Steve's note: Cryptocurrencies are in a mania – no question about it. But no matter what happens with the fast-paced headlines and prices we're seeing, my colleague Eric Wade is finding ways for his readers to make smart moves in this space... and to get positioned for big potential profits. Today, he explains the mindset you should have if you're invested in this space...
Cryptocurrencies had an eventful autumn...
In September, a fake press release said that Walmart (WMT) would begin accepting Litecoin (LTC) as a form of payment. The press release was based off real information that Walmart was looking to hire a crypto expert, but the big-box retailer quickly denied the report.
The news made Litecoin plummet... bringing the whole crypto market down along with it.
Cryptos also experienced a "flash crash" earlier that month. Bitcoin (BTC) and Ethereum (ETH) fell by more than 10% in minutes. (It was the sell-off my readers had been waiting for... We highlighted it as a buying opportunity in my Crypto Capital newsletter.)
And after that, investors again sold cryptos – and stocks – based on the fear that China's real estate market's troubles could affect the overall global economic recovery.
The crypto markets can be chaotic. There's always another story to send prices gyrating.
That's why, as I'll show you today, it's important to keep this in context – and view crypto volatility through the right lens...
Today, we're nearing the end of November. And we can see what the "aftermath" of all the September drama has been...
Bitcoin has been trading between $50,000 and $60,000. The world's largest crypto has climbed around 100% year to date... and soared more than 200% over the past year. Meanwhile, Ethereum, the world's second-largest cryptocurrency, is trading around $4,000.
The Bloomberg Galaxy Crypto Index (BGCI) – which includes a basket of bitcoin, Ethereum, and eight other cryptos – dropped sharply in September. But you can see it was a quick recovery...
Even accounting for the latest batch of uncertainty this week, the BGCI is now up roughly 200% year to date and 370% over the past year. Take a look...
I still believe cryptos are crossing the chasm from "early adopters" to the "early majority." That's the sweeping story that will carry these assets higher...
For instance, El Salvador recently became the first country in the world to recognize bitcoin as legal tender. Salvadorans can use bitcoin to pay for just about anything – coffee, cars, houses, and even taxes.
This is a pivotal moment for the adoption of bitcoin and cryptocurrencies. It opens the door for other countries to follow suit.
Elsewhere, AMC Entertainment (AMC) announced that it will expand the cryptos that it accepts as a form of payment. The cinema franchise already accepts bitcoin, but will now also begin accepting Litecoin, bitcoin cash, and Ethereum for ticket purchases.
And British financial giant Standard Chartered said it sees bitcoin peaking at $100,000 in late 2021 or early 2022. That's more than double where bitcoin sits today. It believes bitcoin could reach a long-term peak of $175,000.
Standard Chartered based its estimates on bitcoin's potential to become the "dominant peer-to-peer payment method for the global unbanked." It also said that the future cashless economy could accelerate adoption even further.
If you're invested for the long term in cryptos, the outlook is bright. But in the short term, cryptocurrencies are still capable of extreme bouts of volatility...
And as investors, we need to be ready to experience that.
Let's look at where volatility stands today. For stocks, we measure this through the CBOE Volatility Index ("VIX"). The Crypto Volatility Index ("CVI") is the crypto market's version...
Crypto investors can use the CVI to invest in volatility or to hedge positions against volatility. So when the CVI rises, investors are buying options to serve as protection against sell-offs. Take a look...
The CVI now sits around 97. This is well below its recent high of 165, but it's still well above the lows from last year.
There are always more headlines to worry about. China continues to crack down on crypto mining... And folks are nervous about crypto tax regulations in the new U.S. infrastructure bill. These contributed to a drop in prices yesterday.
If you're going to invest in crypto, you need to expect volatility. The CVI shows us that it's here now. More than that, however, it's simply the reality of this asset class.
This same volatility is what gives us such tremendous profit potential in this space...
You need to know that... accept it... and position your investments carefully so you can sleep well at night – because we'll see more of it from here.
Good investing,
Eric Wade
Editor's note: On Wednesday night, Eric sat down to reveal a blockbuster story that's coming for cryptos... an event that's set to unleash 10 million bitcoin worth of wealth in one little-known corner of the market, starting in January. His discussion is a must-watch if you hold the majority of your wealth in U.S. dollars – or if you've simply been waiting for the "right time" to get into cryptocurrencies. Watch it here before it goes offline.
Further Reading
"When you look at the cryptocurrency market today, it seems like a lot of people are making easy money," Eric writes. But with everyone excited about these assets, you might be nervous about where this market is going. One chart has some answers... Read more here.
If you're like most investors, you've probably heard about cryptocurrencies... but you might not know a lot about them. That's why Eric put together an essay to answer your biggest questions... Learn more here.
If you're going to invest in today's crypto market, you need some basic rules to get started. And these are two that every investor needs to know...
A HOMEBUILDER REACHES ALL-TIME HIGHS AS HOME PRICES BOOM
Today's company is benefiting from the U.S. housing boom...
Regular readers know that Steve believes the U.S. housing market will keep soaring. Near-record-low interest rates and a shortage of homes on the market have sent prices higher. Folks are scrambling to snap up any available homes for sale. And that's great news for today's company...
Lennar (LEN) is one of the largest homebuilders in the U.S. Since 1954, the company has built more than 1 million homes across the country. And as housing demand soars, it's riding the tailwind... Despite grappling with supply-chain issues, Lennar recently reported quarterly net earnings of $1.4 billion – up more than 100% from the same quarter last year. And Executive Chairman Stuart Miller noted that new-home demand remains strong, with new orders up 5% year over year.
LEN shares are in an uptrend – up more than 90% in the past three years, including dividends. They recently hit a fresh all-time high. As the housing boom rages on, that trend should continue...
