In this Article:
- Volatility and Tough Times
- Wall Street Is Still Long Term Bullish on Crypto
- The Adults Are Coming – And the Bros Are on The Way Out
- Things Are Bad, But I’m Still Bullish Too
Over the years, I’ve invested portions of my money with other money managers who were experts in areas I’m not.
One thing I’ve learned is no matter who I work with… there are times when the investment I’m in goes upside-down.
I’ve had this happen in private equity deals… multifamily investing… and private hard money lending.
Nobody put a gun to my head when I invested. So I can accept volatility and tough times.
What I won’t accept from my advisors is radio silence – or even worse – outright denial.
What I’ve learned is that really great deal sponsors and money managers tackle setbacks head-on… openly and cooperatively.
I’ve always sought to be the same way with you.
In that vein, there’s no way to sugarcoat the absolute beating we’re taking in our crypto investments this year. Everything that could go wrong has gone wrong.
Leveraged lending led to billions of dollars’ worth of bitcoin being dumped on the market.
This selling triggered even more selling in a cascading effect that caused long-time HODLers (hold on for dear life) – who had made the mistake of using leverage – to sell.
This perfect storm of events has laid waste to everyone holding crypto assets this year.
While it may be cold comfort to you, my own crypto portfolio is currently down millions of dollars.
I don’t share this with you to garner sympathy… but rather to show you I’m right there with you experiencing this pain in a very real way.
And while the next 12 months or so look bloody ugly for crypto (how’s that for truth in advertising?)… we’re seeing a culture change that will make the ecosystem much stronger when the cycle turns.
Wall Street Is Still Long Term Bullish on Crypto
Over the years, I’ve learned you can’t just look at price as the sole barometer of long-term value in an asset class.
You also have to look at the overarching tailwind driving it.
During bear markets like we’re experiencing now in crypto… I re-evaluate my fundamental thesis for being in the asset in the first place.
If the tailwind remains intact, then my conviction remains strong.
Since I started investing in crypto in 2016, I’ve told you we’d see bitcoin (and crypto overall) go from a few hundred thousand users to billions of users.
All along our journey together I’ve said it would be institutional adoption that would be the main driver of taking the crypto asset class mainstream.
That tailwind is only getting stronger.
- In August, BlackRock – the world’s largest asset manager with $8.5 trillion in funds under management – announced it partnered with Coinbase to allow its own institutional clients access to the crypto market.
- In October, BNY Mellon – America’s oldest bank – announced its digital asset custody platform. The platform will allow clients to hold and transfer bitcoin and ether.The bank decided to embrace cryptocurrency after a recent survey of nearly 300 institutional investors worldwide. It found over 91% of institutional investors are interested in tokenized products.With that fervent demand among the world’s largest investors, it’s no surprise that other firms are embracing crypto as aggressively as BNY Mellon.
- Also in October, tech giant Google selected Coinbase to assist it in taking cloud payments of cryptocurrency.
- On November 3, Fortune reported that the retail brokerage powerhouse Fidelity will offer crypto trading to its 35 million customers.
Over the short term, these announcements won’t do a damn thing to raise the bitcoin price. And so bitcoin will continue to languish until this bear market has run its course.
However, it does tell us that the next crypto bull market will have more market participants with more money to put to work than any other time in history…
That’s encouraging, but in my opinion, it will be at least a year before that adoption picks up enough speed to start moving bitcoin’s price higher.
That tells us that the asset still has legs long term and that is why we must continue to wait out this bear market because once that money starts to hit, you will see another epic bull run.
What I am also encouraged to see is the “gray beards” finally showing up in the space.
Here’s what I mean by “gray beards”…
The Adults Are Coming – And the Bros Are on The Way Out
The players in the crypto space for this most recent bull run were dominated by “Crypto Bros.”
I’m talking about the so-called “geniuses” that ran Three Arrows Capital, founders Su Zhu and Kyle Davies… BlockFi Founder Zac Prince… and Celsius founder Alex Mashinsky.
There is no doubt these boys were clever, but they were irresponsible with their company’s finances and made unforgivable blunders in their risk management.
They developed cutting-edge technology and built out the infrastructure for blockchain to flourish. And many of them became billionaires.
However, they lacked the maturity needed to manage a complex financial firm…
Over the past year, we’ve seen “Crypto Messiahs” like FTX CEO Sam Bankman-Fried, Terra founder Do Kwon, and Alameda Research CEO Caroline Ellison completely wreck their financial firms.
These “children” of the internet age did not have the institutional knowledge one gets from spending decades in the financial industry.
Fortunately today, we are seeing a new set of seasoned so-called “gray beard” actors come into this space.
I’m talking about companies like Visa, Microsoft, and JPMorgan.
These are professional men and women who run multibillion-dollar businesses. They know what they’re doing. Although the crypto creators are smart, institutions won’t tolerate their shenanigans. And they’ll tame the Wild West fraudulent aspects of the crypto space.
We saw a similar shift in the internet space after the dot-com bust.
When Pets.com and the others washed out, we saw a wave of well-seasoned professionals come into companies like Amazon, eBay, Paypal, Expedia, and Priceline, transforming these companies into trillions of dollars of shareholder value.
I expect the same to occur in the world of crypto.
So what does this mean for bitcoin?
And as I showed you above, institutions want bitcoin to survive.
To be clear: There’s no quick and easy way out of the current bear market. I don’t expect any headwinds to clear in a week… a month… or anything less than a year.
But the headwinds will eventually abate. Sentiment will reverse. And if history is any guide, bitcoin’s price will rally to new all-time highs.
FUD (fear, uncertainty, and doubt) will eventually give way to FOMO (fear of missing out) as we head into the 2024 Bitcoin Halving.
Things Are Bad, But I’m Still Bullish Too
Friends, I’ve always promised to never BS you or insult your intelligence.
And that’s why I’m telling you in plain English the next 12 months will be unpleasant for us crypto investors.
So what do we do now?
The first thing we must do is get clear on this asset’s future. Will it survive? Will it still become widely owned?
The announcements I shared above suggest that the long-term adoption story remains very much intact.
Here is what I am paying special attention to…
With all the scandals surrounding private firms that facilitate crypto trading and lending and bitcoin’s 76% drop from its all-time highs… you’d think the world’s biggest financial institutions and tech firms would avoid entering the industry.
That’s exactly what they did in 2018 during bitcoin’s 85% implosion. But this time around, they’re doing something different… They’re flocking to bitcoin.
This is happening despite bitcoin and the crypto asset class coming under more pressure than I have ever seen before.
What is clear to me is that Wall Street and Silicon Valley continue to see a long-term runway of growth, value, and profits in crypto – despite the current bear market.
Otherwise, they wouldn’t be jumping into the market while it’s crashing around them.
Blackrock, Fidelity, and BNY Mellon aren’t stupid… So if they’re not stupid – could it mean they’re seeing something everyone else is missing?
These are the most reputable firms on Wall Street. They make billions a year in profits. They would not risk those profits on a pipe dream.
That means they see real value here. And that matters because they’re arguably the world’s three most important “shepherds” of capital.
And where they go, their flock of investors will follow.
That continues to make me bullish on bitcoin and crypto’s long-term prospects. And it’s why I still believe bitcoin will eventually hit $500,000 over the coming years.
Let the Game Come to You!