Best Way To Play The "Crypto Comeback"

How To Play The "Crypto Comeback"

Crypto is back. 

At least for now. 

Sentiment is everything in crypto and it has turned. 

Bitcoin is up 30% since its November lows. 

Despair has turned into cautious optimism. 

But our take still hasn’t changed since crypto’s collapse in November…

If you are going to buy crypto, you better do so with a margin of safety. 

That’s why our top crypto play hasn’t changed either.

Because it has less risk than Bitcoin and it’s still beating it too. 

If you’re looking to jump in this crypto comeback (more likely a “bounce” though), read on to see how. 
 

Still #1 Crypto Bet

Crypto has been in a steady downtrend in all of 2022. 

It had its first “Lehman Moment” in June of 2022 according to Institutional Investor. 

That’s when the Terra “stable coin” collapsed and blew a $60 billion hole in the crypto industry. 

Then in November the Sam Bankman-Fried founded FTX crypto exchange collapsed. 

Even the suspiciously Sam Bankman-Fried friendly New York Times called it crypto’s “Lehman Moment.”

That crisis sparked a final sell-off in Bitcoin pushing the price down a full 75% from its all-time high. 

The event, however, had all the makings of a “everything that could go wrong has gone” wrong moment which gave crypto high potential for a big rebound. 

We took a data-specific look that confirmed Bitcoin probably fell too far, too fast.

In our research, Is This The Bottom (Finally) For Bitcoin?, we identified one indicator that gave a numerical value to how crazy the Bitcoin bearishness had become. 

The indicator was the market value relative to the net asset value of the Grayscale Investment Trust (GBTC).

GBTC holds Bitcoins. That  is its entire business model. It charges a small annual fee for doing so which is why it’s not exactly like Bitcoin, but that’s what it does. 

So GBTC should be valued near where the amount of Bitcoin it holds. 

In November, however, it wasn’t anywhere close to what it was worth. 

In fact, GBTC was literally trading at a 45% discount to the value of the Bitcoins it held.

In other words, GBC was basically buying Bitcoins for 55 cents on the dollar. 

That’s how crazy extreme crypto bearishness had become.

Through GBC you would be able to get Bitcoin exposure with a higher margin of safety and greater appreciation potential because it was so cheap. 

Since then, GBTC’s value has proven through. 

While Bitcoin has rebound 30% and GBTC is up more than 40%. 

That’s the value of value. 

But with the rally in Bitcoin in full swing, we have to say that’s our only way to buy crypto we see. 
 

Dead Cats vs. Running Bulls

It will take years for crypto to recover from the drop post-pandemic-crypto-bubble.

The party was so big, the hangover should be commensurate. 

It took three full years (and trillions of inflated currency pumped into all assets) for Bitcoin to get back to 2017 bubble highs. 

This one is going to probably take even longer for that fact alone. 

But there’s another headwind too. 

There’s no real driver of short-term value in crypto. 

After all, the crazy peak was driven by high ponzi-level income streams from owning and “lending” crypto. 

All the promises of 12% to 18% “yield” on crypto deposits are gone now. 

And with the regulations and settlements coming, they’re not coming back anytime soon either. 

There will have to be another driver to get the tens of millions of investors who bought crypto at the top back into the market. 

That’s not readily apparent and without crypto will have some bounces, but they’re more likely to be dead cats than new bull markets.