Crypto Winter or Buying Opportunity? Dan Morehead’s 4-Year Outlook

I think somewhere around here is probably the bottom. I'm happy to admit it might be another six or eight months of grinding here, you know, because that's what it's done in the past. But my main advice to investors is, you know, definitely don't invest more than you're willing to lose and the amount you can hold for at least four or five years. And anyone that's held Bitcoin for four years has always made money. I think the minimum is doubling your money if you've held it for four years. People will realize you don't need the state to sponsor money and you could use money like Bitcoin or other cryptocurrencies. And I think these geopolitical flash points have probably highlighted even more that the world's kind of fracturing into groups, east-west, you know, US-aligned, adversarial to the US. And I think there will be an increased demand for money that's not controlled by the US Treasury Secretary. And Bitcoin's great at that. I will admit the first couple of bear markets I was sweating it. You know, crypto was down 85% and everybody's talking about it was over and it failed and, you know, I'd just been telling everybody it was the greatest trade ever and got a bunch of, you know, friends and colleagues into it and sweating it. I don't lose any sleep now. So, I think it really has reached escape velocity. Bitcoin is going to be really important and yes it goes through these, you know, wild cycles, fear and greed drive it up and down, but it really does feel inevitable.

It's wonderful to be back.

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I do. And throughout my career I've been looking for these disruptions that have way more upside than downside. And I still think Bitcoin and the broader crypto space is the most asymmetric trade I've ever seen. And I used to back that up by when talking to people about crypto in the early days. I used to say you literally could lose all your money. Like don't invest more than you're willing to lose. But you could make five times your money, 10 times your money. As you mentioned, earliest investors who made a thousand times their money. That is crazy asymmetric. It's still there. And the reason I'm still so bullish is we're still in the earliest phases of this. The majority of institutional investors' exposure to blockchain venture and cryptocurrencies themselves is 0.0. Literally, the majority of investors have no exposure yet. And so we're very early in a multi-decade disruption, bull market, whatever you want to call it, that has to be very asymmetric because the downside is, you know, only the appreciation so far, which is very small relative to financial assets.

Yeah. So anything that's going to change the world creates a lot of hype. There's a lot of hype on the upside and then often there's a lot of, you know, kind of pessimism when things go down. And so we've been doing this for 13 years and we've been involved in four of these four-year cycles that crypto goes through. And they're actually very regular and they're actually fairly predictable. And when we had met in October we had just hit the peak that we had forecast two or three years for when Bitcoin was at, you know, 30,000 or something. We ran all of the models for the previous three four-year cycles that we had been trading in and had estimated that Bitcoin would peak on August 11th, 2025 at $17,542 and it did that day. That is very strange how precise it is. One of our investors said, 'Hey, congrats. That was an amazing call, but doesn't that mean it's going to go down tomorrow?' And, you know, the hope is this time will be different, that the new administration in the US or, you know, all these things that happened would be good and would change the cycle but actually, you know, in hindsight the cycle did really assert itself and the markets have come off. It's down 50% as you mentioned. The previous cycles went down 75 to 85%. So this is less than in the past but there is a pretty good chance that the market will be down for about a year. That's what it has typically done is come down for about a year, very tight dispersion between each of the three cycles and then continue its rally. That is, you know, what it's done in the past and it does feel like it is playing out as it's done in the past.

No, it's a great question and yeah in the moment I hadn't predicted that the markets would come off. There did seem like there were some unusually positive things like the change in administration in the US and a few other things. But in the end, you know, the markets do kind of have their period to them that they go up a bunch. What I would say is in previous peaks the market got way past its long-term logarithmic trend and this time it really didn't. It went a bit above where it was in 2021, but not, you know, five times higher than it was or whatever. And so that gives me comfort that we don't need to have the same downside. We didn't have a completely crazy blowoff top like we did in 2017 and 2021, and 2013 as well. In 2013, the market went up 10x in four months prior to the peak, you know, so we didn't have one of those super crazy up moves. So, I think somewhere around here is probably the bottom. I'm happy to admit it might be another six or eight months of grinding here, you know, because that's what it's done in the past. But my main advice to investors is, you know, definitely don't invest more than you're willing to lose and the amount you can hold for at least four or five years. And anyone that's held Bitcoin for four years has always made money. I think the minimum is doubling your money if you've held it for four years through the full cycle. And I have that same view here is if you can invest and you can hold it for four or five years, you will highly likely make money and potentially, you know, five times your money or 10 times your money.

Yeah, I don't understand the black art of technicals. So, I've never been an aficionado of that. And we really don't try and trade for very short-term periods that, you know, we're trying to invest people's money in a kind of venture style, you know, 5, 10, 20 year view. And so, it seems pretty cheap here.

It's a great question. I actually like the way you phrased it. The first risk off. If a huge event that shocks the market happens outside Monday through Friday, 9:30 to 4, you can't trade stocks, right? You have to trade something else. And the only $2 trillion something else is crypto. And so crypto is the only massive huge liquidity market that is open 24/7. And so I think it does bear probably a bit too much of the brunt of risk off, you know, kind of hedging if you will when something like a geopolitical shock happens people want to take risk off the only thing they do sell a huge amount of Bitcoin or whatever. The thing to keep in mind is over very long periods of time Bitcoin has a very low correlation with the S&P 500 or other risk assets. Historically it was 0.1. I think it's crept up to about 0.2 now, but it's still very low. Most assets are 0.5, 0.6. And so although it appears to be correlated because the day a geopolitical thing happens, Bitcoin does go down and the S&P goes down. So everyone goes, 'Oh, they're correlated.' But over any, you know, longer period of time, the correlation is pretty low. And the reason it is low is a result of what I said earlier. Since almost nobody has a meaningful position in Bitcoin, when they have to take risk off, they don't have any Bitcoin or crypto to sell anyway. And so there's only these very short-term flashes where crypto is highly correlated, but over long periods it's not. And then the huge point is that, you know, volatility, sometimes there's a trend to it and then, you know, over any multi-year period, cryptos typically weigh up and other things, you know, kind of drift around and maybe down over five or 10 year periods.

Yeah. So gold's an interesting animal, relic as it's been called, that, you know, comes into people's consciousness from time to time and there are decades when people forget about it and don't really care. And so early in this trade we were talking about maybe buying Bitcoin and selling gold and we thought they'd be really connected and they really kind of marched their own drummer. They both have the same theme. They're fixed quantity things that's not being debased by the printing of money. And so they have kind of the same concept to them, but people's appetite for them really goes in these kind of bursts of enthusiasm. And gold actually was languishing for a long time. Up until 2025, there were net outflows from gold ETFs for years. At the same time, there was I think it's about 80 billion total inflows into Bitcoin ETFs, right? And so up until 2025, everyone was into, you know, digital gold and essentially getting out of old school gold. And I don't know why, but every the consciousness of people got into the dollars being debased. You know, we got to buy hard assets and bought gold, you know, big time in 2025. I think, you know, if I were a betting man, you know, from here forward, Bitcoin will outperform physical gold because, you know, it's done so poorly over the last five months.

I do. I do. And the way I think about it is not to talk about, you know, gold hitting record highs in price or real estate hitting record highs or the equities hitting record highs. I really think the right way to say it is all those things are kind of not moving relative to each other. It's paper money hitting record lows. And as they print more and more paper money, the number of pieces of paper it takes to buy an ounce of gold or to buy a stock or to buy a piece of real estate or a bitcoin has to go up. And even in this country, the pound sterling used to be exchangeable for a pound of sterling silver, right? And I haven't done this calc in a while, but I think it's over 300 now. It takes 300 pieces of paper sterling to buy a pound of sterling silver. And it's that simple. That used to be exchangeable. They used to be fixed. And they used to be identical. And now governments just print as much paper as they want. And so it takes a lot more pieces of paper to actually buy fixed quantity things.

Yeah. I think that is the reality is that, you know, three-quarters of Earth's surface is covered by trees, you know, and so there's no stopping paper money printing, right? Like there's just nothing that slows people down. And the US, the UK, and actually former British colonies are one of the only countries that have never defaulted on their debt or debased via inflation. And Ken Rogoff did a great book on this. There's only 13 countries out of 240 or whatever that haven't debased, half British colonies. But even that the US is debasing at 3% a year, euros it's debasing at 8% a year.

Yeah, I think we are debasing at a rapid rate. The Fed now calls stable prices 2% debasement which is crazy. It should be zero, right? And so even at our current rate of debasement, your savings are debased by 90% during your lifetime. Like it's incredible debasement and that is what I think people are realizing is that you have to be in fixed quantity assets like stocks or real estate, physical gold or digital gold, other cryptocurrencies. And I do think another kind of part of the debasement trade is generational. There's essentially the younger generation is being priced out of housing by massive money printing, right? And so money printing is great for, you know, old people with stocks and real estate, right? Because, you know, it just inflates the value of their assets, but for young people, it's terrible. And so the age of first-time home buyers in the United States went from the 20s, it was like 28 or so to 40 now, right? And so there's a huge chunk of the population that really can't do what used to be the way to build wealth is to invest in your home, have the real estate go up.

And they're buying crypto. And actually I think it's rational. Like I really think that is smart.