It’s been a long five years…
If you’ve been with me since I started recommending crypto in 2016… you know we’ve been fighting a battle of ideas over whether bitcoin has value.
And if you’re anything like me, you’ve probably been ridiculed by your family and friends for just even talking about crypto.
But your faith in crypto is about to pay off…
Just a few days ago, I was watching an interview on TV, and the guests were BlackRock CEO Larry Fink and Mark Carney, the governor of the Bank of England.
If you haven’t heard of BlackRock, it’s the world’s largest asset manager with $7.8 trillion in assets under management. And the Bank of England is one of the world’s oldest banks – and the model for all other central banks.
Now, what blew me away about this interview is they were talking about bitcoin.
And they weren’t talking about bitcoin derisively. They weren’t saying, “Oh, this is some money laundering nonsense or a fraud.”
Instead, they were discussing how bitcoin was on a trajectory to become a legitimate global asset class.
I want you to understand how important that is. These are the types of men who pull the levers in the world we live in. They run the global financial system.
Five years ago, the concept of bitcoin would’ve never even entered their minds… let alone come out of their mouths in a public format.
Yet here we are today. And these men are ready to embrace bitcoin as a legitimate asset class.
This shows you how far we’ve come since 2016. It’s been a sea change. And for those of you who’ve had faith in bitcoin and crypto, you’re about to be richly rewarded.
But the life-changing gains we see in crypto come with a price. And that’s what I want to talk to you about today…
Choppy Waters Ahead
We’ve seen a massive profusion of good news in crypto this year…
Giant payment platforms like PayPal and Square now offer bitcoin trading services to their millions of clients.
World-class luminaries from the traditional financial world – such as billionaires Stanley Druckenmiller and Paul Tudor Jones – are buying bitcoin.
And public companies like Square and MicroStrategy are adding bitcoin to their corporate treasuries.
With all this positive action, it’s no wonder bitcoin is the best-performing asset in the world. Since January, bitcoin has rocketed 150%. Over the same span, the S&P 500 is up 13%, and gold is up 22%.
Now, with bitcoin and other altcoins rising to new highs this year, you can very easily lose your sense of prudence… and start getting overly excited. That’s when FOMO – the fear of missing out – begins to set in.
When that happens, you can act recklessly and ignore your risk management. If that’s you, I want you to please tamp down that desire.
Here’s why…
I’ve been looking closely at bitcoin’s price charts since it broke its all-time high last month. And while bitcoin undoubtedly will go higher next year (as will Ethereum and other altcoins)… I see some hesitation in the charts.
So over the short term it wouldn’t surprise me to see bitcoin drop to $15,000 and Ethereum to drop to $450.
If that happens, you’ll want to freak out. You’ll want to panic. You’ll want answers. I’m telling you right now, don’t panic. Don’t freak out. We’ve seen this movie before.
The Price of Admission
I’ve been invested in bitcoin long enough to know that when everybody believes it’s the greatest investment in the world… it comes along and reminds everybody just how volatile it can be.
That’s exactly what happened at the end of 2016. Bitcoin rallied to its old high then sold off 25%. And when bitcoin drops, altcoins drop even harder. (The reverse is also true. When bitcoin rallies, altcoins rally even more.)
When this happened back in 2016, everyone was freaking out. I got so many letters, emails, and phone calls, “Oh my goodness. Is this the end of crypto?”
So what do I want you to do if bitcoin drops 25% again? Absolutely nothing.
It bears repeating… Assets poised for massive growth in their early days are highly volatile. So volatility is the price of admission you pay for life-changing gains. You can’t expect huge 100x swings to the upside… without downside volatility, too.
But right now, people are forgetting that… and they’re probably going to pay the price. I guarantee you people are levering up… they’re borrowing against assets they shouldn’t… and they’re getting a bit too ahead of themselves.
Now, I don’t want you to worry and think my perspective on crypto has shifted. It hasn’t. I am providing this warning so if a pullback does happen, you will be emotionally prepared.
Please do not try to trade around this. I could be 100% wrong on expecting a pullback. And the last thing you want to do is get out of the market looking to sidestep a 25% drop… and instead end up missing out on a triple-digit gain.
So no action is needed on your part.
What to Do Next
Friends, crypto is a mental game. This market will have your emotions ping-ponging like you can’t imagine. So you need to prepare yourself.
The first step is to always position size wisely. Pick a dollar amount you are comfortable losing. I recommend $200–$400 per position if you are a smaller investor and $500–$1,000 per position if you are a bigger investor.
Crypto investing is speculative. Never invest more than you can comfortably lose.
The second step is to get 100% clarity on the story or narrative you expect will drive the asset higher. In this case, we know the story of crypto is one of mass adoption.
And now, we’re seeing even the largest asset managers in the world showing interest in it as a legitimate asset class. So the narrative is intact.
With the narrative intact and your position sizing in place, the next step is to do nothing. Just let the trend play out. Let time do the heavy lifting for you.
That is all you need to do. It’s no more complicated than that.
As we head into the holiday season, my deepest wish is that you ignore the day-to-day volatility and enjoy this time with your families. Tell the people you love how much you love them… Eat some good food… Enjoy yourself… And always remember…
Let the Game Come to You!
Teeka Tiwari
Editor, Palm Beach Daily