It was dotcoms at the turn of the century, the mortgage crisis in the late 2000s, and now we’re peering into the eyes of the next major financial story of our lifetimes…
But the point of this article isn’t to scare you; quite the opposite, in fact.
I’m about to reveal some hidden truths, make an unpopular prediction, and explain how YOU can build a fortune by making the right moves…
As the dotcom bubble imploded in 2000 and 2001, the Nasdaq (IXIC) crashed from 5,000 down to 1,100.
Then it was real estate’s turn in 2008, at which time another popping bubble saw the S&P 500 (SPX) fall from 1,500 to 700.
And while the crash is the part we all walk away remembering the most, it isn’t the whole story…
Before bursting, the Nasdaq skyrocket from below 1,500 up to those highs around 5,000 because of the emergence of dotcoms!
And the same for the S&P 500 years later, which climbed from 800 up to that peak of 1,500 in large part because of a booming real estate market!
The point is this:
Bubbles are a “normal” aspect of the financial cycle, and while all bubbles must pop in the end, there’s A TON of money to be made on the way up…
…and then on the way down, too!
So, what’s the big story this time around?
As you may have already guessed, the cryptocurrency/blockchain craze should prove to be the biggest story of this decade. And yes, I suspect it will have both the up and the down that came with the previous two major financial stories I mentioned.
And while I foresee cryptocurrencies eventually falling off a cliff, I’m certainly not the only one…
In a recent CNBC article, Warren Buffett is quoted as saying, “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”
He also went on to say he doesn’t know how or when it will happen, but that’s a powerful statement from a man widely regarded as the best investor of all time.
And Buffett actually backs up my point about money being made on the way up (before the bubble bursts) when he said, “If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”
Let’s break this down…
If you don’t know, shorting is basically buying in reverse. So being short cryptocurrencies would make your money rise and fall inverse to how cryptocurrencies perform, just the opposite of buying cryptocurrencies.
A 5-year put option, as Buffett prefers, would mean you would pay a limited amount to have the ability to sell cryptocurrencies at a predetermined price at any point throughout those 5 years. So if cryptocurrencies are down several years from now, that put option could make you a lot of money.
In essence, Buffett is saying he doesn’t want to bet against cryptocurrencies right now and suffer as cryptos rise, but he’d be eager to bet a relatively small and limited amount that the cryptocurrency bubble will pop in the years to come.
So, my prediction: the cryptocurrency bubble will implode, but not before a lot of money is made on the way up.
How can YOU build a fortune through this major financial story?
- Don’t be afraid to get into the cryptocurrency game. Start by dipping your toe into the water – get a small position in a crypto you like, bitcoin or otherwise. And look for new ETFs, like GBTC, to come online, giving you the ability to trade cryptos like stocks.
- Give yourself downside protection. Use a stop loss on every position you have.
- As options trading comes online for cryptocurrencies (likely through the ETFs being created right now), take Buffett’s advice and place long-term bets against cryptos by buying long-term put options.
Remember, never trade with money you can’t afford to lose.
But if this bubble plays out the way previous ones have, there’s a mountain of money to be made on the way up AND the way down!
