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At the very start of this year, Alternative Wealth Daily advisory board member colleague David Zeiler - a close friend and a respected cryptocurrency expert who actually mined Bitcoin back when individuals could still do so - shared a bold prediction with us here.
The prediction: Bitcoin would triple - and reach $100,000 - by the end of 2021.
At the time, the crypto bellwether was trading at about $31,400.
By mid-April - just ahead of the stock market debut of cryptocurrency exchange Coinbase Global Inc. (NASDAQ: COIN), Bitcoin had zoomed to a record high up near $65,000.
In short, the blue-chip digital currency was already two-thirds of the way to Dave's target.
But that peak has been followed by twin sell-offs, the first in late May and the next one in late June - both of them wrenching. Crypto prices crashed: Bitcoin has traded as low as $29,031 - a peak-to-trough decline of 55.2% from the then-record peak of $64,829 hit back in April.
Coinbase took a nasty hit, too.
Although COIN had a "reference price" of $250 a share for its IPO, the stock shot out of the gate at about $381. It briefly traded above $429 - giving the company a market value in excess of $100 billion. It finally ended that energetic first day at $328.28.
But then the crypto sell-off absolutely nuked the crypto broker - taking it all the way down to $208 a share.
But we saw a comeback - for cryptocurrencies in general, and Coinbase, too. (And that's why I've consistently recommended my Private Briefing subscribers accumulate shares.)
Coinbase is now at $340. And Bitcoin has zoomed to nearly $69,000, before the latest sell-off dropped it back to $60,000.
With the end of the year just weeks away, we want to make sense of it all.
We want to tell you what we see next - for this final slice of 2021, and for the first part of the New Year.
To do that, we're going back to the source - to Dave Zeiler.
The last time I sat down with Dave, in late July, Bitcoin had been whipsawing for months.
His take back then: Nothing was amiss - it was just a case of "'Bitcoin being Bitcoin."
His advice back then: Don't allow that display of crypto-cantankerousness to chase you away from what he continues to see one of the single-biggest "windfall windows" he sees.
Within the cryptocurrency world, there are plenty of places to make money. And we're going to show you some of them here today.
Identifying the "Fearsome Four"
In that early January interview, Dave predicted Bitcoin would hit the $100,000 by the end of this year. There are four weeks to go.
Bitcoin Millionaire Makes Stunning Prediction: One of America's earliest Bitcoin millionaires... a guy who mined Bitcoin from his garage... says "DON'T buy Bitcoin until you watch this interview."
To shed some light on the situation, I reached out to Dave once again and spent more than an hour reviewing the broad market, individual cryptocurrencies, and the strategies needed to capitalize on it all.
I came away with what I'm calling the "Fearsome Four" - the four things every cryptocurrency investor has to know to sidestep the biggest risks and grab maximum profits. These are the key questions you need to have answered to position yourself for maximum long-term cryptocurrency gains.
- What the heck is the deal with all this whipsawing volatility?
- Where do we go from here?
- It's no longer just Bitcoin and Ethereum: What are your top crypto plays, and how about sharing some "Lotto-Ticket Picks?"
- And, finally, what should investors do to protect themselves? What are some strategies folks can use to manage risk? And (as part of that) which specific cryptos are you telling investors to avoid?
The key takeaway from this latest talk is to resist giving in to emotion - both euphoria when Bitcoin is soaring... and panic when it's plummeting.
The pattern of volatility repeats itself over and over again. Like a bowling pinsetter that clears away the "dead wood," the net effect is to chase away the "weak hands" - investors who aren't really sold on crypto's future. That gives investors with the long view prime opportunities to build positions in an asset that's ultimately headed higher.
"Folks who have been investing for a long time see each correction as a chance to buy more Bitcoin before the next leg up," Dave told me. "Their mantra is, 'Buy the Dip.' And it's worked out for them."
Here's an edited transcript of my talk with Dave.
We're Decrypting Cryptocurrencies Here
WPIII (Q): Okay, Dave ... I joked about the "Fearsome Four"... and with good reason: In the face of almost-constant whipsawing, an endless flow of confusing headlines and competing "expert" opinions, there are really just four questions that folks investing in Bitcoin and its brethren need to have the answers to.
These are pretty much the same questions (in some form) that we keep coming back to...
DZ (A): When you think about it, Bill, it makes sense that we keep coming back to these questions. Because what investors are really thinking (to themselves) is: "It's the same pattern ... but is it headed toward the same outcome? Or are things 'different this time'? When Bitcoin goes up, you'll hear that it's going 'to the moon.' When Bitcoin goes down, there are always some voices saying, 'This is it, it's over. Bitcoin is going to zero.'" Reactions like that are based on emotions, and aren't helpful.
People need information that can help them navigate these rough new waters. And they want answers they can trust.
WPIII (Q): Hence the "Fearsome Four." In fact, by posing those same four questions - and testing if the answers we've given folks still hold true - we can revisit the "Bitcoin Baseline" we've kinda established with the answers to those queries.
DZ (A): [Nodding] Precisely.
WPIII (Q): So let's start with that first one: "What's the deal with all this volatility?"
DZ (A): Well, volatility has always been a part of Bitcoin. Bloomberg recently reported that Bitcoin volatility has declined over the years, but ...
WPIII (Q): It sure doesn't feel like it...
DZ (A): No, it sure doesn't.
WPIII (Q): So, man, what's at work here?
DZ (A): Some of it is driven by "whales" - the people who own and trade large amounts of Bitcoin. Although you can track their activity on the blockchain, no one knows for sure who these whales are and why they buy and sell when they do.
Most of the bigger moves, though, are driven by news. All the talk about China's so-called crackdown on Bitcoin in May roiled the market for months. People were also worried about chatter about Bitcoin mining consuming excessive amounts of energy and making climate change worse.
Finally, there have been persistent rumblings in Washington this year about the need to regulate cryptocurrencies. Every time Treasury Secretary Janet Yellen or SEC Chair Gary Gensler says anything vaguely negative about crypto, prices fall. The infrastructure bill created a stir over unclear language about taxing crypto "brokers" - the definition of "brokers" is too broad and could affect crypto players like miners who aren't really brokers.
WPIII (Q): Investors hate uncertainty - in any slice of the financial markets.
DZ (A): That's just it, Bill. All of this stuff injected a lot of fear directly into the market - fear that took a long time to work through and to wear off.
But it finally did wear off - and Bitcoin finally bottomed out in mid-July. After that we saw a string of positive developments that pushed the price back up.
WPIII (Q): It's been on a tear since then, right?
DZ (A): Yes, the Bitcoin price doubled in four months, although we had another pullback over the past week.
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WPIII (Q): What caused the turnaround?
DZ (A): As usual, it was a combination of catalysts reinforcing each other. Some are news events, but one long-term catalyst has served as a driving force for months now.
WPIII (Q): Inflation - a huge swath of today's investors have never experienced it before.
DZ (A): Correct. On both counts. We're currently seeing inflation like we haven't seen since the late 1970s - when you and I were teenagers. This feeds right into the notion of using Bitcoin as a store of value, a hedge against inflation.
Aside from that, we had a series of positive news events. One was the launch of the first Bitcoin ETF, the ProShares Bitcoin Strategy ETF (NYSE: BITO). It wasn't as big of a deal as it could have been because this ETF is based on Bitcoin futures. A spot-based Bitcoin ETF, which would hold actual Bitcoin, would be a better investment, and would more accurately reflect the daily Bitcoin price. If the SEC ever approves a spot-Bitcoin ETF, that alone could spark a rally.
In September, an El Salvador law went into effect that made Bitcoin legal tender in that country. It's the first country to do it, but a lot of people think other emerging market countries will follow suit. These countries either have weak native currencies or use the U.S. dollar, which puts them at the mercy of the U.S. Federal Reserve and U.S. government. Moves that might be good for America aren't necessarily good for the nations that have adopted the U.S. dollar as their primary currency. Rising use of Bitcoin in emerging markets is one of the main reasons tech-investor Cathie Wood - someone I know your subscribers know very well - is so hot on Bitcoin.
Then you had Bank of America Corp. (NYSE: BAC) launching coverage of Bitcoin, which it did in October.
WPIII (Q): And it wasn't just that it initiated coverage of Bitcoin - it initiated coverage of all "digital assets," in fact. Here's a mainstream investment bank telling everyone it's doing this because Bitcoin et al. are now "too big to ignore." Not that all coins worth owning are huge; some of the most intriguing crypto opportunities are on the small side.
DZ (A): Exactly, Bill. That really, really tells you something.
WPIII (Q): Okay, so we're up to date. So that brings us to our second question: "What's next for cryptocurrencies? Where do we go from here?"
DZ (A): Despite all that's happened over the past couple of years, it's still really early for crypto. I believe we're going to see cryptocurrencies become more pervasive in the financial system. Crypto wants to replace the incumbents. But the incumbent financial institutions - the big banks and investment firms, like Bank of America, for instance - have started to adopt crypto, albeit in very small ways, for now. But it's happening, and it will keep happening. Eventually, crypto will be completely integrated into the financial system. And it won't be a big deal; it'll just be the "new normal."
I also think that U.S. regulators have now finally realized they can't keep kicking the can down the road when it comes to crypto regulation. They're starting to make more of an effort toward understanding it so they can come up with common sense rules. Granted, it won't be easy. Crypto is a new asset class. And it has characteristics of stocks, commodities, and currencies. But they need to figure it out, and the sooner the better. While some people in crypto don't want regulation, the reality is that regulation will remove a major source of uncertainty that weighs down the sector. That will increase confidence in crypto as an asset, which will help push prices higher.
WPIII (Q): This is really the latest step in the ongoing evolution of money itself, isn't it?
DZ (A): Absolutely, Bill... well said. In fact, you made this case in a pretty eloquent fashion in a Private Briefing column awhile back. Folks should go back and check it out. And I agree: This is the latest step in the progression of money.
People also need to bear in mind that the time frame for the crypto revolution will be measured in years - and I mean years in terms of decades.
We're already a whole decade in. While Bitcoin has gone through several major crashes, a look at the all-time chart shows a consistent rise in price. People need to stay focused on that big picture and not worry so much about the short-term volatility. Three years from now, Bitcoin will be much higher than it is today. A decade from now, higher still. This is a buy-and-hold type of investment.
WPIII (Q): That brings us to the third of our four key questions: "It's no longer just Bitcoin and Ethereum: What are your top crypto plays, and how about sharing some 'Lotto-Ticket Picks'?"
Something new is coming... and it's about to revolutionize the entire crypto market. It's a technology so advanced that it makes Bitcoin look like a horse and buggy. This could be the greatest wealth generator of our lifetime. Watch here.
DZ (A): Well, for beginners I still recommend starting with Bitcoin and Ethereum. They're No. 1 and No. 2 for a reason. They should form the foundation of any crypto portfolio. That said, I see plenty of "next-tier" cryptocurrencies that have a lot of potential.
My favorite is Cardano (ADA), a "platform" type of crypto like Ethereum. Cardano is knocked a lot among crypto folks because it has been slow to adopt new features. But that's intentional, and what I like about it. The developers have gone to exceptional lengths to make sure the technology is rock solid. In the long run, I think Cardano will emerge as one of crypto's biggest winners.
Other projects I like include Polkadot (DOT) and Cosmos (ATOM). Both have strong developer teams and strong use cases.
As for "lotto ticket" cryptocurrencies, I'm going to share a couple of plays that have two driving forces behind them. Not only are they cryptos, they're aimed at enabling advances in artificial intelligence (AI). One is called Fetch.ai (FET) and the other is called SingularityNet (AGIX). Bill, I know you've talked about how important AI will be in the years to come. These coins are both under-the-radar bets on the future growth of AI. If successful, both Fetch and SingularityNet could skyrocket 10x, 20x, or more.
WPIII (Q): Wow. That's incredible. How about crypto-based stocks for investors who want to use the equities market to get exposure to crypto? Let's start with Coinbase Global Inc. (NASDAQ: COIN), which we recommended to my paid subscribers back in April.
DZ (A): Yes, Coinbase is still a solid pick. It has set itself up as a toll collector in the crypto space, onboarding investors that are mostly new to crypto and making money by charging fees for trades. COIN is very well-positioned to capitalize on the growth of crypto and its evolution into a mainstream investment. It's already operating in more than 100 countries, has high brand recognition, and excels at ease of use.
WPIII (Q): The last time we talked, in late July, COIN was down around $235. We told folks to snag some shares back then. In fact, you specifically described it as "a terrific place to start or add to your stake." And you were correct - now it's trading at about $335, a 43% gain in less than four months.
DZ (A): Nothing like a great call...
WPIII (Q): Are there any other crypto stocks you like right now?
DZ (A): Yes, a couple. One is Voyager Digital Ltd. (OTC: VYGVF), a U.S.-based crypto brokerage. In the September quarter, Voyager generated more revenue from crypto trading than Robinhood, which gets way more attention. Voyager is also seeking a listing on the Nasdaq, which would give the stock a huge boost.
The other is a Bitcoin mining stock based in Australia, Iris Energy Ltd. (NASDAQ: IREN). It just had a U.S. IPO last week. Iris sets itself apart in several ways. For one thing, 98% of the energy it uses is from renewable sources. That's an advantage now that so many critics have attacked Bitcoin mining for using fossil-fuel-generated electricity and contributing to climate change. But I'm fired up about the plans for growth. Iris has contracts to buy enough mining equipment to increase its capacity 21x by September 2023. And while IREN has slipped back a bit from its offer price, I see that as a great opportunity for retail investors to get in a great price.
WPIII (Q): Great. That brings us to the fourth, and final, question: "What should investors do to protect themselves? What are some strategies folks can use to manage risk? And which specific cryptos are you telling investors to avoid?"
DZ (A): One thing I always say is not to invest money in crypto that you can't afford to lose. A lot of folks see the big returns others are bragging about and are tempted to start dumping every dollar that have into crypto. I suggest people start out just putting in 2% or 3%, no more than 5%, of their investable money.
And when you do get a big gain, a 2x or 3x or 5x, then sell off 10% or 20% of those profits At least take the money out you put in. That way, if the crypto market crashes, you're not losing money. If the crypto market soars, you're still in the game and making more gains. That's the best strategy for crypto investing.
As for cryptos to avoid, I say watch out for the "meme" cryptocurrencies. By that I mean cryptos like Dogecoin (DOGE) and Shiba Inu (SHIB). They don't have real value. Coins like that are totally community-driven. A bunch of people on social media decide to drive the price up, so they all buy and the price goes up. But sooner or later, they get bored and stop buying - and the price starts falling. Look at Doge. It was trading at more than $0.70 at its peak in May. Now it's trading at about $0.20. You don't want to buy into that hype then get stuck holding the bag after everyone else sells.
WPIII (Q): Thanks to Alternative Wealth Daily's Dave Zeiler for his insights. Rest assured - as we do with all our recommendations - we'll circle back with updates. And we'll see you back here next time.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.