The Wolf Den #653 - Patience Pays Off
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In This Issue:
Patience Pays Off
Coinbase Stock Rebounds On News
Binance Acknowledges Flaws
January 8th Has Passed - Now What?
The Fed, Bitcoin, NFTs & Kim Kardashian | Jon Najarian
TODAY'S NEWSLETTER IS SHORTENED - I AM TRAVELING AND UNABLE TO ACCESS CHARTS! I WILL BE FULLY BACK TOMORROW
Patience Pays Off
Perspective is everything.
Investors and traders in the crypto space often have wildly unrealistic expectations.
How many times have you made an investment and pictured retiring from it?
Your goal should never be to 100x an investment. Even a 10x return is an incredible feat that most investors will never achieve in any other market, ever. The pace of our sector can make even a seasoned investor feel FOMO, even though we all know that massive wins are few and far between.
Did you know that conventional investing wisdom outside of crypto says that you should aim for 10% portfolio gains a year, which will double your investment every 7 years with compounding? This has been enough for people to become wealthy in all other markets.
The goal should be 10% a year. Not 10,000%!
What’s more realistic is to accumulate smaller wins with more at stake. And this requires patience.
Like any wise investor, I don’t like risking a lot of my money. I love my money and respect how difficult it was to earn it. This is why I preach using stop losses and always defining exactly how much money you are willing to lose on a position. My moves are calculated and never whimsical, and generally are structured in a manner that will take time to play out in either direction. If your investment keeps you up at night, that’s a huge red flag and it’s time to reassess. This is where patience comes into play.
I also maintain a well structure portfolio to protect my capital. I generally have 70% in long-term positions that I do not touch, primarily BTC and ETH with the leftover percentages of positions that did many multiples and I can afford to let ride.
I would rather take a slow and steady 2x on my investment portfolio than roll the dice and risk my hard-earned money. If you do feel that urge to gamble, it probably isn’t even worth your time, because trades should only be taken with a very small percentage of your trading portfolio. The solution isn’t adding more to make the investment 5% or 10% of your net worth - the answer is usually to walk away, take a break, and find something else that looks better.
Patience and conviction go hand in hand. If you have conviction in an asset, you can justify putting in a larger percentage of your stack for a greater return. If somebody tells you they pulled a 10x, it is unlikely they did it with more than a tiny percentage of their portfolio. A 2x or 3x that you committed to, waited for, and believed in, can dramatically increase your entire net worth with minimal day-to-day management or stress.
99% of hype chasers are either committing too little and wasting their time or committing too much and gambling. Don’t be fooled by their rare win. There are a few advanced traders out there wisely risking 1% of their portfolio, with this number being enough money to justify their time. Don’t convince yourself this is the norm, just be comfortable and confident with your personal situation.
To make money, you have to love it enough to protect it and let it grow at a healthy pace. If I double up on an investment (not a trade), I’m ecstatic - a sizable percentage of my net worth has increased. As my good friend Mark Yusko has said on the podcast, “the two most important things in investing are fighting to see another day and doubling up.” So shoot for the slow and steady wins - you really only need a few over your lifetime to really make it big!
Coinbase Stock Rebounds On News
According to an SEC filing yesterday, Coinbase is laying off 20% of its workforce to cut costs amid "continued turbulence in the cryptocurrency industry." The 20% equates to roughly 950 employees, marking the third round of layoffs, bringing the total layoff number to 2,110. The good news is that after this layoff, it has been calculated that operating costs will be cut by 25% from Q4 2022 to Q1 2023, which is a big jump in a short time.
With the news of the layoffs and praise from an analyst at Jefferies, COIN stock has sustained a decent short-term recovery. Currently, nearly every investment research firm has COIN marked as a "sell," "reduce," or "avoid," but one analyst from Jefferies said, "FTX's demise could also give Coinbase a chance to regain market share" causing the stock to jump. Coinbase definitely has a long road ahead, but the wipeout of FTX is bound to breathe life into Coinbase - it's common sense.
Last Friday, COIN dipped as low as $31.59 and is now trading at $43.09 for a 36.4% gain. The following is a statement from the company regarding the layoff: "We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion... In the face of increasingly challenging economic conditions, we made the difficult decision to further reduce the size of our teams to ensure we have the appropriate operational efficiency to weather downturns in the crypto market and capture opportunities that may emerge."
Binance Acknowledges Flaws
News broke yesterday that the Binance-Peg BUSD was often undercollateralized in the past, as a result of a mistake made by Binance. The reason for Binance admitting to this mistake is likely for two reasons: (a) to build trust by being transparent, and (b) to control the narrative by releasing the news themselves (the evidence can be seen on the blockchain).
The technical details of how this happened are not fully understood yet, but the following statement should alleviate concerns:
"First, this occurred some time ago. The Binance-Peg process is sufficiently backed now and has been for some time.
Second, even at that time Binance wallets held most BUSD, so it is possible that these were backed in some other way. It is also possible that those other wallets contained client deposits and should not be counted as backing. We do not know for sure.
What we do know is that Binance has established a specific process for Binance-Peg, and that process was not followed sufficiently well to achieve full collateralization. Evidence of this issue can be found on the blockchain."
January 8th Has Passed - Now What?
Remember the letter Cameron Winklevoss sent to Barry Silbert a week ago in which he exclaimed, "we are asking you to publicly commit to working together to solve this problem until January 8th, 2023... and time is running out?" Well, the time has run out and nothing has happened yet, except for another, even longer letter. In this new four-page letter written by Cameron Winklevoss (and lawyers), accusations of "fraud, greed, and lies" are thrown at Barry Silbert, concluding with the request that Barry Silbert steps down immediately. Once again, Barry has responded with no intention of meeting these demands. This attention is clearly bad for DCG and fuels the flames of contagion. It is reasonable to expect a lawsuit soon if there isn't a resolution.
The Fed, Bitcoin, NFTs & Kim Kardashian | Jon Najarian
Don't miss this conversation with the legendary Jon Najarian: we cover everything from the Fed to the housing market, Bitcoin volatility, crypto leverage, inflation, ETFs, and more.
In this episode with Jon, we discussed:
Inflation
How to spot a bottom
Mortgage
Volatility in Bitcoin
Interest in Bitcoin will come back
Leverage in crypto
Insider trading
Kim Kardashian
SEC vs Bored Apes
ETF
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
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