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August 28, 2024 | Listen Online | Read Online

Four Reasons Why You Should Own Crypto Right Now

Did anyone panic sell [on] March 23, 2020 and hasn't bought back yet?

I can't believe I missed the bottom. You guys were right, we wouldn't be able to time the market.

The above remarks were posted to Reddit by an investor expressing frustration that he sold his positions shortly after the COVID-19 outbreak in March 2020.

As I'm sure you remember, March 2020 an ugly month for the markets.

The entire economy ground to a halt. The CBOE Volatility Index – also referred to as the market's fear gauge – rocketed 400% to 85, its highest level since 2008 during the financial crisis.

The S&P 500 and the Nasdaq indexes plunged 36% and 32%, respectively, in a matter of weeks. Bitcoin plummeted 64%.

Just days before the market crashed, billionaire hedge fund manager Bill Ackman appeared live on CNBC to beg then-President Trump "to do something."

In the most dramatic fashion, Ackman told the millions watching that "hell is coming" and "America will end as we know it." (You can watch the clip here.)

Fortunately, that didn't come to pass.

Since the pandemic panic, the S&P 500 and Nasdaq have rallied 157% and 195%, respectively. And bitcoin is up a whopping 1,496%.

Unfortunately for the investor above, March 23, 2020, did mark the bottom of the market crash. And based on his Reddit post, he was forced to buy in much higher.

At Digital Asset Daily, we constantly warn you not to make the same mistake as this Reddit poster: Panic sell.

In fact, we've been training you to buy when others are running for the hills. That's because the best bargains are to be had during the worst days of the market.

Whether it's the 2020 pandemic… The 2008 Great Financial Crisis… Or the flash 8% crash we saw earlier this month… When markets fall, doubt creeps in.

During these periods, it's important to remember that most gains are made by buying (and holding onto) high-quality assets for the long haul.

Trying to time the market is a fool's errand.

That's especially true when you're investing in new asset classes that are extremely volatile – like internet stocks were in the 1990s and cryptocurrency is today.

In today's essay, I'll reveal the four biggest reasons you need to position yourself in this asset class. Once you digest them, you'll have all the ammunition you need to steel yourself against the next inevitable bout of volatility.

Reason 1: Supply Pressure Is Easing

Based on my research, I believe we're on the verge of one of the greatest bull markets crypto has ever seen… And the past six months of sluggish price action is about to end.

The first reason is easing supply pressure.

This year, we saw two massive sellers dump thousands of bitcoin on the market. Not because they wanted to – but were forced to.

I'm talking about Mt. Gox executors and the German government.

Recently, both have been selling billions of dollars' worth of bitcoin, which has acted as an overhang on the market.

At its height, Mt. Gox was the largest bitcoin trading hub in the world. The exchange handled nearly 70% of all bitcoin trading volume.

In 2014, hackers stole 850,000 bitcoin from Mt. Gox. Authorities recovered 142,000. Since the start of the year, they've distributed 108,000 of the recovered BTC.

At current prices, that's about $6.5 billion in potential sell pressure now behind us.

According to crypto research firm Arkham, there are still 34,000 of the recovered BTC remaining to be distributed. At current prices, that stash is worth about $2 billion.

When you consider 76% of the bitcoin from Mt. Gox has already been distributed, maximum pain from this distribution is behind us.

The second major seller was the German government, which seized roughly 50,000 bitcoin from a website found guilty of money laundering.

In total, Germany raised roughly $2.87 billion from its token auction.

Over the past few months, these two major sellers offloaded over $9.3 billion worth of BTC on the market. That's an incredible amount to absorb in such a short period.

With the relentless selling pressure almost behind us… Bitcoin is poised to bounce back above the surface like a beach ball held under water.

Reason No. 2: Fed's Monetary Policy Is Easing

The second reason you should own crypto right now is because the Federal Reserve is expected to lower interest at least three times before the end of the year.

And when the Fed lowers rate, it's rocket fuel for riskier assets like tech stocks and cryptocurrencies.

The Federal Reserve has a dual mandate: Maximum employment and low inflation.

Up until April, the unemployment rate had been at a historic low of 3.4%. However, it has begun to tick up to 4.3%.

While inflation is still above the Fed's 2% target rate, the central bank has made significant progress in lowering it. The latest Consumer Price Index stands at 2.9% – down significantly from its high of 9% in June 2022.

Given the Fed's dual mandate, it's no surprise the majority of economists polled by Reuters expects three rate cuts by year end.

Rate cuts are bullish for risk assets like stocks and cryptocurrencies because they act like a release valve.

When rates are high, money freezes up and it slows the economy. But when rates are low, dollars flood the system as borrowing increases. This boosts the economy.

For example, after the Fed dropped its key interest rate to 0.25% on March 16, 2020 due to the COVID crisis, the S&P surged 102% over the next two years.

In short, lower rates translate to more money in the system. And that will likely lead to higher asset prices.

Reason No. 3: Adoption Is Increasing

The third reason why you should own crypto right now is because Wall Street's marketing machine is just beginning to fire up.

Here's what I mean…

In January, the first bitcoin exchange-traded funds (ETFs) hit the market. Since then, we've seen $17.6 billion in new inflows into these 11 ETFs. Total bitcoin assets in all bitcoin ETFs stands at $60 billion.

That may not seem like a lot when you consider the ETF market is valued at $9.6 trillion…

But when the Securities and Exchange Commission approved the first physically backed commodity ETF in 2004 – the SPDR Gold Trust (GLD) – it took the gold ETFs five years to match the capital the bitcoin ETFs have amassed in just eight months

Today, there are over a dozen physically-backed commodity ETFs traded on public exchanges in the United States, including funds for silver, copper and platinum. In total, they hold over $130 billion in assets.

We'll see a similar explosion of crypto financial products.

For example, in July, we saw the first of eight Ethereum ETFs go live. And asset manager VanEck has applied to launch an ETF for Solana, the fourth-largest crypto by market cap.

Wall Street isn't launching these crypto products because they have become converts to this asset class. They're launching them for one reason and one reason only: Greed.

The big firms have finally figured out they can rake in billions of dollars' worth of fees from selling crypto financial products.

How else do you explain Morgan Stanley giving the green light to its 15,000 wealth advisors to begin selling bitcoin ETFs to their clients.

This opens the floodgates to the firms $4.9 trillion in assets under management (AUM).

How else do you explain the head of Goldman Sachs' wealth management unit telling The Wall Street Journal that, "We're not believers in crypto" on April 2.

Yet, just five months later, we discover via SEC filings that Goldman Sachs holds $400 million in BTC. Clearly, they've had a change of heart.

Research firm Statista estimates there's $128 trillion in global AUM. So far, only $60 billion – a minuscule 0.05% of global AUM – is in bitcoin.

If you believe digital assets are the future – and bitcoin is the foundation of this new asset class – then we're just at the tip of the iceberg.

The firing pistol for this $128 trillion in assets being green lit for crypto just went off.

And no one in the mainstream media is talking about it.

Reason No. 4: Regulatory Policy Is Easing

The fourth reason you should own crypto right now is because the regulatory landscape in the United States is about to get friendlier.

Last month, I had the opportunity to see former President Donald Trump at the Bitcoin 2024 conference in Nashville. It's the largest bitcoin conference in the world.

During his keynote address, the President promised to fire SEC Chair Gary Gensler on Day One.

Gensler has been on a crusade against the crypto industry, including suing popular exchanges like Coinbase and Kraken. So just getting rid of Gensler would remove one impediment to crypto's growth in America.

Trump promised to put in power people who understand the industry. Not hate it. If he wins, we should see a friendlier crypto regime in the United States.

(You can read the full article on President Trump's speech at the bitcoin conference here.)

After President Trump's speech, Republican Senator Cynthia Lummis of Wyoming announced pro-crypto legislation she's planning to push through Congress.

The bill would permit the U.S. government to buy 5% of the world's bitcoin supply over the next five years… And hold it for at least 20 years as a strategic reserve asset.

The purpose of the purchase would be to help pay down the national debt.

While President Trump is a more bullish candidate for crypto assets than his rival, Vice President Kamala Harris, Democrats are warming up to crypto, too.

An estimated 20% of Americans own crypto. And a recent Harris Poll found one-third of voters plan to take a candidates' crypto policy into consideration when voting.

So, it's no surprise that the Democratic Party is reevaluating some of its anti-crypto stances.

Last month, Democratic members of Congress sent a letter to the Democratic National Committee asking for it to embrace pro-crypto policy.

And while she didn't appear herself, Vice President Harris had surrogates attend the event. One of them is U.S. Representative Wiley Nickel of North Carolina.

Unlike President Biden, Wiley said Vice President Harris "understands" crypto and may embrace it as an issue in her campaign for the White House.

The political winds are rapidly shifting in favor of crypto.

If more favorable crypto regulations are put in place, we could see crypto assets melt up as restrictions are removed.

We're Holding a "Diamond Hand"

Last week, Daily editor Teeka Tiwari explained why you need "diamond hands" to become a successful investor.

Diamond hands are the investors who have the fortitude to hold risky assets during the most volatile times. They don't throw in their hands at the first sign of panic – like the unfortunate Reddit poster I referred to above.

To be a diamond hand, Teeka says, "you have to know the value of an asset is… And what its value will likely be in the future."

Hopefully, based on the four reasons I outlined in today's essay, you can see that bitcoin's value will be much, much higher in the future than it is now.

And as bitcoin goes, so do the altcoins.

So don't let today's price action cloud your vision of what's going to happen over the next five to 10 years.

If you want to pull your financial goals years forward, you need to act now while most are sitting on their hands.

Today's prices present a buying opportunity. And those who act now will be rewarded in the years ahead.

Best,

Houston Molnar