In the first four months of the year, the world’s first cryptocurrency soared.
It went from $28,996 at the start of January to a peak of $64,869 on April 15 – a 124% rise.
Then came the fall…
Bitcoin (BTC) has since plunged as much as 55% from its high.
And the crypto market fell along with it.
As I type, bitcoin is down 53% from its peak.
You may be asking, “Who are the crazies who invest in this stuff? Why would any sane person own something that can fall that much in so short a time?”
The answer… anyone who wants to turn tiny grubstakes into life-changing gains.
Already, paid-up subscribers of our crypto investing expert, Teeka Tiwari, have had the chance to make 8,465% on bitcoin.
That would have turned every $1,000 grubstake into $85,650.
And as you’ll see today, two key fundamental forces mean there’s still the potential for a nearly 1,500% gain from here.
We don’t recommend you take your life savings and dump it all into crypto. That would be reckless.
But as part of a diversified portfolio, speculations on crypto are still your best shot at really moving the needle on your wealth.
If you’re reading the Cut for the first time, you recently subscribed to one of the 20 paid investment advisories we publish at Legacy Research.
It’s the publishing alliance of Teeka Tiwari’s Palm Beach Research Group, Jeff Brown’s Brownstone Research, Doug Casey’s Casey Research, and Bill Bonner’s Rogue Economics.
The Daily Cut is the premium e-letter we created for all paid-up Legacy subscribers.
If I (Chris Lowe) am doing my job right, you’ll never miss a big moneymaking idea from Teeka, Jeff, and the rest of the team.
One of the core recommendations we’ve been making – since August 2018… just days after our inaugural edition – is to own some bitcoin.
We weren’t on the case as early as Teeka. Still… if you’d bought bitcoin when we first recommended it here at the Cut… you’d be sitting on a profit of 400% today.
Quite the contrary…
We’ve shown you, over and over again, how bitcoin and other cryptos are highly volatile.
Here’s how Teeka put it…
We’ve seen how volatile bitcoin can be. In the 2018 “Crypto Winter” bear market, it plunged as much as 84%… only to rocket to new highs this year.
I’ve said for years that volatility is the price you must be willing to pay for life-changing gains in crypto. You won’t see these huge up cycles without some huge down cycles, too.
That’s why he recommends readers of his flagship Palm Beach Letter advisory set aside no more than 10% of their portfolios for bitcoin… and another 2% for smaller cryptos (aka altcoins).
That way, even a 50% drop in bitcoin will take only a 5% chunk out of your overall portfolio.
That’s unpleasant. But it’s not a steep enough fall to make you panic sell. So you can hold your position long enough to profit from the subsequent recovery.
I put together a table to show you what I mean.
In the second column, you see the annual gain or loss for bitcoin. In the third, you see the maximum drawdown (peak-to-trough fall).
|
Bitcoin |
||
|---|---|---|
|
Year |
Annual Return |
Max Drawdown |
|
2010 |
9,900% |
-94% |
|
2011 |
1,473% |
-94% |
|
2012 |
186% |
-85% |
|
2013 |
5,507% |
-83% |
|
2014 |
-58% |
-71% |
|
2015 |
35% |
-78% |
|
2016 |
125% |
-30% |
|
2017 |
1,331% |
-40% |
|
2018 |
-73% |
-72% |
|
2019 |
95% |
-43% |
|
2020 |
301% |
-61% |
|
2021 YTD |
10% |
-55% |
Looking at this table, one thing is clear… If you can’t handle sky-high volatility, you can’t have the chance to earn the outsized returns bitcoin has delivered.
As a U.S. Air Force flying manual from the Korean War said, “No guts, no glory.”
Since going public in 1997, Amazon.com (AMZN) shares have climbed 146,985%.
That’s enough to turn every $1,000 stake into about $1.5 million.
But to earn those gains, you’d have had to suffer through drawdowns of 56%… 65%… and even 94%.
Apple (AAPL) is up 147,944% since it went public in 1980.
That’s also enough to turn every $1,000 into nearly $1.5 million.
But to realize those gains, you’d have had to go through a 91% plunge in the dot-com crash. And there were several drawdowns of 40% or more to challenge your faith along the way.
That’s why Teeka calls volatility “the price you must be willing to pay” to earn spectacular results as an investor.
I refer to this a lot. But it’s critical to grasp…
If you’re not willing to pay this price, you’re better off avoiding crypto altogether. Put your money instead into something like a bond fund or a bank CD.
You’ll be out of the running for life-changing gains. But you’ll avoid the stomach-churning volatility that comes with crypto investing.
Back to Teeka…
The best way to think of “Mr. Market” is as a moody teenager. Sometimes, he’s on a high… and is bidding up assets beyond their fundamental values. Sometimes, he’s in a sulk… and is prepared to sell the same assets for less than they’re worth.
I’m not saying I don’t ever look at crypto prices. That’s impossible. But I don’t let price be my guiding star when it comes to my research. When I’m figuring out the future of any investment, I look at two things: Is it getting better? Are more people using it?
This is particularly important for investments in new technologies. And I view cryptos as a tech play.
So for a moment, I want you to forget bitcoin is down 53% from its high. And I want you to consider some of the latest news around innovation and adoption.
The bitcoin blockchain keeps a tamperproof record of all bitcoin transactions.
RSK is what’s known as a “sidechain” – a blockchain linked to the bitcoin blockchain. It allows developers to build decentralized finance – or DeFi – services based on bitcoin.
This will open the door for decentralized crypto lending and trading… decentralized exchanges… even decentralized e-commerce platforms – all on the most secure blockchain in the world.
RSK also speeds up transactions. It can handle about 100 transactions per second (tps) – roughly the same as PayPal. And it plans to bring that to 20,000 tps.
Right now, the bitcoin transaction speed is 5 to 7 tps. RSK will bring a clear improvement in usability. It will allow for transactions up to 4,000 times faster than what the bitcoin blockchain is able to handle on its own.
I’ve spilled a lot of ink in these pages about corporate America’s adoption of bitcoin.
We’ve looked at how large corporations such as Tesla (TSLA), MicroStrategy (MSTR), Square (SQ), and PayPal (PYPL) are adding the cryptocurrency to their balance sheets.
That’s because they see it as a good hedge against a devaluing dollar… and negative interest rates around the world.
We’ve also looked at how Square and PayPal now allow their customers to buy crypto via their online payment apps.
And as Teeka’s analyst Grant Wasylik pointed out recently, U.S. politicians are the latest adopters…
You can read Grant’s essential essay in Teeka’s free e-letter, Palm Beach Daily. But I’ll give you the highlights here…
Financial disclosures from July 7 reveal that Senator Pat Toomey (R-Pennsylvania) invested in two of Grayscale’s crypto funds.
These allow you to get exposure to bitcoin and other crypto through your regular broker.
Toomey isn’t the only lawmaker on Capitol Hill who owns crypto.
Filings reveal that Representative Barry Moore (R-Alabama) and Senator Cynthia Lummis (R-Wyoming) do too.
Some politicians are taking it a step further. Miami’s Republican mayor, Francis Suarez, wants to turn the city into a crypto hub.
He’s pushing for the city to pay municipal employees a percentage of their salaries in bitcoin. He’s advocated for accepting crypto for taxes. He’s even financing his re-election campaign with bitcoin.
And state legislatures in Texas and Wyoming have passed laws recognizing the legal status of cryptocurrencies.
Remember, you make money in the market by buying low and selling high.
That means buying when others are fearful… and selling when others are greedy.
And right now, as we’ve seen, fear is stalking the crypto market.
But it’s just a short-term issue. Teeka sees bitcoin heading from $32,500, where it is today, to $500,000, as innovation and adoption make it more valuable.
This won’t be an easy move. It’s hard to buy in times of fear. But if you have the guts, it’s a great way to lock in lower prices for the world’s premier cryptocurrency.
You stand the chance to make a 1,438% gain as bitcoin rises to Teeka’s target price of $500,000. That’s enough to turn every $1,000 investment into $15,385.
You can find out how to buy bitcoin in our free special report here.
Just remember to keep your position size small. Teeka recommends an initial stake of $200 to $400 for smaller investors and $500 to $1,000 for larger investors.
Regards,
 |
Chris Lowe
July 22, 2021
Barcelona, Spain