THE BULL
“Behold, I have engraved you on the palms of my hands.”
—Isaiah 49:16
*NOT FINANCIAL ADVICE*
Months back, I let readers know about the start of the current crypto bull cycle. Since then, things have popped off, and as predicted, Bitcoin ETFs were approved. Inflows caught many off-guard, including Coinbase, a designated ETF Bitcoin custodian. Activity ran so hot that their platform gave out and temporarily showed $0 in funds for its users until they could bring everything back online. That’s what we call in crypto much bullish, very wow.
If you’re feeling left out, you’re not alone. I’m happy to say there’s still time. I’ll explain in a moment.
Weeks ago, when Vanguard announced that CEO Tim Buckley would be retiring, many speculated that he had been pushed out because he refused to offer customers a chance to buy spot Bitcoin ETFs on their platform. Those speculations were largely put to rest when he discussed the subject in a recent interview, saying “We’re not going to change our minds” because Bitcoin is “too volatile and not a store of value.” Simply put, it’s the company line, and it won’t change regardless of who’s in charge.
If you’re not a crypto nut like myself and actually have your head screwed on correctly, you will look at these wise words from a wise man who’s grown his company to $9 trillion (trillion with a T) in assets under management, and you, being wise yourself, will take his wisdom to heart by avoiding Bitcoin and crypto in general at all cost.
But it’s a trap. Don’t do it.
Buckley is not mistaken, per se, in his evaluation of Bitcoin. It is volatile. It is speculative by its very nature. It has not fully accomplished what it was designed to do—i.e., take over the monetary system. Why then should you dismiss Buckley’s musings and throw your hat in with the crypto kooks?
For one, Vanguard is the second largest shareholder of MicroStrategy, Michael Saylor’s Bitcoin behemoth. Bitcoin go up > MicroStrategy go up > Vanguard mutual fund go up. Indirect exposure to Bitcoin is still exposure for Vanguard. Are you aware that Bitcoin is Saylor’s whole schtick? While you and Grandma were out buying bonds and opening savings accounts to get that extra .25% interest, Saylor was gobbling up metric tons of digital gold more volatile than nuclear fission and arguably less understood. See this man’s energy?
Vanguard’s exposure to Saylor is one thing. The other thing is that when it comes to wisdom in investing, most of the people on the other side clicking the BUY button in today’s world have none of it. People will buy whatever’s hot. Tech is hot and getting hotter. Perhaps it wasn’t always this way, but it is now. Conventional wisdom about what will go up and what will stay put or diminish will need reevaluating. It’s not even clear that stocks will survive in the long-term as tech companies pursue ICOs—initial coin offerings—that functionally act like stocks and would be subject to SEC regulation, but would bypass any kind of market listing. So long NYSE.
If you thought the demise of the wild-eyed floor traders on Wall Street was the end of an era, widen your gaze.
With crypto, it will be all or nothing. The end game is either complete takeover of the monetary and financial system, or it will die a slow, agonizing death under a pile of VHS players and moldy beepers.
Why is the S&P 500 still going up when people are feeling the economic pinch and jobs reports are continuously being revised down? Could it be the top movers are tech-related? Why yes, yes it could be. This should be a signpost that something has shifted.
Much speculation is driven by the rise of A.I. Will A.I. truly be successful? The answer to that question is beside the point. It’s hot, and you will put your money into it because you can’t help it. We’ve either moved into a new era of investment, or the economy is so bad that in order to get ahead, people will chase the riskiest possible plays because their prospects elsewhere—jobs, housing, expenses, retirement—look bleak.
The final point I’ll make is that crypto really does go beyond the speculative. It’s a hard asset with hard use cases and slowly hardening methods of mass adoption. Don’t let the FUDders (FUD: fear, uncertainty, doubt) fool you. And while some investors have proclaimed Bitcoin to be a fake asset because it produces no cash flow or quarterly report that shows the “business” is doing well or doing poorly, the truth is the Bitcoin network generates average fees to the tune of $2.6 million dollars a day. It’s true that those fees aren’t going to you as an investor in the form of dividends (unless you’re a miner), but it is a good measure of how well Bitcoin is working and how many people are willing to use it.
That brings us to the present moment and how you can ride this crypto wave, if you’re strong enough and unhinged enough!
If you think $2.6 million in Bitcoin network fees is good, the Ethereum network is currently generating an average of $24.5 million in fees a day. The usage is massive.
You’re reading this at just the right time. We’ve hit a modest dip. If I were looking to purchase more crypto, I would be buying now. And specifically I would be buying Ethereum since it has the most room to run and a likely ETF of its own on the way very soon.
The other components that make Ethereum an attractive buying opportunity are the launches of new L2s that work off the Ethereum mainnet to reduce fees. A recent upgrade to the Ethereum network called “Dencun” is reducing fees for those who operate on L2s. Feel free to do your own research on these things; just know that it means *massive* investment is going into the Ethereum blockchain. Moreover, as we’ve seen since 2022, the supply of Ethereum has turned negative due to the way new upgrades to the blockchain deal with “gas fees” on the system.
This means that everyone who is buying Ethereum is scrambling to get a slowly diminishing supply. Opportunities for price movement upward look good for the foreseeable months.
That’s the good news. The dose of reality that you will need going forward, should you decide that investing in crypto is a good idea for you, is that crypto cycles include both rapid run-ups and rapid collapses. It is called a cycle for a reason. It’s never shameful to find yourself ahead in crypto and decide to sell.
We haven’t hit crypto mania yet in this cycle, but when we do, that is a sell signal, psychologically speaking. If you make a profit and decide to sell, you will experience pain when you see that price continue to go up. Don’t let it get you down. It’s far worse to ride the cycle up and ride it back down and find yourself at a massive loss.
Never be afraid to sell at a modest profit!
That’s why you have to be brave, strong, and ever so slightly crazy to be a crypto bro looking to make money on the market itself. But if you have long-term vision and conviction, it is my opinion that crypto is the play of the century that will become the standard financial system at some point in time. When? I don’t know. But if you’re going to bet on it, now’s the time.
Happy bull!