How I’m Investing Going Into 2020 (And Lessons From My Bitcoin Investing)
It’s been over two years since my last investing hypothesis post where I explained why I had become extremely bullish on bitcoin.
I published that article right as the ICO bubble of 2017 was starting to heat up, and a LOT has changed since then…
So I wanted to write a quick update to show what I’m focusing on now, and where I think the markets are headed over the next year or two.
After all, I like to think about investing like a chess player and ask questions like…
- What do I see that the mass majority of people are ignoring?
- What are the future possible outcomes, and what’s most likely to occur?
- What black swan events or unforeseen events can throw off my hypothesis?
- What do I believe that most people will disagree with me?
To help give context to my current thoughts, I’m going to explain the phases of my journey with cryptocurrencies.
Phase 1 — Bitcoin Accumulation (2013–2015)
My first blog post about bitcoin in 2013 was actually quite negative about bitcoin’s current price.
I correctly believed bitcoin was in a bubble after it went from $100 to over $900 in a few months.
And during the 2014 bitcoin bear market, we practiced shorting bitcoin during panics to increase our USD value, then reinvested those fiat gains in bitcoin when the price had done a full retracement of the prior bubble.
2015 gave us a full year to aggressively accumulate bitcoin in the $100 — $200 range.
I even self-published a book teaching people how to invest and trade bitcoin, and spoke on stage to anyone that would listen trying to explain why I thought bitcoin was the best market for traders and investors.
Looking back, it felt like most of my time was spent trying to convince people that bitcoin wasn’t a scam or passing fad and that something very special was about to happen.
These early days were my favorite time in crypto.
Phase 2 — Mainstream Awareness & ICO Bubble (2016–2017)
In 2016, I noticed my YouTube subscribers were growing quickly and search volume for keywords related to “bitcoin” were seeing significant traffic.
We also saw the growth of first-generation altcoins like Ethereum and Ripple. It became apparent that the crypto space was ripe for fast growth…
This attracted many get-rich-quick speculators, scammers, copycats, and vaporware “devs” that would eventually leave an ugly bruise on the crypto sphere…
And this flood of people helped drive the ICO (initial coin offering) bubble of 2017.
It’s weird because 2017 was my least favorite time in crypto, even though I made life-changing amounts of money during this time.
The BS started with people impersonating me on social media, trying to run various scams which I’ve laid out in detail in this post.
Then my YouTube comments went from being 99% positive and intelligent to being over-run with angry morons demanding I tell them how to make money without having to put in any work.
In 2013, I was one of the first guys in the world creating videos about bitcoin. By 2017, there was a new “crypto guru” popping up on YouTube every 24 hours.
I’ve actually considered quitting YouTube and social media altogether, but realized I couldn’t let the scammers win because I genuinely enjoy helping other people build wealth in the crypto-economy…
And thinking of the thousands of people that have succeeded on this journey with me makes all the bullshit worth it at the end of the day.
Phase 3 — Popped Bubble & ICO Purge (2018)
In late 2017, bitcoin’s price went from $8,000 to nearly $20,000 in just 3 weeks…
Then on December 18th, 2017 the first regulated bitcoin futures contracts started trading, which literally created the top of the 2017 crypto bubble.
It became the all-time high price of bitcoin and began the downfall of many crypto projects.
As price started to pull back, the investors that bought at sky-high prices began to panic sell which caused the price to crash to $6,000 (70%+ loss in a few weeks).
Then bitcoin slowly stair-stepped back down in the $3,000 range, and most altcoins lost over 90% of their value.
Many of the under-capitalized crypto projects quickly failed, while there are still hundreds (thousands?) more that will eventually fail over the next 1–3 years.
2018 felt similar to 2015. Articles were written calling for “the death of bitcoin”, and market sentiment was at an all-time low.
Phase 4 — Plateau Of Productivity & Mainstream Adoption (2019 — ?)
As I explain in this video, bitcoin’s price has been going through the same boom-bust cycle since 2011…
And in early 2019 we had another time period to accumulate bitcoin at pre-bubble prices.
But no matter how many times I do videos explaining how to “buy low and sell high”, I’ve had to accept that over 90% won’t do the rational thing because humans are irrational when it comes to investing.
This year we’ve seen many well-respected VC’s, hedge funds, and economists finally throwing their hat in the “bitcoin bull” ring.
Even though most altcoins are still struggling (and are likely to fail), we’ve seen the launch of Security Tokens, which in my opinion offer a much more sustainable way for crypto projects to raise capital.
This year we’re getting the launch of physically settled bitcoin futures contracts, and the prospects of bitcoin ETF’s become stronger by the day.
With U.S. recession risk at a recent all-time high, investors are turning to gold, bitcoin, and other non-paper assets as potential safe havens and places to find yield.
The Future Of Crypto In 2020 & Beyond
As real-world use cases for crypto-assets continue to come to light, governments realize they can no longer ignore what’s happening…
And this year we’ve seen debates in the U.S. Congress, tweets from Trump, and polarization between countries that are either embracing or becoming hostile toward crypto.
Countries that embrace bitcoin will help their citizens grow wealth…
And countries that fight bitcoin are stealing future prosperity from their citizens.
All we need for increased bitcoin use and adoption is one major economy to experience a deep recession, hyperinflation, or currency crisis.
In my opinion, it’s not about IF, but rather WHEN that’s going to happen.
How I’m Investing Going Forward
I like to keep things simple. I also view myself as a retired trader, only coming out of retirement when a trade looks too good to pass up.
My motto is — Trade Less. Profit More.
The older I get and the bigger my investing capital base becomes, the longer I set my time horizon for positions.
For example, in my early 20’s I focused on day trading when there was higher volatility in the stock market and we saw less manipulation from high-frequency trading algorithms.
Now in my 30’s, I’m looking for a minimum of multi-month swing trades with a bias towards 2–3 year holds.
Over the past year, I’ve been looking at every possible Security Token available, and have only invested in a handful so far.
The STO space is much slower, more regulated, and filled with less hype…
Which is a great thing, but…
I firmly believe we need a complete overhaul of the accredited investor rule, which helps the rich get richer and keeps the average investor out of the highest growth markets.
Why should millionaires be the only people with access to high-growth potential investments?
Also, even though a lot of people don’t want to hear it, most ICO’s from 2017 will fail.
That’s just the nature of startups, and companies that raised too much capital without clarity on how they’ll grow the value of their tokens will bleed value until they run out of runway to continue operations.
With that said, I’m extremely bullish on the future of humanity and entrepreneurship, which means I’m a long-term bull for publicly traded stocks and well-run private companies.
However, I also see some massive looming risks in the stock market, so I’ve moved about 15% of my assets into long/short managed futures funds which tend to do very well in bear markets and recessions.
Instead of stressing myself out by personally trading futures all-day every day, I’ve hired some of the best firms in the space to trade all the most liquid futures markets for me.
I look at a long/short managed futures fund as a hedge against my long-only stock/bond portfolio.
I’ve also been accumulating gold and silver since 2014 and added to my holdings on the $1,400 USD gold breakout.
Knowing we’re late in the business cycle, I’m playing defense with startup investing by only adding to my existing investments that are performing well, and staying away from any over-valued private companies.
There’s been a lot of desperate money chasing deals, and I refuse to get caught up in irrational buying hysteria…
WeWork IPO anyone?!
I’m also going to continue to accumulate bitcoin when everyone else is panicking and taking profit when everyone else is partying.
There are several theories on how to value bitcoin long-term, but instead of trying to predict an uncertain future, I like to approach it with different capital buckets:
Capital bucket #1 — Cold Storage Holdings: Just like you would store gold in a vault, holding bitcoin you personally control is a great hedge against a fiat currency crisis.
Capital bucket #2 — Multi-Year Position Trades: Since bitcoin is the fastest growing and most volatile market on the planet, it might make sense for someone to trade the larger market cycles. My strategy is to accumulate bitcoin when price is low, then sell for fiat during bubbles to increase my net worth so I can buy even more bitcoin during crashes. Rinse and repeat.
Capital bucket #3 — Short-Term Trades: I’m less focused on short-term trading nowadays, but I will take a trade if I see an opportunity too good to pass up. This is where I see newbies get in the most trouble — overtrading and emotional decisions lead to blown out accounts.
So I’ll wrap this up with a question…
Where do you see opportunity that nobody else sees?