The best way to win the crypto game
The best way to win the crypto game is to know the seasons... Bull, bear, or puppy?
Bostoncoin update Jan-Feb 2022
When the bulls are away, the bears will play
If you have been watching the markets in the past few weeks, well… we really hope you have not been looking too closely. In past issues of the newsletter, we have highlighted some main points about crypto markets and this particular time of year.
First, we have the eternal battle between the bears and the bulls. An actual bear attacks with a downward strike of his claws; in stock and crypto markets, bears want the markets to go down. This is because markets tend to go down swiftly, especially in times of fear, and bears can make more money, more quickly, when markets go swiftly down.
A literal bull attacks with an upward strike of his horns; in stock and crypto markets, bulls want the markets to go up. Markets often tend to behave irrationally, but it is frequently said that “markets take the elevator down, and the stairs back up”.
A downturn in prices can drop further and faster when there is panic in the markets. Remember that markets are driven by fear and greed, and fear tends to be more contagious than a simple pandemic, as you can catch it online as well. When the markets are panicking, it can be hard to keep your cool and think rationally, but that is exactly what the bulls and value investors must do to win.
As value investors, we know that crypto and blockchain is the future of banking, insurance, technology and financial systems. Despite the distracting media static, doom and gloom headlines and other bad news, we must hold faith in what we believe and where we want to be.
What else is driving the markets?
Aside from the eternal struggle of bulls and bears, we have highlighted several times over the past several years that seasons and holidays play a role in crypto prices. Western nations may celebrate Easter, Christmas, Thanksgiving and similar traditions, but we must remember that over two-thirds of the world may not. Many Asian countries celebrate Chinese New Year (2022 is the year of the Water Tiger, which last occurred in 1962, thanks for asking).
In many Asian nations, Chinese New Year is a time to spend with family. Millions of factories and businesses close, millions of people take time off work and travel to be with family. Production slows to a snail’s pace, and many investors sell off their holdings to spend on travel, gifts, food, or just because there is no work.
If you have been around crypto markets for a few years, you will know that crypto investors in Asian nations tend to sell off towards Dec-Jan and then the market slowly recovers leading back into March-April (the date of Chinese New Year is linked to the moon, so it is not the same day every year).
In the West, many investors are watching the US Fed as it struggles with the outcome of its own cash-printing silliness. Yes, there were many people who could not work during pandemic shutdowns, and small businesses, in particular, did require some increased funding. The problem was that under-regulated policies saw some very large businesses receiving massive bail-outs, even as their profits rose. The system was not perfect and did not seem fair to all.
Anyone who had completed Economics 101 knew that giving boatloads of free cash to anyone and everyone would result in hyperinflation and rising asset prices. Perhaps the boffins working in Central Banks may have skipped class that day? A few weeks ago, the US government was claiming that higher prices, inflation and supply-chain shortages would be “transitory”. They are no longer saying this, as realisation sets in.
The only way to prevent record inflation is to increase interest rates, which would likely devastate both homeowners and business owners. Higher interest rates can also trigger a drop in stocks, bonds and yes, even crypto, as investors are forced to sell down assets to repay debt. On the surface, we can understand why market panic may be driving prices down, even though rate rises are currently just a rumour.
Is there any good news?
The good news includes:
1) Bears eventually go back to hibernating, particularly when seasons change and other news comes out.
2) Interest rate hikes may actually be lower and slower than first feared
3) The COVID pandemic may be having less of an impact on economies in 2022, as vaccine rates increase, less-deadly variants emerge and herd immunity increases
4) Crypto’s brief forays into lower-price territory can mean some bargains for value investors, especially the brave bulls who have the opportunity to invest before the recovery is fully-known
5) Tried and tested habits such as dollar-cost averaging (DCA), diversifying and “buying the dip” still work well, provided you choose quality investments
What are we up to?
There is nothing much we can do to reverse the impetus when the bears want to drive prices down. What we can do is to take advantage of lower prices when there is market panic, or incidences of Fear, Uncertainty and Doubt (FUD).
This month we had a couple of new investors who joined the puppy pack and we also took advantage of lower prices to add additional holdings to some of our existing investments.
In a month where market leaders Bitcoin and Ethereum were down by 30-50%, we bought more of each, just as you would stock up on toilet paper or tinned food when the prices are suddenly slashed. Whether you believe the near future will include an idyllic Metaverse or a zombie apocalypse, we will probably need BTC and ETH just as much as we need toilet paper and tinned corn.
Winners this month include
· CRO, even after a drop, we are still up 220% on this gem
· SAND, the promise of gaming and metaverse, up 420%
· SECRET, a wise buy that is now up 476%
· LPT, defying trends to grow by 725%
· XYO, still going gangbusters at 8 580% for the year
In other news…