Devin’s Daily Crypto Tips

I often get asked “where is Crypto heading in 2019?”… So I thought I’d write a short piece giving my opinion on where the Crypto market is likely heading over the next 12 months.

Of course it’s impossible to predict the future, but there are many indicators that can help guide the general direction of where the market is likely to go… remember, it’s all about probabilities.

An overview of Bitcoin

Market Overview

What’s going on behind the scenes

What will a financial crisis do to Crypto

Final thoughts

1) An overview of Bitcoin

I saw a post by Forbes today highlighting that Bitcoin has fallen over 80% from its peak in 2017. Whilst this is true, lets have a look at the overall change in the price of Bitcoin since the earliest date CMC lets us go…

April 2013: $1.5B market cap | Price = $135 .

April 2014: $5.5B market cap | Price = $400 .

April 2015: $3.5B market cap | Price = $250 .

April 2016: $6.5B market cap | Price = $425 .

April 2017: $20B market cap | Price = $1,100 .

April 2018: $120B market cap | Price = $7,000 .

April 2019: $70B market cap | Price = $4,000 .

In 2013, Bitcoin peaked at $1,125 and then fell all the way to $185, just over 85% decline from peak. It then of course went on to climb to greater heights each ‘cycle’, with the most recent peak being just under $20,000.

I just think it is worth mentioning that data can be manipulated to push a narrative to potentially influence the public’s perception of Bitcoin / Cryptos. The facts are that Bitcoin over a 5 year period is up more than any other asset class combined. Bitcoin over a one year period is down around 45%. The total Bitcoin has fallen since its peak is very similar to the 2014 bear market, around 85%. Those are facts.

Now, lets speak about market cycles and why I believe we are about to shift from a bear market, into the beginning of a bull market…

2) Market Overview

Markets work in cycles. They go from undervalued to fairly valued to overvalued then back down to undervalued. The famous saying “the bull climbs the stairs and the bear jumps out the window” is one I often use to describe how this works.

Put simply, when an asset is undervalued, it takes a very long time for it to return to the fairly valued section, and then momentum builds until it is extremely overvalued and then pop, it plummets back down to undervalued again.

We’ve seen this happen time and time again in all markets.

Different markets take different time periods for this sequence to occur, the stock market on average goes through this cycle every 10 years for example.

Think of it like this. Undervalued (35% of the life-cycle) Fairly Valued (40% of the life-cycle) Overvalued (15% of the life-cycle).

Lets look at when this happened to Bitcoin in 2014…

(Image A.1 - 2013-15 Bear market).

The bear market shows the peak around 1,000 USD, where Bitcoin was clearly overvalued and then saw a sharp decline in the price, this is the market being rapidly thrown into the undervalued segment.

This bear market lasted until May 2015 and then the reversal started to happen (going from undervalued to fairly valued)…

This can be noticed by a lot less volatility and volume, almost as if the bears are exhausted. This is often the case when the market seems dead and there’s little interest (relative).

Then the market starts to gain momentum, shifting into the later stages of fairly valued. More people start making money, and they then tell their friends. Think of this point like a snow ball rolling down a mountain, it’s gaining size and momentum.

Then you have the overvalued section, this is where everyone is speaking and investing in that asset, you can’t escape the news about it, you’ve made a lot of money on paper and feel as if the market is going to increase forever.

and guess where that leads to…

This is where we are today. We hit overvalued in 2017, and we have now experienced very similar volatility on the way down like in 2014/15. In my opinion (I don’t have a crystal ball) we are shifting from the undervalued stage into the fairly valued stage. In other words, the market has been beaten down to levels where the bears are near enough exhausted and now we should start to see slow, but meaningful growth.

Markets go in cycles, and tend to reach higher peaks each time. I don’t think we’ll see all time highs until at least 2020, however that does not mean we won’t see 10K BTC for example, and altcoin increase by a substantial amount.

The snow ball has been put back on top of the hill, and will start to gain even more momentum than last time.

3) What’s going on behind the scenes

One of the main reasons I created this Newsletter was to keep you informed as to what is going on behind the scenes. I’m not going to dive into great detail about what is being done on a micro level, instead I want to point out one key differential element that we have now that was not present during the last market cycle…

Institutional Investment Vehicles…

Whether we are talking about ETF’s, Futures, Funds, Circle Invest, User-friendly applications, infrastructure that can support the demand, regulated stable coins, SEC guidelines, laws, gateways, information and community have all exponentially grown over the past few years, and are certainly much more robust and ready for mass adoption than in 2017.

2017’s demand during the end of the year saw many exchanges closing their doors due to the inability to handle such volume. We also saw many people that wanted to invest in cryptos be turned off by the difficulty of such (private keys, wallets etc).

We now have solutions for both of those issues, as well as many more. Both institutional and retail investors will have more ways to get into the market, and the barrier to entry will be pretty much removed.

4) What will a financial crisis do to Crypto

This is a topic that I could speak about for days. I have mentioned before that due to the infancy of the crypto market, it is pretty much impossible to tell how it will perform during a financial crisis.

Bitcoin is widely referred to as “digital gold”. As mentioned before, during times of fear, investors are looking to preserve as much of their capital as possible, and have historically used precious metals to become a store of value.

Many investors are already using Bitcoin as a store of value, despite its volatility. If everyone believes that Bitcoin is a safe haven and a store of value, then during a crisis, it may very well live up to these expectations.

This is one of the most common reasons that people give.

Another reason closely tied to the first is the fear of hyperinflation due to excess printing of fiat capital.

A great example is Venezuela, where their levels of inflation have exceeded 1 million percent (and still rising). Their currency is worthless. Holding onto it will dramatically reduce your net worth in a very short period of time.

Venezuelans do not want to be paid in their national bolívar currency,rather in commodities, dollars or… bitcoin.

Yep, bitcoin. The demand for bitcoin in Venezuela has skyrocketed, increasing month on month despite the cryptocurrency market being in a downtrend.

Can we use this as evidence that during times of fear, people may in fact flock to cryptos? Very possibly.

The second biggest argument that cryptocurrencies will be adopted during a crisis is the fact that, for the first time ever, it presents an alternative to currency that isn’t controlled by the banks/governments.

It’s safe to say fewer and fewer people are trusting banks, especially after the 2008 financial crisis.

If a financial crisis happens, and many people experience significant financial difficulties as a result, they very much may shift to an alternative.

Unfortunately, this is the most likely scenario for quick mass adoption.

People are lazy, and will only act when they absolutely have to. Fear is a very powerful emotion, and gets people to act.

We already have a strong foundation of investors in the cryptocurrency space who strongly dislike banks (to put it nicely), so it is inevitable during a crisis that these investors will be able to easily convert those on the fence into the space and trigger a domino effect and rapidly progress adoption.

So to conclude, Bitcoin is a symbol of hope for many investors, or a symbol of protection against uncertainties. It provides an alternative to currency currencies and may very well be adopted globally as a result of other financial markets crashing.

5) Final thoughts

My final thoughts are that despite being in a bear market for the past 2 years, the crypto space continues to innovate, evolve and disrupt every industry globally. It is much easier for the masses to migrate to the space now, and once the demand starts to pick up, I expect a bull market in the trillions.

I hope you’ve enjoyed this piece. Let me know your thoughts.

All the best,

Devin

This is a public episode. Get access to private episodes at devin.substack.com/subscribe