Crypto Run - How High Can They Rise?

At the 2010 low, one Bitcoin token traded at five cents. Investing $1 in Bitcoin at the low purchased twenty tokens. That $1 grew to over $2 million by December 2024. Few, if any, investments yield that type of return.

The November 5 U.S. election was the latest event that put Bitcoin on a launchpad to the stratosphere. The incoming Trump administration has expressed support for cryptocurrencies.

After trading below the $68,000 level in early November, Bitcoin rallied to the $100,000 per token level later during the month, reaching its latest $107,016.20. Bitcoin’s over $2 trillion market cap represents more than half of the total cryptocurrency asset class. Bitcoin, Ethereum, and many other cryptos are highly volatile assets. If the past market volatility is a guide, a significant correction could be on the horizon, but each downside plunge has been a buying opportunity.

Bitcoin reaches a milestone and Ethereum rallies

• Bitcoin closed 2023 at $41,945.45. At the most recent high of $107,016.20, the leading cryptocurrency more than doubled and eclipsed the $100,000 milestone.
• Ethereum closed 2023 at $2,287.135. While Ethereum rose to over $4,090 per token in March 2024, the most recent peak was at that level.
• The asset class’s market cap has risen to $3.63 trillion. Bitcoin’s most recent share was 56.4%, while Ethereum’s was 12.8%.

The case for even higher crypto prices

• The incoming Trump administration’s support for Bitcoin and cryptocurrencies sparked the latest post-November 5 Election Day rally.
• The potential for a U.S. national Bitcoin reserve under the incoming administration has ignited increased interest in cryptocurrencies.
• Bitcoin’s ascent has caused many capital allocators to include Bitcoin, cryptocurrencies, and crypto-related assets in portfolios.

The case for a substantial correction

• Each new high in Bitcoin has led to significant downside corrections. Over the past years, we have witnessed the following:
• An 83.1% decline from the December 2017 $19,862 high to the February 2019 $3,355.25 low.
• A 55.3% decline from the April 2021 $64,789.27 high to the June 2021 $28,957.79 low.
• A 77.5% decline from the November 2021 $68,906.48 high to the November 2022 $15,516.53 low.
• A 31% decline from the March 2024 $73,622.76 high to the August 2024 $49,784.02 low.
• Even the most aggressive bull markets rarely move in straight lines.

Bitcoin and crypto-related ETFs that will move with the sector

• Two leading Bitcoin ETF products with substantial liquidity are IBIT and GBTC.
• Two leading Ethereum ETF products with substantial liquidity are ETHA and ETHE.
• Coinbase (COIN) is a leading cryptocurrency exchange.
• RIOT and MARA are cryptocurrency mining companies that rise and fall with cryptocurrency values.
• BITQ is the Bitwise Crypto Industry Innovators ETF product with a publicly traded crypto-related company portfolio.

Risk-reward dynamics are crucial when approaching cryptocurrencies

• The potential for massive rewards comes with commensurate risks.
• Any crypto risk position requires careful attention to risk-reward dynamics.
• Time and price stops can minimize losses while trailing stops can maximize profits.
• Understand that any crypto-related risk position involves the risk of a total loss.

A $1 investment in Bitcoin in 2010 at the five cents per token low is worth more than $2 million in mid-December 2024. However, it has been a very volatile road from a nickel to over $107,000 per Bitcoin. Expect lots of volatility in the crypto sector over the coming months, as history tells us that price implosions tend to follow the explosions.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!