The two most popular crypto assets, bitcoin (BTC) and ether (ETH), are down about 45% from their highs last fall. That’s despite some more positive trading over the last couple of days.
And the crypto market cap – the sum value of all tradeable cryptos – is down 43% since it peaked last November.
As usual when crypto plunges, the naysayers are out in force.
On Monday, Slate – a progressive online magazine – ran the headline “Bitcoin Is Just a Crappy Tech Stock.”
And you’ve likely seen forecasts about crypto going to zero.
But as my mentor and contrarian investing legend Bill Bonner once put it, getting your news from these sources is like watching a bad opera. You can tell from all the shrieking that something important is happening. But you’re missing the plot entirely.
In this case, you’re missing that crypto’s fundamentals are stronger than ever.
That’s why here at the Cut, we view this sell-off as a rare opportunity to get quality cryptos at bargain-basement prices.
But before we get to that, it’s important you grasp a key point.
Stocks are taking a beating, too.
Our regular stand-in for the U.S. stock market, the S&P 500, is down 9.5% from its high on January 4.
That’s its steepest fall since September 2020.
And the tech-heavy Nasdaq-100 is down 16% from its high on November 21.
That’s its steepest fall since the pandemic-induced sell-off in March 2020.
What’s causing all this carnage?
In two words, the Fed.
Inflation is at its highest level in 40 years. The latest reading showed consumer prices up 7% over the past 12 months.
This has led Fed boss Jay Powell to announce that the central bank will raise rates faster than investors expected. He also says the Fed will “taper” its bond-buying (aka quantitative easing, or QE).
Now, investors are fretting that the era of cheap money that’s propped up asset prices is ending.
So they’re dumping riskier assets like tech stocks and crypto… and seeking less risky investments.
Nobody likes having their positions cut in half.
But if you’ve been following our guidelines… and keeping your crypto investments to 10% or less of your portfolio… you’ll be fine.
With a 10% allocation to crypto, a 50% drop for those investments translates to just a 5% drop in the value of your portfolio. That’s not pleasant. But it’s not the kind of drop that will ruin you.
Meanwhile, the upside potential of cryptos is bigger than any other asset class we know of…
For example, if you bought bitcoin or ether during the pandemic-induced sell-off in March 2020, you’d be up 652% and 2,150% respectively.
It may surprise you, given what’s happened with crypto prices lately. But fundamentally, 2021 was a great year for crypto…
Here are some key stats about last year. They come from Greg Wilson, colleague Teeka Tiwari’s top crypto analyst…
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The number of bitcoin transactions jumped 317% to $4.2 trillion
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The number of Ethereum transactions soared 729% to $3.3 trillion
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The overall supply of stablecoins (cryptos with values tied to the value of a fiat currency) grew 388% to $140 billion
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Stablecoin transaction volume increased by 370% to over $5 trillion
You’ll be hard pressed to find these kinds of growth metrics elsewhere. They show a surge in adoption. And that’s bullish, not bearish, for crypto.
According to Greg, the three most significant are:
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Record venture capital (VC) funding
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The breakneck speed of crypto innovation
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The level of developer talent pouring into the industry
Over to Greg for more details…
Crypto funding has reached a record $25 billion. And there were over 1,700 VC deals last year. More money went into crypto venture funding in 2021 than in the previous six years combined. This will propel the industry forward over the coming months and years.
Meanwhile, talent keeps flocking to crypto. Electric Capital’s 2021 Developer Report reveals that a record 18,000-plus developers are working in crypto. And that number is growing faster than ever.
These developers keep building on what crypto can do. Greg again…
In 2015 and 2016, we saw the Ethereum blockchain and Ethereum-based tokens and wallets enter the crypto universe. In 2017 and 2018, initial coin offerings (the crypto equivalent of an initial public offering, or IPO) and ENS (Ethereum Name Service) domains (simplified, human-readable crypto addresses) came on the scene.
And more recently, DeFi (decentralized finance) and NFTs (non-fungible tokens) have grown rapidly.
That’s why Greg says now is a great time to buy some bitcoin or ether.
Crypto fundamentals are rock solid. So lower prices let you buy quality assets at steep discounts.
Just remember to keep your stakes small. Greg recommends a $200 to $400 position for most investors.
That may not seem like a lot. But as I said, if you bought bitcoin or ether in March 2020, you’d be up 652% and 2,150%.
The latter would have turned a $400 stake into $9,000.
These are digital assets that are cryptographically secured and authenticated on a blockchain – the distributed digital ledger tech underpinning all cryptocurrencies. Think of them as digital collectibles.
We can “tokenize” artwork, trading cards, video clips, music tracks, and more and store them on a blockchain.
And as Jeff Brown – our tech and digital asset expert – has been saying, 2021 was a breakout year for NFTs. Jeff…
Last December alone, NFT sales reached $2.3 billion. That’s almost seven times more than the $340 million NFT sales in all of 2020.
What’s more, venture capital is piling in. Last year, Andreessen Horowitz – one of the most successful VC firms in Silicon Valley – backed two raises for the popular NFT marketplace OpenSea. Across two funding rounds, the firm poured more than $123 million into the company.
And this month, crypto-focused firm Paradigm led a funding round that raised more than $300 million for OpenSea. All this capital has driven OpenSea’s valuation to more than $13 billion.
That’s impressive. And that’s before you get to the eye-popping prices individual NFT artworks are selling for.
Take the Bored Ape Yacht Club collection. One of these coveted NFTs jumped from $228 to more than $560,000. That’s a 246,501% return.
Another Bored Ape jumped from $228 at first sale to almost $3 million at most recent sale.
In total, NFTs related to this collection have generated over $1 billion in sales since its release last April.
But Jeff isn’t recommending you go out and speculate on individual tokens.
He’s identified three under-the-radar “NFT coins” that represent the best plays for early investors in this rapidly growing market.
They’re coins associated with blockchain projects that let folks create – as well as buy and sell – NFTs across the world.
And tonight at 8 p.m. ET, in a special broadcast, Jeff will show how these coins could unleash decades’ worth of returns in as little as three months.
So if you’re interested in joining him… and profiting from the surging interest in NFTs, make sure to reserve your free spot here.
Jeff will not only reveal these three coins… He’ll also give away his own line of NFTs to several attendees – a first here at Legacy.
Regards,
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Chris Lowe
January 26, 2022