Let’s get this out of the way.
Things that I am: a 100+ golfer, a Product Manager in tech, a pseudo-expert on the 2007-2008 financial crisis, a cryptocurrency investor & armchair expert, a resident of Leadville, Colorado and an avid coffee drinker.
Things that I am not: a financial adviser. There are tons of CFAs out there though, and if you’re looking for financial advice, many resources abound for you with a quick Google search. I will never promote shit coins or anything that I don’t truly believe in. At the end of the day, the most important relationship is the one of trust between me and you, the reader.
Early hysteria and exuberance from the first half of 2021 has ended in nothing but pain and disappointment for May and June in the cryptocurrency space for most of us. I personally saw a 39% decline in my crypto portfolio in these six months, mainly because I was a buffoon and FOMO’d into many smaller cap coins during the late January/early February blastoff with significant portions of my paychecks. These included REN, GRT, NU, and XLM. Whoops! One coin in my portfolio has been immensely profitable despite the dips and FUD though: Cardano. ADA has shown that strong fundamentals are the vaccine against FUD and market manipulation by whales. Fear and greed drive markets, and I’m no exception to this notion although I’d like to think otherwise. Take a look at the Crypto Fear & Greed Index, it’s been in fear/extreme fear for nearly two months now:
Typically prolonged periods of fear like this are followed by some big gains, meaning crypto is most likely on sale right now but won’t be forever. As Warren Buffett likes to say: “Whether it’s socks or stocks, I like to buy things on sale.” While I’m at it, I’ll also throw in his saying “Be greedy when others are fearful and fearful when others are greedy.”
But the bull run is not over yet. After a turbulent first half of 2021, I am positive we will see a strong crypto rebound due to more institutional accumulation, key network upgrades for ETH and ADA, and a myriad of other macroeconomic factors like strong government spending (worldwide), GDP growth, strong corporate earnings, and past crypto market cycle timelines. Chatter about inflation will continue, since the Fed will keep interest rate policies accommodative, and stocks and real estate will likely continue their meteoric rise. The great thing about asset bubbles is that they tend to inflate far past reasonable fundamentals. Therefore, even if you know things are ludicrously expensive, it’s worth hanging on for as long as possible, and sell and profit-take in very small increments on the way up. To the HODLers go the spoils.
About those past crypto market cycle timelines. History has shown us that the typical crypto market cycle is initiated by a Bitcoin halving event. This means miners are now only rewarded half the coins for their proof-of-work efforts. Less Bitcoin is issued than there is demand for it, and we see the price increase. When Bitcoin price increases, the whole market for coins does well too. The market cycle timeline is as follows: the halving event takes place: then the market experiences around a 1.5 year bull run followed by a 2.5 year ‘crypto winter’. If you don’t believe me, you can just look at how this has unfolded in the past again and again:
Researchers would probably say a sample size of two halving events is too small. They’re probably right.
There are a few things that could stand in the way of this continued bull market- my first and biggest concern is who the incremental buyers of crypto will be. Crypto pessimists would call them the “greater fools.” Prices are already relatively high, meaning we need to continue to see institutional adoption and wider acceptance of crypto. Note that this wider acceptance of crypto need not be in the US or EU or China: we’ve already seen that adoption and an announcement in a country like El Salvador, a country of 6.5 million, can help rebound the price of Bitcoin- and as mentioned, everything else tends to follow Bitcoin. Let’s not forget Cardano founder Charles Hoskinson’s jet setting around the African continent cutting deals with extremely populous nations like Ethiopia.
There’s also going to be some more FUD.
The FUD Continues, but There’s Only So Much To Go Around
Each week, we see more and more of this. The cause of the mid-May 2021 crypto crash was chalked up to the Chinese government announcing its crackdown on Bitcoin mining. As the blockchain asset class grows, it’s becoming tougher for politicians to ignore- and many cryptos are a direct challenge to the power of central banks. When a rising power like crypto challenges an incumbent, carnage is likely to ensue.
However, the ‘U’ in FUD is for uncertainty, and when nation-states take a stance on a policy that affects crypto markets, coin prices can actually go up because the other shoe has finally dropped. If you haven’t done so, my piece on why regulation could be good for crypto is required reading.
The wonderful thing about FUD is that it cannot in of itself change the fundamentals of why blockchain technology is so fucking incredible. Bitcoin is particularly immune to regulation and manipulation by bad actors. Because proof of work is so economically expensive, no one node can become too powerful. Bitcoin is impossible to ban, unless you were to get rid of the internet entirely, which is unlikely to happen. Most of the other top cryptos thankfully share this characteristic of resilience. This is the miracle of decentralization- there is no central node to attack, nothing to go after. The network is like water that changes its shape to fill the container to which it belongs. What I’m getting at here is that there are plenty of fundamentals/intrinsic value add of crypto that can fight back against FUD, politicians grandstanding and media nonsense. Wait, wasn’t this post about predictions? Right. Without further ado…..
- Bitcoin will see a retracement above the $60k mark at least once by the end of the year
- Due to EIP 1559 and the new deflationary nature of Ethereum 2.0, we’ll see ETH retrace back above the $4k mark by the end of the year.
- Cardano will reach between $3-$5 per ADA token when the full release of Goguen (smart contracts) increases demand on the network as thousands of decentralized apps jump onboard. This will cause ADA to overtake BNB (the Binance smartchain token) in market capitalization.
- Other currencies in the top 20 will appreciate at least 20% since BTC, ETH, and ADA will do so well.
- The Binance Smartchain’s (BNB) first-mover advantage with smart contracts will start to diminish. BNB could face some headwinds with Binance’s legal issues, so its price increase will be one of the lowest among the top 10 cryptocurrencies by market cap.
Since the most recent Bitcoin halving event happened in mid-2020, I see us getting toward the end of the bull cycle here (1.5 years historically, which would put us very late 2021 or early 2022). I give the bull market cycle end/’crypto winter’ start a 30% chance of happening in 2021, a 60% chance of happening in 2022, and a 10% chance that the bull market ends in 2023.
Bull market runs are awesome and the gains make all of the pain worth it. But if there’s one thing I could wish for, it would be more global adoption of blockchain technology as fast as humanly possible. Currently less than 1.5% of the world’s population have adopted crypto as an asset, a currency, or a utility. For comparison, the internet reached 1% global adoption in 1996 with 55 million users. That year, Apple’s market cap was around $4 billion. Today it’s over 500 times that. I’m not completely sure on the chances of global adoption for crypto, but I’m pretty sure it’s north of 1 in 500. That’s why I’m such a huge crypto bull! Nearly all of cryptocurrency’s current $1.4 trillion valuation is based on the future promise of what crypto can do instead of its current utility. In cases like Bitcoin where the coin is more of a store of value, there need not be an everyday use case- Bitcoin is arguably the most secure crypto on the planet and in my opinion a viable alternative to holding gold. Why else do you think the gold dinosaurs are up in arms? Gold has been extremely fashionable for the last 5,000 years of human history. But what about the 995,000 years of Sapien existence before that? We’re only left with us and our psychology- which is basically that we value whatever we decide to value.
2021 will likely continue to be profitable for crypto (75%+ chance). Economic data provided by the Fed shows us that the national savings rate at year end 2020 was 13.7%, nearly double that of 2019’s figure of 7.6%. There is pent up savings and demand, and much of this capital could go into crypto for the genuine fears of inflation happening right now. There’s always a chance things could go up in smoke and we all lose 80% of what we own. That’s capitalism. Be ready, be stoic, stay calm. But if anything bad happens- won’t Joe Biden and Janet Yellen likely come running with their checkbooks? It seems to be the status quo. Some or most of these predictions will be wrong- but hey, we’ve got to try. We’ll revisit this together at the end of December 2021.