Over the last few months, a contagion has been spreading through crypto…
Like the subprime housing crisis in 2008… overleveraged crypto buyers are now selling off assets like bitcoin and Ethereum to cover their margin calls on all the “subprime” garbage tokens they speculated on.
Now, even the best investors can make bad investment decisions…
But when crypto lenders hand out hundreds of millions of dollars in unsecured loans so people can speculate on “subprime” junk tokens… it’s only a matter of time before those loans collapse.
To date, we’ve seen centralized crypto firms like Three Arrows Capital, Celsius, and Voyager Digital go belly up. And as I wrote earlier this month, they won’t be the last.
The good news is there’s no one coming to rescue these reckless investors…
There are no bailouts from the Fed or Congress. So eventually, the market will wipe out bad actors… And the entire space will become stronger and smarter.
That’s the nature of true capitalism. It rewards the strong and punishes the weak.
I understand that’s cold comfort when the overall crypto market has fallen 47% since May alone. And I can empathize. I’ve watched my net worth get walloped as my crypto investments have dropped millions of dollars in value.
If you’re new to crypto or extreme volatility, it’s easy to draw incorrect long-term conclusions about the future of this asset class.
The reality is, we’ve been through pullbacks like this before…
We went through it from 2018–2020… 2014–15… and even as far back as 2011.
And just like back then, selling your bitcoin into the downturn has regularly proven itself as one of the worst investment mistakes you can make.
I’ve always cautioned my subscribers that this will not be an easy ride.
I’ve repeatedly said that we will have times when we have to sit through 80%+ drops in prices. That’s why I’ve always strongly advised you to use small, uniform position sizes and never use leverage.
It’s insane to use leverage on an asset with a history of dropping 80%+ every few years.
The Adoption of New Tech Is Always Volatile
If you’re new to this asset class, I understand you may think it’s impossible to recover from these losses and go on to new all-time highs.
That might be difficult to imagine right now because crypto is such a new asset class for so many people. So it’s hard to see its full potential. But this is not my first time helping people see a world different from the one they currently live in.
Think back to cellphones in the late ‘80s and early ‘90s…
When I worked on Wall Street in 1991, I told my clients to invest in McCaw Cellular.
At the time, cell phones were for the wealthy. They were wildly expensive and incredibly impractical.
And here I was, telling clients that everyone would eventually own a cell phone. I said they’d be ubiquitous as televisions and incredibly cheap.
I got laughed off the phone.
That’s because it was difficult for my clients to imagine a world radically different from the one they lived in (just like now with crypto asset adoption).
For most of human history, change has been gradual. That’s not true anymore. Over the last 120 years, humans have experienced a level of change that is unprecedented. We have not had enough time to normalize the rate of change we deal with in modern life.
Think about the introduction of the smartphone in 2007…
Steve Ballmer, the CEO of Microsoft at the time, famously said it was just a toy… And in 2010, the company held a mock funeral for the iPhone.
The average person saw it as an expensive gadget without practical use. Fast forward 10 years to 2017, and just about everyone in the Western world had one.
Today it’s inconceivable not to own a smartphone.
That’s a prime example of the nature of technological adoption. And bitcoin is no different.
Back in 2016, there were just 10 million bitcoin wallets. Today that number is approaching 300 million… and by the end of this decade, there will be billions of users.
So if you’re sitting there thinking – “Oh my Good Lord, what did I get into? These cryptos will never come back. This future Teeka is talking about is a pipe dream” – I understand why you may feel that way.
All I can ask you to do is rely on the track record of my research in this space…
In 2016, when bitcoin was about $630, and many called it “worthless and stupid,” I told subscribers to ignore the noise and buy… exactly one year later, the crypto had exploded 820% to $5,800.
Then there’s November 2018… the depths of so-called Crypto Winter. Bitcoin was trading around $4,000, but I told Daily readers not to sell… That the fear was overblown, and based on the rate of adoption and interest from Wall Street, we’d see bitcoin hit $40,000.
A year later, it was up nearly 100%… two years later, it was up 354% at $17,000… and by November 2021, it had hit its all-time high of $68,789. Well above $40,000 and a 1,720% gain in just under three years.
And then there’s March 2020. Shortly after bitcoin fell 50% in one day, I told readers, “This forced selling in the crypto market is the biggest financial gift you will ever receive…”
By the end of the year, bitcoin had risen from $4,860 to $29,244… a 502% gain.
Again, all of those calls came from my research… And the same research tells me bitcoin and the crypto space will eventually recover to new all-time highs.
Throughout bitcoin’s history, the longest you’ve had to wait between a bear market low and a brand-new all-time high is 24 months.
This time around, I would expect it to be faster because bitcoin and crypto assets have far more market acceptance than at any other time in their history. People who have been in the asset for more than one market cycle will keep dollar-cost averaging into every dip.
And unlike a stock investment, where a company can keep issuing new shares, there will never be more than 21 million bitcoin. The new supply is completely inelastic.
Once all these forced liquidations are over, the market will eventually find a new price equilibrium. We’ll see a true bottom and start the inexorable march upwards again.
These Sell-Offs Are Like an In-Game Reset
I mentioned above that we’ve seen pullbacks like this before… moments in the history of bitcoin and crypto when one negative headline plunged the crypto market into a cauldron of fear and chaos.
Then – just like now – many are predicting the demise of bitcoin and crypto in general as an asset class. As a new investor in the space… that’s scary to see. One ray of hope I’d like to offer you is we’re seeing big corporate players stick with their decisions to support bitcoin.
The Wall Street Journal recently reported that MasterCard and Visa have specifically said, “We are not walking back our crypto plans. We plan to embed crypto into our offerings. We believe this is the future of payments.” (Emphasis added.)
This wasn’t true during the last Crypto Winter of 2018. I remember back in 2017, Goldman Sachs made waves when they said they would open a bitcoin trading desk. But then came the 2018 Crypto Winter, and Goldman tucked tail and ran.
Visa and Mastercard’s decision to stick it out is a huge change in corporate sentiment. It portends massive future growth in the usage of crypto assets. And it’s usage that ultimately drives value creation in this space.
So, where does that leave us now?
Long story short, we’re going to see more volatility ahead. I wouldn’t be surprised to see more companies get caught up in this leveraged loan contagion, have more issues, and see more sell-offs.
But that doesn’t mean you should sell.
I know it’s unpleasant, but the best thing you can do now is to sit tight and just let the washout of weak hands happen…
And if it makes financial sense for you, buy more bitcoin on weakness. I have new buys lined up starting from $18,000 and staggered down to $10,000.
Think of this crypto winter like an “in-game” reset for those of you who may have missed the previous bull markets in crypto.
This sell-off will look like a blip on the radar when bitcoin eventually hits my target price of $500,000 over the coming years.
So no matter what the headlines are, I want you to know that bitcoin and the crypto ecosystem will survive.
And when the contagion currently spreading through crypto has run its course… bitcoin and the entire crypto ecosystem will hit new all-time highs once again.
Let the Game Come to You!
P.S. Despite the depth of the pullback in crypto… the reality is there’s more pain to come… that’s why I have been looking at ways to secure crypto-like gains outside of the crypto market.
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