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Crypto bulls vs crypto bears

Crypto bulls vs crypto bears

Lines, and bulls, and bears, oh my! As the market hovers near lows, prominent voices make their cases for crypto. [Jakie Niam via Getty Images]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Major analysts are debating bull and bear cases for crypto. From Ray Dalio to Bill Miller, prominent voices are surveying the cryptoeconomy.

4 tips for navigating crypto down cycles. How to keep your composure when crypto prices fall.

Noteworthy numbers. A record-breaking amount of Solana NFT sales, and other key stats to know this week.

BULLS VS BEARS

World’s leading firms, investors debate bull and bear cases for crypto as market bounces off lows

The good news? As of Tuesday, BTC prices were up around 10% for the week. The less-good news? Both crypto and traditional markets are still hovering near multi-year lows. From surging inflation and a crippled supply chain to the end of COVID-era stimulus and the war in Ukraine, a wave of negative factors has erased trillions of dollars in investor gains. With the Fed expected to raise interest rates at least three more times over the next few months, we wanted to see what the smart money — from Wall Street and beyond — thinks will happen next. Here’s what they have to say:

  • According to a new report from JPMorgan, Bitcoin “has significant upside from here” and has become the firm’s “preferred asset” over real estateas an “alternative investment” while interest rates soar. The report also suggests that sustained venture capital flowing into crypto would help avert a “long” crypto downcycle. And despite CEO Jamie Dimon’s history as a prominent crypto skeptic, the bank participated in a $60 million fundraise for the blockchain analytics firm Elliptic last October.

  • Investment in crypto technology shows no signs of slowing, with Andreessen Horowitz (a16z) announcing a record breaking $4.5 billion crypto fund. The new fund brings the firm’s total investments in technology related to the crypto-powered future of the internet (also known as web3) to $7.6 billion. The firm's founder, Marc Andreessen — who helped shepherd the early internet era with his company Netscape and has navigated down cycles including the 2000 dot-com crash – sees major parallels to earlier moments: “The only time I have ever said ‘this is like the internet’ is this … I don’t take the comparison lightly … we could actually imagine the entire global economy running on the blockchain.” (a16z is a Coinbase investor.)

  • At the World Economic Forum last week in Davos, hedge-fund giant Ray Dalio explained his rationale for adding some BTC to his portfolio: “We’re in an environment where we’re going to ask, ‘What is the new money? What is the type of money we can move between countries that is a medium of exchange and a storehold of wealth?’ Bitcoin has made a tremendous achievement over the last 11 years.” Likewise, legendary value investor Bill Miller — whose bets on Amazon and BTC made him a billionaireremains committed to Bitcoin: “I consider Bitcoin an insurance policy against financial catastrophe."

  • But not everyone gathered at Davos was as optimistic, with Guggenheim Partners’ Scott Minerd predicting that BTC may not see a bottom until $8,000. Minerd — who in December of 2020 predicted that BTC was on its way to $400,000 — now says, “Bitcoin and any cryptocurrency at this point has not really established itself as a credible institutional investment.” Other Davos attendees noted that bear markets have more to offer than just pain: “It’s good, because it’s going to clear the people who were there for the bad reasons,” said the CEO of the Web3 Foundation. “So the legit ones will be able to focus only on developing on building and forget about the valuation of the token because everyone is down.”  

Why it matters… With interest rates set to rise over the coming months, market watchers expect continued turbulence — but do rising interest rates automatically mean that crypto prices will fall? We can look at the past for clues. From 2016 to 2019, U.S. interest rates rose from nearly 0 to 2.5%. BTC? It rose from nearly $400 to over $10,000. And whether we’re experiencing a full-on crypto winter or just weathering a shorter-term storm, some of the biggest banks and venture firms in the world appear to remain bullish on the technology’s future — and are setting themselves up to ride the next wave.

KEEP YOUR COOL

How to manage a down market

Even though crypto is famously volatile, sudden changes in price (like May’s 25% BTC drop) can be harrowing — especially if it’s your first time experiencing a significant selloff. But as veteran traders will tell you, it’s a lot easier to stay calm and make smart moves if you have a plan. Here are some helpful tips to keep in mind:

  • Keep your emotions out of it. It’s okay to feel anxious, but don’t let anxiety dictate financial choices. Emotional trading can lead to badly-timed trades, like selling when prices are lowest or buying at a peak due to FOMO

  • Think ahead. Buying and holding isn’t right for every asset, but during a market downturn, consider your long-term goals. Did you buy with the intention of selling many years in the future? If so, it’s probably ok to stop refreshing that tab and take a deep breath. 

  • Look into dollar-cost averaging. Dollar-cost averaging is a popular strategy for reducing the sting of volatility — it involves buying a smaller amount of crypto every week or month no matter what the market is doing.  

  • Trade within your limits. Are you planning to “buy the dip?” Remember: No matter how confident you are about a particular asset, you should never put in more than you can afford to lose.

Why it matters… If you bought BTC at the peak of the 2017 bull run (around $20,000), you saw a decline of 80% over the following year. But if you continued to hold, you’d be up nearly 60% right now — even after the crypto market’s most recent decline from all-time highs last November. The lesson here? Don’t let short-term emotions impact your long term plans. And when in doubt, speak to a trusted and certified financial advisor.

NUMBERS TO KNOW

$24.3 million

Sales volume of Solana-based NFTs last Wednesday. Why is that interesting? Because Ethereum’s NFT volume over the same period was just $24 million — meaning that, for the first time, the low-fee ETH alternative did more NFT business in a day than the OG smart-contract compatible blockchain. (The surge was powered in large part by sales of the popular Trippin’ Ape Tribe collection).

$8 million

All-time high monthly revenue that the Ethereum Name Service (ENS) recorded last week, likely due to users taking advantage of recent, relatively low gas fees on the Ethereum network. ENS lets crypto users buy domain names for their numeric wallet addresses — much the same way you type coinbase.com (and not our numeric IP address) into your web browser.

398

Number of S&P 500 companies that mentioned “inflation” at least once during Q1 earnings conference calls between March 15 and May 24.

5

Number of years it could take for the U.S. to launch a “digital dollar,” according to Federal Reserve vice chair Lael Brainard. “I really see the potential for a digital dollar as being complementary to a more stable, efficient system that would include stablecoins and commercial bank money,” Brainard told the House Financial Services Committee. (CBDCs are state-issued money, unlike BTC, which is decentralized.)

TUNE IN

How web3 will give you more control over the internet

Creators on social media platforms like TikTok, Twitch, and YouTube might own their content — but they definitely don’t own or control the platforms their content makes possible. Redefining the relationships between users and platforms is a core element of the crypto-powered evolution of the internet known as web3. What might an internet where users have much broader ownership look like? In the latest episode of Around the Block, host Justin Mart breaks it all down with Li Jin, the co-founder of Variant, a crypto fund focused on the “ownership economy.”

TOKEN TRIVIA

Last week, Elon Musk announced which company will soon accept DOGE?

A

Tesla

B

SpaceX

C

Twitter

D

Starlink

Find the answer below.

Trivia Answer

B

SpaceX