Mark, Trump’s election was the biggest thing EVER for crypto. Why are you fading it?

I’m not. Have you read my posts?

If you believe modern research on investor psychology and how markets move, you have no reason to think Trump’s policies will make a difference for your crypto portfolio.

The post-election pump came from a massive short squeeze, as shown in the November 13, 2024 update. An artificial move triggered by a burst of speculative buying after Trump's victory. The rest took care of itself.

The people telling you Trump will make 2025 amazing are the same people who said 2025 would be amazing before Trump or Harris were even on the ballot.

As we have seen with guns, oil, gold, rubles, and olive oil in recent years, assets don’t always behave as you think they should based on government policies or changes in leadership.

Did you forget that Bitcoin’s price rose 400% under what experts called the most aggressive monetary tightening ever and the most hostile US administration in history?

Markets and people are complex and adaptive.

Smooth sailing?

Speaking of markets, Trump will confront a very muddied “macro” picture.

Bond prices have fallen across all major economies despite near-universal rate-cutting among central banks.

Does the world no longer have enough money to pay for what governments want to do? Are global investors losing faith in governments’ abilities to control inflation or pay back their creditors? Does the divergence reflect a momentary blip of happenstance that resolves in a month or two? Or is this the first sign that the multi-decade sovereign debt bubble is at risk of popping?

Liquidity from Fed programs continues to dwindle, with reverse repos back to the levels of early 2021 and the balance sheet back to mid-2020 levels.

The U.S. economy added only 12,000 jobs in October as the government revised previous months’ employment figures downward by 112,000 jobs, almost 50% of the reported 254,000. 

New job openings dropped to 7.44 million--the lowest level since January 2021--as the Beveridge Curve inches closer to historical “recession” levels.

With 4.1% unemployment, the US economy has little room to improve. It has plenty of room to get worse.

Likewise with GDP growth. After peaking at 4.4% last year, it has returned to its pre-pandemic range of 1-3% annually but with higher inflation than the pre-pandemic era.

Home inventory hit its highest mark in five years, mortgage rates went up, and the number of completes keeps rising.

At the same time, both the outgoing and incoming administrations are working to curb immigration.

It's hard for housing prices to rise when supply grows, credit tightens, and politicians deport millions of people who buy and rent homes.

As discussed previously, the S&P 500 continues to follow its path from 1999 to 2000, which points to a market peak in Q2 of 2025.

For an investor, these are not things you want to see. There’s an old adage, “You pay a high price for a cheery consensus.” The question is, what price and when?

But this is not a macro newsletter. We deal with crypto. The “macro” matters, but crypto is a global asset that does not depend on the US for its success.

That is, until Wall Street, banks, and US politicians sink their teeth into it.

The plan

Crypto experts say we will soon enter the banana zone of parabolic, unending growth. Rising global liquidity, US tax cuts, the four-year cycle, and loose regulations will take the market to Valhalla. Buy with both hands.

Sounds great. How many of you still have money to buy crypto with?

If you follow my plan, you have plenty of cash and a strong allocation to the market. You're up 51% at worst, up 2,300% at best, and most likely up 186% with cash to spare.

Where you fall depends on when you started and whether you bought this summer’s drop with new money or money you recycled from selling Bitcoin in March and altcoins at the beginning of April.

This is what you’d have done with Bitcoin since 2023, after buying for most of 2022:

The plan doesn't apply to altcoins, but generally, when Bitcoin's price is in the buying zone, you can buy altcoins, too.

A steady hand

Crypto’s zooming. Everybody's hyped about “easy mode,” power laws, and retiring their bloodline.

All part of the move from the first sell-off to public awareness in our bubble cycle.

Premium subscribers saw this happen in real time, with data and analysis to justify buying Bitcoin between $50-65k.

Our first clue came in June from an unusual trend in relative unrealized profit. As Bitcoin’s price went sideways, the metric continued trending down.

Usually, unrealized profit moves in line with price. We should have seen it go sideways. Instead, new buyers entered with enough money to keep Bitcoin’s price steady as sellers took profits, pushing the trend lower, even as Bitcoin’s price went horizontal.

Combined with data from other sources, we could bet that those buyers skewed towards funds and institutions.

As summer progressed, we saw a healthy churn among HODLers and a drop in sales from OGs. Accumulation picked up among small- and medium-sized wallets. Key metrics like aSOPR and the stablecoin supply ratio oscillator returned to healthy levels.

At the same time, altcoins hit three of my four entry targets while vamping up and down within the ideal zone of my chart of altcoin dominance.

Given the circumstances, you were getting a good deal on crypto.

Hopefully, you took the deal.

God bless the child that’s got his own

None of that matters, Mark. The US government will create a Bitcoin reserve. It's “only up” from here! Your charts are irrelevant.

Right. Because the US government is such a good steward of our money and resources, we should trust it with our Bitcoin, too?

I’m sure Congress will happily transfer the wealth of working-class taxpayers to crypto bros without a single objection, immediately, in amounts large enough to pump your bags.

Whatever. Republicans will make crypto great again!

Let me introduce you to regulatory capture. This happens when special interests use the government to create laws and regulations that enrich themselves at your expense.

It's a topic I touch on in my book, Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency.

There's a natural conflict. You want the government to pump your bags and make you rich, but to do that, you have to give influence and control to Wall Street, banks, and political parties because they have the political and financial power to make that happen.

Ironically, these are the same entities cryptocurrency was designed to replace.

You’re sacrificing 100% of the world's wealth for one percent of whatever is left after Wall Street takes its cut. Great for them, not us.

No, no. Politicians will PROTECT us from the banks and Wall Street.

Ha. Good one!

Whatever. Trump will never let the market crash.

I'm sure that's his intent, but that's what they said about institutions in 2021. Do you remember how that worked out?

Not yours to give

Dammit, Mark. How does any of this help me get rich?

Stop measuring your worth by your government’s money. You can make money anywhere, any time.

Many people lose money in crypto bull markets. If you bought any random day in 2021, a crazy bull market, you finished down on your investment at the end of the year. Bitcoin’s price averaged $47,000. It finished the year at $46,000.

Bet on something bigger.

You hold the tokens that will power the financial networks of the future. As these networks grow, the prices of your tokens will go up a lot. You can buy your stake today for a fraction of its future value.

Today, that growth comes purely from speculative enthusiasm. In time, as people use the platforms that grow around these tokens, you will own a share of durable, robust financial networks that transcend political boundaries. You will have the security of money that’s always in demand, in your possession, and beyond the control of politicians and government agencies.

At that point, you will no longer have to time the market, pick the “right” part of the four-year cycle to enter and exit, or hope for banana zones and altseasons.

Wealth will flow to you and everybody else who participates in those networks. If a network falls apart, you can switch to another one. You may or may not lose money, but you will have a safety valve that your government will never give you.

If the government screws up, you have no alternative. You go down with the ship.

Or does that not matter because you will sell at the peak of the market in “Q4 2025” and buy a Lambo?

Aren’t you forgetting something?

The money is great but what about the promise of crypto?

With cryptocurrency, we build our own solutions, not the government.

These solutions operate globally, at scale, independent of any president or political entity. If you don't like one protocol, you don't need to petition your government or go to war. You can choose another.

When these protocols work, the community prospers. Nobody takes a cut except the people who contribute. Your financial security does not depend on the whims of a dictator or political party but on the substantive benefits your token provides and your ability to leverage that for the benefit of others.

Of course, a better regulatory framework can help things move along. Let’s hope the new administration delivers something useful, but let's not pin our hopes on its creation. Adoption is far bigger than any political party or government.

Examples abound, but I will use real estate because I know enough about the topic to have a nuanced view of what blockchain and cryptocurrency can do.

Last month, I sold an investment property.

The settlement date got pushed off twice, once because the bank didn’t have the documents in time and once because of a US banking holiday. The buyer’s settlement office was so far away that we paid a notary $175 to handle our signatures.

That $175 was OK because we paid for the convenience. Those other fees, though. Those hurt.

Transfer fees, recordation fees, resale packet fees, title and settlement charges…

And that's before paying taxes and commissions!

Blockchain technology can eliminate those hassles and fees with tokens and smart contracts, but not until the laws allow it to do so.

For example, if the law says somebody needs to notarize a document and file it with the court, adding a record on a blockchain creates more work, not less. You still need to file the documents and the law doesn't recognize an entry on a blockchain.

Blockchain technology eliminates the need for notaries and court files but somebody needs to change the law to allow it to do that.

What about legal and operational concerns? Will governments need to run nodes? Do they need to hire blockchain experts to verify the records? Are those records admissible in court?

Theoretically, blockchain technology simplifies tax collection and bookkeeping. But in the US, most agencies run on shoestring budgets at the state and local levels--often with antiquated technology and processes.

Many struggle with a simple wallet to handle payments and convert to USD. For them, it's a lot of hassle and expense to bring on a new system with new training and security risks. They can process checks easily.

To change this, you need to convince skeptical bureaucrats, hesitant legislatures, and local councils to change something that already works.

You can elect all the presidents you want. You can reform securities regulations and rework financial laws to your heart’s content.

Wall Street and VCs will thank you for a new source of revenue.

If you want any of this technology to make a difference in people’s lives and bring durable, lasting wealth to you and those you care about, you need to look at more mundane, fundamental changes.

Those changes will take time and effort, no matter who runs the US federal government.

That's not to say we don't have room to work with.

Settlement charges totaled almost $800. Those fees mostly covered clerical and administrative tasks. Basically, paperwork and scheduling.

Vital work but necessary only because buyers and sellers do not have a single source of trustworthy, verifiable information nor a way to execute binding terms automatically. No blockchain, no tokens, no smart contracts.

Whoever packages those technologies into a simple platform will save a lot of money for homebuyers and sellers.

You can add utilities, homeowners association fees, and other services to generate even more efficiencies.

Any settlement company that can take away $800 on each deal will find themselves very popular. Even $500 will give them a huge competitive advantage.

Don’t scoff at a $500 savings. More time and money have gone into developing technologies that save fewer people less money.

The challenge: blockchain technology can eliminate many costs, but it can’t eliminate the laws governments have passed to preserve those costs.

The ramifications extend beyond real estate to DePIN, DeFi, decentralized exchanges, and many other crypto-enabled technologies. They're all incompatible with some laws, with no easy way to comply.

This doesn’t mean we have to go to the extremes I suggested in another post, Should We Make Market Manipulation Legal for Crypto?

It simply means we need to do more than change financial regulations.

All politics is local

Many of those changes fall outside any US president's power. They’re local rules or the vestiges of conventional financial and legal operations.

When the law says you need to pay fees to the state, bring paper documents to settlement, and comply with other inconveniences, taxes, and contrivances, blockchain technology is redundant at best.

At worst, it adds more time and effort by duplicating activities you already have to do.

This also stifles innovation.

Let’s say the world uses NFTs to represent deeds and titles.

When you want to buy a house, the homeowner locks his or her NFT in a smart contract that grants you the right to raise funds for the purchase.

You post that NFT into a real estate protocol like Propy, fractionalize 80% of it, and auction that equity to a bidder in exchange for 5% annual payments for 30 years, spread into equal amounts, with the option to buy back your equity share at any time.

Instantly, you can access a world's worth of capital willing to compete for your NFT and a stake in your house.

You’ve flipped the paradigm. You no longer need to go from one bank to the next to find the best offer. The best offer comes to you. If the banks want to compete for your business, they have to compete with everybody else bidding for that NFT.

Essentially, you've converted a mortgage into a 5% bond secured by an NFT representing the deed to your property. You could even write some terms into the smart contract regarding homeowners insurance, derivative loans, real estate tax payments, and other contingencies.

With this arrangement, you have the power, not the banks.

Under the legacy financial system, you compete for capital. With cryptocurrency, capital competes for you.

Of course, this technology does not exist yet. It's one of many new paradigms we can build. In doing so, we will fundamentally rewrite our modern economies and open new opportunities for common people like us to control our financial affairs.

This can't happen under today’s laws.

No government has the operational or regulatory infrastructure to do it. The courts don’t protect these arrangements. There's no way to defend your claims. Your local authorities require certain documents and paper files that nullify the benefits of going this route.

Regarding the NFT, you may have to register your house as a security.

The problem is not limited to real estate.

Some states and counties have only one energy provider. Cryptocurrency offers a way for people to buy and sell energy across borders far more efficiently and economically than the status quo.

But the laws in some places protect the status quo. They shut out crypto-enabled platforms. They protect the local monopoly.

DePIN networks operate beyond consumer protection laws. In some jurisdictions, that makes them illegal.

The list goes on.

Have you ever approached your local and state representatives about cryptocurrency, blockchain, tokens, or decentralized apps?

You want action from Congress or the president, but nothing stops your state or local government from pushing the matter forward. There are no federal laws about cryptocurrency, though regulators have tried to shoehorn them in.

If enough local governments start using this technology, Congress and the president will be forced to respond.

While this is less sexy than trading tokens, it's more important.

Security laws and strategic reserves let other people make money off of you. At some point, you should make money off of them, too.

When you leave that decision in the hands of Wall Street, banks, and politicians, you'd better play 2025 perfectly. It may be your last chance to get ahead of them.

Fortunately, you read this newsletter. You know what to do.

Relax and enjoy the ride!