Cryptocurrencies & The 50-Year Kondratiev Wave Cycle

About 2 weeks ago, I attended a talk by one of my former professors (SMU), and it was on the topic on cryptocurrencies and the upcoming technological disruption. She mentioned about Kondratiev waves and the 50-year cycles, and I went on to do some research on how Cryptocurrencies fit into this wave, and how long it is likely to last according to this model.

“In economics, Kondratiev waves (also called supercyclesgreat surgeslong wavesK-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy. It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals between high sectoral growth and intervals of relatively slow growth.” – Wikipedia

 

After the global financial crisis in 2008, the market bottomed in 2009, and since then we saw the start of a new major cycle, which could last till 2050/60. This means that we are still in the early stages (fast growth stage) of a big long-term trend. This trend consists of not just cryptocurrencies, but also things like blockchain, AI, VR/AR, machine learning, etc.

 

Will it Crash Like the Dot Com Bubble?

In every phase of innovation, it will start off with radical innovation, where a new technology is introduced. This will be a period of experimentation and flux, as many new products come into the market. Cryptocurrencies are currently in this stage, which is why prices are so volatile.

As you might be aware, there are 3 main types of coins: currency, platform, and applications. Some people also include a 4th type called privacy coins, like Monero and Zcash, which are meant to allow completely anonymous transactions. Some examples of currency coins include Bitcoin, Litecoin & Bitcoin Cash, and their main purpose is to serve as a virtual currency. However, Bitcoin behaves more like an asset rather than a currency now, since people are buying it for capital appreciation rather than to use it for transactions. Platform coins refer to ones like Ethereum, which do not directly provide a function to the consumer, but allow applications to be built on their platform. Lastly, applications are like the iphone apps, which serves a particular function for the end user.

After the market has gone on long enough to enter the bubble stage, the next phase of innovation is the “shake out” phase, where the market gets rid of “useless” or bloated/weak products. This will typically be the part associated with a market crash, but it is also possible that the bubble deflates slowly instead of bursting.

In an early stage boom, the application coins will tend to proliferate, and there will be a lot of them. This means that this class of coins would be the most risky to invest in, because a lot of them will be the first to die out when the market crashes.

 

 

After the dust settles, the ones who survive will likely become the dominant players (Facebook, apple, Amazon), and it is worth noting that the best products/technology may not necessarily be the ones that survive, rather it is the one with the widest adoption. Do keep this in mind when building your Crypto portfolio and deciding which coins to invest and hold for the long-term.

After the crash, the trend may take a while to resume, but it will be more majestic than before. The next phase involves incremental innovations, where products are further refined, such as improvements in the products, or new applications for existing products, etc.

So Should I Buy Now?

Although we know we are at the early stages of a mega-trend, we also have to keep in mind the “shake out” phase which has not occurred yet.

If you are willing to hold through that and capture the subsequent big upside, then you will not need to worry so much about timing the market now. But if you prefer to take a more cautious approach, you can wait till the “shake out” is over before entering the market.

And lastly, if you prefer the best of both worlds, you can use swing trading to capture the short/medium-term moves in the market, while waiting for the “shake out”, and then going all-in when the dust settles. Whichever approach you choose, just make sure you don’t miss out on this 50-year wave, because it is literally once in a lifetime. 😀

Forex Trading Updates: AUD/USD & GBP/AUD

At the start of this week, we made some trade calls in our FREE forum, and today we are reaping some of the profits together! 😀

The Art of Precision Timing: Calling the Big Crash in Bitcoin One Day Before!

Last week, I spotted a bearish “3 black crows” pattern on the Bitcoin chart, and immediately posted in my 5000+ member forum, to warn everyone about the big crash about to come.  The recommended course of action was to rotate out of Bitcoin (into cash or Tether), or to take short positions on Bitcoin.

 

The very next day, Bitcoin crashed a whooping 30%, making it one of the worst correction in recent times. I am glad we helped many people avert his disaster, by keeping an alert eye on the chart at all times.

Remember, just because something keeps going up, does not mean it won’t have corrections. And if you avoid the major corrections, you can buy back in at a much cheaper price to increase your long-term returns.

Stay tuned, and join us in our free forum! 😀

My Full Crypto Strategy for 2018 (And my Current Portfolio Holdings)

Recently, I have been getting a lot of questions about Bitcoin and Cryptocurrencies, so I will take some time to address all of them.

Is  Bitcoin a bubble?

Its price action is certainly bubbly. If we look at the tech bubble, what happened in phase 1 is that people were buying based on potential growth and expectations, which is why you saw stocks trading at skyhigh PE ratios. After the crash, and after the dust settled, phase 2 was where the companies with strong fundamentals started manifesting the potential growth, so in a way the fundamentals were catching up to the expectations. I think we are in phase 1, but it is possible that prices just go sideways instead of a crash as we head into phase 2.

In addition, Bitcoin is just one application of the Blockchain technology, and there are also many other coins/cryptocurrencies to invest in.

Who is going to buy your Bitcoin from you?

If Bitcoin (or any currency since they are interchangable), becomes a currency which is used and accepted, there is no need to “cash out” or sell it to someone else, because you can simply use it as currency to pay for things. People are now hoarding Bitcoin because it is akin to buying a currency which will be worth more in the future. That said, it is unlikely that it will totally replace our fiat/paper currency (at least in the next 5-10 years), but my guess is that it will coexist side by side like common global currency.

Will Bitcoin become a global currency?

There are 3 main functions of a currency:

  1. Effective means of payment.
  2. Good measure of value.
  3. Effective way to store value.

Currently it is not that universally accepted, but that could improve in the future as more business accept it. There is a problem with its transaction speed and fees, which it will need to solve to get mainstream acceptance. And as its market cap gets larger, it will naturally become more stable and less subject to huge price fluctuations.

What are some positive and negative catalysts?

For the positive, Bitcoin could go up a lot more if banks, funds, institutional investors, and even sovereign funds start including cryptocurrencies (especially Bitcoin) as one of the must-have asset class in their portfolios. For individual coins, they usually get a big boost when they announce a major deal with a big partner, or when they get listed on a major exchange. For the negative, prices could collapse if existing holders start to cash out, and institutions start stacking short positions on the futures.

Is it a good time to get into the market now?

Before entering, take some time to read out list of resources which we have compiled. I have a couple of risk-minimising ideas for people who have missed out so far, but are unsure how to enter at current prices:

  • Dollar-cost averaging: Buy a small amount every month and allocate across 10-15 coins.
  • Portfolio approach: Create a diversified portfolio and rebalance weekly/monthly.
  • Lump sum market timing: Split your capital into 4-5 parts, and enter whenever there is a price correction.
  • Invest in a mining rig to reduce the risk of price fluctuations since your returns are spread over 3-5 years.

Personally, I started this new portfolio in December for my students to follow, and in 2 weeks I was up 150% on my portfolio. By actively rebalancing it and keep a certain percentage in cash, I am able to take a cool and systematic approach to riding on the crypto assets trend. For this portfolio, I have a 10 year time horizon, which means I am prepared to sit through any crash, but I will be rotating to cash/tether if I see a major crash coming. Lastly, it is also worth noting that this crypto portfolio accounts for roughly 5% of my total portfolio.

I have been updating my portfolio regularly in my forum, and if you are keen to learn more about Crypto, you can join our forum as well. (It is completely free!)

See you on the inside! 😀

Exclusive Interview at the WWCC 2017

Last month, I was interviewed at the World Wealth Creation Conference (WWCC), and I shared some insights on my 15-minute trading system and also had a short discussion about Bitcoin. I talked about the large potential of Blockchain and cryptocurrencies in general.

Since then, the prices of cryptocurrencies have continued to soar. I will be following up with a new blog post on my full crypto strategy for 2018 very soon. Stay tuned! 😀