What’s needed to build long-term wealth in crypto … understanding bitcoin’s latest crash … a technical look at what to expect from its price next
It may have been the most expensive dinner I ever had.
So says our cryptocurrency specialist, Matt McCall.
In his just-released issue of Ultimate Crypto, Matt tells the story of a recent dinner that turned out to be quite costly, though not in the way you might think.
The dinner itself wasn’t incredibly expensive, so let me tell you what I mean…
I was watching bitcoin prices before we went out, and it happened to be trading under $48,000.
I practice what I preach, so I wanted to take advantage of the dip and buy. But I was running late, so I decided to wait until we got back.
What a big mistake.
After good food and drink, I completely forgot about buying more bitcoin after I got home. I remembered when I woke up the next morning… and bitcoin was $7,000 higher than the evening before.
It just goes to show how cryptocurrencies can bounce any time, and they can bounce big.
Anyone who decided bitcoin was falling too much and sold Sunday afternoon is now kicking themselves big time.
Today, let’s peek into Matt’s Ultimate Crypto issue to learn how this expert is viewing the recent bitcoin “crash” that saw its price tumble nearly 30%, while many top-tier altcoins fell even further.
In short, prepare yourself for volatility. That’s just the price of admission…but the payoff can be life-changing.
This is why Matt’s bottom-line is simple…
Pullbacks are buying opportunities… but NOT selling opportunities.
Let’s jump in.
***Staying strong when your asset appears to collapse
For newer Digest readers, Ultimate Crypto is Matt’s service dedicated to the explosive world of altcoins.
I don’t use the word “explosive” lightly…
Matt launched the service in January of 2020, beginning with a handful of elite altcoins. Today, the portfolio has expanded to 13 positions, which average a return of 1,158% as I write, Monday morning.
Over the same period, bitcoin has climbed roughly 642%. In other words, over the last 16 months, Matt’s altcoin portfolio has trounced bitcoin by a whopping 80%.
In his latest issue of Ultimate Crypto, Matt begins by detailing how to build life-changing crypto gains going forward:
Here are three steps to building wealth over the long term:
- Remember that no investment goes straight up.
- Realize that pullbacks are buying opportunities when the outlook and long-term trend remain intact.
- Repeat as often as necessary.
I bring this up because if you read the headlines and listen to the media, bitcoin and cryptocurrencies are headed down the tubes.
The media’s negativity has been focused on bitcoin’s 27% fall that took place from its all-time high on April 13, to its recent low on April 25th.
Here are a few such headlines…
But as we’ve noted countless times here in the Digest, crypto investors should expect this type of exaggerated volatility.
Whereas a 27% decline in, say, Coca-Cola would, in fact, be a real crash and cause for alarm, a 27% decline in bitcoin and top-shelf altcoins is completely normal. And as Matt experienced recently, crypto volatility works both ways – meaning sharp, upward gains are frequent too.
In fact, since bitcoin’s most recent low, it has climbed almost 20%.
Matt’s Ultimate Crypto subscribers experienced this same fall-and-bounce with their altcoins:
We saw that the last couple of weeks as our coins fell 44% on average from their recent highs to their recent lows. But… they have bounced 35% off those lows, more than double bitcoin’s bounce.
That’s how our Ultimate Crypto portfolio has gained 1,070% in less than 16 months – with bitcoin up 572% in that same time.
***A better understanding of the volatility in the crypto sector
Telling someone to “ignore the volatility” only goes so far. What can be far more helpful is to explain the source of the volatility itself. Having a better understanding of why it’s happening can help remove the sting, enabling crypto investors to better endure tough market conditions.
Here’s Matt explaining a major source of crypto volatility:
Here’s the reality: Big money investors – the “whales” – and professional traders want to scare you out of your positions.
We see it with stocks. We see it with cryptos. We see it with virtually any tradable asset.
The big money tries to shake out the weak hands so they can buy cheaper. But as we have seen over and over, bitcoin and altcoins can bounce at any time, so we need to stay strong.
Matt provides an illustration of this by looking at bitcoin’s chart over the last four months.
The chart below shows bitcoin’s daily trading. It separates the price-action into sections that highlights pullbacks and bounces.
Here’s the chart, after which we’ll add Matt’s commentary.
You can see three corrections of about 30% each since January 8 (A, C, E), and then three bounces immediately following those corrections (B, D, F).
We’re in the midst of a fourth correction (G) and based on the bounce Sunday night through today (last Tuesday), we may now be in the next bounce (H).
The first bounce (B) was big, as bitcoin doubled off its low. The next (D) was 45%, and the third 30%. But the pattern is more important than the numbers – bitcoin keeps rebasing higher.
After the first correction in January, bitcoin dropped below $29,500. In the second, it bounced from the $43,000 level, or about 46% higher than the previous low on January 22.
As Matt correctly points out, trying to perfectly time all of those bottoms and tops would be practically impossible. It’s much smarter – and less stomach-churning – to hold your crypto assets, maintaining a longer-term focus.
Back to Matt:
Corrections are part of investing. They always have been and always will be.
The only thing that matters is that the long-term potential of altcoins has not changed. They are still set to transform the way we transact business and so much more.
***Huge amounts of leverage also led to the recent bitcoin plunge
So, we know that whales want to shake out weak-handed investors so they can buy more crypto at lower prices. But there’s another factor behind bitcoin’s recent drop…
Matt explains that the recent volatility in crypto has come because leverage amounts in bitcoin grew too high and investors needed to unwind some of it.
Back to Matt:
The chart below shows bitcoin futures in dollars.
The amount of money in futures contracts peaked at $27 billion on April 14, which happens to be the same day bitcoin hit its all-time high.
This tells us that traders – most likely new and inexperienced traders – took on massive leverage and made extremely bullish bets based on the breakout on April 13.
Four days later, most of these traders had bailed as the price of bitcoin started to break down.
This was a historic amount of leverage, and it was a big warning sign.
Too much leverage indicates that people are way too greedy.
Unfortunately, these are often inexperienced traders who get sucked in by exchanges that allow individual investors to buy 10X, 20X, even up to 100X on margin!
When prices fall, this inflicts massive pain on overleveraged investors. They have to sell to stop the bleeding, which pushes prices down even further.
But eventually, all of this excess leverage is drained out and the market rights itself. Of course, it can be a painful process to get there.
***A technical look at bitcoin’s chart and what to expect from its price-action
As I write Monday morning, bitcoin trades at $57,895. That puts it 10% beneath its all-time-high of $63,729.
If the recent rally pushes prices back to this high, wonderful. But what should investors prepare for if it fizzles and bitcoin drops back toward its recent lows?
That would give us our latest 30% correction and put bitcoin around $45,000 (in the purple zone on the chart above).
The charts indicate there is likely significant support right around that price. The 20-day exponential moving average (EMA, which weighs recent trading more heavily) and the 21-day simple moving average (SMA) come together around $45,000, so we would likely see a bounce.
Though prices could fall lower into the $42,000 – $45,000 area, Matt writes that there would be a much higher probability of buyers stepping in. For bitcoin to remain at such a subdued price for an extended period would require a fundamental change in bitcoin’s underlying investment thesis – which is something Matt believes has virtually no chance to occur.
Before wrapping up his issue, Matt turns to the broader altcoin universe, noting that the volatility can be even more exaggerated for smaller altcoins.
Indeed, many of Matt’s holdings fell harder than bitcoin…but proceeded to rally much higher.
As noted earlier, the average return of Matt’s entire Ultimate Crypto portfolio – even after this latest crash – is 1,158%. Despite this, Matt believes the biggest gains for elite altcoins still lie ahead.
Plus, many of these altcoins can soar in value in just a matter of weeks and months. For example, I’m looking at one coin Matt added to the portfolio in January – less than four months ago. It’s up 376% as I write.
We’ve said it before – for our money, there’s no other asset class that can create more wealth, in a shorter period, than crypto.
Here’s Matt with the final word:
As long as the big picture trend is in place, you are much better off holding for massive long-term gains.
With altcoins, the trend is firmly intact as adoption continues to spread from Wall Street to Main Street, and we are well positioned to benefit from their transformative power and tremendous potential.
Have a good evening,