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On The Table Read, “the best book magazine in the UK“, in new book, Cryptocurrency Risk Management, cryptocurrency expert, Joshua M. Peck, shares the risks and benefits to investing in cryptocurrency.
Investing In Cryptocurrency?
The financial crisis has investors worrying about their finances, and asking whether cryptocurrency is a safe place to put their money. In his new book, Cryptocurrency Risk Management, founder of TrueCode Capital, Joshua M. Peck, hopes to provide the answer.
“The best reason to invest in crypto,” said Josh Peck, “is growth, growth, growth.”
Most investors consider crypto for diversification, Peck explained in his book. However, since crypto is highly correlated with other growth assets, it’s not a good diversification in that regard.
As for investing in crypto as a hedge against inflation, Peck points out that Bitcoin is down 70%, while inflation’s at around 10%. “So that thesis does not hold up either,” says Peck.
What he does believe makes a great deal of sense is for investors to peel off a portion of their NASDAQ allocation of high-growth stocks or bonds and consider putting that into cryptocurrency for growth.
“Anytime you allocate to another asset class, you’ll get some benefit to your portfolio and some negatives,” explained Peck. “So the decision, in my opinion, is not whether I should invest in crypto or not. But rather, how much should I invest in crypto? It’s more of a portfolio construction question. Historically, even a tiny percentage of crypto in a portfolio brings improvements to return.”
Peck points out that an investment in the S&P 500 has averaged about a 7% rate of return with about a 27% drawdown. If even a small percent of crypto is put into that mix, the return goes from 7.02% to a 7.37%.
“What excites me about this is that 1% of the portfolio is providing nearly 5% of the portfolio’s total return,” says Peck.
But investing in cryptocurrency is not without its challenges and risks.
– To date, the crypto market has declined by over 70%, which in past bear markets has proven to be a good time to buy.
– Bitcoin appears to be in week 18 of a bottoming process that lasted 20-30 weeks in past bear markets. Crypto markets tend to go off like a rocket, then crash. “The process does not terminate at one point,” says Peck. “It sells off and sits at the bottom for a period. We appear to be in that phase now. We can’t predict, but we can say that people who accumulate a little bit each month have done well in the past.”
– If Bitcoin returns to the former all-time highs, it could provide a 270% return from today’s market price.
– Mastercard Inc. recently debuted a service offering crypto trading tied to bank accounts. As more big players get into the game, institutional adoption rises. This has historically been positive for price. Essentially, we are inching our way closer to people being able to buy crypto in their everyday brokerage accounts.
– Bitcoin dominance has begun to increase, a hallmark of past altcoin capitulations. This crash may not be over.
– Bitcoin’s 200-week moving average has not held. Bitcoin’s price is 23% below the 200-week moving average, which historically was the bottom of past markets. Is this market cycle different somehow? Is the crypto game over because that support level did not hold?
– The Bitcoin crash happened sooner during this market cycle relative to the next halving than during previous cycles, so the bottoming process may take longer than it has historically.
Takeaways From Cryptocurrency
– Be patient with altcoins and focus on top-tier cryptocurrencies such as Bitcoin and Ethereum.
– The long-term outlook is promising, but there may still be more short-term volatility to come.
– Accumulate a position rather than hoping to time the exact bottom.
About Josh Peck
First-generation family wealth manager, and founder of TrueCode Capital, Josh Peck leveraged his background in engineering to grow his private family portfolio by applying mathematics to develop The TrueCode Capital Crypto Momentum Strategy.
After nearly a decade of testing, experimentation and live trading with his proprietary strategy, he opened the TrueCode Capital Crypto Momentum Fund LP to outside investors. His new book, Cryptocurrency Risk Management: A Guide for Family Wealth Managers, is due for release in January.
Peck began his career in academia in support of high-performance research computing environments. where he became a regional expert in systems engineering, cybersecurity and data engineering.
He has served as an advisory board member, angel investor and mentor for various venture clubs and accelerators and has invested in a diverse group of companies.
Peck received his BS in Computer Science from Pittsburg State University and his Master of Science in Engineering Management from the University of Kansas.
Find more from Josh Peck now
For more information, please visit https://truecodecapital.com/.
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