In last month’s issue, I looked at Wall Street’s first steps into crypto and why you should care (and not for the reasons you might think).

In this month’s issue, I share some concerns nobody else seems to care about.

Earlier this month, I posted three ways to prepare for the halving.

In that post, I said to take your time while the market is quiet and fees are cheap.

Oops.

Life comes at you fast. 

I would still encourage you to do everything I put in that post. The past few weeks may seem crazy. It’ll get crazier after the halving. If you can wait, try to do it when the market has settled down.  

The one big takeaway from that report?

Prepare now, before the madness comes.

Did you forget what an upswing feels like?

Mark, isn’t this the madness? The market has almost doubled since Bitcoin left your buying zone. I just took a profit on a 1,000% gain from one of your altcoin reports!

Really? You got a better entry than I did. Well done!

No, this isn't madness. You can tell from the lack of accumulation, distributions from old/diamond hands, elevated selling from miners, and a drop in new addresses. 

The buying pressure comes mostly from Aunt Sally, Uncle Morton, and the Pickleball crew getting their 1-3% allocations to bitcoin with the Wall Street ETFs. 

It's crazy that the mildest, second-shortest bear market in crypto history ends with a face-melting, parabolic explosion, but here we are.

You’re not early

This month, for the first time in ages, I had two Boomers and one teenager voluntarily bring up crypto, unprompted, in casual settings. 

An old friend recently texted me about bitcoin. He never talks to me about crypto unless he's selling low or buying high.

A radio host mentioned bitcoin’s zoom on a morning broadcast. The Federal Reserve chairman sent a note to Congress urging them to pass stablecoin legislation ASAP.

The wider world has again re-awakened to what's going on in crypto. 

We’ve moved out of the stealth phase and into the awareness phase of the anatomy of a bubble, shown in this chart:

What do you see in that phase?

A sell-off.

We don’t know when that sell-off will come. Make sure you’re prepared for when it does.

Look out for the Boomers

The great Marius Kramer said this will be the first time Boomers become exit liquidity for younger generations, instead of the other way around.

I worry he's right. Wall Street makes bitcoin “safe.” Next, US Congress makes stablecoins “safe.” Then the Boomers get sucked in, as countless millions have in previous cycles.

Meanwhile, we will farm airdrops like it’s DeFi Summer all over again. DePINs, RWAs, and L2s will make people feel like we've created a new paradigm. Restaking will create a virtuous cycle that turns into a death spiral, as LUNA did before.

Wall Street’s branding will give this asset class a veneer of legitimacy. The boom and bust cycle will repeat again—except this time, it won’t just be Billy the Neighbor flipping altcoins or Samantha Down the Street putting a few bucks into her Coinbase account.

It’ll be pensioners, retirees, and people who don’t have decades to make up for their losses.

We won’t have Tether FUD, cringy shills, bizarre memes, crypto bros, and central bank policies to scare ordinary people from investing.

We will have men in suits and well-spoken women talking calmly and intelligently about the future of finance and “it’s the way everything’s going.”

Legitimate professionals from legacy financial firms will have their compliance department’s approval to get some exposure while common people will put a little money into crypto and crypto funds because “it’s safe now” and “it’s only 1% of the portfolio.” 

El Salvador will pay its bonds. Microstrategy will enter the S&P 500. Some projects will produce viable technology that works at scale.

And it’s this bubble cycle that wrecks the world—not because people put money into a risky, volatile asset that they didn’t understand, but because they put money into a risky, volatile asset that they thought was safe.

It’s on us to make this market safe or, failing that, remind people of the risks.

Worse if the bears are wrong

Fat chance.

Bitcoin’s price popped above $50,000 and the whole market of influencers went turbo-bull ballistic. Imagine what they’ll do when bitcoin’s price hits a new all-time high!

You can already see this in traditional financial assets. Six months ago, we were supposed to have a recession. You shouldn't even touch the stock market. You needed to buy long-term bonds.

Today, the “macro” is safe. No recession! Soft landing! Risk on!

That makes it easy to dismiss the bears.

The Doombergers and naysayers have shown so many scary models and charts for so long predicting a recession “next quarter” and a “crypto collapse” that they’ve lost credibility. 

They’re as bad as the “supercycle” crowd who shilled outlandish predictions in 2021. 

We need more bears.

Once people stop listening to the naysayers, they stop tightening up. They spend too much. They take on too much risk. They forget about the downside. They buy into whatever hype comes across their feed or matches their hopes for the market, as they did in 2021.

Priya in the Park always says, “It’s all going to crash.” She’s always right, but her timing sucks.

What happens when she gets her timing right? Even a broken clock works twice a day.

Win with bears and bulls

For that reason, I follow my plan.

With my plan, you’re probably up about 110% with cash to spare. At best, you’re sitting on 850% gains. At worst, you’re about even on your investment.  

You’ve saved for months, waiting for bitcoin’s price to come back into the buying zone. Some of your altcoins have gone up 10x or more.

If the market keeps up this pace, you’ll sell soon and buy back in after the inevitable crash that follows. 

When will that crash come? How? At what price? 

We don’t know yet.

We’ll have to see where the market takes us. Who doesn’t love an adventure?

My plan’s results look pretty lame when you compare them to what you’re seeing people post on Twitter or share in your Telegram groups.

They are what they are—better than most traders and everybody who dollar cost averages, with less effort and no timing the market.

Mark, why do you benchmark against dollar cost averaging? Everybody else says they can get 1,000% returns. Aren’t you setting your expectations too low?

No. Dollar-cost averaging is objectively the best way to manage risk in an upward-trending market. The research is conclusive.

If I’m going to benchmark my results, I want to benchmark against the best. My plan gives you up to 30% more crypto for your money. Wouldn’t you want more crypto for less money?

My plan does not work for altcoins, but generally, when bitcoin’s in the buying zone, it’s a good time to buy altcoins.

If you took the trade from February 2, 2023, you locked in a 74% profit with a potential return of 100% if bitcoin’s price hits the final target. 

If you entered the trade from February 14, 2024, you’re up 8% in BTC with plenty of upside (and downside, too!) 

Premium subscribers, I’ll let you know when there’s any action to take on those trades.

What, me worry?

Today, bitcoin’s overheated, won’t go up forever, continues to see higher-than-normal selling from every part of the market except the ETFs, and still has plenty of room to run. You’ve seen the evidence for weeks in my market updates.

While I’m certain we will get a chance to buy crypto at better prices than today’s, I’m not certain those prices will be so much better that we’ll come out ahead for selling now and buying lower. 

After we pay our taxes and fees, we’ll still need to buy back in at prices low enough to justify the risk and expense. That requires perfect timing, which is impossible. Nobody gets the timing just right.

Of course, if you’re up bigly, worried about your cash position, or doubt your ability to make more of your government’s money, there’s nothing wrong with “selling high.” Just make sure you read my checklist for taking profits.

Mark, I didn't come to sell crypto, I came to buy it!

If that's the case, then buy. Buy as much as you want. Let’s not overcomplicate things:

• Bitcoin’s price will go much higher than today’s price. Some altcoins will, too.

• You’re not getting a good deal at today’s prices in today’s circumstances.

• You need to prepare for a drop of 20–40% for bitcoin (50-80% for altcoins). A 20% drop is normal volatility. A 40% drop is a typical move in bull markets.

Here are the prices you need to care about, for reasons explained in the February 14, 2024 market update:

• $32,000

• $35-38,000

• $42,500

• $57,000

Today, those prices matter. In a week, they may or may not. This market moves quickly. Circumstances change all the time.

Don't worry about prices. Think about the circumstances. You can't control prices, but you can appreciate the circumstances and act accordingly.

Regarding the ETFs

People say the US cash ETFs change everything. 

It’s no exaggeration to say these ETFs open the floodgates of passive investment. They satisfy pent-up demand.

They don’t tell you who’s selling on the other side. They’re simply a tool for buying and selling bitcoin within a traditional investment portfolio. 

Today, we have enough inflows to overwhelm the sellers. The Boomers are up 40% on their stock portfolios and getting a 5% yield on their bond portfolios. Wall Street’s encouraging them to diversify some of those gains into bitcoin, and they figure, “it’s only 1-3%, I can afford it.”

What will happen after they get their 1-3% allocations?

They will stop allocating.

They may already have stopped. This past week, Farside reported negative inflows for the first time and the total levels remain below the robust pace we saw earlier this month.

Let’s hope that’s not a new trend. Otherwise, we might get a 2019 scenario.

That year, big inflows from the Plus Token scam pushed the market very high, very fast. When the Plus Token scammers disbanded in June 2019, the inflows stopped. The market went downhill for months and ended 53% lower.

ETFs are no scam, but once they satisfy the demand for bitcoin, the inflows will stop (like the inflows from the Plus Token stopped).

We need to make sure market conditions change before that happens. Otherwise, we’re in trouble.

We also need to hope that the US stock market doesn’t drop too much and that bond yields don’t rise too much. If those things happen while the crypto market’s going up, financial advisors will sell bitcoin to rebalance their clients’ portfolios to the 1-3% target allocation.

Some of the early ETF buyers will trim a little regardless as bitcoin’s price rises too high for the portfolio target.

Aunt Sally and Uncle Morton don’t care about the halving, four-year cycles, data models, or any of that. They just want their portfolio to grow. If that means cashing out crypto, they'll do it. They don't want a stake in the financial networks of the future. They want more of their government’s money.

They don't even realize they can do much better by buying bitcoin directly.

Those ETFs take a .03-1.5% cut every year. With Coinbase Advanced or Gemini Active Trader, you pay a one-time acquisition fee that’s the same or less than the fees the ETFs charge each year.

Better yet, you own your bitcoin, free and clear.

This is not an academic distinction. Those fees make a difference! They eat into your returns forever.

ETFs, the bane of on-chain analysts

While ETFs may not change the course of the market, they diminish the usefulness of some on-chain metrics. 

Because of their massive and growing size, they make entity-adjusted metrics obsolete. They also make a lot of the accumulation metrics less useful. 

Those metrics already have limited utility because exchanges obscure a lot of activity, but we have other ways to see what’s going on with exchanges. 

With the ETFs, you have no such transparency. These funds are much bigger than individual exchanges and pool many people's assets into a single or a few large wallets. They skew every metric that uses wallet cohorts. Even HODL waves will need careful consideration when comparing pre-ETF and post-ETF changes.

This problem will worsen as more people buy and sell through the ETFs rather than sending to or from their own wallets and exchange wallets (many exchanges create individual wallets on-chain for their depositors).

Ecoinometrics posted about this recently.

In other words, ETFs make my job harder.

Thanks a lot, Larry Fink.

100x gains? Your timing’s off

While Larry Fink may make my job harder, he might make your job easier. We benefit from anything that facilitates new inflows.

Will those inflows give us the biggest bull market ever?

We'll never come close to the returns from earlier cycles. The worst returns came from a 3,000% increase in total market cap from 2018 to 2021. For today’s market, a similar move would give crypto a $22 trillion market cap.

The market’s already 2x from its bottom. Some altcoins already went up 2,000% from their most recent lows.

As a result, you can't expect a 100x return on an altcoin before the next major, long-term market peak. You might get it if you're lucky or you get in on the ground floor of some VC pump project. Even then, it's a stretch. 

Your last chance for 100x came in 2022. A big crash could send us back to those prices and give you another chance, but I wouldn't bet on it. 

Would you be mad about only 20x or 50x over the next 1-10 years? You can’t get that from any other asset class.

Perspective is everything

If you're still reading this, you may feel like you've missed the best chance to get into crypto.

Hardly. Opportunities come all the time. The question is, are you willing to wait for those opportunities? Are those opportunities even right for you?

I do portfolio reviews. Half of the people are looking to get more money into crypto. The other half are looking to get more money out of crypto.

You can't do both at the same time.

My plan aims to grow your portfolio.

That's hard to do today, but it will get easier. Wait for a better opportunity. It will seem risky or scary. It may take you by surprise. You may feel weird or bad about buying when that opportunity comes.

Winners in this market are not hustlers, though they may come out ahead from time to time. The winners are people who act with conviction and courage.

Be courageous. When opportunities come along, take them. You never have to go all in. You always want to keep fresh cash handy.

That cash is there for when the market crashes, not for chasing prices as the market goes up. Trust that when you wait for low prices, the market will take care of you. 

That way, you don't need to “buy the dip” or time your entries and exits. You can just . . .

. . . relax and enjoy the ride!