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Feb 1, 2022

"Don't you give it up now

You'll be thanking you in years from now...

All that grows takes time."

- Eva Valery, Xylem

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Whale Reads

Worthy news for aspiring whales

Recent On-Chain Trends in Stablecoin Activity (Coin Metrics): After yesterday's update on the likely U.S. takeover of the stablecoin market, here's a look at how fast that market's growing.

Investor takeaway: A number of readers took issue with our stance that the U.S. government bringing stablecoins into the traditional banking system could be a good thing.

Whatever your opinion, it is unlikely the government will allow this to continue for much longer, given the furious pace of stablecoin growth. Our view: better to be banked than banned.

Your Money is Growing

Truth, in numbers

Two charts stand out from the Coin Metrics research above. First, the Total Supply (or how much traditional money is being stored in stablecoins), which currently stands at $150 billion:

The second is Total Value Settled, or how much money is being used (as opposed to just being stored). In 2022, over $500 billion has already been settled -- more than the entire year of 2019.

Investor takeaway: Money is snowballing into stablecoins -- and it's being used for real transactions. The Fed is taking notice, and will (likely) bring this into the traditional banking system.

The Big Picture

with Evamarie Augustine

Hi Everyone,

Well, it's the beginning of a new month. Markets had a rather ominous start in 2022, with losses across equities.

Cryptocurrencies have been taking some heavy hits—enough that the phrase “crypto winter” is again seeing action on Google Trends.

The major indices closed the month in negative territory, with the Nasdaq Composite dropping 9%. Bitcoin, meanwhile, lost 17% on CoinDesk, continuing on the trajectory started in November, after the coin hit its all-time high of over $68,000.

So, is it all doom and gloom from here? Or, as the crypto space becomes increasingly correlated with the broad equity markets, is it time to look at some of the traditional investing principles and apply them to crypto?

Invest for the long-term

One of the most basic principles of investing is investing for the long-term. Short-term movements typically lead to bad decisions. So while bitcoin has taken a short-term hit, what do the long-term returns look like?

For the year through Jan. 31, 2022, bitcoin climbed a healthy 14.72%, but it underperformed the 19.65% return of the S&P 500. Bitcoin rose over 60% in 2021, but January’s losses brought the return for the last 12 months down considerably.

However, when we look at the longer term, the returns are much more compelling, as bitcoin climbed more than 3,500% over the last five years.

A recently released report by Fidelity’s Digital Assets group stated that bitcoin’s value is enhanced by its scarcity and decentralized nature:

“The asset has proven to be a monetary good and a store of value for investors over the years.”

Don't try to time the market

We know that bitcoin has delivered positive returns over the long-term and is increasingly seeing adoption by institutional investors.

What’s the best way to capture the market’s upside but limit the downside? Consistently investing a set amount every month—referred to as dollar-cost averaging—can help take the fear and uncertainty out of trading.

Timing the market usually doesn’t end well. When looking at an asset class's peaks and valleys, emotions can cloud judgment and make investment choices and decisions that much more challenging.

However, embracing a consistent buying strategy provides the benefits of compounding returns and allows you to buy the dips and not get caught up too much in the coin’s volatility.

Asset allocation

Should bitcoin be your only investment? Probably not. But does it belong in a long-term investment strategy? More and more institutional investors are starting to incorporate bitcoin into their overall allocations.

In fact, a recent article highlighted that an increasing number of institutional investors have been allocating a greater share of their assets under management to digital assets, citing survey data from Nickel Digital Asset Management.

More than one-third of the institutional investors that took part in the poll said that their allocation to these innovative assets should rise by somewhere between 5% and 10%.

And a study by Fidelity Digital Assets over the summer also found that a majority of institutional investors plan to invest in digital assets at some point in the next five years.

Have a plan

Are the assets you are looking to invest in purely speculative? Or will the funds be needed for retirement, college, or a new home?

As with all investments, knowing when the funds are needed can help set a barometer of when to sell and limit unexpected losses.

As with any investment, "Past performance is no guarantee of future returns." The best investing strategies involve a consistent, long-term approach.

As always, thank you for reading!

Evamarie Augustine

Market Analyst

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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.

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