What is going to happen next?
This Crypto Winter Will Savage Many More People
We have seen crypto winters in the past. We have seen massive bear markets and giant hacks and crypto bankruptcies in the past. But this one will be different. Here's why: - FOMO brought in millons of retail investors. The purpose of retail investors is to feed the professional investors.
- There are many more companies crowding the crypto space.
- There was a dramatic increase in the amount of leverage and borrowing compared to the previous bear markets.
Put all this together and you have the makings of a true wipeout in the crypto market even beyond what we have already seen. These are dramatic differences and we are not even including the final factor of Fed tightening. Let's take a look in more detail. | |
Right now we are in a mid year election cycle with a first term Democratic president. According to The size of the crypto space was much smaller when we had previous crypto winters. Look at the chart above and you can see that the previous crypto winter, in 2018, started with total crypto value at less that $1 trillion while this one is starting at just under $3 trillion. The difference is the incredible hype that triggered the retail public to buy crypto. So we had a flood of public suckers, er, investors buying crypto that had no business buying crypto. The character of the crypto market changed from the true believers of 2018 to the retail public in 2021. When you buy because of FOMO you get SNAFUed. Got it? But the same thing applies to companies. The world is now flooded with companies trying to make money from crypto. Kinda like 1999 with the Dot Com Boom. Guess what? Busts follow booms. Same thing here. Then add in the ability to borrow money and buy crypto on leverage. We were only seeing the very beginning of leverage buying in 2018 but now it is commonplace. We even saw the hypesters and scamsters promoting how you could get over 20% return on your money if you lent crypto. The only way that makes economic sense is if the credit quality of the borrower sucks. Well, guess what? It sucked and people can't pay the loans as the price of crypto tanks. Margin calls are sweeping the crypto market causing forced liquidation. Ooops. Oh, and the Fed hiking rates doesn't help. So how do we make money from the current crypto winter? | |
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Last year, I told you about how crypto, and other things, were in bubbles because of the Fed keeping interest rates at zero and that the bubbles would pop as soon as the Fed started raising interest rates. That is happening now. I further told you that the bottom in Bitcoin, as a proxy for all crypto, would bottom around $10,000 give or take $1000. So that is what is happening now. So the way to make money in crypto right now is to be short. Period. Stay short probably until we reach below $11,000. By the way, I'm going to be starting a free crypto newsletter called Complete Crypto Analysis. Click here to sign up for free! | |
Words To Live By "My great concern,' said Lincoln, "is not whether you have failed, but whether you are content with your failure." How I Raised Myself From Failure to Success in Selling Frank Bettger Courtney Comment: The book is about selling but applies to every aspect of life! | |
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