Cryptocurrencies are falling! Help! Its incredible to look at Cryptocurrencies at the moment and think that this is suppose to be the salvation of all would be investors who see as the holy grail. But the fact is that nothing goes up exponentially without it falling to some degree back to normalcy. And in this case, that is what we are seeing. After seeing some recent highs, Bitcoin has come back to where it was in early February. So what has caused this most recent events? Another round of headline risks? Another round of regulation? Another occurrence of hacks etc? YES, YES, and YES.
The reality is that for would be investors of the crypto space, volatility is your way of life. Cryptocurrencies are by design the new frontier. The wild wild west. Where laws and rules are still being formed. And that reality is that Cryptocurrencies are an inefficient market. What you have is mis-information as well as insider manipulation. Although hard to prove, due to the fact that we don’t know every single transaction, one can at least deduce that there are people who are “in-the-know”…and unfortunately, we are not that.
So what does that mean for you and I? it means to stay the course. If you drank from the kool-aid back in 2017…then what has caused you to change your mind? Are you rattled because you put too much money in the market? I hope not, but that could be a reason why you have gotten jittery. But let’s not lose all hope. Remember to not invest based on emotion. But on facts. Its all that you can do before you cry uncle and crystalize a mountain of losses and associated pain!
So what happened last week that spooked this latest sell-off?
Last week’s Summary of new events:
• Bitcoin, down 10%... is now -40% Year-To-Date.
• Google Ban’s cryptocurrency adds – Google is following what Facebook did about 1 month ago, which is policy of banning cryptocurrency and initial coin offering advertisements. … "including but not limited to initial coin offerings (ICO), cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice." The restriction takes effect in June and will extend to all of Google's ad platforms – Is this really shocking? Not really, you have a lot of shady activity at the moment of people who are taking advantage of naïve investors.
• A new headline where an Allianz (a German based asset management firm) analyst thinks Bitcoin is worthless, “Bitcoin’s intrinsic value is ZERO”. --- What else is new here? Not much.
• Bitcoin has been absent from a recent blog that at one point touted them as top 10 investments. – Not surprising since the volatility of Bitcoin is like 100%. All to say, don’t bet the farm on crypto. Again…not surprising.
• Senate Hearings on March 14th to further dive into more regulation of Cryptocurrencies. Both side of the isles are in agreement that more oversight is needed.
On the positive side of the ledger
• Billionaire Founder of Twitter and Square – Jack Dorsey, just added $2.5M into Lightning Labs to further Cryptocurrency development (Lightning Labs is a blockchain startup). I’m sure those dollars were not a direct purchase of Bitcoin per se, but to the ecosystem nevertheless.
• Other investors that have added/seeded Lighting Labs include: Litecoin creator (Charlie Lee), Former PayPal COO (David Sacks), BitGo CTO (Ben Davenport), Eventbrite co-founder (Kevin Hartz), Venture capital firm Digital Currency Group, Robinhood co-founder (Vlad Tenev).
• According to Lightning Labs CEO Elizabeth Stark, the firm’s platform "functions as a software layer that sits on top of the bitcoin network……If bitcoin is like a decentralized savings account, Lightning is a decentralized checking account where users can send money instantly," Stark said Lightning Labs is an answer to the growing chorus of complaints about high bitcoin fees and slow transaction processing times….it is expected that Lightning Labs is a game changer for Bitcoin.
• A company called Marex Solutions is offering for the first time two separate structured notes. Both notes were created by a firm called ResonanceX, which was formed by a former managing director of JP Morgan (Guillaume Chatain). One of the structured notes will be using Ethereum’s Blockchain….the underlying investment is the FTSE 100, in British Pounds). This is somewhat of a crazy jump in terms of creating a security that is essentially an equity instrument but can be settled on the Ethereum platform. This is the first of the kind….and could be the beginning of things to come…or it can implode. Who knows. But for me this is truly innovative. And speaks to Ethereum’s future, as well as to the broader ICO echo system.
• On today’s headline, Peter Thiel, Billionaire (co-founded PayPal, CEO of eBay, and Board member of Facebook) just came out and stated that Bitcoin is the future and has been buying Bitcoin since 2012, via his venture firm, Founders Fund (Peter is worth $3B). He also stated that Bitcoin will squeeze out Ethereum and other ICOs. He is a person that sees Bitcoin as digital Gold.
What to Do in this current Bearish Environment?
• I think given the amount of volatility in the market, its good to be patient and wait for your FAT pitch.
• Ethereum at <$500….is truly appealing…so I recommend dollar cost averaging…buy a little here, buy a little more if it falls below….buy it along the way…and sit on it.
• The BEARS and the SELLERS will eventually go away…and the BULLS will be back…..not sure when, but it will. Ethereum’s value proposition is too compelling. But know this! ETHEREUM could go back to $200…so don’t shoot all your bullets now….save some “DRY POWDER”….for the long haul.
• Ethereum got to $470 yesterday before bouncing back. Too bad that I missed that bite, wish I bought. Its now back at $536.
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