Article contributed by Isaiah McCall. Follow them on Medium here.
“Why?”
“What could possibly possess you to do such a thing?”
“It’s only going up from here, you idiot.”
I get it, I really do. But for the first time in my investing career, I feel as though I understand the value of an asset. There’s an old saying by Warren Buffett that goes, “price is what you pay, value is what you get.”
A few months ago that saying finally clicked and it compelled me to sell my ETH. Here’s why.
I Sold Before the Recession
So let’s get this out of the way, I 100% still believe in the fundamentals of Ethereum. I think it’s a fantastic project with a bright future. But I also believe that we are in the midst of a global economic recession that will only get worse.
I’ve been writing about this since last year but it wasn’t until January that I started to put two and two together: Ethereum was going to be hit much harder than the stock market.
There was no reason for me to follow the groupthink of “hodling” until prices plummeted into the Earth’s crust. The data was there, and I executed my plan. Here’s an excerpt from that January article where I say exactly this —
“The Fed’s statement even mentioned the growing number of speculative memestocks. Everyone (including myself) should have taken this as a clear sign that they weren’t interested in keeping your stock or crypto bags pumped anymore.”
Any hope of a recovery we’re seeing right now is called a “dead cat bounce.” This isn’t a real market recovery. Most assets are going to keep crashing due to inflation, the Fed, and the overall state of the economy.
And although inflation is high, I’d rather have the cash right now.
Why Cash is King During a Recession
Nothing is safe from inflation. Not gold, Bitcoin, stocks, or even cash. But cash is still the best asset to have during a recession because it’s the most liquid.
What does that mean?
It means that you can convert it to anything else very quickly and easily.
And this leads us to Mr. Buffett.
I want to buy more Bitcoin and Ethereum at a price that feels like I’m getting a deal, not because everyone else is buying it and FOMOing in.
For now, this means I’m going to sit on my cash and wait for a buying opportunity that seems fair. I’m not sure if $20,000 was the bottom for Bitcoin or if $1,000 was the bottom for Ethereum, but for now, I’ll sit on my hands and wait.
Historically speaking assets will continue to crash until the Federal Reserve begins to cut rates. I don’t know when that will be, but I do know that it’s not going to be anytime soon. So for now, I’ll keep my cash safe and wait.
I Want More Bitcoin, Not More Ethereum
Risk management and risk assessment.
These are the two reasons why investors fail. They either don’t understand these two concepts or they don’t do it.
Ethereum is a bigger bet than Bitcoin on paper; in fact, one of the core developers even said that it was too complicated and that devs needed to focus on culling the project back a bit. Does this mean Ethereum will fail? Definitely not. But it’s undeniable that Ethereum, even in its Ethereum 2.0 phase, has more problems to deal with than Bitcoin.
Bitcoin doesn’t have any competition in the blockchain space, unlike Ethereum which has hundreds, and it only tries to accomplish one thing: be a store of value. It’s a stroke of monetary genius leaving fiat in the dust in comparison to its elaborate structure and adaptability.
Bitcoin is digital gold, and I want more of it. That’s why going forward I’m balancing my crypto portfolio 60/40 in favor of Bitcoin.
What if Crypto Isn’t Worth What We Think It Is?
Nonsense.
As legendary investor Raoul Pal points out, you can value Bitcoin and Ethereum by Metcalfe’s Law.
Metcalfe’s Law is named after Robert Metcalfe, the creator of Ethernet, and is an equation used to value networks.
It’s pretty simple: the more people that use a network, the more valuable it becomes. This is why Facebook, Amazon, and Google are worth so much. They have a ton of users that use their platforms every day.
Bitcoin and Ethereum’s networks were parabolic up until the 2018 crash and once again in 2022. Yes, network adoption is once again crabbing — but that’s okay! We’re in a “revulsion” phase of cryptocurrency. No one even wants to hear the word Bitcoin or Ethereum just as no one wanted to hear about websites or the internet after the Dot-Com crash in 2001.
This doesn’t mean the technology isn’t valuable, it just means we’re in a valley of disillusionment at the moment.
This is Greatest Generational Buying Opportunity
You didn’t miss out on Bitcoin or Ethereum.
There isn’t even a clear regulatory framework for the crypto industry in the largest economy on the planet: America. You are literally here before the governments and corporations and banks.
Just as there are inefficiencies in any social infrastructure, there are inefficiencies in economic infrastructure. This is why the implications of a frictionless currency built on the backs of Bitcoin and Ethereum are enormous.
You still have time to make it, and a lot more than you think. We’re only at the beginning of this financial revolution, and 15 years down the line there will still be tons of opportunities.
Let’s assume that Bitcoin goes to $100,000 per token. This will lead many financial services and businesses to rise up and join the tide. We will see the introduction of a new digital asset securities market where startups will crowdfund through tokens and regulated ICO/IDO and NFTs.
This is all to say that you can still make it even if you learned about crypto yesterday. Just ignore the hype of the masses that cry and scream about daily price action and join the innovators that think in a longer time frame.
The party’s just getting started.
Ever since I was a child it was my dream to become a financial advisor. Unfortunately, it never came true. Therefore I am not a financial advisor and you should do your own research and not just listen to random people on the internet. Nothing contained in this publication should be construed as investment advice.
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