Metacoin

Covering Bitcoin, the Blockchain, Altcoins, and Fintech

Et Tu, Crypto?

It’s March 15, 2020. I’m trying to answer a whole host of questions. Some are serious:

  • Are we going to stay away from this virus?
  • How will bloggers, writers, and entrepreneurs like me make a slowdown work financially?

Some are less than serious:

  • What is the best recipe for a “Quarantini?”
  • And what about a “Cryptotini?”
Glass of mysterious alcohol, plus an orange peel, and some ice.
“Just throw some liquor, an orange, and few ice cubes in a glass…and hope for the best.”

But, in the spirit of this blog (“making sense of crypto” is kinda the mantra), the questions we’ll ask today — and attempt to answer — are all Bitcoin and crypto in nature. Here goes:

Have We Hit “Bitcoin Bottom?”

Price swings in Bitcoin from March 12.
It wasn’t THAT bad, was it?

Well, to answer the question in the caption, it WAS that bad. Like REALLY bad, actually. THAT IS A 43.3% DROP.

But to answer the bigger question…

Nobody knows. $4185.21 might appear to be a bottom — FOR NOW — because, as of this writing, we’re at $5373.35. We’re bouncing around in the $5100-$5500 range for the past day. There’s some stability. But there’s also that “flight to safety” question that we asked forever ago: Is Bitcoin Digital Gold? (And yeah, forever ago was two weeks back.)

Is What’s Happening Outside Really Impacting Crypto Prices?

One theory — not my theory, had been espoused elsewhere, most notably by vagabond entrepreneur and crisis investor Doug Casey — is that prices aren’t impacted by anything other than rogue traders (Chinese? North Koreans? Both?) who are dumping their ill-gotten gains for cash.

Another theory — probably works in parallel to the above — is that whales are using the drop to dump their Bitcoin and Ethereum on unsuspecting noobs. Then they’ll buy the same coins back at lower prices, with a plan to lather, rinse, and repeat as the days go by. (And as people get less and less certain of what’s to come.)

What’s a Crypto Investor — or ANY Investor — to Do?

Hey, here’s where we can go back to the basics. And these basics make sense for ANY investment — you are entering an uncertain time. You don’t know what will happen next, none of us do, and that’s okay. Consider the following as advice that is worth the paper it is printed on.

  1. Remain calm. It’s a dog-eat-dog world out there — and, if you’re Norm Peterson from Cheers, you’re wearing Milk-Bone underwear — and having a steady hand is going to help a ton.
  2. Assess where you are and where you’re going. Some may need money immediately and don’t have time to play the game of market timing (as has been said often, nobody rings a bell when you hit the bottom). Some may have a little extra to set aside for crypto projects. It all depends on where you plan on being in a month, in six months, in six years.
  3. And, if you can, play the long game. We wrote about that a while ago and we’re still there: playing the long game is going to get you farther than anything else.

Links to Help You…

These are of course AFFILIATE LINKS and if you use them to open an account and make a qualifying purchase, we’ll get a commission. But two long-game tools we’ve been using are…

  1. Coinbase. Dave’s Affiliate Link. They have recently started letting you make regular purchases to “dollar-cost average” your way into crypto. 50 bucks or so, a couple times a month might be all you need to get your feet wet.
  2. Crypto.com. Dave’s Affiliate Link. We have more in this account of late than in our Coinbase account, partly because of the nifty debit card option.

In any event — prices up, prices down, rock bottom, Moon, etc. — we’re here to help. Stay Sanitized.

Time for Discount Bitcoin

It’s been a long, long, LONG week on the financial markets. Coronavirus fears plus an oil price drop made for a one-two punch that has left quite a few people scratching their heads. Trading was halted for a bit, and the Dow dropped 2000-plus points. That was MONDAY…

Tuesday was meh and now Wednesday brings talks of a bear market having finally arrived. You name it, it’s in the red.

Look at these low prices!

Crypto people thought this could mean a flight to safety for BTC and other names in the space. Wrong. Bitcoin is really not digital gold (yet) and also doesn’t have a hundred-year track record of results.

SO…we thought we’d take a look at the year-to-date charts and try to get a handle on what the first ten weeks of the year — and what the coronavirus crisis — can tell us about what the heck is going on.

BTC has had a rocky year so far.

Headline 1: 11.5% Up from the Low

Okay, that’s one way of looking at it. Had you timed the market exactly right and bought at the low of $6994.28 AND held to today, you’d be up 11.5%.

The low wasn’t too far from the opening price in 2020: $7203, so an 8% gain if you bought on New Year’s Day. (Compare to a volatile stock, I guess.)

Headline 2: Had You Called the Top…

Let’s use the scenario above — you buy at the low because you are really really really smart and you “called the bottom” and “bought the dip” — to show you just how you could have done: a 48.7% gain!

Headline 3: What If You’re Bad at This?

Ah, let’s say you’re not so good at calling the market. You buy at the top and sell today because you think you’re calling a bottom.

You lose: to the tune of 33.4%.

HEADLINE 4: DON’T TIME THE MARKET

If there’s one thing that people who trade stocks for a living will tell you it’s this: “DON’T TIME THE MARKET.”

And if there’s one thing that we’ve told you here a few times, it’s this: “PLAY THE LONG GAME.”

Listen, We Don’t Have the Answers…

But — and we’re not financial advisors, do you your own research, etc., etc. — it probably makes sense right now to look at your own situation before doing anything rash like buying or selling tons of $BTC. Do you need the money for something else? What about your own long-term view? Do you feel like playing the market?

It’s a crazy world — made crazier by the fact that no one really knows what will happen to Bitcoin and crypto — so you’re best to stay grounded. Don’t watch too much news. And don’t go batty trying to time any market.

Flight to Safety? Not Exactly; Why Bitcoin and Crypto Didn’t Pop This Week

In the financial markets, the headlines this week were pretty grim. The Dow had one of its worst weeks ever, falling by 10.5 percent, or 2993.57 points.

Dow Performance Week of Feb 25
Not the greatest week for the Dow

100 percent of the drop was due to fears of the spread of the Coronavirus. Traders are still uncertain, especially after China’s economy slowed to a crawl, whether this means we’re looking at a really bad situation for the global economy, or a kinda bad situation for the global economy, or even whether this is just — and not to diminish the lives lost and the impact of this virus — a bad flu season.

Isn’t Gold a Flight to Safety?

That’s a good question — you would think that folks would run towards gold. Here’s a February chart from Kitco, though, that tells you that wasn’t the case this week.

Kitco Gold Chart for February

Gold is trading, according to Kitco, at $1585.50 — it appears to be right at where it was at the beginning of the month. Its week wasn’t as bad as the Dow’s week, but it was down around 5 percent. (Due to the vagaries of the precious metals markets — a London open, a New York close, and random differences between the two, we’ll just stick with around 5 percent.)

All of this leads us to the premise of this article:

If the Dow is down and gold is sorta down and sorta flat, shouldn’t the world be looking to Bitcoin and Crypto as “digital gold” in times of uncertainty?

A quick look at the week in BTC and you’d learn that wasn’t the case.

Feb 24 BTC Weekly Chart
Charts from Coinmarketcap.com; graphics added by Metacoin.co

That’s a drop of $1002.57. 10.27 percent. Dropping almost as much as the Dow. Dropping more than the price of gold.

We Posit a Guess or Two

To make sense of this, I reached out to one of the smartest people I know: crypto trader and developer Von, who we heard from in our post about Playing the Long Game. Here’s what he told me through a Twitter DM:

Traders’ tastes have changed with the advent of the Coronavirus. Traders and investors are looking for alternatives, shifting the demand curve to the left. The stock trader bought Bitcoin, the crypto trader bought gold. We will see an equilibrium soon; sudden changes in tastes globally have an instant impact.

Sounds sensible: if you watch the business channels like I do, you hear a lot about trying to call the bottom, a lot about making sure you look for buying opportunities, and a lot about having a long-term view. Very little about Bitcoin.

(Except Tim Draper, who was bullish as all get-out in a recent CNBC interview, calling for a $250,000 BTC price in 2023.)

My guess about all of this is a little bit of math and a little bit of guesswork.

The math comes from Jeremy Siegel, the Wharton School professor and pundit, who reminded folks again this week that just 10 percent of a stock’s price comes from its current earnings value — the rest is long-term enterprise value. (WHAT?)

I’ll explain as best I can: Siegel says stocks could weather a lost year — an entire year’s earnings could be wiped out from something like the coronavirus — and, if they are appropriately valued, you will be okay in the long-term. So if you have stock in a company like, for example, JP Morgan Chase, and there’s a lost year due to a protracted crisis from the virus, there’s still 90 percent of the value of the business in everything else.

(Apologies to Professor Siegel if I didn’t explain this correctly.)

Bitcoin — and the rest of crypto, but let’s just talk about Bitcoin here — does not have such a luxury baked into its price. AND it really can’t be compared to gold yet either. This gives us a really interesting pricing conundrum because…

  1. Bitcoin doesn’t have earnings or dividends or a board of directors
  2. Bitcoin doesn’t have thousands of years of history as a medium of exchange or a store of value
  3. Heck, Bitcoin doesn’t have quarterly earnings, and doesn’t have a memory of the 1929 Crash or the 1987 Crash or the 2008 Financial Crisis.

What Next?

This reporter — who is not a financial advisor and reminds you to do your own research — is dollar-cost-averaging. Sure, I’ll have an interest in long-term projects that could pay off, but for me it’s about ensuring that this is one of the hedges in my portfolio.

Because, really, there’s a decent amount of guesswork here.

Stay safe out there!

BRED vs. Balance – Which Portfolio Wins 2020 So Far?

Well, this has been an interesting few weeks, huh?

It seems, at least to this reporter, that every time you look up someone is saying “this is the LAST TIME you’ll see Bitcoin under $10,000! BUY NOW! HODL!”

10K BTC Price Movement
Okay, that’s just one week…

Well, then…this *is* quite the development, in that the $10,000 resistance level is something that CT (“Crypto Twitter”) will tell you is really really important for short-term price spikes. So maybe there is something to be said for the fact that once BTC goes above $10,000, it holds for a little and then swings downward and then who knows what happens next?

But What Does That MEAN???

As you know, we’re less about trading crypto and more about investing in crypto. It’s about long-term projects — you can find a whole host of others who will tell you about short-term gains — and we did what we thought was a pretty decent post called Playing the Long Game a few months ago.

In the interest of talking about those long-term investments, we told you a few weeks back about the 2020 Balance Portfolio. Today, we’re curious about that portfolio, how it’s doing, and whether or not it stacks up against BRED, the stalwart we started tracking in 2017.

Let’s Go to the (Crypto) Videotape

Actually, before we do that, two things. ONE: THIS IS NOT INVESTMENT ADVICE. DYOR = DO YOUR OWN RESEARCH. We’re not responsible for your success or failure or anything in between. TWO: HERE IS A SPONSORED LINK: If you haven’t gotten yourself some crypto, we highly recommend Crypto.com. That’s our affiliate link and you can get a bonus by using it if you make a qualifying purchase.

A little foreshadowing: when we wrote the post on the Balance Portfolio a couple weeks back, we didn’t think we’d see the results that we’re seeing. We thought both would be up a little — but we didn’t think we’d see the winner that we saw.

First, the 2020 Crypto Balance Portfolio:

Two rather pleasant surprises here: ONE is that ETH has nearly doubled. (And, if you were following over the weekend, it had more than doubled before pulling back; prices were north of $280 a couple of times.) TWO is a big wow around EOS. That’s a little crazy, right?

So yeah, if you had invested $10,000 in this Balance Portfolio, you’d have nearly $15,000.

And you would have lost this little contest to the BRED Portfolio.

This one popped because of two factors: ETH (nearly doubled) and Dash (nearly tripled).

Another “Wait, WHAT?” moment was the fact that a $10,000 investment would have given you an 88 percent ROI.

Evidence It’s a Bull Market?

Not one asset in either portfolio is down Year To Date. Not one.

The worst performer of any of the assets was PAXG, which is tied to the price of gold.

What can we learn from all this? Not much, actually — it’s a Bull Market and stuff is up six weeks into the year. Some of the stuff is way up.

Might be time for the “Crypto Dartboard Portfolio:” we’re not going to tell ourselves we’re any better at this than someone randomly selecting crypto projects — but maybe there’s SOMETHING to picking a few potential winners, sticking with some old stalwarts, and hoping for a positive outcome?

As always, maybe staying interested in long-haul opportunities is really the way to go.

A Balanced 2020 Crypto Portfolio

We struggled with this one for a little while, and you can’t really blame us: 2019 was a meh year for crypto, and our typical portfolio wouldn’t exactly be the way to go for 2020. Plus, a bunch of new entrants — both projects and categories — caught our eye last year.

Our first question: Does the BRED Portfolio makes sense anymore? Given the fact that Bitcoin had a good year and the others didn’t, does the mix of Bitcoin, Ethereum, Ripple’s XRP, and Dash still give you the kind of portfolio that will propel your crypto investments into the stratosphere?

ALSO, it may not be about the “into the stratosphere” anymore for you. And that’s okay. In any event, we have to figure out if there’s another way to do this.

First Up…How Did BRED Do?

Glad you asked: weird year for sure. Let’s look at the numbers:

2019 BRED Portfolio
Down a shade, but not insane, but…

So, in the interest of consistency, here’s what the 2020 BRED Portfolio would look like.

The 2020 BRED Portfolio

However, we don’t think this is the kind of portfolio to focus on for the year(s) ahead. We’ll give a couple reasons why we *think* there’s a rebalancing ahead.

  1. Bitcoin still makes sense, but Ethereum less so.
  2. Ripple is working on a ton of partnerships, but hasn’t grown like before.
  3. Dash didn’t catch fire on the consumer-facing front.
  4. Way too much else going on.
2020 Crypto Balance Portfolio

Let’s Follow the Trends and Create a New Portfolio

Without further ado, here you go: the 2020 Crypto Balance Portfolio.

2020 Crypto Balance Portfolio
She’s a beauty…

So, what have we done here?

First Up, MOAR Bitcoin

If a stock went up 90% in a year, would you still want it in your portfolio? Or would you take profits?

Good question, and we address that at least a little by (a) keeping BTC in the portfolio and (b) ratcheting it up to 30% of the overall $10,000.

While I wouldn’t go so far as this commentator who thinks Bitcoin will go to $400,000 after its “halving” (when the mining rewards for Bitcoin are cut in half) in May, Bitcoin has cemented itself as the blue chip of cryptos during the past couple years.

You’ll also see that, in this Crypto Balance portfolio, we’ve ignored the forks. If there are notable forks this year, we can take those into account; but “forkening” isn’t that much of a deal the past couple years.

Ethereum, Still, Has a Role

We’ve done some writing on these pages about projects like Megacryptopolis; you can’t play with any of those NFTs, and you can’t trade any assets on OpenSea without ETH that’s in a Metamask wallet (or some other ETH wallet).

Ethereum is really a two-sided coin (ha!) — with quite a few bearish cases on the internet, and a few bullish ones, too. We think the bullish case outweighs the bearish case, though. We’re keeping it in, but dropping it down to 20%.

About the Other Five…

If our goal is a “balanced” portfolio…uh…what the heck does that mean?

In our case, we achieve some level of balance with the other 5 assets in this portfolio, each at ten percent:

XRP — The coin from Ripple still aims to underpin bank transfers, a la SWIFT. Also, if you still believe in the long-term prospects of the project, under a quarter per coin is not a bad deal at all.

MCO — We lurrve this coin. (That’s a technical term, like HODL.) Not just because you can get some for free just by jumping through a couple of hoops [DISCLOSURE ALERT: AFFILIATE LINKS IN THAT ARTICLE] but because they are doing the regulatory thing correctly. We’re American, and bank laws are pretty important to follow.

EOS — I’ll admit to still being really skeptical, but also see the benefits of owning some EOS as an anti-ETH.

VeChain (VET) — This has potential, thanks to the Toolchain, to be the standard corporate “Blockchain-as-a-Service” solution. Partnerships right and left throughout the world. Tremendously undervalued.

VET Website Screenshot
VET’s website tells you what they’re up to.

PAX Gold (PAXG) — One really clever idea is to tie the price of a coin to an ounce of gold — so it’s like Tether, but with gold behind it. Also helps the “gold bugs” get into crypto while helping the crypto bugs get into gold.

And…There You Go

Whether this will catch fire like the 2017 edition of BRED or stall like the 2018 edition of BRED or do nothing like the 2019 edition of BRED…all that remains to be seen. But the plan is that we’ll track both all year and see what happens from there.

Stay tuned. 2020 should be interesting.