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The total cryptocurrency market cap crossed $1 trillion dollars this month.
Let that sink in:
One. Trillion. Dollars.
Bitcoin's price doubled its all-time high and the overall altcoin market cap has almost touched its lofty 2017 peak.
This is a moment almost three years in the making—but you don’t see bitcoin plastered all over the news and social media. No Lambos. No OGs getting mocked for buying pizza or nuclear bunkers.
My, how far we’ve come.
People who said crypto was a scam at a $500 billion market cap are now begging for a chance to buy at a $500 billion million market cap.
People who said “never bitcoin” when its price was $14,000 in 2019 are now asking whether they should use their next stimulus check to buy some at $40,000.
People who said they couldn’t afford bitcoin at $4,000 now tell me they’ll buy the next dip.
I have at least a half-dozen friends and family waiting for bitcoin’s price to enter the buy zone of my plan for bitcoin’s bull market.
See My Plan
Will that ever happen?
We shall see.
If you’ve subscribed to this newsletter and followed my plan since I launched it in March 2020, you should have somewhere between 300% to 700% gains on the money you invested whenever my plan called to buy bitcoin and altcoins.
You can't get those types of returns in any other market, any other time.
And there’s more to look forward to!
The only question is whether “more” means a big run-up to the market cycle peak, or a big crash before a much larger, higher, stronger move.
In this month’s issue, I will talk about the shifting mentality of people in the market, altseason, and some strategies you might want to think about now that the market has heated up.
You are leaving the awareness phase
In last month’s issue, I introduced the “Anatomy of a Bubble” chart to give you a glimpse of what to expect as retail investors enter the market.
Read Last Month's Issue
Here’s that chart, again:
Since 2017, cryptocurrency has drifted through the “awareness” phase. Most people know about it but don’t know much about it. VCs and hedge funds entered the market. Institutional investors followed. Prices rose quietly, suddenly, and with little fanfare.
During most of 2020, market data—and my personal connections—confirmed money flowed into crypto by the truckload from family offices, private investment funds, and portfolio managers.
Based on the pace of buying by institutional investment funds, those investors mostly stopped buying once bitcoin’s price went above $24,000. We’ll see whether they start buying again.
They may already have done so. If bitcoin’s price goes back up, they’ll tell you they did. If bitcoin’s price crashes, they’ll tell you they didn’t.
The question now:
When do we get that first sell-off, the necessary cleansing of greed from the markets before a much larger, stronger mania?
Did it come during the massive crash in March 2020? If so, it’s past us. We have only mania to look forward to.
Or does it still lay ahead of us, perhaps as a normal crash or a market cycle peak? If so, brace yourself and make sure you’re ready when the time comes to buy more crypto.
As of the moment I publish this issue, bitcoin’s price remains on a parabolic ascent and the total altcoin market looks like it’s on the verge of a massive breakout. I suppose we’ll have to wait for the market to tell us whether mania starts now or later.
You don’t quit a marathon after the third mile
When bitcoin’s price went above $13,700 in November 2020, I told subscribers to not buy or sell crypto.
Anybody who strictly followed my plan would have not bought any crypto once bitcoin’s price went above $10,100. That said, I did tell everybody to buy everything they could until bitcoin’s price went to about $13,000, simply because of the fantastic market conditions.
Once bitcoin went above $13,700, that opportunity had passed. At $16,000, on-chain metrics and data about movements of bitcoin started showing the types of patterns you see before the market crashes. Based on history, bitcoin was not ready to boom.
Yet, here we are. Still too risky, still too hot.
At no point did my plan tell you to sell any crypto.
For us, it doesn’t matter what happens next. We got in at a great time and now we get to enjoy whatever comes next.
Up, we win—the value of our cryptocurrency will grow.
Down, we win—we have money to buy more crypto. Opportunity of a lifetime.
Did we miss chances to take profits or “lock in” our gains? Have we missed a prime 300% swing trade? Will we never get another chance to buy low, sell high?
Possibly.
Instead, we essentially guaranteed ourselves a safe return on a long-term, wealth-building opportunity with a massive upside. We protected ourselves against a likely massive crash and put ourselves in a great position to earn a big windfall if the market does reach its peak ahead of schedule.
No need to get greedy now.
Focus on opportunity, not price
Small consolation if you missed an opportunity to “stack sats” and build your altcoin portfolio from January 2019 to October 2020, but that’s ok. You can save your money for the next opportunity. It may come sooner than you think!
Life will give you many, many chances to make money and build wealth. Crypto has already given you lots of those chances, too—and it will again. If you wait for those opportunities, you will not need to worry about anything that’s happening today.
Price is only one factor in an investment decision. Typically, you want to look at risks and rewards. Great opportunities never come cheap. What do you stand to lose vs. what do you stand to gain?
If you bought bitcoin at $100 and sold it at $2,000, you made 20x on your investment.
If you bought bitcoin at $1,000 and sold it at $20,000, you made 20x on your investment.
If you bought bitcoin at $10,000 and plan to sell it at $200,000, you will make 20x on your investment.
Same result, regardless of price.
Whether you have 100 BTC or .001 BTC, you get the same benefits as the price goes up.
Why risk that upside by taking profits or timing the market? Why buy bitcoin at $40,000 when the risks are high and the upside is low, instead of waiting until the risks are low and the upside is high?
You already missed a chance to buy bitcoin when the risks were low and the upside was high. It’s ok—that opportunity will come again.
Now, everything’s overbought, the on-chain data looks horrendous, and you should never buy anything when its price is going parabolic. At best, bitcoin’s price will hit 2-4x max before a blow-off top. Altcoins will probably average 4-8x under those circumstances.
(Don’t quote me on that.)
Sure, for any other market, that’s incredible, but probably not the returns you’re expecting in this market.
For now, you have a tough choice to make.
The Bitcoin and Altcoin Dilemma
In the future, your decisions will get easier. To get my analysis at every moment, consider bumping up your subscription to the premium plan.
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Everybody’s a genius
In a bull market, everybody makes money. Everything goes up!
Yet, even though bitcoin and altcoin prices have gone up for two years, some people still have a portfolio that’s barely higher than the money they invested.
That’s ok if you just want to play the crypto casino. You can make a lot of money trading, yield farming, and gaming the rebases on algorithmic stablecoins.
If you can do that successfully, you will do amazingly well in this market.
If you’re reading this newsletter, you probably can’t do that, or perhaps you don’t want to. Same with me.
For that reason, I prefer to build wealth the easy way: find great opportunities, act decisively when the time’s right, let time and markets do the hard work, and accept the result—good or bad.
Some people prefer to dollar-cost average. That’s a great approach to this market, but you will also buy at higher prices than you need to.
During the parabolic end of a market cycle, none of that matters. A rising tide floats all ships. In a bull market, you win no matter what you do.
In 2017, people made stupid money trading altcoins on the way up. Trade BTC for DASH. DASH doubles, sell for XMR. XMR doubles, sell for LTC. LTC doubles, sell for TRX, continue.
Four trades, 700% return on investment—in less than two months!
While those “traders” were making 700% returns, HODLers saw their portfolios grow 700% without even touching a keyboard.
How could this be?
Because everything went up.
Look at this chart, which compares the returns for DASH, XMR, LTC, and TRX during the last six months of the 2017 bull market:
All the lines move in the same direction at the same time.
As a result, it didn’t matter when you bought or sold one for the other. You got roughly the same result from simply HODLing.
(BTW you would’ve had 1,500% returns during that time if, instead of trading, you’d have held only LTC until its creator, Charlie Lee, sold his entire stash.)
Keep in mind, those altcoins were just as hot in 2017 as any DeFi token is today. Do you want to rack up taxable gains, trading fees, and transaction costs for a result that’s probably going to be as good as the guy who sits on his hands?
Pick a horse and stick with it
Speaking of today’s DeFi tokens, how do they compare?
Let’s look at the price performance of some top DeFi tokens over the last six months or so. Which ones really stand out?
How about we start with LINK, SNX, and YFI. Look at their returns since August, the height of DeFi mania:
Similar results, different paths.
How about UNI, ZRX, and COMP?
UNI’s pretty new so I could only get data as far back as October. Take a look:
Same story.
Let’s combine them all. To make this work, I had to shorten the time frame from mid-September to today:
You can see at this moment, AAVE and SNX lead the pack, with the rest all roughly delivering the same return.
But that’s only because SNX went on a tear in December. Until then, its gains fell in line with the rest. Perhaps now it’s UNI’s time, moving sharply up from the bottom this month?
Only AAVE has outperformed the rest, and even it lagged the pack from September to October.
Also, while that chart makes the spread look huge, it’s not as big when you look at only January’s returns:
What’s the point of all these squiggly lines and obscure price charts?
To make one point:
At any given time, any altcoin can outperform another.
In the end, they all go up. Some do better over one month, others do better over a different month, and a few lag behind for a while, then boom.
None of that matters. Up is up.
Time and markets will sort out winners and losers. If you have a knack for getting the perfect timing, you’re going to do great.
Otherwise, find good projects and ride them out.
Have you swapped one altcoin for another because its token wasn’t going up as quickly as everything else, only to see your new favorite altcoin stall while the other went up? Did you ever sell a “dog” or ditch a winner, then watch as its price boomed a few weeks later?
Do you ever fight with others over which altcoin is “better” than the other?
Do you sift through Reddit rumors, white papers, and Telegram chats looking for hot tips?
If so, do you enjoy it? Does it give you the results you wanted?
Yes, some altcoins will buck the trend and either massively overperform or underperform the market. Assuming those movements don’t come from a pump-and-dump or hype cycle, those altcoins will sustain that performance beyond altseason.
During altseason, none of that matters. When pretty much everything goes up, you can pretty much guarantee your portfolio will, too.
You can win altseason with many different strategies. I published a special issue about my personal strategy.
Special Issue: Prepare for Altseason
BTW, of all the altcoins I mentioned above, do you know which one would’ve given you the best return since the March 2020 crash?
SNX.
And the #2 winner, just barely behind it?
LTC, which has almost no developers, community, or mechanism to capture value.
Yes, Litecoin delivered better returns than every DeFi token except SNX.
This is a totally speculative market. During altseason, everything goes up. In the long run, LTC will lose the race, even if it seems to lead this lap.
Over time, good projects will continue to build and grow, develop strong communities and loyal users, and see their tokens reach prices that will astound you.
That will take years. How long are you willing to wait?
Brave New World
That’s not to say “all altcoins do the same thing.” You will never hear that kind of talk from me.
At least 700 altcoins have legit teams and actual development. They offer real-world solutions to important problems.
Will they beat bitcoin?
We shall see.
As an investment, altcoins have an advantage. Given their small size, they don’t have to beat bitcoin to give you fantastic wealth-building opportunities. They don’t even need to come close.
Over time, bitcoin will probably serve as the settlement layer for all sorts of financial transactions. You’d be surprised at the amount and quality of engineering around bitcoin’s flaws.
A few altcoins will do amazing things and serve valuable roles in the financial networks of the future, capturing tremendous value along the way. Every other technology has more than one winner. Why would cryptocurrency be the exception?
For that reason, you don’t have to worry about the day-to-day swings of any altcoin’s price. Nor do you have to get wrapped up in the progress of any project’s development (unless it stagnates for months on end).
My goal: build my stake in these financial networks now when the risks are low, the costs are small, and the potential rewards are massive.
As these networks grow, so does my wealth.
To sell now would defeat the whole purpose. Unless the market forces me to exit, I have no reason to do so.
My altcoins will go to zero or infinity. The winners will deliver outsized returns that are unfathomable in any other market that you and I can access. Those winners will more than cover losses from the losers many, many times over.
Does that sound boring?
Maybe.
Would you rather get upset that your altcoin went up *only* 20% in a month or marvel that you have a ringside seat for the development of a new financial network, play a small part in its growth, and see the value of your investment grow many times over?
The future is unfolding before your very eyes
Amazing innovations are forming now. Don’t let greed keep you from appreciating them.
For example, look at Yearn Finance.
Its token, YFI, exists solely to transfer value into some other asset. It works because speculators buy YFI tokens. This subsidizes rewards for users and developers.
That’s great as long as the price of the token goes up. What happens when it doesn’t? How long do you think speculators will stick around?
Yes, you can get in-kind rewards, but that doesn’t automatically make them valuable. As an investment, I don’t see why anybody would buy YFI instead of UNI, SUSHI, or other altcoins that drive value to the tokens themselves.
Perhaps the value lies beyond the token?
Towards the end of last year, Yearn Finance started merging with other projects. When you use Yearn Finance, you get access to a bunch of DeFi protocols, swaps, borrowing/lending dapps, developer communities, liquidity providers, and thought leaders who contribute to the growth and development of YFI’s ecosystem.
As a result, YFI tokens don’t need a way to capture value. If Yearn Finance grows into the best DeFi platform on earth, people will need YFI tokens to get in. Like season tickets to your favorite sports team, YFI will be the cost of admission.
Time will tell whether these mergers will enhance the value of the ecosystem or give you any non-speculative reason to hold YFI tokens. Some of those merged projects are really strong, but at least three of them have flaws in their smart contracts and one of them saw 90% of its users pull funds off of its platform.
Developers plan to fix all of these problems. Let’s assume they do.
What sort of contagion could spread from faulty smart contracts or hidden attack vectors? What about collusion among participants? Can one component steal from another? How will the market set a price for the new governance structures? Will these combinations create synergies or spillovers among projects, or cannibalize each others’ users? Will the mergers make these networks more resilient and secure, or less?
We shall see. I can’t wait to see how it turns out.
Welcome to the Age of Monetary Exploration
Don’t stop thinking about tomorrow
In a year or two, you’ll feel silly that you ever worried about a $36,000 bitcoin and you may even get mad that you took profits at that price. Likewise for a $36,000 YFI.
At this moment, bitcoin is in no-man’s land. It could realistically go much higher or realistically crash +50% or more.
Meanwhile, the entire altcoin market looks amazing, already forming its own parabola, but that momentum is not likely to continue if bitcoin crashes.
Did you find it hard to hold tight as the market took off last month? When bitcoin’s price broke $20,000 and everybody was talking about $100,000 BTC and “it’s different now?” When OGs told you to take profits? When you got the urge to throw more money into the market? When everybody said bitcoin’s not risky anymore? When Tether FUD went viral?
Just wait until bitcoin and altcoin prices start shooting up each hour, your portfolio explodes, bitcoin’s price hits $50k, $60k, and higher, and some of your alts hit their moonshot targets . . . and then my plan forces you to sell, not all at once, but decisively and with a clear strategy.
This will be an easy investment decision, backed by years of data, patterns, and correlations. It will guarantee you catch at least some of the market cycle peak and protect against the inevitable crash that comes afterwards—a crash that has always sent prices tumbling down to seemingly impossible levels.
And yet, after I tell you to sell, prices will keep going up—for days, possibly weeks.
In fact, if history repeats itself, the entire market will go as much as 50% higher after we start selling. Yes, we’ll catch some of that, but we’ll have pulled most of our investment out before then.
Everybody else will think we’re crazy.
The facts will prove them wrong, but you won’t feel that way.
Why will we start selling before the market cycle peak?
Because we need to make sure somebody will buy our crypto. We don’t want to sell after everybody stops buying.
Why will we act decisively?
Because nobody can know when the exact peak will come or at what price, only roughly where to expect it. Better to lock in gains than risk losing them on the other side.
Why will we sacrifice some upside?
To make sure greedy people, so-called bitcoin maximalists, insiders, and institutional investors don’t run off with our money.
Later, once the dust settles, we will buy back in, possibly catch the next long-term bottom, and re-accumulate our rightful stakes in the financial networks of the future.
But let’s not get ahead of ourselves. Bitcoin’s price will have to go a lot higher before we start talking about selling even a satoshi. Altcoins are nowhere near their potential peak.
Suffice to say, once I get even a whiff of a possible market cycle peak, I’ll update you with a plan for leaving the market. And if we crash, I’ll let you know when to buy.
Until then, ask yourself what you’re trying to get out of this market.
Some people like to make money. Some people like to build wealth.
Which type of person are you?
Whatever you answer, you have a friend here. We’re in this together.
Relax and enjoy the ride!
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Mark Helfman publishes the Crypto is Easy newsletter. He is also a top bitcoin writer on Medium and Hacker Noon.
His books, Consensusland and Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency, explore the social, cultural, and business challenges of cryptocurrency. Learn more about him in his bio.
