In this time of historic volatility, my first piece of advice to investors is always to not panic.
Source: Shutterstock
And right behind it … stay focused on the big picture and be on the lookout for opportunities.
Cryptocurrencies are definitely an opportunity — an unsung opportunity right now, but I don’t expect them to stay that way.
They are breaking out. They are an increasingly valuable hedge. They continue to get more and more mainstream. And we know a huge catalyst is coming just two months from now …
You may be surprised to hear about the opportunity in cryptos because they also felt the heat from the coronavirus as investors sold pretty much everything.
Between February 14 and March 13, bitcoin fell from around $10,500 to $3,867. But on Friday morning, it shot up above $6,900 — a 78% rally from the recent low.
Bitcoin isn’t the only crypto rebounding sharply. Some smaller cryptos have done even better, gaining over 100% in the last week.
In fact, the basket of the 100 largest cryptocurrencies known as the CIX100 has greatly outperformed the broader market in 2020. The CIX100 is down just 8% compared to the 30% drop in the Dow Jones Industrial Average and the 26% fall in the S&P 500.
That’s great news for bitcoin … and cryptocurrencies in general.
It’s also not entirely unexpected given what’s happening in the broader market and the massive amount of stimulus coming from governments around the globe.
As governments pump money into economies to help offset the effects of the coronavirus, traditional currencies become less valuable. It’s simple supply and demand.
But bitcoin and a few other cryptocurrencies are immune from this supply and demand manipulation, making them a very interesting currency hedge right now.
The Federal Reserve increased its balance sheet to a record high of $4.7 trillion this week after cutting rates to zero last Sunday. It has also shoveled $1.5 trillion into the system in the form of short-term loans and Treasury security purchases.
The European Central Bank said it will buy 750 million euros worth of securities to support its economy, while the Bank of England has cut interest rates as well.
Zero rates (or even negative rates) could become the norm as the world continues to fight the coronavirus
In the meantime, investors will look for ways to hedge against global currency fluctuations where they can. Bitcoin and other cryptocurrencies provide such a hedge because their supply can’t be inflated by governments or anyone else.
Only 21 million bitcoins can be created. Ever. That’s why it’s often called “digital gold.”
Not only that, in a world where dramatic steps are being taken to avoid contaminating others, cryptocurrencies represent a safe, effective, “touchless” way to transfer money. They are digital by design and can be traded across borders in the blink of an eye.
In Italy, where the number of coronavirus deaths has overtaken those in China, Banco Sella recently launched a bitcoin trading service to allow homebound Italians to pay for goods and services using the cryptocurrency.
I expect more banks will follow Banco Sella’s lead in the days and weeks to come.
Momentum Is Building
If you want evidence of the building momentum, look to the digital currency trading platforms. They’re reporting strong interest from investors.
River Financial CEO Alex Leishman recently told CoinDesk that his company signed up 20% of all of its clients … just this month! Many are first-time bitcoin buyers. And while hedge funds, institutional investors, and other businesses have been selling in part to pay off heavily leveraged loans in a down market, everyday investors are buying.
What’s more, we’re about to witness a catalyst to higher prices coming in mid-May. That’s when bitcoin’s “halvening” is set to take place.
The halvening is a plan written into bitcoin’s software protocol to issue fewer new coins roughly every four years. If demand increases or even just stays steady, the “supply shock” will set the cryptocurrency market on fire.
That’s exactly what we’ve seen before.
Starting three months prior to the first halvening in 2012, prices shot up more than 10,000% in just over a year. And beginning three months prior to bitcoin’s second halvening in July 2016, the cryptocurrency went on to surge 4,500% in just over 18 months’ time.
Today, we’re less than two months out from the third halvening. And as profitable as the first two were for bitcoin, most investors don’t realize how much more profitable they were for altcoins — or alternatives to bitcoin.
That’s why I built a system to help identify the best positioned altcoins in the market. This led me to handpick six altcoins for my Ultimate Crypto portfolio.
With the halvening on the horizon, bitcoin could very well soar past its all-time high near $20,000 set in 2017. That would be a big jump of more than 213% from current prices.
Altcoins should do even better — exactly as they have in the past.
The tough market conditions have put these altcoins on sale. And with a known catalyst on the horizon, we’re looking at a great buying opportunity before the markets stabilize.
Cryptocurrencies are now a legitimate asset class that I believe every investor should own in a balanced portfolio. If you haven’t gotten in before, now is your chance.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.