Dear Member,
The crypto market hit fresh lows today, with bitcoin dropping as low as $4,400.
The latest reason cited for the drop is a Department of Justice probe into whether tether, the dollar-backed stablecoin created by Bitfinex, was used to boost the price of bitcoin higher last year.
Here’s an excerpt from Bloomberg’s reporting:
| Some traders – as well as academics – have alleged that these tethers are used to buy bitcoin at crucial moments when the value of the more ubiquitous digital token dips. |
I don’t believe it’s likely tether manipulation played a major role in the bull run last year. Bitcoin has done this roller-coaster routine many times throughout its history, and for most of that history, tether didn’t exist.
As you know, we have a few possible near-term and longer-term bullish catalysts on the horizon. However, when a sell-off gets going, it can take on a life of its own. In a crypto update I just wrote to members of First Stage Investor, I said this:
| Timing the bottom of the market is extremely difficult, but I don’t expect bitcoin to go significantly lower than where we are today. A few technical pros I respect believe we could dip below $4,400 for a period of time. I don’t dismiss that possibility. But I wouldn’t expect it to stay at that price for long. |
Well, here we are at $4,700. I can’t say exactly what will happen next, but I don’t expect the price of bitcoin to fall much further.
Altcoins are also struggling in this market. As I’ve said before, there are a lot of bad projects out there. I believe those will be damaged most by this environment.
But coins with a strong community, strong organization and good use cases should pull through and eventually go on to thrive. I believe our portfolio is made up of those types of coins and built to weather market corrections like this one.
As you know, we have a few possible near-term and longer-term bullish catalysts on the horizon. I cited a few of them in my most recent update to First Stage Investor Members:
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Enterprise-grade, regulated crypto custody solutions are only now becoming available. I believe they will attract a lot of capital from institutional investors over the next year and beyond.
Let’s keep in mind that Bakkt goes online next month, and Fidelity’s institutional offering will be widely available early next year. Fidelity is already onboarding its first crypto clients, and I believe the market is not factoring how much capital it, and others targeting institutional investors, could bring to crypto. |
We are now facing increased regulatory risk (risk from government/regulators). The SEC has been stepping up its enforcement actions against unregistered initial coin offerings (ICOs) and some unregulated exchanges. And now we have the DOJ investigating tether/bitcoin price manipulation.
So we have some positive developments on the horizon balanced by possible government regulatory actions. The market is clearly more worried about the regulatory risk. But I remain focused on the fundamental near-term catalysts and longer-term bullish trends I see.
As you know, I believe overall weakness in fiat money systems is ultimately what drives crypto higher. And nothing has changed on that front. Governments, people and corporations around the world all have unprecedented levels of debt, and the trend is only accelerating. Inevitably this will lead to weakness in fiat currencies tied to all that debt.
I am still holding and recommend you do too.
Good investing,
Adam
P.S. We won’t be sending you a market update on Friday because of the Thanksgiving holiday. But we will be monitoring the markets so you won’t have to. Please enjoy the time you spend with friends and family on this most American holiday. Our regular market updates will resume next week. Happy Thanksgiving.