Is crypto the (new) trade of our lifetime? I ask this question as the price of Bitcoin (BTC-USD) — a proxy for all cryptocurrencies — has fallen almost 50% since mid-April, from $63,000 to $32,000. (I’ll get to the parenthetical “new” in a second.)
We may even be heading into another so-called crypto winter, where the price of Bitcoin falls precipitously and stays down for some time. But here’s the rub: Heretofore each downturn has been followed by the price of the coin recovering and then going on to greatly exceed its previous high.
Doesn’t that scream long term buy and hold? (Or trader bait if that’s what floats your boat.) Shouldn’t you therefore own a piece? Maybe just a little piece?
How do we know crypto will continue to go up? No one knows. Apple (AAPL), Tesla (TSLA) and Nvidia (NVDA) seem like obvious bets now, but five or 10 years ago they looked risky, or overpriced or both. And with Bitcoin you add a whole other layer of uncertainty, which is to say crypto currency itself. Crypto is way more complex and speculative than iPhones or EVs or chips.
I’ll get into the issue of defining crypto later, but I want to be clear that what I’m really trying to address here is, should you have some exposure to crypto in your investment portfolio, and if so, what kind and how much?
That question comes from this fact: It’s entirely possible the only thing riskier than owning crypto, is not owning crypto. Meaning that 50 years from now, your grandchildren might shake their heads in disgust for you not buying Bitcoin at $32,000, (or $25,000 next week.)
A dilemma, no?
Let me briefly address the word “new” in my lead, which I used because for the past 25 years, I’ve called tech the trade of our lifetime. Just like with what we’ve seen so far with crypto, tech stocks would go up and would go down, but they would always go higher. The chart for the NASDAQ 100 Technology Sector (^NDXT) goes from bottom left to top right. And it makes sense, doesn’t it, as tech becomes a bigger and bigger part of our economy.
And now? Well, I’m not saying tech is finished by any means, but it could be that after two and a half decades, the sweetest part of that trade has run its course, especially for the big FAAN/MG (Facebook, Amazon, Apple, Netflix, Microsoft, Google) names. Two strong winds now blow in the faces of those companies.
The first is the tyranny of large numbers, meaning it becomes increasingly difficult for a company to grow 30% a year when its annual revenue is closing in on $200 billion (as is the case with Google, which…