Understanding the Bitcoin Rollercoaster | Nasdaq

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Matt McCall bests Louis Navellier in a $5K bet … bitcoin’s peak then pullback … what to expect from here

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***And just like that, Louis Navellier is $5,000 poorer

Exactly one week ago, the legendary investor lost his friendly wager with Matt McCall about what would hit the 40,000-level first — the Dow Jones or bitcoin.

Louis took the Dow, Matt took bitcoin.

It was originally nothing more than a friendly disagreement around the office back over the summer. That was until our CEO, Brian Hunt, caught wind of it …

After hearing their respective cases, Brian felt the difference of opinion would be interesting and fun for our InvestorPlace readership, so he asked Louis and Matt to debate their positions live, which we did back in August in the event, “The Race to 40K.�

Here’s how the two have performed since …

***Interestingly, almost as soon as bitcoin topped $40,000, it reversed, giving back 25%

Given this, if I was Louis, I might put an asterisk by Matt’s “win.� But we’ll return to that in a moment …

First, here’s Matt on his victory:

… even though I “won� the bet, anyone investing in good stocks and/or bitcoin should be winning …

I am highly bullish on stocks this year and this decade. And I am exceptionally bullish on bitcoin, altcoins (cryptocurrencies other than bitcoin), and the blockchain technology on which they are built.

In fact, I see bitcoin even hitting $100,000 sometime here in 2021. That would be another 155% from current prices.

If that sounds crazy, consider that it took just three weeks for it to double from $20,000 to $40,000.

Now, at this point, let’s pause and look at what’s happened to bitcoin after Matt published his update …

As Matt just noted, it took only three weeks for bitcoin to double. But as longtime investors will attest, what goes up fast can come down even faster. And that’s certainly what happened with bitcoin.

Below, you can see bitcoin breaking through $41,500, only to then give back 25% over just three days as it fell to $31,500.

 

As I write, the crypto has stabilized and pushed higher. It’s trading around $36,200.

***So, what are we to make of this? Is this volatility a precursor to a 2017-style crash?

In beginning to answer this, let’s return to Matt. Keep in mind, he wrote the update from which we quote below before this pullback:

Could it pull back? Of course … and to my mind, any pullbacks should be bought.

This latest push to new highs is being driven by “big money� coming in.

Institutions and wealth investors are leading the way, which is different than during the first 10 years of its existence when it was more individuals.

Ironically, it’s Louis who recently provided more information on this institutional interest.

Ever the good sport, Louis wrote about losing the bet to Matt earlier this week. Here’s how he described the burgeoning interest from corporations and institutions that are driving this run-up:

Interestingly, bitcoin remains popular with a certain segment of investors, many of whom have had greater access to the cryptocurrency thanks to payments giants Square (SQ) and PayPal Holdings (PYPL).

In Square’s third-quarter earnings announcements, the company saw $1.63 billion in bitcoin revenue, up 11X from a year prior.

Square’s Cash App allows users to buy and sell bitcoin, and the payments company recently said it will allow customers to get bitcoin back on every transaction, which is likely to drive even more interest in bitcoin.

In October 2020, Square rival PayPal launched its own cryptocurrency buying and selling, as well as crypto merchant payments. The cryptocurrencies held in PayPal accounts can be used to pay for purchases at 28 million stores around the world.

And not to be outdone by its payments competitors, Visa Inc. (V) said it will partner with cryptocurrency lending business BlockFi to release a bitcoin rewards credit card early this year.

Some companies are even beginning to shift part of their own corporate treasuries into bitcoin.

In October 2020, Square joined firms like software intelligence company MicroStrategy Inc. (MSTR) and the Grayscale Bitcoin Trust, with $24.2 billion in assets under management, by adding $50 million worth of bitcoin to its own treasury. MicroStrategy Grayscale currently owns about $2.2 billion worth of bitcoin, while Square has about $150 million worth.

Legendary hedge fund manager Paul Tudor Jones has put 1% to 2% of his multi-billion-dollar portfolio into bitcoin, deeming it a store of value and inflation hedge similar in some senses to gold with its finite supply.

He also said he’s confident digital currencies will dominate the world’s economies of the future.

Jones even compared bitcoin to internet stocks in 1999, when investors were still trying to figure out which technology companies would come to grow and prosper on the internet.

So, returning to the question that opened this section — “are we on the verge of a 2017-style price collapse?� — the answer is “highly unlikely.�

Yes, we could see more volatility and downward pressure on prices. In fact, we should expect that.

And equally, yes, we could see a period of consolidation as investors digest these gains. This could mean the crypto is range-bound for some weeks.

But it’s highly unlikely that this is the start of the same 80%+ collapse we endured from December 2017 to December 2018. There’s simply too much buying-interest that would swoop in if we saw a bigger pullback.

***While bitcoin dropped 25%, bitcoin whales were buying

To identify bitcoin “whales,� we look for crypto addresses holding 1,000+ bitcoins (at bitcoin’s current price of around $36,200, a whale-account contains roughly $36 million dollars’ worth of bitcoin). Many analysts consider this level the dividing line for “whale� versus “non-whale.�

Here’s CoinDesk on how whales behaved during the crash:

Large bitcoin (BTC) investors, popularly known as whales, look to have bought Monday’s price dip, indicating confidence in the ongoing bull market.

The number of bitcoin “whale entities� — clusters of crypto wallet addresses held by a single network participant holding at least 1,000 BTC — rose slightly to a new record high of 2,140 on Monday …

The violent sell-off was fueled by heavy selling in the spot market and was accompanied by record trading volumes. That, however, did not deter big players from accumulating the cryptocurrency …

The dip demand suggests that large investors expect the pullback to be short-lived.

***Where bitcoin goes from here

As noted earlier, Matt sees bitcoin topping $100,000 here in 2021.

If you think that’s a lofty projection, Scott Minerd of Guggenheim Investments believes the crypto will 4X Matt’s target over the long-term.

From Bloomberg:

Bitcoin’s scarcity combined with “rampant money printing� by the Federal Reserve mean the digital token should eventually climb to about $400,000, Minerd, the firm’s chief investment officer, said in an interview …

Before we wrap up, a reminder that in all of this excitement over bitcoin, don’t forget altcoins.

While Matt’s a bitcoin bull, he believes that select, elite altcoins will create significantly more wealth for investors than bitcoin in the coming years. He recommends a portfolio of such altcoins through his newsletter, Ultimate Crypto.

One of his altcoins that we’ve highlighted here in the Digest is Chainlink. Ultimate Crypto subscribers who acted on Matt’s recommendation last January have already locked in a gain of 552% on a 1/3rd portion of their Chainlink investment and are now sitting on 806% open-returns in the remaining 2/3rds portion.

I’ll add that another of Matt’s recommendations is up 712% as I write Friday morning. Unfortunately, I can’t reveal it out of respect for Matt’s subscribers. But Matt just added two new altcoins to this portfolio this past Monday that he’s especially bullish on. One is up 10%, the second is up 34%.

Looking at Matt’s overall Ultimate Crypto portfolio, since launching last January, it’s now up an average of 186%, with only one negative-returning position, down just 6%. Click here to learn more.

Bottom line — bitcoin and elite altcoins are going to have a volatile ride, but the smart money is on it being a very profitable ride as well.

We’ll keep you up to speed here in the Digest.

Have a good evening,

Jeff Remsburg

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