The Mainstream Is Wrong (Again) on Bitcoin

Bitcoin has been a on real rollercoaster ride of late…

Over the past five days, it’s gone from just over $32,000… to more than $40,000… and back to $38,000.

And once again, the mainstream has gotten it wrong on what’s behind the big moves.

As Weekly Pulse host Tom Beal and I discuss this week, this kind of volatility is just bitcoin being bitcoin.

That’s why, if you want to be in with the chance at life-changing gains, you need to tune out short-term moves like these.

Instead, focus on two risk-management rules that colleague and world-renowned crypto expert Teeka Tiwari urges all his readers to follow.

It’s all in your Weekly Pulse video update at the top of the page.

Regards,

Chris Lowe
Editor, The Daily Cut and Legacy Inner Circle

Transcript

Tom Beal: How to not lose sleep at night during the highs and lows of the bitcoin volatility?

My name is Tom Beal, host of The Weekly Pulse, where we break down the biggest wealth growth story of the week. I’m here today with the editor of Legacy Inner Circle, Chris Lowe. Chris, how do we kick off today’s conversation?

Chris Lowe: Tom, I thought we’d talk about bitcoin this week again. Over the past five trading days – you may have noticed; I know you own some bitcoin – it’s been bouncing around like crazy. It went from $32,224 to over $40,000. And as we’re recording this, it’s down to about $37,500 per bitcoin. That’s enough to make anyone’s head spin.

So today, I thought we’d do three things…

First, we’ll look at what’s behind those big moves in bitcoin.

Then, we’ll look at why our renowned cryptocurrency investing expert, Teeka Tiwari, says it’s just another week in crypto, meaning this isn’t something to get too concerned about.

And finally, we’ll pass on some risk management tips that Teeka has been sharing with his readers about how to prudently and safely invest in a highly volatile asset such as bitcoin.

I love this topic, Chris. And yes, I am invested in it, and it is interesting. But since following you and Teeka’s advice, I’ve, learned not to get caught up in the day-to-day or the week-to-week. Before tapping into you and Teeka’s wisdom, I would be a nervous wreck, watching it go up and down. But now, I see it as a long game. So I’m excited to talk about this topic today.

Chris: Great, Tom.

So what’s behind the big move? This is actually the easiest question to answer, because the answer is, we don’t know. Nor does anyone else know.

There’s a lot of stuff. For example, Amazon was going to accept bitcoin payments, and then it wasn’t. And this is supposed to be behind the move. There was talk of a short squeeze, which is when people who were betting against the coin get called out and have to go and buy in again.

My advice to everybody watching this who owns bitcoin or is thinking of owning bitcoin – and this is advice I’ve gotten from Teeka over the many years he’s been involved in helping our readers profit in crypto – is don’t look at these short-term moves.

One of the things I’ve learned during my career, Tom, is that markets make the news. The news doesn’t make the markets. I picked that up from former Merrill Lynch strategist and legend on Wall Street, Bob Farrell.

What did Bob Farrell mean? He meant that when something like this happens with bitcoin, when you get a big move, folks in the mainstream press run around and try to find a reason. They try to pin a reason on why that move happened.

What’s really happening is that the move itself is the news. And we don’t know what piece of news triggered these big moves up and down in bitcoin. The reason bitcoin has a price at a point in the day is because of the millions of people around the world buying and selling bitcoin, for all sorts of reasons.

So your job as an investor in bitcoin is not to try to figure out what every little bump in the road means or what’s behind it. That’s a futile task.

Your job is to learn that volatility is the name of the game in crypto. You’re there to shoulder that risk. And you’re getting paid in returns for having that kind of volatility and risk in your portfolio. That’s what I want people to focus on here.

Tom: Right. And if we keep that long-term vision and follow advice such as Teeka’s, if we were to fast-forward a couple of years, Teeka sees bitcoin exponentially larger than what it is now. So if you can see how and why Teeka sees that and grasp that, you don’t get caught up in the day-to-day. And you can have more peace, knowing that it’s heading in the right direction.

What are Teeka’s thoughts on where he feels it’s going to be? Has he made any predictions recently?

Chris: Teeka is on record as saying he thinks bitcoin will hit $100,000 per coin this year. And it’ll go on its way to hitting half a million dollars per coin. That’s because he sees innovation and adoption continuing.

Now, look, I understand that we’ve seen a 50% drop in bitcoin. It hit $64,000 and change in April. And it dropped 50% from there. So it’s sort of natural, in a way, that people are like, “Oh my god. This is a big move.”

Let’s face it, if this was happening in the stock market, if we woke up today and we saw stocks down by 50%, it would be front-page news all over the world. But what Teeka’s message has been is that volatility is the name of the game in crypto. And over time, crypto does rise, and bitcoin does rise. But it does so in a very violent way along the way.

I looked at this in a recent issue of my daily e-letter, The Daily Cut. I pulled up some numbers.

What you see in the table is the annual returns for bitcoin going back to 2010, which is when we started getting prices for bitcoin, when it started to trade officially, if you like, on exchanges.

In the column on the right, you can see the maximum drawdown – the biggest peak-to-trough fall that year. And what you see, Tom, is that bitcoin has gone through dramatic drawdowns – as much as 70%, 80%, and 90% in some years. But still, it’s putting in these phenomenal annual gains of 1,473% in 2011, 5,507% in 2013, and even 9,900% back in 2010.

But you had to put up with 70%, 80%, 90% peak-to-trough falls along the way, which a lot of people just can’t do. But that’s the kind of volatility you can see in bitcoin.

That’s why Teeka is saying, “Look, this is just par for the course. This is the price of admission you pay to be in with the chance of earning those spectacular gains as bitcoin goes to half a million dollars per coin.”

Tom: Right. And if you grasp that and see how and why Teeka has come to that conclusion, you see this as getting something at a severe discount. So obviously, go follow what Chris and Teeka share as to how and what percentage of your portfolio you’d want to put into bitcoin. A few months ago, you could get it at $60,000. Now, it’s in the $30,000s. And you know where it’s going. So it can be a nice opportunity to pick up a little bit more here and there to grow and protect your wealth in the future.

Chris: Absolutely, Tom. That brings us to the third piece of today’s video, which is those risk management tips that Teeka talks about a lot.

Risk management is nothing more than just protecting your downside. That’s what it means. A lot of investors get really excited about the potential upside of investments they’re making, and they forget to think about the downside.

Teeka does not forget to think about the downside. As we mentioned, he’s very aggressively bullish long term on bitcoin. He sees innovation, which means that bitcoin itself is getting better. We can talk in future video updates about some of the pieces of innovation that have happened around bitcoin. And about adoption, which means how many people are using it. He sees those as the key price drivers.

But he’s not going to allow his readers to expose themselves too much to something catastrophic happening. That’s why at our Palm Beach Letter advisory – where Teeka recommends crypto, along with other types of investments, including stocks, real estate, and collectibles – he says, “Don’t put more than 10% of your portfolio in bitcoin.” That’s a very good piece of advice for anyone watching this to keep in mind.

You don’t want to have bitcoin growing to be a large part of your portfolio. Frankly, you won’t be able to handle the volatility. If you have too much of your wealth in bitcoin, it’s going to go against you. If there’s another big dip, and you have too much money in there, you’re going to start losing sleep. And you’re going to start doing stupid things.

You’re going to start checking your portfolio. And the more you check your portfolio, the more you’re going to be tempted to start selling. And then you’re going to miss out on those subsequent gains.

So that’s the first thing: Limit your exposure to bitcoin to no more than 10% of your overall portfolio.

And the last thing is keep a long-term view. Your job, as we mentioned at the top, is not to be figuring out why bitcoin goes down 10% today and up 9% tomorrow. It’s really irrelevant. You know it’s going to be bouncing around a lot. So keep that long-term view in mind. Read Palm Beach Daily or subscribe to Teeka’s Palm Beach Confidential, where he focuses on cryptos exclusively.

Or follow us on The Daily Cut, and you’ll get a lot of those long-term drivers. We talk about them a lot. That’s what you want to focus on, that long-term prize, which is the reward, remember, for stomaching all the volatility along the way.

So that’s two things: Limit your exposure and focus on the long term.

Tom: I love it, Chris. And once again, prior to coming across your wisdom and the wisdom of Teeka, I was having sleepless nights and wondering, should I buy? Should I sell?

But now, with that long-term focus, I just rest easy and know that it is going to be a part of my portfolio that helps me grow and protect it. So thank you for sharing this with us today and giving us all that peace of mind.

Chris: Thanks, Tom.

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