It appears crypto markets may finally be turning the corner. Bitcoin broke out above $5,000 yesterday on strong volume, and most altcoins are rallying along with it. As I write, litecoin is trading at $93. Ethereum is trading at $173. And cardano is trading at just under $0.10. All are up big over the past week.
What caused the turnaround? Part of it was certainly short covering (traders who had bet against bitcoin now having to buy to cover their positions). I also believe that we may have simply reached a bottom for this cycle.
So, is this the beginning of the next crypto bull market? I believe it likely is. It’s not confirmed yet, of course. But we have a number of positive catalysts happening.
Fidelity Digital Assets is up and running, onboarding select new clients before it opens up the doors fully. This is one of the premier financial firms of our time, with $2.46 trillion under management, and it’s setting up a crypto shop in New York City.
We also have the bitcoin halving happening in May 2020. At that point, HALF as much new bitcoin will be coming onto the market every day. Past halvings in 2012 and 2016 caused dramatic price increases.
Lastly, central bankers around the world are doing a great service to cryptocurrencies. They’re firing up the (digital) printing presses while governments pile on debt. Faith in fiat systems is decreasing, and I believe this is what will ultimately drive crypto adoption.
Selectively Bullish Market
I do think the next bull market will be much more selective than the last. In the last bull market, almost every crypto soared regardless of quality.
In the next bull market, I suspect bitcoin and a few select altcoins will capture the majority of gains. Bitcoin is the safest position here because I think it will be the first coin to attract major institutional money. Fidelity Digital Assets, for example, is focused exclusively on bitcoin (for now).
It’s also important to have exposure to altcoins here. If we enter another altcoin bull market, the potential gains will be tremendous. And I am hearing from experienced traders who think we’re beginning another “altseason” (a dramatic bull market for altcoins). We had quite a few of these periods in 2017, and boy were they fun and terrifying.
Let’s go over the coins in our current crypto portfolio.
I still recommend holding 50% (or more) in bitcoin. If I had to choose only one cryptocurrency, it would be bitcoin. The Lightning Network is making impressive progress, and other exciting developments, like Schnorr signatures, are also in the works.
I still like Ethereum and see it as the best way to get exposure to the decentralized finance (DeFi) movement. A lot of exciting financial projects are happening on Ethereum.
Litecoin remains one of the few coins traded on Coinbase’s primary platform. And it still has the potential to shoot up like a rocket, as it has demonstrated in recent weeks. The Litecoin Foundation remains hard at work developing partnerships and improving the network.
Cardano is hot, up more than 100% over the last month. The project is making progress on many fronts (see its latest Reddit posts to get an idea of what’s been happening).
I’m going to close by sharing a post I saw on Twitter from The Crypto Dog.
The more relaxed you are during #altseason the more profitable you will be.
Take a deep breath. Don’t try to catch every pump.
Settle on a few good long holds and hunker down. If you must, day trade with just a portion of your stack.
I agree wholeheartedly. Hunker down and hold. Moves in crypto happen fast, so unless you’re an old pro, don’t trade in and out. It’s fine to buy in over time, just stay put for a while once you’re in.
If you want to cash out half after a certain amount, that’s great. But hold some of it for the long run. It could be worth quite a bit in 10 years.
Co-Founder, First Stage Investor