Bitcoin Cycles Point Toward… | InvestorPlace

Bitcoin investors remain under pressure … remember the booms/busts before … despairing sentiment suggests a buying opportunity is near

 

In January 2017, you could buy one Bitcoin for $1,000.

By December of that same year, it would cost you about $20,000.

We all know what came next…

In 2018, the price of the grandaddy crypto imploded by 80%.

The crash wiped out many “me too” investors who were late to the party. Classic buying high and selling low.

It was hardly Bitcoin’s first boom/bust.

August 2015 marked the low point of a 75% collapse in Bitcoin, after it had soared over prior years.

Another wipeout for short-term crypto traders.

We could point toward a great many similar Bitcoin booms/busts over the past decade. But one thing hasn’t failed during a single one of them…

Crypto investors who held through the bearishness have been wildly rewarded.

After the 2018 wipeout, Bitcoin went on a 1,000% run.

After the 2015 collapse, it was a 7,000% explosion.

In fact, every single bust over the last decade has turned into a launchpad for a subsequent, new all-time-high.

***So, here we are today, with Bitcoin off 38% from its November high. What are crypto investors to make of it?

Let’s go straight to our crypto specialists, Luke Lango and Charlie Shrem, of Crypto Investor Network:

Behavior in the crypto markets is predictable because human psychology is consistent. Bitcoin goes through “cycles”, and those cycles follow the same four-step process:

  1. Bitcoin goes on a tear for a few years, humans suffer FOMO (fear of missing out), and everyone gets bullish.
  2. For various reasons, the price of Bitcoin falls precipitously for about a year. Human despair sets in. Everyone gets bearish.
  3. Bitcoin bottoms out rather quickly. Humans reach the “acceptance” phase. Bitcoin rebounds.
  4. Bitcoin returns to Step 1.

Simple enough, right?

Well, folks, history is repeating itself today. Right now, we are somewhere in Step 2, and are getting awfully close to Step 3.

It’s easy to feel bearish as a crypto investor right now. And it’s hardly just Bitcoin.

Many altcoin investors are looking at Bitcoin’s 38% haircut with envy, given far deeper cuts throughout the sector.

But that makes it all the more important to understand where we are, where we’ve been, and what history suggests is coming.

Today, let’s look at Luke and Charlie’s latest issue of Crypto Investor Network to see what’s on the way for Bitcoin and the broader crypto ecosystem.

***What’s different today and what’s not different

Let’s begin with what’s different.

In short, Bitcoin is no longer behaving as an inflation-hedge.

Luke and Charlie point this out, noting how in 2021, there was a strong correlation between Bitcoin’s price and the 10-year Treasury Yield.

As yields spiked on inflation fears, Bitcoin climbed. When yields ebbed, Bitcoin fell.

You can see this in the chart below (Bitcoin is in purple, the 10-year yield is in black).

From early January 2021 through late December 2021, Bitcoin and the 10-year yield moved in near-lockstep.

Source: StockCharts.com

But below, I bring the chart to present day. It’s impossible to miss “what’s different.”

Chart showing a divergence in bitcoin's price and the 10-year Treasury yield in 2022

Source: StockCharts.com

Here’s Luke and Charlie explaining:

In the face of Fed rate hikes coming down the pike over the next few months, the market has abandoned all risk appetite.

Bitcoin has always doubled as a hedge against inflation and a risky asset. But with risk appetites drained, the latter feature is outweighing the former feature.

That’s near-term bearish.

However, we also view it as medium-term bullish.

Why?

Because risk appetites will rebound once the Fed rips the proverbial band-aid off and inflation pressures ease.

To that end, we think Bitcoin will get back into a winning groove sooner rather than later.

Given this correlation breakdown, we can’t say that the pain in Bitcoin is over. In fact, Luke and Charlie believe we’re in the seventh or eighth inning of this selloff, so there could be lower prices ahead.

But let’s now consider what’s not different, and why that suggests an opportunity.

***Bitcoin rises and falls on sentiment, which is currently in the gutter…and that’s good

How do you value Bitcoin?

After all, there are no profits or dividend-streams to calculate a “price-to-whatever” ratio.

In this absence, analysts have gotten creative over the years. They use external variables like market caps, the number of crypto wallets, capital flows, even the level of the stock market.

But at the end of the day, Bitcoin gets its value from one, primary thing…

Investor emotion.

Obviously, with this as the main driver of price, it sets up the potential for exaggerated pendulum swings from bearishness to bullishness and back again – greed-infused booms and despair-laden busts – based nearly entirely on feelings.

Bitcoin investors would be wise to remember that this cycle repeats (as we pointed out earlier in this Digest). Therefore, bouts of despair should serve as a “on your mark… get set…” call to action for a chance to profit from historical cyclicality.

So, where are we when it comes to despair and fear?

Back to Luke and Charlie:

There is also a specific metric – the Crypto Fear & Greed Index – that leverages market volatility data, trading volume data, social media data, survey data, and search interest data to quantitatively determine how bullish or bearish crypto investors are at any given time. The scale is from 0 (bearish) to 100 (bullish).

Presently, the index sits down at 21, and it has been clocking in at multi-month lows for weeks now.

The last time the index was this low?

In July 2021 – right before Bitcoin proceeded to double in about a month.

Chart showing the Crypto Fear & Greed Index at a

Source: Crypto Fear & Greed Index

Need we say more?

The data here speaks for itself.

Crypto investors are overly bearish on current market conditions, and overly bearish sentiment is a strong contrarian buying indicator.

***Taking advantage in top-tier altcoins while pessimism rules the day

In Crypto Investor Network, Luke and Charlie focus on cutting-edge altcoins that are solving real-world problems, disrupting traditional business models in the process. The amount of change we’re going to see this decade because of these innovations will be mindboggling. The related wealth-creation potential is enormous.

That’s why Luke and Charlie are adding new, elite altcoins to their portfolio today.

Over the last two weeks, they’ve recommended three positions in their Crypto Investor Network portfolio.

Buying when pessimism rules the day isn’t easy. Luke and Charlie acknowledge that, but remind their subscribers of the old Warren Buffett wisdom – “be greedy when others are fearful.”

Bottom-line, it’s a painful moment for crypto investors. And we should prepare for even lower prices.

But look at Bitcoin’s history. Time has proven that buying at the bleakest moments has been a wealth-generating decision. Yes, sometimes it takes a while. But so far, it hasn’t failed.

“So far.”

Are we to believe that now is different? That we’ve officially peaked and Bitcoin and altcoins are currently in a price-meltdown headed toward complete non-existence?

If you believe that, then by all means, sell and sell fast.

But if not, the alternative is that the crypto ecosystem experiences booms and busts, yet is gaining global acceptance. And if that’s true, then history suggests we can use this pain to our advantage.

So…will you?

Here are Luke and Charlie to take us out:

This time is not different.

It’s the same as 2015. It’s the same as 2018. That means, today, you have a very simple choice before you.

You can either ignore the lessons of history and run for the hills at the exact wrong time…

Or you can accept the reality that history repeats itself, buy this dip, stomach a little volatility, and watch your crypto holdings soar in value over the next two-plus years.

The right choice is obvious.

Get on the right side of history.

Get bullish.

As the old saying goes, millionaires aren’t made in bull markets – they’re made in bear markets.

Have a good evening,

Jeff Remsburg

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