Is crypto finally carving out a base? … why caution is still warranted … the one variable influencing market direction … a big event to put on your calendar

You probably know that the crypto sector has gotten crushed this year.

But what you may not know is that Ethereum, the world’s second largest cryptocurrency, is up 65% since mid-July.

If that catches your attention, you should know it was up more than 90% earlier this month before giving back some gains over the last two weeks.

And what about the grandaddy crypto, bitcoin?

It’s up a less-thrilling but still respectable 12% over the same period.

Has the crypto sector officially carved out a bottom? Is the long-suffered “crypto winter” finally on its way out?

Let’s turn to our crypto experts Luke Lango and Charlie Shrem for their quick take:

We continue to believe that the most likely outcome for BTC is for prices to drift ~50% higher towards $30,000 by the end of the year.

However, risks to that thesis remain big enough to keep us largely sidelined for the moment. 

Today, let’s revisit the crypto sector for more details on how Luke and Charlie are playing today’s set-up.

A 30,000-foot look at what’s been happening in crypto

For newer Digest readers, Luke is our hypergrowth investment expert with a growing list of 10X-winners under his belt. And despite the current crypto winter, few sectors offer greater potential for 1,000%-wins than cryptocurrencies.

Meanwhile, Charlie was one of bitcoin’s earliest backers and today is considered one of the most influential people in cryptocurrencies.

He’s been mentioned in Fortune… Forbes… CNN… 60 Minutes… TED Talks… Bloomberg… and The Wall Street Journal… to name a few. His story has been featured in numerous Netflix documentaries and best-selling books.

Together, Charlie and Luke helm Crypto Investor Network, a service dedicated to finding tomorrow’s altcoin winners.

Returning to the state of crypto, let’s get our bearings by looking at a chart of bitcoin and Ethereum over the last four months.

Below, you’ll see the tail end of the implosion that took bitcoin’s price below $19,000 and Ethereum below $1,000.

For context, those lows represent top-to-bottom losses of roughly 71% and 78%, respectively.

You’ll also see the rallies that have occurred since those lows.

Now, as we pointed out at the top of this Digest, big gains have come fast for Ethereum in recent weeks. And though bitcoin’s returns haven’t been as large, they’re still clocking in at double-digits.

But if you look at the chart again, the most recent pronounced move has been a steep selloff since mid-August.

What are the market forces driving this?

From Luke and Charlie:

Long story short, risk assets rallied big in June, July, and the first half of August on signs of slowing inflation.

This caused investors to bullishly shift their expectations for inflation trends over the next few months. As that happened, investors simultaneously reduced their expectations for rate hikes from the Fed in 2022 and 2023.

At the end of July, the futures market was pricing in 1) The Fed to be done hiking rates by December 2022, 2) The peak rate to hit 3.3%, and 3) The Fed to cut rates by 60 basis points throughout 2023.

This bullish shift in both inflation and rate hike expectations was the primary driver of the risk asset rally in June and July. 

But the bullish shift did some “re-shifting” last week.

Luke and Charlie explain that investors began to grow jittery, worrying that perhaps they’d become too optimistic about cooling inflation and rate hike expectations.

This fear was confirmed last Friday when Germany released the hottest inflation print any country in Europe has released yet.

Producer prices jumped 37.2% year-over-year in July, paced by a 105% increase in energy costs.

Back to Luke and Charlie for how this affected inflation and Fed policy expectations:

Today, the futures market is now pricing in 1) The Fed to keep hiking rates until March 2023 (three months later), 2) The peak rate to rise to 3.7% (40 basis points higher), and 3) The Fed to only cut rates 40 basis points in 2023 (20 basis points lower).

This shift underpinned a collapse in risk assets [last] week.

Cryptos were at the epicenter of the selling, with BTC prices dropping about 8% on Friday.

What does all of this mean for how much longer investors will wrestle with this crypto bear?

Luke and Charlie believe we’re at a “make or break” point with the current rally. And short-term market direction depends on one thing – inflation data.

Back to Luke and Charlie:

We see two divergent pathways forward for BTC.

Either: 1) inflation cools, and BTC snaps back into its newfound uptrend and drifts 50% higher into the end of the year, or 2) inflation doesn’t cool, and BTC falls back into a consolidation pattern around $20,000.

This is why, despite their longer-term bullishness, Luke and Charlie are not “all in” on crypto today.

But if inflation data continue to cool significantly, that’s when putting money to work will be the right call.

Back to the Crypto Investor Network for inflation’s likely path over the coming months:

We highly suspect inflation trends are going to meaningfully decelerate. All the leading indicators of inflation are starting to meaningfully drop.

Shipping costs are crashing. Commodity prices are dropping. Survey price indices are collapsing. Home prices are starting to fall. Retail sales are slowing. Delivery times are improving. Production rates are improving. Interest rates are rising.

All of the core drivers of inflation are trending in the right direction, implying that inflation rates should fall into the end of the year.

Even though this is all good news, Luke and Charlie still see risks – most notably energy costs due to the ongoing Russia-Ukraine war. This is why they currently take a wait-and-see strategy.

Here’s their bottom-line:

Let’s stay the course with our core holdings and hold off on getting too bullish.

Cryptos are a 10+ year investment. We’re in no rush to chase a fake rally until it’s confirmed as a real breakout.

Another Crypto Cash Calendar event is happening today

Before we move on from crypto, a quick alert…

There’s another Crypto Cash Calendar event happening today.

If you’re new to the Digest, here’s Luke and Charlie to explain what this is:

Crypto is the future. But that doesn’t mean all cryptocurrencies are the future.

To sift through all the blockchain noise, we’ve put together an exclusive team of crypto engineers and coders to collectively research, analyze, and understand the core technologies underlying the cryptocurrency revolution.

Informed by this research, we’re able to interpret the usefulness and potential impacts of those technologies.

Here’s how it works: Behind the scenes, our proprietary research system gathers information and indicates which altcoins and crypto events are of particular interest.

From there, we’ll share with you the most exciting and promising of those coins and events in our Crypto Cash Calendar. 

Just this morning, Luke and Charlie announced an event that’s triggered their Crypto Cash Calendar system.

Here’s more from Luke on this specific opportunity:

In this month’s highlight of the Crypto Cash Calendar, we are going to discuss a valuable crypto project that could actually do what various other projects have failed to do time and time again: use blockchain technology to take PC gaming to the next level…

We believe we’ve found the crypto project that will successfully pull this off, and it’s just days away from a huge launch that could validate the bull thesis!

It’s a tiny crypto with a great idea and an even better platform, led by a strong team and with a great catalyst on deck. That’s a cocktail for huge returns.

Read more about this crypto in depth.

Before we sign-off, mark your calendar for next Wednesday

Shocking no one, the average American is increasingly struggling with the rising cost of living thanks to inflation.

Meanwhile, though interest rates have been climbing, traditional income investments aren’t offsetting the financial pain.

For example, while the latest inflation data show the Consumer Price Index at 8.5%, the dividend yield of the S&P 500 is just 1.55%. And that’s if you’re willing to put your money into stocks right now.

If you want truly “safe” returns – meaning a savings account – get ready to be depressed…

According to the Federal Deposit Insurance Corporation (FDIC), the national average APY of a savings account is just 0.10%.

With this as our backdrop, let’s return to Luke:

Millions of hardworking Americans are sitting on major stock market losses this year.

And many are struggling to keep up with the rising costs of living due to runaway inflation.

So, for the first time in my career, I’ve dedicated all my team’s resources to solving this income crisis.

For the last eight months, Luke and his team have been working on a project – something to help today’s cash crunch. They’re finally ready to make it public.

Back to Luke:

[It’s] a unique type of investment that could put serious income in your pocket in a matter of weeks…

I’m talking about a way to potentially collect quick, nearly recession-proof cash payments like $4,600 in under two months…

Or $12,000 in only 21 days!

Luke will be diving into all the details next Wednesday August 31 at 4 PM ET in something he’s calling the Rapid Cash Flow Summit.

I’ve gotten a sneak peek at Luke’s research, and I can tell you it truly is something that can help your finances, even in the midst of a broad bear market…and even more so if we truly have turned the corner into a bull market.

If you’re feeling a growing financial pinch, join us next Wednesday to learn how Luke’s project could make a tremendous difference in your cash-flows.

Have a good evening,

Jeff Remsburg