Rethinking the HODL

In 2023, Bitcoin demonstrated an impressive performance, soaring by 150%. This surge notably overshadowed the gains of prominent equities like MSFT and META, which only rose by 55%. Despite this, the Nasdaq 100 closed the year at an all-time high, while Bitcoin still lags 50% behind its peak. This divergence raises a critical question: why are equities thriving at record levels, while crypto struggles to regain lost ground?

The answer may lie in the traditional investment strategies. In the stock market, the classic approach of waiting for old peaks to resurface often bears fruit. However, in the volatile world of cryptocurrency, this tactic seems less effective. Instead, success in crypto often hinges on identifying and investing in emerging trends and technologies.

Historically, if you had bought at the peak of the Nasdaq bubble in 2000, it would have taken 17 years to break even. Yet, today, you would be enjoying a 72% gain, far surpassing the returns from a standard savings account. Now, contrast this with the crypto market. If you had invested in a selection of leading cryptocurrencies like MKR, AAVE, COMP, and UNI at the height of the 2021 crypto bubble, the wait for a break-even point could feel endless.

Several factors contribute to this disparity:

1. Mathematical Reality: Most altcoins plummeted by about 90% in the last cycle, a trend that might repeat. To recover from such a steep fall, an asset needs to surge by 1,000% to return to its original value.

2. Rapid Innovation: Cryptocurrency thrives on open-source, composable technology. Thus, newer technologies often surpass their predecessors at a breakneck pace, outdating older investments rapidly.

3. Market Psychology: At its current stage, crypto investment resembles trading more than traditional investing, with a constant hunt for the next big thing.

4. Supply Dynamics: Decentralized exchanges lack a regulatory body like the SEC, leading to an unceasing influx of new tokens, each vying for investor attention.

5. Limited Demand: The crypto buyer pool remains relatively small, mostly comprising the same group of crypto enthusiasts. This makes altcoin investment more of a zero-sum game compared to the broader stock market.

6. Early-Stage Nature: Crypto investment is akin to tradeable venture capital. But, investing in VC-backed startups that are 90% below their peak valuations is often risky, as a 90% decline usually signals a trajectory towards zero.

In this fast-evolving landscape, the concept of 'Buy and HODL' in crypto needs careful consideration. The crypto market, in its current phase, resembles the early days of the finance industry. While it's tempting to draw parallels with the 1990s dotcom bubble in terms of infrastructure growth, the investment strategy in crypto may still be in its nascent stage, akin to the speculative environment of the 1690s.

Therefore, while the pursuit of crypto profits is fun, it demands a blend of daring and acumen. Relying on past crash sites for investment opportunities might not be the most strategic approach. The path to success in the crypto world is not just about holding; it's about smart, informed, and timely decisions and has we get into a world of AI content creation, narrative may trump everything even fundementals.

BlockBuzz™️

Quick Hitters from the week

• Radiant Capital Falls Prey to Hackers: Loses $4.5 million in Ethereum in a major security breach.

• Michael Saylor's Big Sell-Off: MicroStrategy's figurehead to liquidate $216 million in stock options to meet personal financial needs.

• Crypto Exchanges Hit Trillion-Dollar Milestone: Exchange volume reaches $1 trillion, spurred by hopes for spot bitcoin ETFs, says The Block's research.

• Navigating the US's New Crypto Tax Landscape: Understanding who’s impacted by the latest tax reporting requirements.

• SEC's Stance on Bitcoin ETFs: Delay possible but unlikely, suggests Balchunas in light of upcoming decisions.

• Bitcoin ETF Buzz: As decision looms, industry experts weigh in on the possibility of SEC delay.

The Twitterverse

A collection of the most interesting stuff on Crypto Twitter this week

WAGMI

For the Crypto Culture

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.