When you look at the cryptocurrency market today, it seems like a lot of people are making easy money.
That makes some folks excited. And it makes others nervous.
I recently spoke at our Stansberry Conference in Las Vegas. It was an incredible experience – and a way to see firsthand what people are thinking. In my position, you come away with different impressions…
On the one hand, you spend the week with brilliant, well-informed, up-to-speed investors… Then, you get in a cab or go talk to someone on the street, and people that you didn’t expect to talk to you about cryptos are asking, “Hey, what do you think this coin is going to do?”
When you see smart people getting in – like you, and the folks at our conference – that’s good. But as Joseph Kennedy is thought to have said… “If shoeshine boys are giving stock tips, then it’s time to get out of the market.”
I don’t even know where you could find a shoeshine boy these days. But when folks on the street start talking to you about the hot asset class of the moment, most of us think, “Should I start scaling back a little bit?”
It’s one of the most tried-and-true indicators. And some people just outright run for the door.
With that said, you might be wondering, where is this market going? Today, I’m going to share a chart with some answers…
Let’s look at the bitcoin Realized HODL Ratio… Specifically today, we’re looking at it in terms of its 50-day moving average (“DMA”), a way to measure its short-term trend.
A lot of people look at the HODL ratio as a macro indicator of what’s going on with the crypto market. If you look at the chart below, you’ll see its peaks tend to coincide with peaks in the price of bitcoin (sometimes with a slight lag).
However, the HODL ratio (the light blue line) didn’t peak when bitcoin’s price (the dark blue line) peaked earlier this year. Take a look…
The red zone above is our indicator for when this HODL ratio is in danger. (It has nothing to do with the price line.)
As you can see, the ratio didn’t reach the red zone during the 2020 to 2021 run-up of bitcoin to $60,000 – not even close. And sure enough, the quick fall to $30,000 after that looks like a mere blip on the chart now… Unlike the actual peaks of the past several years, it was a quick recovery for bitcoin.
So what’s interesting, though, is where it stands now. While bitcoin is at all-time highs, the HODL ratio is nowhere near the red zone… It’s in a middling stage.
What does this mean for crypto investors?
First, make sure you’re not investing more than you can afford to lose… and maintain your portfolio intelligently.
Based on what I was able to talk with people about in Las Vegas, our readers aren’t shy about taking some money off the table from time to time. That’s good. Taking profits occasionally is an intelligent strategy as cryptos continue to soar.
But all the indicators – including the HODL ratio – are saying the crypto market has more upside ahead. So keep an eye on your risk tolerance… But stay long.
Good investing,
— Eric Wade
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Source: Daily Wealth