What a study of past Bitcoin cycles tells us about today … the “institutional dollars” difference now … why 1,000% returns from here are possible … what about “rat poison squared”?
In our last two Digests, we’ve highlighted the surge happening in the crypto sector, but we haven’t dived into details.
Today, let’s take that jump. We’ll evaluate what’s happening, why, and how high the sector might go.
To begin, let’s rewind to December of 2022. That’s when our crypto expert Luke Lango made a prediction for 2023 that seemed a bit too optimistic at the time:
Cryptos are going to soar, and Bitcoin will rise more than 100% [in 2023].
You’ll recall that, at that time, Bitcoin traded under $17,000. It had just crashed 75% since its prior peak. Meanwhile, Sam Bankman-Fried of the crypto exchange FTX had just been arrested for fraud.
Being optimistic about the crypto sector wasn’t the mainstream opinion. But for investors who understood crypto cycles, the opportunity was clear.
The agony and ecstasy of being a crypto investor
To understand crypto cycles and what they suggest for the moneymaking opportunity before us today, let’s go to Luke:
Crypto markets oscillate between major booms and busts between halving events.
Every four years, Bitcoin undergoes a halving event, wherein the amount of Bitcoin mined per transaction is cut in half. That means BTC’s supply production is slowed by 50%. This is a very important mechanism because Bitcoin’s core tenet is that it has limited supply.
Therefore, it should be unsurprising that Bitcoin enters “boom cycles” whenever these halving events are close. It should also be unsurprising that Bitcoin enters “bust cycles” whenever these halving events are far off.
What is surprising, though, is how closely Bitcoin follows these halving-driven cycles.
Luke explains how Bitcoin has followed a nearly identical pattern every four years since 2011. The crypto boom begins roughly 12 months before a halving event with the gains continuing through about 12 months after.
At that point, euphoric buyers are exhausted, and Bitcoin crashes roughly 80% over the following two years. It bottoms about 12 months before the next halving event at a point of peak pessimism. But that ushers in a new cycle.
Back to Luke:
This has happened not once… not twice… not three times… but four times now.
We are currently in the Fourth Crypto Boom Cycle.
This crypto cycle analysis is what allowed us to call the bottom back in late 2022, when everyone else was afraid of touching Bitcoin.
It’s also why we’re still pounding the table on cryptos right now.
Where are we in this Fourth Crypto Boom Cycle, and what does that mean for investors who haven’t gotten in yet?
As we just covered, the focal point of Bitcoin’s boom/bust cycle is its halving event.
With the next halving likely arriving in April, we’re not far from exhausting whatever gains will accrue in the run-up to this halving. Does that mean investors have already missed the lion’s share of returns in this cycle?
Fortunately, no. Luke’s analysis shows that the biggest cycle returns come after the respective halving events, not before:
During the First Boom Cycle, Bitcoin rallied 500% in the first half, then soared more than 9,000% in the second half of the cycle.
In the Second Boom Cycle, Bitcoin first rallied about 100%, then soared nearly 3,000% in the cycle’s second half.
And during the Third Boom Cycle, Bitcoin popped 35% at first, then soared almost 500% in the second half of the cycle.
The returns in a crypto boom cycle’s second half tend to be an order of magnitude larger than the returns in the first half.
With Bitcoin up roughly 100% so far in this latest Crypto Boom cycle, that suggests it has 1,000%-plus potential over the next 12 months as it runs up to its cycle peak.
More supporting evidence of the coming boom
There’s a key difference about our current crypto boom cycle – it has institutional support.
Back in January, for the first time ever, the SEC approved the first US-listed exchange-traded funds (ETFs) to track bitcoin. This was a watershed moment, enabling enormous institutional players to wade into the crypto sector.
The January decision greenlit Bitcoin ETFS from BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck. This has opened the door to massive capital inflows that we haven’t seen in prior booms.
Here’s Bloomberg:
Add this eye-popping statistic to the list of superlatives driving crypto’s latest boom cycle: A record $520 million stampeded into BlackRock Inc.’s Bitcoin ETF in a single day.
The iShares Bitcoin Trust (ticker IBIT) saw its biggest one-session haul Tuesday, marking the largest daily inflow so far among the batch of new US exchange-traded funds investing directly in the world’s biggest cryptocurrency. It was also the second-largest daily intake for any US ETF across all asset classes…
And here’s the most exciting part…
This run-up in Bitcoin’s price likely reflects only a handful of institutional investors taking their position. We’ll probably see more professionals moving into the space as 2024 continues. This means our latest boom has the potential to surprise to the upside in its potential gains.
Here’s Stephane Ouellette, chief executive of FRNT Financial, an institutional platform focused on digital assets:
The rally does appear to be majorly influenced by the BTC ETFs.
Some estimates suggest that less than 20% of investment advisers have been approved by their firms to put their clients into the product. That is a process that’s likely to play out over the course of a year.
But what about Bitcoin being “rat poison squared”?
As we noted earlier this week in the Digest, that’s the name Warren Buffett lovingly gave to Bitcoin at a shareholder meeting back in 2022.
So, are we fools to put money into the crypto today?
If your assumption is that Bitcoin is going to replace fiat currencies and be a stable storehouse of value going forward, yes, that’s probably a foolish take.
But if your assumption is that Bitcoin is just a wealth-building tool that can transform your portfolio faster than, say, 95% of the stocks in the market today, then no, it’s not foolish to take advantage of this surge – rat poison or not.
And to be especially careful, follow the protocols we’ve highlighted in prior Digests : Use small position sizes that won’t derail your financial goals if your timing is off, and hedge yourself through a trailing stop that defines your potential downside risk.
Keep in mind that every investment you make involves a calculation: What level of risk/loss is acceptable in exchange for the commensurate level of targeted reward/profit?
History shows about Bitcoin’s “reward/profit” can measure in the thousands of percent during boom cycles such as the one we’re in today. So, what amount of risk is acceptable for you in exchange? That’s the crux of the question before you.
Here’s Luke’s bottom line:
No, it is not too late to buy cryptos.
There’s still time to potentially strike it rich in this crypto boom cycle. That’s why we just issued new Buy Alerts on several cryptos that we feel are prepared to soar in the Fourth Crypto Boom Cycle’s second half.
You didn’t miss the boat. The train hasn’t left the station.
To join Luke in Ultimate Crypto for more of his research and to get his top altcoin picks today, click here. In any case, the crypto sector is surging, and history suggests there’s plenty more upside in this boom.
These condensed periods of hyper-gains are rare. Take advantage as you see fit.
Have a good evening,
Jeff Remsburg
This news is republished from another source.
