Crypto critics were feeling pretty smug this week.
New York Magazine said: “Crypto Is Crashing. It Deserves To.”
Yahoo Finance wrote: “Crypto is crashing. Here’s why Warren Buffett has hated it all along.”
Bloomberg even reported: “Bill Gates Blasts Crypto, NFTs as Based on ‘Greater Fool’ Theory.”
I’ll give them this: It feels good to be right. And it’s easy to hate an asset that’s already spiraling downward.
But those articles aren’t helpful to crypto investors.
That’s why I reached out to our crypto expert, Ian King.
He recently sat down with John Daly for Crypto Corner, a special series exclusively for Strategic Fortunes readers.
I’m going to share a sneak peek of their conversation here.
Read on below for what you should know about crypto bear markets…
John: It’s been quite a ride for the stock market, and even crazier and more volatile for cryptos. Bitcoin is at an 18-month low right now. What’s going on?
Ian: So you have to think of crypto in terms of a risk asset…
If you look at the risk-asset spectrum, the safest asset is probably a U.S. government bond. There are also value stocks and growth stocks. But the most speculative asset you can own is a cryptocurrency.
But crypto is really the only sector that has what I call asymmetric risk. So you might see crypto down 50% during the last bear market, but the upside in crypto is so much higher than it is in the stock market.
You can lose 70% on Netflix in six months and 70% in the Next Gen Coin. But Netflix isn’t going to give you 10X to 50X to 100X your returns over this decade.
So that’s why I think crypto has an interesting asymmetric risk opportunity.
But this is for investors who are able to weather the volatility with position sizing — keeping the percentage of their portfolio in crypto low.
John: And we’ve seen this before, right? Bitcoin dropped, I believe, 50% last summer. Is this cyclical?
Ian: It’s part of the territory. It’s a very volatile asset class if you’re looking for 100X gains. You sometimes can find phenomenal profits like these in crypto, but that also means you have to deal with significant pullbacks.
What we’ve seen in the past is that when bitcoin sells off, it hits a higher low than it did in the previous cycle. So when you look at a long-term chart of bitcoin, you’ll see higher lows and higher highs. That means the uptrend is still continuing higher.
So it’s par for the course, although there are some other factors at work right now.
John: What’s going on in the economy that’s affecting crypto now?
Ian: Everyone is worried about inflation.
The Consumer Price Index recently came in at 8.6%. That’s the highest reading in 40 years. The Fed is handcuffed in terms of raising interest rates. While its target is 2%, there’s no indication it can get there this year without crushing the economy.
So that’s a huge macro headwind not only for crypto, but for the entire investing space.
Now, when you have a bear market or a recession, stocks pull back. And over the long term, these are significant buying opportunities.
I lived through the dot-com bubble, the 2008 financial crisis and the 2018 pullback. And every time, the media were all up in arms about this being the next “Great Depression,” that stocks will be down for 10 years and it’s time to get out of the asset class for good.
And yet every time, within the next six months to a year, assets were either at all-time highs or headed back to new all-time highs.
I don’t see why this moment will be any different than the times that have come before.
I don’t want to give away Ian and John’s entire conversation here. If you’re interested in hearing their entire 20-minute discussion, I suggest you check out Ian’s Strategic Fortunes service.
In addition to a treasure trove of perks, once a month John joins Ian for a rundown on the crypto market. It’s a behind-the-scenes look you’ll find nowhere else.
For more details, click here.
And keep reading below for this week’s Winning ideas.
This Week’s Winning Ideas
Bitcoin’s No. 1 Rival Is Getting an Upgrade — Bitcoin’s standing as the biggest crypto is in jeopardy.
Here’s What’s Really Behind Crypto’s Latest Drop — Now that the crypto tide is going out, we’re starting to get a look at who’s swimming naked.
These Next-Gen Cryptos Are the Future of Real Estate — With real estate prices growing at the fastest rate in history, these next-gen cryptos are a huge deal.
Hold On for Dear Life! Bitcoin Will Come Back — Bitcoin has crashed numerous times throughout its history. And every time, it set up a life-changing rally.
Why LUNA Crashed 99.99999999999% — The LUNA crypto plunged from over $100 to less than a penny. Here’s why…
Senior Managing Editor, Banyan Hill Publishing