Crypto just wrapped up a brutal first half of the year…
Bitcoin’s down nearly 60%...
Ethereum, the world’s second largest crypto, has fallen 70%...
And many smaller cryptos are down 90%+
If you’re invested in crypto… and thinking about throwing in the towel…
Today’s essay is for you.
And if you’re not invested in crypto… but thinking about getting started at today’s low prices…
This essay is also for you.
I’ll explain why this selloff is perfectly normal…
Why long-term crypto investors should be embracing it as an opportunity…
And the best ways to take advantage while limiting your risk.
The first thing to realize is:
We’ve been here many, many times before. And these cycles have all played out the same way…
Bitcoin is the largest and oldest crypto, so we have the most data for it. It’s had nine separate 50%+ sell-offs since 2010.
In other words, bitcoin gets cut in half or more every 18 months or so, on average…
Yet it’s up more than 30,000,000% over that time. Same with Ethereum (ETH). Over the past seven years or so, it has had seven separate 50% corrections, including two 80%+ dips.
Yet, Ethereum is up over 300,000% over that time.
Despite these big selloffs… crypto has always bounced back stronger than ever before.
I’m fully confident it’s going to be the same this time.
There is one big thing that’s different about this selloff though.
Not long ago, bitcoin was really all we had—there were no other crypto assets worth paying attention to.
Ethereum eventually came along, but that only made two cryptos worth focusing on.
Today we have real crypto businesses… with real products and users… producing real revenue. For the first time ever, we have productive crypto assets that don’t move in lockstep with the bitcoin price.
- Ethereum raked in $560 million in transaction fees last month. That’s more than it made in 2015… 2016… 2017… 2018 and 2019 combined!
- Real world DeFi platform Centrifuge achieved record revenues and borrowing volume last month.
- Solana is launching the most ambitious crypto project to date, a crypto/web3 smartphone.
This is the first crypto cycle where we have real businesses with real products. Crypto is no longer just hype and hope. Users are sticking around and continuing to use these protocols.
This solid foundation should support prices and help them recover quicker than past cycles.
That makes buying quality cryptos for huge discounts extremely attractive.
I recently attended a virtual crypto conference packed full of energy. Everyone was bullish.
I was chatting with a crypto fund manager who’s invested through many crypto cycles. He told me, “All of the best ideas happen in the bear [market]. That’s why I’m more positive than ever. I understand this is where the progress is made.”
More recently, I was part of a private discussion with a big-name crypto investor who said:
“When everyone is writing off the space, that’s the best time to invest. I see an opportunity similar to 2018, where the money-hungry newcomers lose conviction and quality gets oversold. Now is the time to invest in things people want and would pay for.”
Andreessen Horowitz (a16z), the best venture capital firm in Silicon Valley, recently raised a new $4.5 billion crypto fund, the largest crypto fund ever raised.
Chris Dixon, one of the managing partners at a16z said over 50% of the businesses coming to the company are crypto-focused companies. He was excited about some of the stuff being built.
I encourage you to pay attention to the good news like this, not the rapid price swings in the space.
Many quality cryptos are trading at or near their cheapest levels ever.
A lot of the “tourists” in crypto, who just joined to make a quick buck, have left.
They’ve been steadily leaving since last May. You can tell by taking a look at volume on decentralized exchanges like Uniswap, where investors buy and sell crypto.
But the folks who matter are here to stay: the people building crypto businesses… and the investors with billions of dollars in funds.
Right now, you have the chance to buy great assets on sale because all the “quick buck” speculators have vanished.
In short, I’ve never been more bullish on the future of crypto. I haven’t sold a single token.
The sheer amount of innovation, brainpower, and experimentation happening right now is unprecedented.
If you’re ready to take advantage, here are two important tips:
Crypto prices could keep sliding lower over the coming months, And that’s okay. We don’t need to nail the exact bottom when we have a strategy that turns any downside into our advantage.
In short, with dollar-cost averaging, you’ll place a fixed dollar amount into an investment on a regular basis. Investing a set amount each month means when cryptos are down, you’ll be buying more tokens at lower prices and lower valuations.
Spreading your buys out means one purchase will not make or break your portfolio.
#2—Keep your position sizes small
When you have too much money in an asset that plunges 50%, you’ll likely panic.
Investing only a small amount of money in each crypto allows you to sit tight through sell-offs… and stick around for the big gains that have historically followed.
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