Last night, I was enjoying a nice concert at a local park with my family when my phone started buzzing uncontrollably as several push notifications came through. Normally, I’m the “no phones during family time” dad. But curiosity got the best of me, and within seconds, I pulled out my phone to check the alerts. The crypto crash was in full swing:
Bitcoin (BTC-USD) is down 6.7% to $26,459
Ethereum (ETH-USD) is down 8.64% to $1,397.
Cardano (ADA-USD) is down 13.74% to $0.48.
The crypto markets were crashing – on a Sunday night – after they’d already spent the past six months crashing.
Ouch…
I dedicated the next 30 minutes to checking price action, making some calls, and messaging my analyst team. But all that work really just confirmed what I’ve already known for weeks: Cryptos are in crisis mode, and there’s no quick fix.
There is, however, one exceptionally compelling long-term fix – and it offers the only way investors can win in the current crypto crash.
The Crypto Crash: Boom, Bust, Boom
As you know, we are long-term exceptionally bullish on the crypto markets.
Blockchain will rewrite the rules of society, the economy, and politics over the next 20 years, much in the same way the internet has rewritten the rules of society, the economy, and politics over the past 20 years.
The investments at the epicenter of the internet – Amazon (AMZN), Netflix (NFLX), Alphabet (GOOG, GOOGL), Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA)– have been the market’s best investments over the past 20 years.
Similarly, the investments at the epicenter of the blockchain will be the market’s best investments over the next 20 years.
Eventually, then, we strongly believe that this current “crypto winter” will turn into a generational buying opportunity like November 2011, January 2015, and January 2019.
Remember: This is just what crypto does.
It undergoes hyperbolic boom-bust-boom cycles. You get a boom for two to three years, then a bust for just over a year, then another boom for two to three years, then another year-long bust.
This cycle isn’t going to break anytime soon. We’re in a bust right now. Soon, we’ll enter a boom.
Our job as crypto investors, then, isn’t to try and catch falling knives amid the current crypto crash. Instead, it is to identify that critical turning point at which the current crypto bust cycle turns into a crypto boom cycle, and then go “all-in.”
The Time & Place for a Generational Turnaround
If you look at the chart above, you can very clearly see that crypto boom cycles last anywhere between 700 days and 1,000 days. The bust cycles, meanwhile, last about 400 days.
Assuming this historical timeline repeats, then history says the current bust cycle will end later this year, likely in November or December.
Fundamentally, this aligns with the macroeconomic outlook.
By November, roaring inflation should be tamed. Equities will likely be in rebound mode. Yields will likely be falling. Risk sentiments will likely be much improved.
Add to that the fact that the fourth Bitcoin halving will be on everyone’s mind (it happens in early 2023), and it fundamentally makes a ton of sense for the current crypto bust cycle to turn into a boom cycle in the last few months of 2022.
How much farther will BTC fall over that stretch? We think the answer is: Not much farther.
As you can see in the chart below, crypto winters/bust cycles/bear markets tend to find support and bottom right around the realized price line for BTC. This happened at the bottom of the 2015 bear market, the bottom of the 2019 bear market, and the bottom of the 2020 COVID-19 crash.
Again, assuming this historical pattern holds true this time around, that means BTC will bottom in the current bust cycle around $24,000. That’s just ~5% lower than where BTC currently trades.
In other words, we believe the base-case outlook for BTC is a 5% drop over the next few months to $24,000, before a sharp reversal in the last few months of 2022 that turns into a new boom cycle in 2023-25 powered by BTC halving hype.
All things considered, that’s a pretty bullish outlook.
The Final Word on This Crypto Crash
So… what’s our strategy?
Consolidation, selectivity, and patience.
This is not the time to be taking a lot of shots in the crypto market. Most of the cryptos out there in the market today will fail in the long run. But it is time to take heavily concentrated bets on high-quality cryptos, as the survivors of this current winter will be huge long-term winners.
In other words, when it comes to crypto investing, leave the shotgun at home and bring the sniper. It’s time to focus in on a few key cryptos, go “all-in” with those names, and forget the rest of the market.
To be sure, that’s a tall order. There are over 6,000 cryptos in the market today. Most of them will go to zero. Only a handful will be 10X or bigger winners.
Fortunately, we have a programmatic, quantitative model that provides a statistically proven way of identifying only high-quality cryptos for huge gains.
This model will be the key between winning big and losing big in the current crypto crash.
And, on Tuesday night, my colleague Charlie Shrem and I are going to reveal parts of this model to the general public for the first time ever.
We’re even going to give away one of our top crypto picks for free.
Reserve your seat to that event by clicking here.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
