“[A] Sign Cryptocurrency Is Dead”…
“The Crypto Party Is Over”…
“Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic”…
With headlines like these all over the mainstream media, it’s no wonder investors are scared. And recent price action hasn’t helped…
Since its peak last fall, bitcoin (BTC) has fallen 69%.
The world’s second-most valuable crypto asset, ether (ETH), has sunk 76%.
And the crypto market cap – the sum value of all tradeable cryptos – is more than 67% below its peak.
Last weekend, roughly $2 trillion were wiped out in crypto assets in the crash that tanked bitcoin more than 70% from its November high.
As I (Chris Lowe) mentioned yesterday, this has readers worried about the fate of their digital assets. And they’re fighting the urge to sell…
But as I’ve been telling you, panic selling is the worst thing you can do. In fact, the bullish market for crypto is strong as ever…
As our crypto investing expert, Teeka Tiwari, has been reassuring readers, the current storm will later look like a minor blip – like the six worse crashes before it.
Crypto is still going mainstream. And it will soar again.
So now is the time to hold on to those investments… and consider buying to profit from the dips. Today, in this week’s mailbag edition of the Cut, you’ll hear more from Teeka on the “ugly” crypto market – and what you can do to protect and grow your wealth.
You’ll also hear from Wall Street whistleblower Nomi Prins on why gold is still a reliable long-term investment to fight inflation.
And tech expert Jeff Brown shows what the future holds for America’s energy supply.
We’ll kick things off with a question for Teeka…
Reader question: If so much investment capital is flowing into crypto, why is the bottom seemingly falling out of it?
– Al W.
Teeka’s response: The crypto market is ugly right now. And I’m not sure it’s done being ugly.
The big question is whether there will be another bear market like the so-called “Crypto Winter.” From the end of 2017 through December 2018, bitcoin plummeted more than 80%. And ether plunged 90%.
I don’t think we’ll see those kinds of price falls this time around.
During the Crypto Winter bear market, many of the use cases for these blockchain projects were completely theoretical.
Only at the end of 2019 and early 2020 did a lot of these use cases start becoming real. Commerce began across these digital platforms.
That’s also when investors started allocating tens of billions of dollars to them. And there are many more platforms in the market now than there were back then.
What we’re experiencing right now is certainly a bear market – a peak-to-trough drop of 20% or more. But it’s a cyclical one, not a secular one.
Secular means long-term. Secular bull markets can span decades – like the one in U.S. stocks from 1982 to 2000.
But within those secular bull markets you can have cyclical – or shorter-term – bear markets.
The Black Monday crash on October 19, 1987, springs to mind. It happened in the context of a nearly two-decade secular bull market. But it still took the Dow down 22.6% in a single day. That was the biggest one-day drop for the Dow in history.
In that same period, we had a mini crash in 1989 and a crash in 1991.
Many investors confused these short-term bear markets with the end of the long-term bull market. And that was a mistake.
If you had known the bull market was still raging, all you had to do to crush every money manager was hold for the long run.
Even better, every time the market retreated, you could have bought blue-chip stocks at steep discounts. That was a winning strategy for 18 years.
The same goes for crypto today. We’re in a long-term bull market in crypto. It’ll last a very long time.
And I don’t think we’ll return to the days of 80% or 90% drops in blue-chip cryptos such as bitcoin and ether. I think the market has gotten wide enough, and the liquidity deep enough.
In the early days, mostly individual investors owned crypto. Way more institutional investors are entering crypto now, including Block (SQ), Meta Platforms (FB), and Microsoft (MSFT).
They have much deeper pockets. They’re longer-term thinkers. And they’re not afraid of volatility.
So you shouldn’t worry this is the end of the crypto bull market. As I tell my readers all the time, the kind of volatility we’re seeing in crypto is the price you pay for a shot at truly life-changing wealth.
Next, a question about our favorite yellow metal – gold.
In the past, it’s been one of the most reliable ways to preserve your wealth in times of high inflation.
It’s a hard asset – meaning it’s hard to produce more of it. And there’s a fixed amount of gold on Earth… about one ounce per adult alive today.
But since COVID-19 first tanked markets in March 2020, gold has let investors down.
The VanEck Gold Miners ETF (GDX) is a good stand-in for the wider gold mining industry. Since the worst of the pandemic-induced sell-offs, it’s been trading more or less flat.
One of your fellow readers wants to know what’s going on. So we reached out to Nomi.
She’s a former global investment banker who now helps regular folks navigate – and profit from – the market distortions caused by central banks’ massive money creation.
And she warns that it’s too soon for investors to give up on gold…
Reader question: Hi, Nomi. I like how you think. You are a welcome addition to Legacy!
I do not understand how gold isn’t worth at least $3,000 an ounce [it currently trades for $1,826 an ounce], given the current state of the world. It did go up briefly but has given back all gains year to date.
Can you please explain why the performance has been awful? If gold isn’t showing signs of life this year, why should it be in our portfolios moving forward? Everyone keeps talking about a gold run, but nothing ever happens.
– Norm B.
Nomi’s response: Hi, Norm. Thanks for writing in.
It’s an important question. After all, the Fed has been creating money faster than ever before in modern U.S. history. And we’re living with a high level of inflation we haven’t seen in four decades.
But gold is facing headwinds from the U.S. dollar. The dollar has stayed firm relative to other currencies.
More importantly, the Fed’s three interest rate hikes so far this year have hindered gold’s growth.
Rising interest rates are generally bearish for gold and gold stocks. After all, gold doesn’t pay interest.
So folks will often invest in interest-bearing accounts instead of buying gold.
But gold’s performance this year isn’t that bad compared to some other investments.
It’s up 1.4%. Silver is down 7.5%. All three main stock indexes are down double digits.
So although gold hasn’t been shining the way folks might like it to… it has performed comparatively well.
I think we may see it peak at around $3,000 in the coming years.
Historically, gold thrives in environments of financial uncertainty and inflation. Despite the Fed’s recent efforts, I don’t see either one letting up soon.
I can’t be certain this will happen. But gold’s average annual rate of return since 1971 is about 10%. Using this math, it could hit $3,000 within five or six years.
Or it could go much higher. While gold fell in the initial shock of the 2008 financial crisis, the chaos that ensued triggered a massive rise in gold’s price.
Between September 2008 and October 2011, it soared about 170% to $1,900 per ounce. Meanwhile, the S&P 500 returned a meager 6.9% in the same period.
Now, physical gold isn’t – and will never be – a crypto-like speculation that could soar hundreds or thousands of percent overnight.
It’s a safe store of value that has stood the test of time. It gives you peace of mind.
And in today’s crazy market, that’s worth its weight in… well, gold.
Nomi has also been perfecting a strategy for the past two years. It’s the same type big banks paid her millions to develop during her 15 years on Wall Street.
And it can help you grow your wealth whether the markets go up or down. Learn more here.
Finally, here’s Jeff on the future of America’s energy supply…
Reader comment: The recession is coming. It will not end until the prices of oil and natural gas come down to Trump-era prices. I think Jeff’s right that fission energy will be a solution to the problem.
But thousands of products are made from and with oil and natural gas. Demand will never go away. Chinese solar panels and windmills will never solve the problem.
– Fred M.
Jeff’s response: Hi, Fred. Thanks for writing in.
You’re right. The two most critical “inputs” for our lives are food and energy. When those prices skyrocket, the economy is in trouble.
And you’re correct that energy has a key role in the current situation. Gas and oil prices are at record highs.
We feel this at the pump when we fill up our cars. It also affects shipping costs, which drive the cost of pretty much everything higher.
Russia’s war on Ukraine has cut off a lot of our exports.
Making matters worse, the U.S. government canceled the Keystone XL oil pipeline last June. It also halted permits for drilling oil and natural gas last year and this February.
When wells are decommissioned, we can’t turn them on again instantly. And while the oil and gas companies that survived the pandemic continued to invest, the restrictions on them in the last 18 months have resulted in lower energy production. It was impossible to offset the loss of oil from Russia.
Even countries like Saudi Arabia and the UAE can’t ramp up production quickly enough to balance the loss of Russian oil.
Sadly, there’s still no clear plan to remedy the situation. Ironically, it’s an easy problem to solve.
I believe nuclear fission is a great solution to meet our energy needs. It releases no carbon dioxide into the atmosphere.
There’s a problem, though. I don’t see fission as a long-term viable solution because of the politics around radioactive waste. This is a highly charged emotional issue not typically grounded in facts. But I feel the barrier is too high to overcome.
I view nuclear fusion as an even better option. It could supply clean energy without radioactive by-products. And it could feed the world’s electricity grids to keep the global economy humming.
When that tech is ready for widespread use, I expect we’ll see a sharp drop in the use of fossil fuels for energy.
But it will take time to move away from traditional energy forms. If nothing else, it takes time to build out the infrastructure.
We should develop a program to accelerate advancements in compact nuclear fusion tech like we’re seeing from companies like TAE, General Fusion, Commonwealth Fusion Systems, and Avalanche Energy.
In that world, oil and natural gas will be a short-term bridge to a world of clean and sustainable energy abundance.
That’s all for this week’s mailbag.
And if you have a question for anyone on the Legacy team, be sure to send it to [email protected].
Have a great weekend.
June 24, 2022