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This time last year, crypto was down in the dumps.
Bitcoin had been in a vicious bear market after peaking in November 2021. Then one of the largest crypto hedge funds - Three Arrows Capital - went belly-up. This led to exchanges like Celcius locking customer funds and formerly-successful crypto startups like BlockFi filing for bankruptcy.
Then the final shoe dropped: FTX - the world’s second largest crypto exchange - was revealed to be a fraud. This sent a chill down the spine of the crypto community. Some people - including me - wondered if the industry would ever be the same.
And then something remarkable happened: crypto prices bottomed:
Since this “sentiment low” for crypto a year ago today, bitcoin had more than doubled and many other high-risk, high-reward projects are up 500% or more.
But that begs the question: if you didn’t buy yet, have you missed the boat?
Don’t Say I Didn’t Warn You
I was skeptical of whether crypto would bounce back after the FTX collapse.
And while I had invested 10% of my personal portfolio in crypto going into the year, I wasn’t confident prices would rise much in 2023.
But my thinking soon changed. In fact, in the April 2023 issue of this newsletter I said this:
I’ve invested in bitcoin since 2017. I wrote about my experience investing in the crypto space in my 2022 book A Beginner’s Guide to High-Risk, High-Reward Investing. Based on my background, I’d say we’re currently near the start of a new market cycle.
This turned out to be a good call as bitcoin is up 40%: since:
But the question everyone is asking now is…
And we can try and answer that today.
Time in the Market > Timing the Market
Everyone wants to know the exact time to buy and sell crypto.
Unfortunately, trading crypto is much more of an art than a science. But I can still show you a few indicators I keep an eye on to see how far this cycle can go.
For instance, the reason crypto is rallying now is because a Bitcoin ETF approval seems imminent. This is a big deal as it would unlock billions in institutional money.
According to crypto research firm Galaxy Research, $78 billion in flows would go into the Bitcoin ETF in the first three years:
And over that period, they expect these inflows to spark a +75% rally in Bitcoin.
Now nobody can know for sure what will happen. But we did see a similar run for gold prices after the SPDR Gold Shares ETF (GLD) was approved in the 2000s...
...sending gold prices +350% over a six year period. If a similar run happens for bitcoin prices, that would peg bitcoin's future price at $139,500.
Again, forecasting bitcoin’s price is more of an art than a science. But there are three indicators I’ve used to tell when to buy and sell bitcoin for years.
And they’ve made be a boatload of money.
The Best Time to Buy Bitcoin
I have a few indicators I watch closely to gauge investor sentiment in the crypto market and - by proxy - measure where we are in the market cycle.
The first is the Net Unrealized Profit and Loss (NUPL) indicator. This is a measure of the number of bitcoin currently in profit.
And in previous cycles, it peaked when 75% of recently purchased bitcoin are in profit (i.e. people are feeling very rich)…
…and bottomed when 0% of recently purchased bitcoin are in profit (i.e. people are feeling very poor). Considering the indicator is currently at 43%, NUPL is telling us bitcoin still has room to run higher.
Next, I keep close attention to people’s Google Searches:
When tons of people are searching for bitcoin on Google, it’s usually a good sign we’re near a market peak. For instance, in the previous cycle bitcoin peaked in mid-2021 and - likely - bottomed in November 2022.
This nearly perfectly coincides with Google searches for bitcoin:
The flip side is true too, as markets typically bottom when searches for “bitcoin is dead” or “crypto is dead” see activity:
And right now, not many people are searching for crypto on Google implying there is further upside.
Lastly, I look closely at general sentiment. Thanks to my 500,000 social media followers I can gauge easily how people are “feeling” about the market.
Judging by some of the comments on my latest bitcoin video…
…people are still pessimistic even after the +123% gain for bitcoin in 2023.
But this begs the question: is now a good time to buy bitcoin?
Everything Depends on Your Risk Tolerance
There is no “one-size-fits-all” answer to that question.
Everyone has different investing goals and risk tolerances. Some people think they can handle the type of volatility you see with crypto (i.e. regular 20% intraday swings are very common).
Investors are often emotional when they see their position losing -20% of their value in a single day. Volatility is not for everyone, and there is no shame in sticking with lower volatility assets like bonds and S&P 500 index funds.
For my investing goals and risk tolerance, I am happy to have ~13% of my portfolio in high-quality crypto projects (you can see my full portfolio here).
Because if my forecast is correct, bitcoin alone has the potential to triple from here.
And I don’t plan to miss out on it.
Stay safe out there,
Robert