This article is excerpted from Tom Yeung’s Moonshot Investor newsletter. To make sure you don’t miss any of Tom’s potential 100x picks, subscribe to his mailing list here.
BTC Reapproaches $50,000, Greenlighting Meme Coins
On Tuesday, I noted how negative yield curves warn about recessions far too early. Much like last-minute defrosting a turkey in a microwave, it takes time for overly loose monetary policy to overheat an economy. If history is any guide, we have somewhere between six months and three years before the heartburn (and regret) kicks in.
Meme stocks have already rebounded to party like it’s 1997… or 2005… or 2019… the last three times the yield curve inverted. Earlier this week, GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) collectively added almost $10 billion in market capitalization.
Meanwhile their cousins, meme coins, are also showing green shoots. SafeMoon Inu (SMI-USD) and Dogelon Mars (ELON-USD) are both up 50% for the week, despite having zero fundamental value and no real-world use.
Bond markets are already signaling that the good times won’t last. But until the Fed begins tightening faster than expected, crypto investors are going to be having an early Thanksgiving feast.
Might as well have fun while it lasts!
The “Everything’s Going Up” Market
On Tuesday, Terra (LUNA-USD) closed above the $100 mark.
The Moonshot favorite was supposed to be a defensive play; its relationship with stablecoin TerraUSD (UST-USD) is meant to create an inverse relationship with the broader crypto market.
Instead, the altcoin has now risen 3x since I first recommended it in September… even as Bitcoin has staged a recovery.
The cause is straightforward: overly loose monetary policy.
Fed Chair Jerome Powell has reversed course on the hawkish stance I warned about last October. Instead of the 50-point rate increase Citi analysts forecasted for March, we got a 25-point one. And though prices at the pump remain stubbornly high, the Fed is adopting a conspicuous “wait-and-see” approach instead of deploying the big guns.
Its caution is warranted. Raising rates too quickly can cause stagflation — a slowing economy paired with high inflation. And labor force participation rates still remain stubbornly below pre-pandemic levels, signaling an incomplete economic recovery.
But easy money has also created an “everything goes up” market that looks a lot like a rehash of 2021. And that’s setting the stage for some familiar winners.
The Low-Quality Cryptos of the Moonshot Investor
In the short term, the most obvious winners will be meme coins. Much like their meme stock brethren, these picks rise when retail investors begin to feel invincible (and fall when that feeling subsides):
Dogecoin (DOGE-USD). If you missed out on selling Dogecoin at $0.70, there’s a good argument to hold on for the time being. The coin is one of the few cryptocurrencies available on Robinhood, and a single Elon Musk tweet would be enough to start a stampede of fresh money.
Shiba Inu (SHIB-USD). The No. 2 meme coin has put its treasury to surprisingly good use. Earlier this year, the project’s backers announced plans for a metaverse and a play-to-earn game. While it’s unlikely to beat competitor Yuba Labs at the NFT game, try explaining that to any of SHIB’s “hodlers.”
Floki Inu (FLOKI-USD). The self-promoting meme coin is attempting a similar shift as Shiba. The token launched a playable battle arena testnet in February and now markets itself as a Play to Earn (P2E) coin. Don’t set your long term expectations too high though — creating a successful game involves more than hype.
The High-Quality Moonshot Picks
Regular readers will know that I view many of these lower-quality coins with a great deal of skepticism.
Last May, I warned that the popular SafeMoon (SAFEMOON-USD) coin was a “hustle.” Despite its legion of social media fans, the Binance token had telltale signs of self-dealing, centralized control, and plagiarized code. SafeMoon would eventually rug pull its investors and redeploy a “version 2” of itself.
Many meme coins today have similar issues. Baguette Token’s (BTT-USD) creators retain 77% ownership in the coin, making a rug pull as easy as flipping a light switch (or basting a turkey). Meanwhile Shiba and Floki have levels of centralized control that should make any investor pause; their strategic decisions are made with virtually zero community input.
So investors looking for safer “buy-and-hold” plays should consider other top picks from the Moonshot portfolio.
- Ethereum (ETH-USD). The world’s second-largest coin has an unstoppable head start in the NFT space.
- Hedera Hashgraph (HBAR-USD). The top choice for corporations seeking blockchain solutions.
- FTX (FTX-USD). Replaces Crypto.com as my top retail-focused pick.
- Solana (SOL-USD). The “Ethereum Killer” with the greatest potential.
- Terra Luna (LUNA-USD). A stablecoin ecosystem that solves many of Tether’s shortcomings.
- Decentraland (MANA-USD). A top metaverse pick for maintaining a limited supply of high-worth assets.
- Immutable X (IMX-USD). A promising Layer 2 NFT solution used by Nike and GameStop.
- Filecoin (FIL-USD). The blockchain equivalent to Cloudflare’s InterPlanetary File System (IPFS) Gateway.
The Crypto Cash Calendar
Meanwhile, Luke Lango and Charlie Shrem have also been busy in the crypto world. Two weeks ago, they wrote about how Bitcoin (BTC) was “on the cusp of a big move.” And last Friday, they revealed three high-potential altcoins that weren’t even on the Moonshot Investor’s radar.
Now they’ve launched the Crypto Cash Calendar, a tool to help investors buy into newly listed altcoins at the right moments.
To learn more about the service, click here.
$0.15… $0.70… $10? What’s Dogecoin Worth?
If you’ve ever thought about buying a motorcycle, you’re not alone. There are nearly 10 million of them in the U.S., including the one I own (even if it sounds more like a lawnmower than a Hell’s Angel).
But what about buying a collectible motorcycle?
The economics for vintage bikes are far stranger. A 1940s Harley-Davidson “Knucklehead” can sell for under $50,000, less than some modern-day sports bikes. Meanwhile, lesser-known pieces can sell for 10x that figure. When there are few buyers and even fewer sellers, you can end up with prices that defy layman’s logic.
The value of meme coins follows the same upside-down rationale. When Dogecoin (DOGE-USD) rose from 7 cents to 36 cents in April 2021, the largest gains happened on comparatively lower-volume days. High-volume trading days would signal the end of the bull run.
Today, Dogecoin sellers seem happy to cash out whenever prices rise above 15 cents, as indicated by spiking volumes on March 24 and 27. Chartists might call this a “resistance level,” while I would simply call it the price where investors are willing to cut their losses. It’s a balanced market where little price action happens.
Eventually, the market could run out of motivated sellers, even if temporarily. A tweet by Elon Musk… a trading outage at Robinhood… there’s no shortage of scenarios that could cause sellers to hold on.
If that happens, it’s off to the dog races. Dogecoin could easily vault over $1 in the short term.
But in the longer run, DOGE’s value will reflect its utility. And only if Dogecoin becomes widely accepted will prices stay above $0.15 for good.
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On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.