We’re in a crypto “autumn” … the long-term picture remains bullish … three reasons for optimism today … a free, special report from Charlie Shrem and Luke Lango
We’re in a crypto “autumn,” as opposed to a crypto “winter.”
That’s according to 29-year-old crypto billionaire, Sam Bankman-Fried.
To make sure we’re all on the same page, a crypto “winter” refers to a period when prices fall and remain low for longer than a year.
But that’s not what Bankman-Fried believes is happening:
Certainly, there has been a slowdown…
I don’t think it’s really a winter. We’re still seeing a lot of activity in this space, and a lot of excitement.
So, when will this activity and excitement translate into higher crypto/altcoin prices? And what factors might delay such a rebound?
Today, let’s find out with the help of our crypto experts, Charlie Shrem and Luke Lango, of Ultimate Crypto.
Though crypto prices have bounced off January lows, it’s too soon to say we’re through this bout of weakness. However, sector fundamentals remain strong, technicals are intact, and Bitcoin whales have been buying.
Put it all together and we’re confident that patient investors will be rewarded.
Let’s jump into all the details.
***Expect continued volatility and weakness for the near future
For newer Digest readers, Charlie was one of bitcoin’s earliest backers and today is considered one of the most influential people in cryptocurrencies.
He’s been mentioned in Fortune… Forbes… CNN… 60 Minutes… TED Talks… Bloomberg… and The Wall Street Journal… to name a few. His story has been featured in numerous Netflix documentaries and best-selling books. And yes, he’s become a bitcoin millionaire many times over thanks to his early involvement.
Meanwhile, Luke is our hypergrowth investment expert with a growing list of 10X-winners under his belt. And few sectors offer greater potential for 1,000%-wins than cryptocurrencies.
Together, Charlie and Luke helm Ultimate Crypto. The service focuses on identifying tomorrow’s altcoins winners.
Returning to market conditions today, crypto investors shouldn’t be expecting massive returns anytime soon. There are still too many headwinds.
From Charlie and Luke:
The market is under fire from inflation, the Fed, and now a potential geopolitical conflict in Europe. Until those issues are resolved, cryptos will remain highly volatile.
However, we believe last week’s resilience is indicative of the fact that whatever pain cryptos do endure over the next few weeks at the hands of these macroeconomic and geopolitical headwinds will be largely mitigated by robust buying support.
In other words, cryptos aren’t going to soar immediately from here – but barring a “Black Swan” risk, they won’t collapse either.
Rather, they’ll stumble about until issues surrounding inflation and the Fed are resolved, at which point the whole crypto market will likely take a big leg higher, led by Bitcoin powering towards $100,000.
It’s worth noting that Bankman-Fried shares Charlie and Luke’s perspective on the Fed’s substantial impact on the crypto market:
To the extent that Fed policy remains one of the core drivers of market movements, I think we’re going to continue to see that pretty strong correlation over the next, probably, months.
***Why patient optimism is the right prescription for today
We have nervous investors, historic inflation, geopolitical risk, and a hawkish Fed – not a great combo for crypto, or many investment markets, for that matter.
So, what are the reasons for optimism? Well, let’s start with Bitcoin’s technicals.
Back to Charlie and Luke:
We’re bullish that Bitcoin has held its multi-month uptrend dating back to the start of 2021 (shaded below).
We’re also bullish on the Relative Strength Index (RSI, at the bottom), which has swung powerfully from below 50 to above 50 in a matter of days – a bullish indicator that last happened in September 2021 and July 2021.
Both of those RSI upswings led to near-term choppiness followed by a medium-term breakout.
We could be due for similar price action over the next few months – a small reset here, then a big breakout towards $50,000.
But there’s more to like than just technicals.
***Charlie and Luke also point toward the continued adoption of Bitcoin by corporate America
They highlight accounting giant, KPMG, which agreed to add both Bitcoin and Ethereum to its balance sheet last week.
Back to their update:
Recall that, in our outlook for 2022, we identified large corporations adding cryptos to their balance sheets as a huge potential upside catalyst. It looks like that catalyst is materializing as hoped.
We expect more major corporations to follow suit in the coming months, and each new company will add more buying firepower into the crypto market.
This demand also importantly provides a floor for Bitcoin prices, much as institutions buying stocks provides a floor for their prices.
To Charlie and Luke’s point, software company, MicroStrategy, bought $25 million worth of Bitcoin between Dec. 30, 2021, and Jan. 31, 2022. The company paid an average price of $37,865.
By the way, don’t miss the significance of MicroStrategy’s purchase-timing from a broader investment perspective.
It is hard to buy any asset when prices are in the gutter. As investors, we tend to extrapolate and expect further declines.
That’s why it can be incredibly helpful to ask a follow-up question as you evaluate a purchase. In addition to considering “what’s the likelihood that the price keeps dropping?” also ask, “even if prices drop, is today’s price one that I believe will make me money X years from today?”
This second question helps relieve investors from the burden of perfection. After all, no one can time markets perfectly. But perfect isn’t required to make significant wealth.
***Meanwhile, Bitcoin “whales” have been adding to their positions
Let’s say you have no idea how to invest in a specific asset so you decide to follow someone else’s lead.
Which of the following would you prefer?
Thousands of small investors, sinking in a few hundred or few thousand dollars each?
Or a handful of big-dollar “whale” investors, allocating minimally $10M, some up to $50 million?
I’m going to guess you’d choose to follow the whales.
After all, logic suggests that the whales had to be financially savvy enough to amass their huge wealth in the first place. So, one could argue that the same intelligence or access to information that helped them become rich is now informing them about investing in this specific class.
Well, the Bitcoin whales have been buying.
Back to Charlie and Luke:
Bitcoin whales have been buying Bitcoin in bulk.
Addresses with 1,000 Bitcoin or more have added a combined 220,000 coins to their wallets since December 23, marking the most rapid accumulation of Bitcoin by whales since September 2019.
Now, to be clear, the September 2019 super accumulation was followed by rangebound trading over the subsequent year.
Therefore, this accumulation does not necessarily mean Bitcoin prices are going higher. But it does mean that the “big money” is getting very bullish.
***Putting it all together
Expect crypto prices to remain volatile in the coming months.
As we pointed out in the Digest earlier this year, Bitcoin’s price action is no longer rising along with bond yields. Instead, as yields have been surging, Bitcoin has fallen like any risk asset. This suggests more volatility as the Fed embarks on its rate-hiking program next month.
That said, as we’ve highlighted today, technicals, corporate adoption, and whale-purchases are all bullish. And these periods of price weakness are par for the course for cryptocurrencies. But when conditions change, prices can explode higher in short order.
That’s why Charlie and Luke have been adding to their Ultimate Crypto portfolio in recent weeks.
Last week, Charlie held a special, live event to discuss the state of today’s crypto market. He calls the period we’re entering “Phase 3.”
In short, this is a time in which the markets are maturing, and it’s going to become harder and harder to pick out the cryptos that are worth their salt. On the other hand, certain top-tier altcoins will become tomorrow’s household names, creating enormous wealth in the process.
I’ll give Charlie and Luke the final word:
Overall, we believe the fundamentals underlying cryptos remain very healthy today.
Does that mean price action will follow suit immediately? Not necessarily. There are too many macro risk factors at play today to push cryptos significantly higher in the near term.
However, it does mean that once those macro factors clear, cryptos are in a position to soar.
We suspect those headwinds will pass within the next few months, and therefore, we believe cryptos are due for a big 2022 surge with much of the firepower coming in the second half of the year.
Have a good evening,
Read More: When Will Crypto Hit New Highs?