwari, has a message for you: Expect volatility and don’t sell on the first dip. Cryptocurrencies are a long-term tech play and they will continue to grow in value.

By Teeka Tiwari, editor, The Palm Beach Letter

I wanted to send our readers a quick update about the overall volatility in cryptocurrency markets.

Over the past few weeks, we’ve seen bitcoin hit a high of $3,000 then drop to a low of $2,200.

Other cryptocurrencies have experienced similar wild moves.

For those of you who are new to cryptos, this type of volatility may be unsettling.

But for those of you who have been following me since early last year, you know this is par for the course:

  • One of the first cryptocurrency picks in our portfolio went from $12 to $20 to $5 before rocketing to $60.

  • Another went from $8 to $21 to $6! A year later, it rose to over $400.

  • And a third we recommended went straight down! We were down double digits for months. Today, we are up over 500%.

The point is: These assets are volatile—just like the dot-com stocks were in the 1990s.

Three Things You Need to Know to Ride Volatility

Below is the chart of Microsoft. It shows the monster run it had from 1986–2000.

During that period, the stock rose from a split-adjusted 10 cents per share to over $50. From valley to peak, every $1,000 investment in Microsoft turned into $500,000.

It’s tough to see how volatile Microsoft was on the long-term chart.

So I’ve included some zoomed-in shots to show you what it was like to “live” with Microsoft.

You can see in the chart below that in Microsoft’s first decade as a public company, it was highly volatile. Much like how bitcoin and many others are today.

This volatility moderated somewhat in the ’90s (see chart below).

You can see that even though we were in the biggest bull market in history in the ’90s, Microsoft was still very volatile and oftentimes quite boring.

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My point is that cryptos are following the same script that dot-coms did in the ’90s.

Just like then, we will see explosive growth followed by terrifying pullbacks. But there’s no reason to be alarmed or take drastic action.

There is a three-stage process for thriving during a crazy roller coaster ride like this cryptocurrency bull market…

  • Stage 1 is to hold fast to our positions during the pullbacks.

  • Stage 2 is to buy in on the pullbacks.

  • Stage 3 is to sell your positions when the whole world is crypto crazy.

Right now, we are in Stage 2. That means you should be buying, not selling.

Stage 3 is many years away. When my cab driver and waiter start giving me crypto tips, that’ll be our signal to get out.

Until then, keep this essay handy. Refer to it when you get worried. Remember the three stages. And ask yourself: Have we hit Stage 3 yet? If the answer is no, then just hang tough and ride out the volatility.

Because if you do, we’ll have a whole portfolio of Microsoft-type winners.

Friends, the future is bright for cryptos. Stay focused on the big picture. Use appropriate position sizing, and we will continue to make a killing for years to come.

Let the Game Come to You!

Teeka “Big T” Tiwari
Editor, The Palm Beach Letter