If You Hate Bitcoin, You’ll Hate This Article!

“I wanna hit you with the force of an asteroid from space … I wanna fall out of the sky right into your stupid face …” “I Hate You” by Frank Carter & The Rattlesnakes

There’s a word that’s bound to trigger eyerolls …

Bitcoin.

Half the people fear you’re a “crypto bro” taking a beat before going on some long-winded monologue about the virtues of blockchain and the evils of fiat currency.

The other half hate cryptocurrencies –Bitcoin in particular. And they’re chomping at the bit to espouse their personal gospel on why it’s all a scam, sham, or downright untenable house of cards.

Warren Buffett, and the Patrick to his SpongeBob, Charlie Munger, are vocal Bitcoin haters. As is Paul Krugman, Peter Schiff, and a parade of other successful investors.

Is their hate justified?

Or is it that too many crypto investors just don’t know what they’re doing?  

More Monster than Monster

Bitcoin launched in January 2009.

It is now March 2023.

That’s too long of a period to still be referring to cryptocurrencies as “tulip mania” or some other fly-by-night trend.

Bitcoin is older than Instagram, Instant Pot, Moderna, Peloton, Slack, and Uber.

On top of that - despite its very pronounced, but predictable, boom-and-bust cycles – Bitcoin has been the best performing asset of the last decade.

And let’s not mince words … the second-place horse isn’t merely a few links back. It’s been lapped several times over.

From December 31, 2012, to December 31, 2022, Bitcoin’s blasted off 122,474%!

It rocketed from $13.50 to $16,547.50.

And that gain doesn’t even include peak gains when Bitcoin was trading above $68,000.

Now, there were some great individual stock runs during that same stretch:

·        Monster Beverage (MNST) gained 477% …

·        Pool Corp. (POOL) shares surged 702% ...

·        And Netflix (NFLX) shares raced 2,128.8% higher …

But those returns aren’t in the same league as Bitcoin.

Here’s the problem … if Bitcoin had such a meteoric run, why did a 2022 Pew Research Center poll find that of the 16% of Americans that have invested in cryptocurrencies, 46% said their investments did worse than expected?

The answer is simple: stupid emotions.

The good news is, I can help. Now, I can’t dull the pain of your childhood trauma.

But I can show you one powerful table that can increase your odds of being a successful – and profitable – Bitcoin investor and trader.

First … The Boring Stuff

Before we sprint through the boring stuff, here’s the headline: Bitcoin moves in a four-year cycle.

And this four-year cycle revolves around what’s known as “reward halving.” This is one of the most pivotal events for the crypto’s blockchain.

For the uninitiated, what makes Bitcoin (and other cryptos) unique is it’s designed to have a finite supply. There are only 21 million BTC.

Now, I’m not going to spend a lot of time and space explaining the process, but in the simplest of terms crypto miners use high-powered computers to add blocks of transaction data to the Bitcoin blockchain. Once a miner completes a new block - and provides proof of their work - they earn a treat.

And that treat is Bitcoin.  

Originally, the reward was 50 Bitcoin.

But besides wanting a finite supply, the Bitcoin creators wanted to ensure that it would increase in value. So, they built in this synthetic price inflation. After every 210,000 blocks are mined, the Bitcoin reward is chopped in half.

And this happens roughly every four years.

In the first reward halving, the cut was 50 to 25 … Then it was halved to 12.5 Bitcoin … And again to 6.25 …

The result is Bitcoin is harder to mine and the available new supply is reduced.

Now, what happens to an asset’s price when that happens?

I’ll give you three guesses (and you better not need all three of them).

Steal This Table

Don’t just look at this table of annual Bitcoin returns since 2012 and shrug it off.

Copy it... Keep it… Update it… Use it to make better decisions about trading Bitcoin and other cryptocurrencies today, tomorrow, and in the future.

In this table, we see years of explosive gains and years of red. And if you’re an observant person, you notice they happen four years apart.

So, what’s happening here?

First, our three Bitcoin reward halvings took place on:

·        November 28, 2012

·        July 9, 2016

·        May 11, 2020

Those years are marked in dark green.

And we can see in each of those years, Bitcoin’s price rose triple-digits.

But that reward halving upside momentum carries over into the next year (the years in lighter green). That’s because there’s a supply shock, prices jump and it triggers FOMO from investors who want their ship to be part of the rising tide.

Every reward halving triggers a two-year bull market (2012 & 2013; 2016 & 2017; 2020 & 2021).

But just like balloons, or an asteroid from space, it all comes crashing back down to earth. Buyers get exhausted and can’t keep up the momentum. Bears take control.

In turn, Bitcoin has averaged a 66% decline in the third year following a reward halving.

It does give Buffett, Munger, Krugman, Schiff and all those haters to smugly chide, “I told you so!”

A broken clock is right twice per day. And Bitcoin perma-bears are right once every four years – 2014, 2018, and 2022.

But despite all chants that cryptos are dead, like most bear markets, the Bitcoin one is short-lived.

So, where does that leave us in 2023?

Well, we’re at the same point in the cycle as 2015 and 2019. These are rebound years, as well as anticipation years for the next reward halving. And our next halving is in 2024. So, best to prepare now.

For those that don’t want the hassle of opening a crypto wallet account, you don’t have to. There are ways to trade this four-year cycle in Bitcoin with ETFs like the Grayscale Bitcoin Trust (GBTF) or the ProShares Bitcoin Strategy ETF (BITO), which can be traded in a traditional brokerage or tax-deferred account.

So, don’t roll your eyes when you hear “Bitcoin.” Don’t hurt your financial future by hating it. Don’t fall victim to FOMO. Embrace this trend and succeed where so many others don’t.

HODL on loosely,

Matthew

Before you go rushing off to do all those things that make you great, do me a favor … Don’t worry, I’m not asking for money. But if you like what you read here, give me a like, comment or share this article with a friend. If you didn’t enjoy what you’ve read, tell me why. I’m not promising you won’t hurt my feelings, but I’m open to suggestions for improving content!

---

© 2023 Matthew Carr

All rights reserved.

This market commentary is opinion and for entertainment purposes only. The views and insights shared by the author are based on his many years of experience covering the markets. But nothing in this email should be considered personalized investment advice. Investments should be made after consulting your financial advisor and after reviewing the financial statements of the company or companies in question.