Riding the "Crypto-Coaster"

By Wayne Mulligan, on Thursday, February 8, 2018

It’s been a volatile couple of weeks for the market...

After reaching a new high of 26,670, the Dow dropped by more than 4,000 points.

But the volatility in stocks pales in comparison to the action in cryptos:

For example, after soaring to about $20,000 in December, Bitcoin recently crashed to just $6,000 — which equates to a 70% loss in a month. Ouch!

This has made many crypto investors, especially those who are newer to these markets, question whether they should be investing here.

So today we’ll review the main catalysts causing the recent decline in cryptos…

Then we’ll show you why these events may turn out to be a good thing for crypto investors in 2018.

China “Banned” Crypto Trading (Again) 

In September of last year, China banned ICO investing — and shortly thereafter, it shut down all of its domestic crypto-currency exchanges.

This caused the price of Bitcoin to quickly drop by 25%.

But then, three days ago, dozens of websites reported that China was set to crack down on cryptos even further:

This time, it was reported that Beijing was aiming to use its “Great Firewall” technology to block access to all crypto currency trading platforms — domestic and foreign ones.

But there are a few things to keep in mind here:

First of all, since the September shutdown of Chinese crypto-currency sites, the volume of crypto trades originating in China is already down by roughly 99%.

So, given that the participation of Chinese traders has already being dramatically reduced, the impact of this week’s announcement on crypto prices should have been minimal.

The second thing to keep in mind is that most of the websites reporting on this issue are quoting secondary sources — and they’re dramatically misreading or misreporting what was actually said by the People’s Bank of China.

If you read the original report published by Xinhua, the central news agency in China, you’ll see that regulators are focusing on a very specific type of illegal crypto trading.

It involves local residents pooling their money and transferring it to friends in countries like Taiwan. This way, their friends can invest in ICOs on their behalf.

But this behavior makes up only a tiny portion of crypto trading in China.

So, bottom line: this recent “news” about China has been dramatically overblown.

Credit Cards and Facebook Too! 

There were also a couple of recent developments closer to home:

First, credit card companies like Chase and CapitalOne decided to ban customers from using credit cards to purchase crypto-currencies.

This is a bit of an annoyance for investors, but it shouldn’t negatively impact crypto prices.

For instance, when I’m looking to make a quick crypto trade, I’ll occasionally use my credit card. You see, when you use a credit card on a crypto exchange like Coinbase, it gives you access to your funds immediately. In contrast, when you transfer funds from your bank, it takes up to three days.

Again, this is slightly annoying — but it’s not critical to the crypto markets.

The second thing that happened is that Facebook banned all crypto advertising...

But this is a good development!

You see, by banning crypto companies — including the low-quality ones — from advertising on one of the largest ad networks in the world, it’ll be more difficult for them to artificially “pump up” the price of their cryptos.

And as we’ll explain in a moment, this wasn’t the only recent good news…

Regulators Starting to Make Noise (in a Good Way)

This past Tuesday, J. Christopher Giancarlo, the Chairman of the Commodity Futures Trading Commission — that’s the CFTC, the regulatory body that oversees the commodity and currency trading markets — testified before the Senate Banking Committee.

Many expected him to call Bitcoin a scam and push for extreme regulation of cryptos.

But that’s not what happened at all.

Instead, explaining how impactful cryptos could be to our monetary system and the overall prosperity of American citizens, he advocated for lighter regulation of cryptos and their “distributed ledger technology.”

Specifically, he said:

"'Do no harm' was unquestionably the right approach to development of the Internet. Similarly, I believe that 'do no harm' is the right overarching approach for distributed ledger technology. ... With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity."

This marks one of the most bullish and informed public comments about cryptos to ever come from the head of a major banking or regulatory body.

Could be a Massive Buying Opportunity

As you understand now, most of the news that’s caused cryptos to tumble over the past few weeks has either been overblown, misinterpreted, or outright ignored.

The market for cryptos is as healthy and robust as it’s ever been.

And to be clear, we personally have a great deal of capital invested in cryptos, so we understand how difficult it can be to keep things in perspective when the value of your holdings is dropping.

If you’re not comfortable with the inherent volatility of cryptos, you could certainly get out of this market altogether — but given the upside potential that exists here, we believe that would be a mistake.

In fact, we look at “down” cycles like this as buying opportunities:

For example, when the crypto markets took a 25% hit last September, we wrote to our subscribers:

“...it might be helpful to keep in mind that Bitcoin has been declared “dead” 166 times over the past six years…

And guess what: not only has it been “resurrected” every time, but it’s generally gone on to reach new highs shortly thereafter.”

At the time we wrote that, Bitcoin was trading at just $4,000 — and within the next 90 days it rocketed up 500%, to $20,000 per coin.

We’re not saying the exact same thing will happen this time…

But given the recent declines in crypto prices across the board, personally, we’ve been adding to many of our existing positions.

So if you’re new to the crypto markets and you’ve been looking for a good time to step in, now might be the time to take action.

And if you already own various positions, now might be a good time to add to them.

Happy investing.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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