The Crypto Winter from 2018-20 was a very painful time for crypto investors. Although I made a relatively small investment into Bitcoin, I watched it drop nearly 80% in a short time span, and it stayed there for a long time. It was so discouraging that I did not log into my Coinbase account for nearly 3 years after that.
But I never sold. Looking back, I should have bought more. But at least I didn’t panic sell one of the greatest assets in human history.
Why didn’t I?
Because I believed in my research. And that research showed me crypto was still in its early stages of adoption. As long as I got the adoption story right, I knew Bitcoin and the overall crypto market would eventually rally to new highs.
And that’s exactly what happened.
From its Crypto Winter depths, Bitcoin skyrocketed 2002% to an all-time high of nearly $70,000 in November 2021. As Bitcoin goes, so goes the altcoin market, and the overall crypto market rose from around $100 million to more than $3 trillion.
But I knew the journey to mass adoption for crypto is a marathon – not a sprint. And I’ve repeatedly said this is a very volatile asset class already.
With 100% certainty, there’d be more big drops before we reach the finish line. I’ve also urged you to not invest more than 10% of your total investable dollars into crypto, due to the extreme risk.
Volatility continues to negatively affect the financial markets. Digital assets have been hit especially hard. The industry is also reeling from the collapse of several token projects and hedge funds. Much of the industry is still waiting for the next shoe to drop.
I know it’s a painful time for digital asset investors. I’ve personally seen my own investments in this space sink nearly half a million dollars as the broader crypto market declines.
So when crypto crashed nearly 70% from its November 2021 highs, I was better emotionally prepared to deal with a long, drawn-out bottoming process. I’ve been quite cautious, expecting this bear market to drag out and possibly break to lower lows.
However, two catalysts have changed my mind. These extremely bullish developments will force this crypto winter to not last as long as the previous one.
This $10 Trillion Titan Is Coming Into Bitcoin
During the last Crypto Winter, nearly every institutional player walked away from Bitcoin as it dropped by 85%. Just last week, the biggest institutional player in the game said it’s entering “the space”.
This year, BlackRock, the world’s largest asset manager with over $10 trillion under management, announced a partnership with crypto exchange Coinbase.
Let that settle in for a moment.
BlackRock says its institutional clients want access to this space so badly that it’s teamed up with Coinbase to provide them an access point to crypto assets. According to Bloomberg, BlackRock said the focus of the partnership with Coinbase, the biggest U.S. crypto-trading platform, “will initially be on Bitcoin.”
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets”, said Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock.
It’s impossible to overstate how bullish this is.
Despite all the volatility we’ve seen in crypto over the past nine months, the biggest institutional investor in the world has just publicly announced it’s joined the party.
Look at the stats:
- Bitcoin is down 66%
- Ethereum is down 65%
- The whole crypto space is down 64%
- Three Arrows, Capital, Celsius, and Voyager, have blown up.
- An investigation into Coinbase by the SEC is underway
And yet BlackRock is still coming in.
BlackRock would never risk its credibility if it wasn’t 100% convinced that Bitcoin and crypto assets were here to stay. And it’d never align with a partner (Coinbase) if it thought its partner would get shut down by the SEC.
Let me be clear.
This does not mean the volatility is over.
What it does mean is a new buyer has entered the room.
A buyer with pockets so deep it can buy up the entire crypto market 10 times over. Shoot, Blackrock’s assets are larger than most countries' entire annual economic output. And with a buyer like that, we still may drop another 50%, but I can virtually guarantee we wouldn’t stay down for long.
That’s why I’m getting ready to double down again.
Why I’m Ready to Double Down Again
Do you know how bullish this news has made me?
Not nearly as bullish as the second catalyst.
We are fast approaching an event known as “The Merge.” And it will be the most important near-term catalyst for the entire cryptocurrency market.
At a high level, “The Merge” is when Ethereum – the world’s second-largest blockchain network – will switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Stay with me here, peeps, because I’m making this simple because my brain also cannot wrap around complex tech jargon.
The Merge means that new blocks will no longer be formed by computers that compute very difficult math problems before others.
In other words, this means miners like me will no longer be rewarded for mining ETH. I’ve been mining Ethereum with my business partner, Adam, for over 18 months now, and we’ve successfully mined over 20 ETH. Not a huge operation by any stretch, but definitely profitable. Now, we will be forced to mine other coins that are Proof-of-Work.
And although I’m getting displaced, I couldn’t be more excited because this will send the value of my ETH to new all-time highs.
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Instead, the new blocks will be formed by validators who stake their tokens in the network. This method of validating transactions is called Proof-of-Stake. This is another way of saying users put capital up front as insurance against malicious actors.
A benefit is that the energy used to secure the network drops by more than 99%. At a time when climate change and reducing carbon-based electricity production are daily talking points in the news, this is really fucking huge. It also means fund managers desiring to invest in Environmental, Social, and Governance (ESG) assets will now find ETH very attractive.
Global ESG assets are predicted to grow from $35 trillion to $53 trillion by 2025. So, when a fund focuses on blockchain exposure, Ethereum will end up at the top of the list, due to its migration to Proof-of-Stake and its liquidity.
Ethereum is the second largest cryptocurrency. And soon, it will cut its carbon footprint by 99% and produce at least a 5% yield on staked tokens. This shift will make the token one of the most sought-after ESG-related assets when it switches from PoW to PoS.
That alone will make ETH a “must-own” for any long-term digital asset portfolio.
But there’s another transformation this network upgrade is enabling that the markets are discounting right now. This shift is precisely what I predict will create a very attractive buying opportunity for investors in the coming months.
Before we get to what the market is missing when it comes to “The Merge,” let’s quickly go over what to expect in the months to come regarding the timing of this event.
Ethereum’s Road Map
Ethereum developers are notorious for delaying releases. This is frustrating for investors who want to see dates met. But for developers, it’s more about making sure they dot the I’s and cross the T’s. Delays are relatively normal. The Ethereum 2.0 upgrade was supposed to happen over a year ago, but it’s an extremely complex change that they have to be very careful to get 100% right. If they don’t get it right, one error in the code and all hell will break loose.
This date is currently penciled in for the week of September 19. That’s right around the corner. With these milestones coming up, investors will want to add ETH to their portfolios ahead of “The Merge.”
The main reason we’re looking to do this ahead of time is that Ethereum’s supply and demand economics will change once it goes to PoS. And this is where we see the most potential, in terms of price, in the months to come.
ETH Becomes Deflationary
Millions of newly minted ETH enter the market each year. While the amount in terms of percent has declined over the years, it is still significant.
In the chart below, we can see the annual inflation rate of ETH since 2015 – It currently sits just above 4%. This means that at a current supply of 119.78 million tokens, that percentage represents nearly five million ETH tokens over the course of a year.
But what we want to focus on here is what happens after “The Merge.” Several factors will come into play, each one with a deflationary effect. To put it another way, each ETH token will become scarcer. Anytime a valuable asset becomes more scarce, it inevitably becomes even more valuable.
When I was around ten years old, I was heavy into baseball cards. My parents dragged me across the country on multiple road trips, forced me into historical museums for entire days, and made my sister Emily, and I tour one historical home after another. We were so fed up at one point that we got smart and banded together, sat down on the front steps, and protested.
“We’re not going into another historic home,” we said with resilience and a slight twinge of fear.
On that trip, we got to stop at Cooperstown, New York, home of the Major League Baseball Hall of Fame. In the HOF, honestly, the only thing I remember is laying my eyes on the famous Honus Wagner 1909 T206 card. In that year, 1988, it was valued at a few hundred thousand. Today, it recently sold for $7.25 million. For one single baseball card.
Why? Because it’s the rarest card on the market. There are believed to be less than fifty in circulation and less than 10 in great condition.
It’s not because Honus Wagner is that famous of a player. I mean, who the fuck is Honus Wagner? He certainly doesn’t carry the same weight as Babe Ruth or Mickey Mantle, or any of our modern-day sluggers. It’s simply an extremely scarce asset.
Think what the government is actually doing right now: printing trillions of new dollars out of thin air. This increases the money supply, which decreases the value of your dollars. We are all experiencing the pain of fast-rising prices with everything we buy.
Imagine for a moment if the U.S. government destroyed a percentage of the total money supply every year. Each dollar would likely become more valuable with each passing year. This is what will happen with Ethereum. Here are two of the factors that will make this happen:
- The first is the number of rewards blockchain validators will receive. Right now, the annual rate of new tokens entering circulation comes to 4.85 million ETH. After “The Merge,” this rate will decrease to a range between 180,000 to 1.8 million ETH. If I tried to explain why it’s going to decrease, I feel you, like myself, have a good chance of getting a “deer in the headlights” glossy look in our eyes. I’m accused all the time of staring off into space when someone talks too much or gets into complicated jargon. I apologize for that if you’ve experienced it. Just understand that this will reduce the amount of new supply of Ethereum tokens issued monthly.
- The second factor contributing to the downward pressure on new supply is an upgrade that took place not too long ago called EIP-1559. This upgrade takes a portion of the fees paid by users to miners and burns it. This means, as network activity rises, more ETH gets burned. If we look at May of this year, the network burned just shy of 200,000 ETH. If we scale that up to one year, that comes to 1.8 million ETH, or an inflation rate of negative 1.5%. This is very significant.
A Major Supply Shock
These two above-listed factors will spark a major supply shock in 2023.
But it isn’t receiving as much attention as it should. That’s because most news coverage focuses on whether or not “The Merge” might be delayed. Whatever potential delays may arise, we can ignore the headline news. We just need to focus on the bigger picture when it comes to Ethereum 2.0.
Not only will supply be shocked, but demand will spike through the roof when the big guys start buying it up in droves. You don’t need to be an economist to understand when supply goes down quite a bit and demand goes up, you have intense upward price pressure.
Long-term, ETH will be a must-own for any digital asset portfolio. “The Merge” will create the perfect opportunity for investors to gain exposure to this industry-leading token.
I don’t normally do price predictions; in fact, I don’t remember having issued any since I launched my platform. But these conditions are so ripe, that I believe in 2023, ETH will hit at least $10,000 per coin.
Again, let me be clear:
In the short term, I don't think we are out of the woods yet. There are still too many uncertainties. Guessing what the Fed will do with interest rates, the global food supply shortage, the Ukraine/Russia war, and the highest inflation in 40 years are still big concerns.
But at least now, we can see a way out through the trees when before we were clouded in murkiness.
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