Don’t let this recent bitcoin rally fool you. Even though bitcoin is up about 5% over the last seven days and up 20% over the last month, the markets are in a dangerous spot. Much of bitcoin’s rally can be attributed to a big bet placed by Balaji Srinivasan, Coinbase’s former chief technology officer and an extraordinarily gifted crypto mind and angel investor.
I wrote more about Srinivasan’s wager for Early Investing, so I won’t delve into the details here. But the main idea is that Srinivasan is betting that due to the banking crisis and money printing, the U.S. is headed for a period of hyperinflation. And with the dollar devalued, bitcoin will emerge as a critical store of value.
The Fed’s 25-basis-point rate hike combined with guidance that it would likely only raise rates one more time this year illustrates just how real that possibility is. Two weeks ago, policymakers indicated we’d see more rate hikes this year to bring inflation under control. But with the banking industry facing significant stress (thanks to some banks not managing the Fed’s rate hikes correctly), the Fed is slowing down. And by using interest rates to solve both inflation and the banking crisis, it runs the risk of solving neither.
This is a major problem for crypto investors. The Fed’s inability to contain inflation has been a major factor in driving prices down and extending crypto’s bear market. But the bank crisis and money printing is why crypto was created in the first place.
I believe the Fed will be much more successful in containing the banking crisis than it will in fighting inflation. If that’s the case, this rally will be short lived. And it doesn’t make sense to buy into the market this month.
So instead of recommending a coin this month, I’m suggesting that you take the time over the next few days to get your crypto portfolio in order. That’s what we’re doing with the Crypto Asset Strategies portfolio.
Let’s start with selling Haven Protocol (XHV). It’s been in our portfolio since 2018. And I just don’t see it recovering in the next bull market. It’s time to sell it and cut our losses.
It’s time to sell Chiliz (CHZ) as well. The World Cup didn’t provide the catalyst I was hoping for. And the coin has really struggled since we added it to the portfolio in September.
Depending on your financial situation and investment philosophy, this could be a good place to take some profits as well — especially on Cosmos (+122%), GMX (+51%), and Litentry (+41%). We’re going to keep them in the Crypto Asset Strategies portfolio as is. But if you’d like to pull just your initial investment off the table, this is a good spot to do so. I believe these coins are set up well for the next bull market, so make sure you don’t sell your entire stake in each position.
Finally, let’s hold on to Molten Ventures (formerly Draper Esprit) for now. Tech stocks have been getting hammered for some time now. And the tech recession isn’t over. So I wouldn’t be surprised if things get worse. But I believe Molten is a very good company. And when tech stocks do rebound, Molten should perform well.
Overall, I believe the Crypto Asset Strategies portfolio is built to handle any upcoming market turbulence and thrive during crypto’s next bull run. But the key for now is patience. I think the market is at a critical inflection point. Let’s see which direction it heads in before making the next move.