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Best Way To Play The Crypto "Winter"
“We like Coinbase to $475”
That’s what Jim Cramer tweeted in April of 2021.
Crypto was flying high and Coinbase (COIN), the second largest crypto exchange in the world, just IPO’d.
The bubble has completely deflated since then.
Crypto has crashed. Coinbase shares have fallen more than 90%. And the crypto community (at least what’s left of it) has declared“crypto winter” is here.
This is the kind of despair that should get any contrarian investor interested.
Should you be loading up on crypto now?
Let history be your guide.
Baby It's Cold Outside
Scandal, fear, and mounting losses have combined to put crypto in the dumps.
The good news is that with all the mayhem there will be trading opportunities (like this one, which is more of a bet on market mechanics than a crypto recovery).
The bad news is there’s unlikely to be a meaningful recovery anytime soon.
The crypto winter is set to be longer and harsher than, I fear, most crypto “investors” are really prepared to wait out.
Because the cycle crypto is going through is nothing new.
The last “crypto winter” started when Bitcoin peaked around $20,000 in 2017.
Bitcoin prices went on to fall more than 80% over the next two years and take the entire crypto sector with it.
Even when crypto did rebound, Bitcoin only was range bound between $6,000 and $12,000 throughout 2020.
It wasn’t until a breakout at the end 2020 – nearly three full years from its last peak – that it returned to past highs.
So that was the “crypto winter.” Three years of dead money.
At the risk of saying it’s different this time…it is different this time.
The mania that fuelled the 2017 crypto run was nothing compared to what drove Bitcoin over $60,000 this time around.
The numbers are staggering.
The New York Times says, “An estimated 20 million people started trading on their own during the pandemic.”
The number of Coinbase accounts surged from 34 million at the start of 2020 to 98 million at the peak of the main at the start of 2022.
Altogether, 59 million - about one in six – Americans bought cryptocurrency at some time during 2021.
Those stats mean tens of millions took a hit in crypto.
It takes years to recover from that.
There’s no new market to get into crypto because everyone who was going to get in, got in. And did so near the top.
It was a ridiculous party. Euphoric. Far bigger than the 2017 crypto bull.
Naturally, the bigger the party, the bigger the hangover.
Well, crypto is set for a major hangover and the “crypto winter” could last for years.
But there’s a good side to this if you use it to your advantage.
No Catalyst, No Turnaround
There are few assets that have built a cult following like crypto.
Outside of gold, we can’t think of any other.
And the fanbases of these assets (more apt description than investors) spend far too much time waiting for a new bull market to return that rarely comes…if it ever does.
I get it. Crypto has been crushed. It’s tempting.
But there’s no catalyst for a new bull market and crypto could be dead money for years to come.
The best thing for investors to do today is focus on growth and value, wherever you find it.
At this point in the financial boom and bust cycle, crypto offers neither growth nor value.