How to Profit From “The Purge”

by Jun 28, 2022Articles

Articles

We needed a good purge… and we are getting one.

In the last month, the crypto market has washed out, with many coins falling 70 to 80% in a matter of weeks.

Some of these coins won’t survive.

And that’s not a bad thing.

Every few years, the crypto market goes through a purge like this, and many of the junk coins get washed away.

The Bank of England’s deputy governor Jon Cunliffe has likened the current crypto market crash to the dot-com crash of the late 1990s – when $5 trillion was wiped off values.

“A lot of companies went in that crash,” said Cunliffe, “but the technology didn’t go away.”

And the companies that survived went on to make huge profits.

“The survivors”, says Cunliffe, “will evolve into the “Amazons” and “eBays” of tomorrow”.

RIP: Dentists and Russian Burgers

In fact, this is playing out just like the last purge in the crypto market.

I remember that purge.

It was 2018, and at the time, the big fear was about government regulation of the crypto market.

China had issued a ban on crypto trading.

Japan had banned leading exchnage Binance.

There were whole parts of the crypto market that were disappearing…

And that was healthy.

There was too much fraud going on back then.

Too many naïve investors getting sold down the river by unscrupulous individuals and bad agents.

In 2018, the “ICO” end of the market – high risk initial coin offerings that have delivered enormous gains in the last year – was an absolute swamp.

Very few of these coins had actual users and there was a terrible lack of disclosure – with many of the founders exiting shortly after the ICO.

I would say that about 90% of the market was junk.

Top of the list…

Dentacoin – “aiming to improve dental care worldwide and make it affordable by utilising the blockchain”.

BitCoen – the world’s first kosher crypto currency.

Whoppercoin – the new cybercurrency of Burger King Russia.

All this dodgy stuff got washed away.

And I remember the reaction from new members of our crypto group, the Crypto Traders’ Academy.

They were surprised that we continued to be so bullish about crypto.

As one member pointed out: “Bitcoin has crashed from $19,000 to $8,500 in the last two months. Are you lot mad?”

The best time to buy

But we’ve lived through four, maybe five crypto bubbles at this stage.

And yes, they do pop.

They pop hard – often around the time that some exchange is hacked or there are calls for more oversight.

Sometimes you can see a 70-80% retrace in the market. This is volatile stuff. It’s not like traditional assets where you might see liner growth – your stocks trailing 5-10% higher each month.

In crypto, you’ll go these periods where it can go up 10-15X in two or three months.

Then it will crash down.

It will consolidate there for a few months….

And then, once the air has cleared, the market will recover as big investors, the so-called ‘whales’, come back to the market and start accumulating coins while they are cheap.

That’s the easiest point to make money as a crypto investor.

That’s the time to stock up on coins: to invest in the projects that have the best chance of surviving: the “Amazons” of the crypto market.

We usually recommend starting with Bitcoin.

It’s the most venerable, stable, and heavily traded cryptocurrency.

It’s a coin that we can point to say: that’s going to be around in five or ten years’ time.

We have complete faith Bitcoin will rise again to new highs.

Then there’s Ethereum.

Long term, we believe Ethereum will hit $10k… and maybe $20k and beyond in the medium to long term.

The Key Takeaway

Bear markets are always a double-edged sword.

The deeper the price goes, the worse your crypto portfolio looks in the short term…

But the bigger the purge, the better the entry we can get for the next bull market (which will happen again given time).

Right now, BTC and ETH are getting hammered.

And there is a good chance that these coins could fall a little further from here. Especially with the macro situation – with inflation running rampant and a continuing war in Ukraine.

But as Michael said to members of the Crypto Traders’ Academy last week, if you can keep a long-term focus: then you have a great opportunity to profit from this latest purge in the crypto market.

Because two to three years from now… the charts for Bitcoin and Ethereum and many of our other holdings will look very different to what we see today.

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