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BUSINESS OPINION – Bill’s Blog – Crypto Winter

Fraser Valley (Bill Westmacott/Fivefold Financial) – I thank Peter Krauth for sharing his insights on markets and silver on Saturday’s webinar. In addition, Peter provides a solid rationale for why he believes silver will end up at $300 US in the coming decade. We had an excellent turnout for the webinar, but for those who missed please enjoy through my YouTube channel: https://youtu.be/dxXAb9HmdnE

Also, if you want to learn more about Peter’s work, please go to the Silver Stock Investor newsletter or check out his latest bestseller, “The Great Silver Bull.” available on Amazon.

For those new to crypto or seasoned, many are learning what a crypto winter feels and looks like; not fun if you are still in the market. Once again, this last week, we saw the massive failure of the FTX Exchange, and 32 billion US vanished. The collapse was no small matter, as many significant institutional players took huge losses (I will get to that later). But, as I and many have warned, cryptocurrencies and blockchain are still early in their development and 100% speculation (meaning, very high risk). Second, in my crypto consulting, I educate people that 95% plus projects will fail. So, if you decide to participate in this new technology and asset class, take only a small position and be well diversified into 5 to 10 projects. Please do your research.

So, what can we learn from a crypto winter and the many project failures this year? 

  • When any investment has massive upside potential, unfortunately, it attacks criminals, unethical people and those driven by greed. FTX looks like a Ponzi Scheme, as ongoing reports indicate, and hopefully, the founder Sam Bankman Fried (SBF), will be brought to justice. 
  • The crypto industry is still very loosely regulated or not at all. So, buyer, beware! Once again, we see the utter failure of government regulators. The amount of criminal activity yearly in all markets (even regulated) stocks, bonds, forex, commodities, and even money laundering by banks is staggering. So, the complete failure of many crypto projects this year does not surprise me. Expect regulations to come soon, as BIG money took a beating.
  • It reminds me of the Internet Dot Com insanity of the late 1990s—anything with a .com, the stock prices were driven to the stratosphere, only to return the earth with a massive crash in 2000. Thousands of companies failed with no real business plan, and we see the same thing again in the crypto world. King Solomon was right, “There is nothing new under the sun.” Cycles keep repeating, just new actors/actresses on the stage!
  • As I have often said, “there is a time to be in an asset class and when to exit.” Now is not the time! If you are in sizable gains, take your profits. Greed and fear are the two most dangerous emotions that all investors and speculators need to master. 
  • If you have taken losses, you are not alone. Here is a short list of institutional investors who took massive hits to their capital with FTX’s bankruptcy:  Blackrock, Lightspeed Venture, Brevan Howard, Tiger Global, SoftBank and many more were major investors like Mr. Wondeful (Kevin O’Leary). The Ontario Teachers’ Pension Fund lost a staggering 95 million. Significant Hedge Funds and Venture Capitalists who are supposed to understand risk lost hundreds of millions. 
  • Generally, the crypto markets follow the four-year Bitcoin halving cycle. I suspect we have another year to 18 months before the chill comes off the market. As I told my clients and readers, I exited with sizable profits all my tradable crypto positions last year and completed them in February 2022 before the crash started. Currently, I have less than $50 in cryptos and have no plans to reenter until signs of the spring arrive, possibly in late 2023 or 2024. 
  • I still see a significant downside in the crypto market and watch Bitcoin as the leader. The next support level is 12K, then 9K; if that fails, $3500 is highly likely. If we reach that price, I may consider taking a small position in several tranches. Most people should stay on the sidelines in the winter season unless they are experienced traders.
  • The most important lesson is doing homework (understanding the risks and what you are investing in) before entering any trade or investment. Have a plan and work your plan. Always be willing to adjust your plan, which has been a valuable strategy to make profits. Do not make trades based on fear or panic, as this almost always leads to significant losses! 
  • Finally, be well diversified into many asset classes. With speculation (unless you are an expert), only take minimal positions that you can afford to take 100% losses. 
  • Second finally, please do not leave your crypto assets on any exchange. There have been many massive failures with exchanges like Mt. Gox, Quadrigix and FTX. Yes, you often need to use an exchange to buy and sell but remove your assets immediately onto a cold wallet for safe storage. 

Thank you for reading my Blog, and as always, “Increase your financial IQ, and you will make better money decisions.” If you found the Blog helpful, please pass it on to a friend.

Bill Westmacott, Founder

fivefoldfinancial.ca 

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