Crypto is Down But Not Out
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Crypto is Down But Not Out
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The world's first diversified crypto portfolio, or "coin of coins"
Feb 2022: Update on crypto markets, stock markets and
global macroeconomics.
When the bulls are away, the bears will play.
If you have been watching the markets in the past few weeks, well… hopefully you have not been looking too closely. In the past, many
experts have highlighted some main points about crypto markets and this
particular time of year. Some characteristics of crypto markets are similar to stocks. However, there are large differences with crypto, as the market is truly worldwide and open 24/7.
First, we have the eternal battle between the bears and the bulls. An actual bear attacks with a downward strike of his claws; in stock and crypto markets, bears want the markets to go down. This is because markets tend
to go down swiftly, especially in times of fear, and bears can make more money, more quickly, when markets go swiftly down.
A literal bull attacks with an upward strike of his horns; in stock and crypto markets, bulls want the markets to go up. Markets often tend to behave irrationally, but it is frequently said that “markets take the elevator down, and the stairs back up."
A downturn in prices can drop further and faster when there is panic in the markets. Markets are driven by fear and greed, and fear tends to be more contagious than a simple pandemic, as you can catch it online as well. When the markets are panicking, it can be hard to keep your cool and think
rationally, but that is exactly what the bulls and value investors must do to
win.
Value investors believe that crypto and blockchain are the future of banking, insurance, technology, and financial systems. Despite the distracting media static, doom and gloom headlines, and other bad news, value investors must keep faith in what they believe and where they think the world will be.
"If in doubt, zoom on out" is also great advice.
Financial adviser since 1992, Jeremy Britton, says, “if in doubt, zoom right out”. Hourly and daily price fluctuations can cause panic and uncertainty, so it is important to look at price growth over 1, 3, or 5 years.
The charts show Bitcoin is up 249% over the last four years, whilst the diversified Bostoncoin crypto portfolio is up over 800% in the same period.
What else is driving the markets?
Aside from the eternal struggle of bulls and bears, over the past several years, it is noted that seasons and holidays play a role, particularly in crypto prices. Western nations may celebrate Easter, Christmas, Thanksgiving, and similar traditions, but westerners must remember that over two-thirds of the world may not celebrate these dates. Many Asian countries celebrate Chinese New Year instead (2022 is the year of the Water Tiger, which last occurred in 1962, thanks for asking).
In many Asian nations, Chinese New Year is a time to spend with family. Millions of factories and businesses close, and hundreds of millions of people take time off work and travel to be with family. Production slows to a snail’s pace, and many investors sell off their holdings to spend funds on travel, gifts, food, or just because there is no work.
If you have been around crypto markets for a few years, you will know that crypto investors in Asian nations tend to sell off towards Dec-Jan and then the market slowly recovers leading back into March-April (the date of Chinese New Year is linked to the moon, so it is not the same day every
year).
In the West, many investors are watching the US Fed as it struggles with the outcome of its own cash-printing silliness. There were many people who could not work during pandemic shutdowns, and small businesses, in
particular, did require some increased funding. The problem was that
under-regulated Fed QE policies saw some very large businesses receiving
massive bail-outs, even as their profits rose. The system was not perfect and did not seem fair to all.
Anyone who has completed Economics 101 knows that giving boatloads of free cash to anyone and everyone would result in hyperinflation and rising asset prices. Perhaps the boffins working in Central Banks may have
skipped class that day? A few weeks ago, the US government was claiming that higher prices, inflation, and supply-chain shortages would be “transitory”. They are no longer saying this, as the realisation of hyperinflation sets in.
The only way to prevent record inflation is to increase interest rates, which would likely devastate both homeowners and business owners. Higher interest rates can also trigger a drop in stocks, bonds, and yes, even crypto, as investors are forced to sell down assets to repay debt. On the surface, one can understand why market panic may be driving prices down, even
though western rate rises are currently just a rumour.
Interestingly, Lloyds of London and other UK banks are now offering
fixed-rate mortgages of 1.66% for ten years. Draw your own conclusions, but it seems that many banks may be assuming very low interest rates for a decade or more.
Is there any good news?
The good news includes:
1) Bears eventually go back to hibernating, particularly when the seasons change and other news comes out.
2) Interest rate hikes may be lower and slower than first feared.
3) The COVID pandemic may be having less of an impact on economies in 2022, as vaccine rates increase, less-deadly variants emerge, and herd immunity increases.
4) Crypto’s brief forays into lower-price territory can mean some bargains for value investors, especially the brave bulls who have the opportunity to invest before the recovery is fully known.
5) Tried and tested habits such as dollar-cost averaging (DCA), diversifying, and “buying the dip” still work well, provided you choose quality investments.
What is the smart money doing?
There is nothing much the bulls can do to reverse the impetus when the bears want to drive prices down. What the ‘zoomers’ (smart money investors who zoom out on charts) can do is take advantage of lower
prices when there is market panic, or incidences of Fear, Uncertainty, and Doubt (FUD).
This month, directors of BostonTrading.co took advantage of lower prices to add additional holdings to some of their existing investments.
In a month where market leaders Bitcoin and Ethereum were down by 30-50%, the Bostoncoin fund bought more of each asset, just as a smart person would stock up on toilet paper or tinned food when the prices are
suddenly slashed.
Whether you believe the near future will include an idyllic Metaverse or a zombie apocalypse, people will probably need BTC and ETH just as much as we need toilet paper and tinned corn.
Crypto winners this month include
• CRO, even after a drop, still up 220% for the year
• SAND, the promise of gaming and metaverse, up 420%
• SECRET, a wise buy that is now up 476% for the year
• LPT, defying trends to grow by 725% in 12 months
• XYO, still going gangbusters at 8 580% increase for the year
In other news…
Directors double-down during the dip
When Bitcoin was first created, the founder(s) never held any tokens for themselves just because they knew how. If anyone wanted to get Bitcoin, the person had to either add power and value to the network by mining
or buying BTC from the open market. There were no special privileges for a select few. From all accounts, it seemed that Satoshi Nakamoto despised the elites and their "enrichment for the 1%" agenda.
Some (dodgy) coin issuers engage in unfair market practices by holding back a large chunk of coins for founders, developers, marketers, and
influencers. The scammers release 20-50% of the coins to the market, and when the price increases, they can dump their own “free” coins for a profit and get rich whilst they crash the market.
This has happened time and time again with worthless meme coins and tokens pushed by celebrities. Let the buyer beware, especially of celebrities who are not experts, and always do your homework.
The founding team of BostonCoin and BostonTrading.co is comprised of all investors, who put in their own funds before the coin was launched to the public. There were never any preferential tokens held back from the open market, and none were awarded to anyone for any reason. This is known as a “fair launch” or “fair issue”, where, just like Bitcoin, everyone is invested on an equal opportunity basis.
During the recent price drop, the Bostoncoin team invested more into the portfolio whilst the price was down. This is a show of confidence, and the team is proud to be long-term value investors. “It is important to believe in what crypto stands for. We avoid the scammers, FUD-sters, and nay-sayers. News media changes every day, but long-term, value investing always beats the market fluff and hype. To those who HODL for the long-term, and to those who double-down on the dips, we salute you,” said CFO
Jeremy Britton in his latest newsletter.
Cathie Wood’s flagship ARK Innovation ETF is now trading at around a 56% discount from its peak last year, and some investors may be wondering whether to take notice of her clarion call to buy innovation which is
on “sale.”
Speaking last Tuesday at Ark Investment Management’s virtual Big Ideas Summit 2022, following a big drawdown from her flagship ETF, Wood
declared, “Innovation is on sale and it will be really important to investors
to get to move towards the right side of change, given the amount of disruption that we do expect.”
Nine of the fifty ARK Innovation ETF’s holdings have grown revenues at over 100% per annum, including those that have grown revenues at a
rate of over 50% brings the total number to 21, just under half of their 50
stocks.
Considering the average returns in traditional stocks, such as the ASX200 (3.7% for the past twelve months) and the SP500 (18.8% for the year), crypto markets, with their innovation and double or triple-digit returns, can no longer be ignored.
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