In today’s Exponential Investor:

  • A warning from September
  • Some considerations from October
  • A prophecy from November

In the last week, the price of bitcoin has risen 22%. We haven’t seen a move like that since early 2022 – almost a year ago. Ethereum has also made very solid gains.

The last year has mainly seen the price of bitcoin coming down, down and then a little more down.

Not anymore, though…

The number that matters is actually going up.

So is this the proverbial “dead cat bounce” or is it the start of the next big crypto bull run cycle?

Well, I’m about to tell you exactly what I think… but first…

22 September 2022

Back in September 2022, I wrote to some of my subscribers about what I saw was happening in the crypto markets. Here’s what I said:

When you see flows of human and financial capital in times when markets are down, it strengthens the view that the down days won’t last forever. What you quickly learn is the foundations for the next big leg-up are being built right now.

That’s exactly what’s happening. And that’s exactly what’s happened in previous cycles.

The fear, the doom, the anger set in really fast when prices are down. But prices that are down don’t mean activity and industry growth are down. I’ve seen it first-hand several times now.

And I’m seeing it again.

No, you don’t want to see prices down. But take some solace from the fact that it won’t last forever. A new bull market will come, and it will blow away the others.

There’s no guarantee, of course, of that outcome. But I’m pretty confident that it’s what we’ll get.

Patience, understanding and, OK, a little dose of “hopium” will get you through and into the next cycle. If we build it – and we are – the bull will come.

Of course at the time, it was pretty hard to think of the crypto markets ever heading higher again. It had not a dissimilar feeling to those of the “crypto winters” of 2018 & 2019, 2015 & 2016 and 2012.

Having seen it all before, I was adamant things wouldn’t last this way forever, and that in these so-called “winters” things aren’t ever as bad as they seem.

27 October 2022

That’s why just over a month later I wrote the following about the crypto winter:

As we’ve tried to make clear over the last few weeks, this is only a winter in terms of price. That’s no consolation, I know, but it does provide us with the optimism that the next cycle higher will be bigger than the last.

Every single person I speak to inside the crypto industry and outside of it but looking to enter is incredibly positive about the next few years. The groundwork being laid now is adding to all that has been developed over the last decade, reinforcing it as progress towards mass adoption continues.

For example, at a function last week I had an in-depth conversation with someone from BNY Mellon’s custody division. He typically looked after stock custody, but we got chatting about BNY rolling out digital asset custody.

That’s not just some flippant throwaway thing. BNY is a giant investment bank, but also the world’s largest custodian, with around $45 trillion of assets held for third parties. Its move into the digital assets space certainly isn’t something that indicates this market is “going to zero”.

I also recently spoke with the global head of digital assets and the head of blockchain at Fidelity. I can’t right now say what we spoke about in detail… that’s for my upcoming book… but I can say that it only strengthened my long-term view of the direction of this market.

Again, it’s in these “winters” when the development really gets cranking. What it does is set a foundation for the next cycle to build off. All it then needs is the ice to thaw and the summer sun to peek around the corner.

17 November 2022

And so, to further reiterate what I saw coming around the corner, just under a month later I wrote,

Over the past week, the share prices of several crypto-focused companies have risen.

Crypto exchange Coinbase is up 24.2%. Crypto and fiat currency payments giant Block Inc. (NYSE: SQ) is up 27.5%, and digital-asset platform Bakkt has risen 30.6%.

Given last week’s collapse of FTX, the world’s third-largest crypto exchange, this may come as a surprise.

However, sometimes the market has a way of showing its hand.

The “crypto winter” might just have started to thaw.

A lower-than-expected inflation figure from the US Federal Reserve Bank (the Fed) last Thursday suggests that inflation is starting to cool off, leading to a return of the positive sentiment that can underpin riskier crypto stocks.

If you did need a reminder about how far crypto is integrating with the traditional finance (TradFi) system, we can take a look at recent events.

In August 2022, Coinbase secured a deal with BlackRock, the world’s largest financial asset manager. Based on the agreement, Coinbase will provide crypto trading services to BlackRock’s institutional clients.

And only this week, stablecoin operator Circle confirmed that its merchant customers will now be able to provide Apple Pay as a checkout option to its customers.

This shows the growing integration between fiat currency and crypto payment rails, which is an unstoppable trend even during the current macroeconomic climate.

I’ve been talking about this for a while now, but don’t get used to crypto prices being at historically low levels for long. I’m expecting 2023 to be the year the new cycle warms up and surges upwards into 2024.

Excuse the mixed metaphors but… if that plays out and this cycle is bigger and badder than the last, you don’t want to wait for the tables to turn. It looks as if the bitter frost of the crypto winter is melting at last. A new “summer” approaches.

Before I go today, some exciting news…

Exponential Investor is changing. In fact, I’m joining forces with my colleague Nick Hubble over at Fortune & Freedom, to bring you a wider ranging daily message.  

If you like my insights into small stocks, crypto and technology… and you’ve been enjoying hearing from Nick lately about how all the big picture dots join together…

… I think you’re going to love what’s coming your way.

Starting Monday 30 January, or just under a fortnight from now, you’ll be hearing from either Nick or myself on a daily basis in Fortune & Freedom. That way, we’ll be able to cover everything a clued-up investor needs to know about what’s really going on in the markets.

You know me: I believe that there are always opportunities to be found. I believe that good companies and innovation wins out.

At the same time, the financial waters are choppy. You’d have to be a blockhead not to see that. And there are big threats brewing that a lot of people just won’t see until its too late. That is Nick’s speciality – showing the man on the street investor how to understand the dangers of the over-complicated financial system.

Right now, Nick believes that a big blow-up could potentially be on the cards for the UK pensions sector. That’s something that matters to all of us, optimists and sceptics alike. You’ll be hearing from him about how that could play out.

What does this mean for you?

Well, you don’t have to do a thing – except “whitelist” a new email address, [email protected], so we don’t get sent to your junk folder. If you don’t know how to do that – just click here.

Aside from that, just keep opening your daily Fortune & Freedom email from myself and Nick, to keep up to speed with all the important financial stories and opportunities that matter. Bear market or bull, we’ll have you covered!

Until next time…

Sam Volkering
Editor, Exponential Investor