Updated: Jul 11, 2022
Over the last few weeks, I’ve explained how the bear market in crypto will not spell the end for bitcoin or Ethereum… but I’ve also told you the selling is not over. I’ve said the best thing to do with your crypto assets right now is nothing… and that selling quality assets into a bear market is a mistake you’ll regret for years to come. I’ve been in crypto since 2016. And I’m close friends with people who have been in crypto since 2010.
This boom-and-bust cycle has been going on since bitcoin started trading. It’s nothing new. Again and again, I’ve heard stories from investors who were in bitcoin in 2010… And then watch their gains wash away when it dropped 93%. There are others still who loaded up in 2013… only to get wiped out in 2015 when bitcoin dropped 85%. In 2016, many people bought into BTC at $400. By 2017, it had risen to $20,000 – and shortly after, it dropped 85%. Again and again, bitcoin will do everything in its power to test your resolve. There’s a saying that everyone gets the bitcoin “price” they deserve… but I don’t think that’s true. I know lots of people who got into bitcoin cheap and sold far too soon. I think everyone gets the bitcoin “profit” they deserve.
Because if you’re not a believer in what bitcoin represents… then you’re not going to sit through 80%-plus drawdowns every three years. But that’s exactly what’s needed if you want to make life-changing money from this world-class asset. Volatility is the nature of this asset. It’s why I’ve always told my readers to use small, uniform position sizes when investing in crypto. It’s the only way you can stay in when the whole world is running out. And that’s why I always view my bitcoin holdings over a four-year holding period…
Over any four-year rolling period, no one has lost money in bitcoin. The worst four-year period we could find was between December 2017 and December 2021 – when BTC returned 150%. To put that in perspective, even the S&P 500 can’t compare to that performance.
Hope Is Not a Strategy
I’m telling you this because we’re likely not done going down. I can’t tell you where the exact bottom will be… only that I doubt we’ve hit it yet. I hope I’m wrong. I hope you get the chance to write me and to tell me what an idiot I was for being so cautious. I really do. It’s human to have hope. But “hope” is not a strategy.
An investor must face reality as it is… not as they would wish it to be. And the truth is, we don’t know how many more problems are lurking beneath the surface of centralized crypto lenders, market makers, and hedge funds. I’m hearing rumblings of vast losses that have yet to be recognized and cleaned off the books of some of the biggest players in crypto. It’s naïve to assume those liquidations won’t take prices lower. Reading that you might think, “The heck with that! I want out.” That’s a mistake. Think about it. Anytime big money is in play, you get big uncertainty. It’s a fact of making life-changing money. No uncertainty means no opportunity.
And the bigger the uncertainty, the bigger the payday. Just look at Amazon, Apple, Netflix and Tesla. These companies almost went under several times. They were plagued with uncertainty for over a decade. It’s not an accident they’re some of the biggest wealth producers of the last 20 years. If you want to get rich – and I’m talking rich, not comfortable – you need the right perspective on uncertainty. Uncertainty will make you rich if your research is good and your position-sizing makes sense. I’m fortunate to have a world-class team of researchers to help me, and the life experience that has given me a healthy respect for proper position sizing.
Those two things have allowed me to deliver a level of performance to my readers that’s better than any hedge fund manager I know of. Does that mean we never get smoked by the market? Of course not. That’s where our position sizing saves the day. Even if an idea goes down more than 80%… we’re still in the game. Some of my biggest winners have dropped that much on three separate occasions before rallying to new all-time highs. So don’t you dare talk yourself into defeat by dismissing crypto as a non-investable asset. I won’t allow it. I made a promise to you. I will drag you across the finish line even if you’re cursing my name the whole time.
Don’t Try to Time the Market
Hear me when I tell you this: The entire crypto market will rally again.
It will power up to brand new all-time highs and then it will crash and start the cycle all over again. And it will do that for years, just the same way that Amazon, Apple, Netflix and Tesla have been doing for the past two decades. The key right now is to be patient. I actively bought more BTC at $28,000, $22,000 and had orders in at $18,000 that didn’t get filled. I now have orders in from $18,000 all the way down to $10,000 on BTC and my orders on ETH start at $800. So you can see from my own personal orders, I believe there’s more weakness ahead. Why don’t I sell everything and buy back cheaper? Because I might be wrong. And I’m not willing to take the risk of being out of these assets at the wrong time. I already faced that pain in the 1990s when I sold my Microsoft and Oracle shares far too early. I faced that pain again when I sold Apple far too soon in the early 2000s. I will not make the same mistake again. My judgment to own Microsoft, Oracle and Apple was 100% correct. But my hands were weak because my positions were too large compared to my net worth. I couldn’t handle the volatility. That’s why I’m so insistent on using small, uniform position sizes. Even a $1,000 investment in BTC and ETH when I first recommended them in 2016 would be worth as much as $47,140 and $127,000, respectively, today. That’s a combined $174,140 from a $2,000 investment – even with the current pullback. That’s what you can still do in crypto so long as you use rational position sizing. Friends, I promise: As soon as I get the impression it’s time to dive back into the market, I’ll tell you. For now, the smart move is to raise cash and be patient. Both crypto and stocks are very oversold and due for a bounce. A word of caution: Feel free to trade the bounce with a small portion of your capital. But please don’t confuse a bounce with a brand-new bull market… because we’re just not there yet.