Good morning and happy Friday. Let’s talk cryptos for a moment, including a Trade Alert.

I’m not allowed to buy cryptocurrencies directly into the hedge fund, but I am able to buy BRR futures, which are bitcoin futures from the Chicago Board Options Exchange. And that’s what I’ve started doing recently, building a small exposure to bitcoin in the hedge fund using the BRR futures and buying the longest-dated futures they offer. I plan to nibble a little bitcoin whenever it goes down and/or to rollover my bitcoin futures as they expire (the furthest out the BRR futures go right now is to May, so I’ll have to buy more BRR futures when these current BRR futures revert to cash in May). Consider this the Trade Alert letting you know that I’ve been building some exposure to bitcoin in the hedge fund.

Why bitcoin? It’s still the de facto standard in cryptos, there’s still tens of billions of dollars being spent to make a global platform around bitcoin and it’s the only crypto that has futures.

The fact is that there is still an innate demand for liquid, transferable, non-fiat currencies and that demand is never going away and is only going to grow. Billions of people around the world suffer through hyperinflation and wealth transfers via government-backed fiat currencies. People in Iraq and India and Venezuela and most any other developing economy spend their economic lives trying to figure out how to get their money into anything that’s not their country’s version of cash. People in the US and other developed economies also want to stop being held hostage to government-backed fiat currencies. That’s never going to change.

This whole bitcoin bubble and crash that we’ve thus far successfully navigated underscores how we have to be flexible. There are times to be bullish and times to be bearish and that’s why I always rant against what I call perma-bulls and perma-bears. We have to recognize that there will be bubbles and crashes even in Revolutionary markets that have secular trends underpinning their growth — like we’ve seen in cryptos and tech stocks several times over the years. Bitcoin has crashed and bubbled several times over the last ten years, after all.

I’m still a big believer in the long-term value that cryptocurrencies, tokens and blockchain will deliver to society.

In the next two to three years, bitcoin and/or the few other cryptocurrencies that end up being survivors will likely put in a bottom, just like I’d outlined in The Great Cryptocurrency Crash book.

Over the next five to ten years, cryptocurrencies will continue to develop and innovate and revolutionize, including creating new asset-backed and earnings-backed cryptocurrencies and tokens. Regulators will get a handle on how to punish the criminals and fraudsters and scammers. Legitimate investment banks and online brokers will facilitate fiat-to-crypto currency trading and create custody rules.

Over the next ten to twenty years, cryptocurrencies and tokens will go mainstream.

In fifty years, cryptos, tokens, data monetization and other similar Revolutions will be as taken for granted just like we do today with fiat currencies, centralized banking, stock markets, bond markets, currency and commodity markets and so on.

And along the way there will be bubbles and crashes. Our job is to navigate all of that successfully and to build wealth doing so. I’m on it.

Some of the above analysis is reprinted from my November 2018 article which I posted below. I’ve outlined the playbook I’ve been following in cryptos for six years now and we’re still following the playbook as I purchase some bitcoin futures in the hedge fund.

The next 1, 5, 10 and 50 years: How and why society will create a future of cryptocurrencies

November 21, 2018 by Cody Willard

The Great Cryptocurrency Crash is in full bloom now with bitcoin down almost 80% from its highs back in December. Nobody’s asking me about bitcoin or cryptocurrencies any more, unlike four months ago when everybody in the Chat Room, at The Money Show, at CES Las Vegas was asking about it. So I figure it’s a great time to update our analysis and predictions on bitcoin and cryptocurrencies.

Here’s the playbook as I’d laid it out in my December 2018 book, The Great Cryptocurrency Crash:

“I know that most of you want to get right to the juice — how to make to make (or save your) money and predictions! So without any further ado, here’s what I expect for bitcoin and the entire cryptocurrency market. I expect that this building mania for all-things cryptocurrency and blockchain-related with all these wacky ICOs (Initial Coin Offerings) many of which are built around promises that the guys raising the money in these ICOs will someday actually deliver a cryptocurrency coin and with all these silly microcap penny stocks that change their symbol and their names to pretend they’re suddenly in the cryptocurrency/bitcoin/blockchain business will end up hurting millions of people with billions of dollars in losses.

Most cryptocurrencies will be worthless in five years. Most small cap and/or penny stocks that are supposedly great ways to invest in these trends will be down 90-99% from the highs they’re spiking to in today’s mania.  I would expect that as those shady ICOs and microcap stocks crash — the crash most likely come sometime in 2018 but perhaps not until 2019 — that it will take even the best, most Revolutionary cryptocurrencies down with them, at least temporarily and it will most likely take two or three years to put in a real bottom. And when The Next Great Cryptocurrency Crash happens — when you start to see some of these worthless ICOs getting sued in class action lawsuits from the people who are currently investing in them; when you see the shady crypto microcap stocks down 99% from their highs; when nobody wants to talk about bitcoin except to mock it — well, that will be the time to start loading up on those cryptocurrencies and blockchain stocks and technologies.”

Well, just eleven months later, the ICO class action lawsuits are everywhere now. The SEC is even investigating whether bitcoin prices themselves were rigged last year. Riot Blockchain RIOT, one of those shady crypto microcap stocks that I flagged as a shady microcap stock earlier this year is now down 97% from its recent highs. And here’s your latest headline mocking bitcoin example, from Bloomberg this morning in their opinion piece that states the “Last Laugh on Bitcoin” as already having happened and not as it if The Bitcoin and Cryptocurrency Revolution might not be over just yet. The article is mockingly called Jamie Dimon and Warren Buffett Have the Last Laugh on Bitcoin(and I took offense to the part where the author says, “The crypto-currency experts, who clearly didn’t see this coming…” haha):

“Bitcoin turns 10 this year, but there’s not much to celebrate. Its price has tumbled to near $4,000, down 30 percent in a month, 50 percent in six months and almost 80 percent since December. The crypto-currency experts, who clearly didn’t see this coming…”

Unfortunately for the many bitcoin/crypto bulls (I guess that’s what the author of Bloomberg article means by “experts?”), I don’ think The Great Cryptocurrency Crash is quite over yet. Here at $4400, bitcoin is gotten closer to the $1000-2000 levels that I’ve cited as the levels at which I might start buying back some of the bitcoins I sold last year. But I’m not tempted to start buying them back yet.

The worthless ICOs aren’t completely worthless yet as there are still billions of dollars of “market cap” in hundreds of silly cryptocurrencies and tokens. The crypto micro caps are still trying to play their game and still selling any stock they can to foolish retail investors — RIOT, for example, still trades millions of shares per week and the only people buying it are retail investors hoping the stock will magically go back to $40 (it’s below $2 a share, just like I’d said it would be). And the mocking headlines aren’t prevalent enough and the disgust level in bitcoin isn’t high enough yet.

That said, my two favorite cryptocurrencies besides bitcoin, Stellar and XRP (Ripple) are both hanging much stronger than bitcoin and any other cryptocurrencies out there. I still expect Stellar and maybe XRP to bottom before bitcoin does.

The fact is that there is still an innate demand for liquid, transferable, non-fiat currencies and that demand is never going away and is only going to grow. Billions of people around the world suffer through hyperinflation and wealth transfers via government-backed fiat currencies. People in Iraq and India and Venezuela and most any other developing economy spend their economic lives trying to figure out how to get their money into anything that’s not their country’s version of cash. People in the US and other developed economies also want to stop being held hostage to government-backed fiat currencies. That’s never going to change despite this silly utopian statement at the end of the Bloomberg article:

“Finally, if the frustrations that drove people to chuck their savings at a virtual ponzi scheme aren’t resolved, we’re only setting ourselves up for bigger political trouble down the line.”

There’s no way to stop people from being frustrated when they’re forced to use a government-backed fiat currency, so I’m not sure how he thinks those frustrations are going to resolved except by cryptocurrencies!

This whole bitcoin bubble and crash that we’ve thus far successfully navigated underscores how we have to be flexible. There are times to be bullish and times to be bearish and that’s why I always rant against what I call perma-bulls and perma-bears. We have to recognize that there will be bubbles and crashes even in Revolutionary markets that have secular trends underpinning their growth — like we’ve seen in cryptos and tech stocks several times over the years. Bitcoin has crashed and bubbled several times over the last ten years, after all.

Here’s a look back at how I was buying more bitcoins after a prior bitcoin crash after I’d turned from bitcoin skeptic to buyer back in 2013 writing for Marketwatch:

“I’ve had bitcoin in my portfolio since earlier this year when it was near $100, but I don’t know anybody but me and maybe a couple of my TradingWithCody.com subscribers who own any bitcoin. I don’t know anybody else who’s even considering buying bitcoin right now or ever.

Even if you’ve been a bitcoin skeptic so far, what would it take for you to change your mind? I’ve written about bitcoin quite a bit in the past year here on Marketwatch’s The Cody Word, and you can see my evolution from skeptic to buyer. Maybe I’m nuts, but if you’d moved like I did to put 1% of your portfolio into bitcoin when I first suggested doing so, you’d already have more than a triple on your hands. I’ve been slowly but surely buying more bitcoin when it crashed and I have been accepting bitcoin as payment at TradingWithCody.com to build up even more. Obviously, I think there’s still more upside and potential for bitcoin in years to come and I’m investing time and energy in the digital currency too.

As I have made clear, I am long bitcoin and I feel a bit nutty even admitting that much. On the other hand, it makes me sad that I know lots of middle-class folks here in my hometown who speculated on Iraqi dinars but NOBODY here has caught this huge move from bitcoin speculation. Sigh.”

Cody back in real-time Thanksgiving Eve 2018 here. The fact that nobody is looking to get rich in cryptos right now and that’s bullish. But that doesn’t mean bitcoin and cryptos are about to go right back to their old highs. No earnings, no fundamentals for bitcoin and most other cryptocurrencies out there right now means that there’s no level at which they’ll be trading at “book value” or anything meaningful like that.

On other hand, I’m still a big believer in the long-term value that cryptocurrencies, tokens and blockchain will deliver to society.

In the next two to three years, bitcoin and/or the few other cryptocurrencies that end up being survivors will likely put in a bottom, just like I’d outlined in The Great Cryptocurrency Crash book.

Over the next five to ten years, cryptocurrencies will continue to develop and innovate and revolutionize, including creating new asset-backed and earnings-backed cryptocurrencies and tokens. Regulators will get a handle on how to punish the criminals and fraudsters and scammers. Legitimate investment banks and online brokers will facilitate fiat-to-crypto currency trading and create custody rules.

Over the next ten to twenty years, cryptocurrencies and tokens will go mainstream.

In fifty years, cryptos, tokens, data monetization and other similar Revolutions will be as taken for granted just like we do today with fiat currencies, centralized banking, stock markets, bond markets, currency and commodity markets and so on.

And along the way there will be bubbles and crashes. Our job is to navigate all of that successfully and to build wealth doing so. I’m on it.

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