Opportunity in Cryptos is Near, and Getting Closer

It is happening. Bitcoin and other cryptocurrencies are crashing.

Well, sort of.

This week Bitcoin sank below $10,000. It’s down from $21,000 a month ago, in a perfect storm of investor fatigue, expert skepticism and regulatory hell.

Now, Bitcoin itself may not be the new black. But for investors, it is part of a trend that could be as big (and growing) as the internet.

Consider that Mark Cuban’s basketball team plans to accept Bitcoin and fellow cryptocurrency Ethereum when it sells tickets next season. The Dallas Mavericks join the Sacramento Kings in accepting alternate currencies. The Kings, notably, have been doing so since 2014.

In other words, be ready. Opportunity is near … and getting closer.

Like most aspects of current culture, the cryptocurrency debate has become tribal. Unfortunately, most of it is unhealthy, foolish and misses the point. Most investments are not an all-or-nothing proposition. The secret is to understand the underlying premise, then find a reasonable level to invest.

Related story: Weiss Ratings Announces First Bitcoin & Crypto Grades

I’m reminded of the dot-com era. Back in the late 1990s, the next big thing was the Internet. It was a huge deal. Opportunists were everywhere. Investment bankers, starry-eyed entrepreneurs and pundits took advantage.

At one point, a kooky startup called Pets.com was running ads during the Super Bowl. Its only competitive advantage was ownership of a category-defining domain name. Well, that and the belief that pet owners would rather buy supplies online, I suppose. It was a crazy time.

Skeptics lined up. Rightfully so.

They argued that the Internet was dumb and pointless. As an investment vehicle, they said it was a fraud. And they were all over TV, pounding the table, warning about tulips and scams.

The dot-com bubble did burst. Selling pet supplies online no longer seemed like the invention of the telephone. And Amazon.com, the most well-known company during the era, collapsed. It was ugly. After trading as high as $110 during 1999, a smart investor could have picked up shares in the online retailer for $6.60 in 2001.

But I’m getting ahead of myself.

In the dot-com heyday, Internet stocks routinely ricocheted all over the place. In 1999, the Nasdaq-100 Index endured four declines of greater than 10%. It still ended the year with a 99% gain.

While the investor sentiment bubble did pop, the underlying business opportunity never went away.
Today, the Internet remains the dominant investment story of our generation. And with connected cars, cities and a world of sensors on the horizon, I doubt that is going to change anytime soon.

Cryptocurrencies today are where the internet was in the dot-com era.

There are opportunists, starry-eyed entrepreneurs, and detractors. Last week, Warren Buffett, perhaps the most famous investor since Jesse Livermore, proclaimed he knew nothing about cryptocurrencies. But he proffered that he would love to have a five-year put on the whole idea.

In South Korea, regulators continue to step up efforts to ban trading in these new currencies. The motive is transparent. Governments have little control, and they know it.

Longer term, cryptocurrencies pose an existential threat to the fiat currencies they need to fund deficits and occasionally bail out overzealous bankers.

That is the key.

Related story: South Korea’s Crypto Crackdown ups the Stakes

It is why savvy investors should not be deterred by unkind words from pundits … waning bullish sentiment … or even a full court press by government regulators.

Cryptocurrencies are finite. They cannot be duplicated or manipulated by any central authority.

In a world where financial crisis is cyclical, ultimately, that scarcity is a desirable long-term investment proposition. It makes cryptocurrencies an asset class.

I’m not suggesting it is risk-free. It is not. Plenty of Pets.com situations are out there, waiting to suck up the fortunes of unsuspecting investors. But Amazon.com is out there, too.

The opportunity is that big … if not even more significant.

I have been telling my members to stay with stock market plays. Thus far, our focus is the companies building silicon used for digital coin mining, or software companies working out longer-term Blockchain platforms.

These stocks have been big winners. That should continue. Cryptocurrencies and digital distributive ledger infrastructure are not going away.

However, the recent weakness for the digital coins is an opportunity for traders. The 200-day moving average for Bitcoin, valued in U.S. dollars, is $7,102. Given the magnitude of the current retracement, that level should hold. If so, a rally toward $14,900 would quickly ensue.

During the dot-com era, many people lost perspective. Eventually, some them lost their shirts. But a lot of savvy investors made a killing. Cryptocurrencies have the potential to be just as big.

Best wishes,
Jon Markman

P.S. The time to do your homework on cryptos is now. That’s why we’re pleased to announce that Weiss Ratings will become the first company to start issuing letter grades on cryptocurrency ratings. Check out our founder Martin Weiss’ interview on CNBC this morning about this groundbreaking research by clicking here.