The Misery of Being Up 60%

Is this a chart that makes you happy or sad?

If you sold in May, you could have taken a six-month vacation and not missed a thing.

On the other hand, what else could you have done this year?

The NASDAQ is up 24% this year, the S&P 500 is up 22% and the Toronto Stock Exchange is up 16%.

Meanwhile, the Russell 2000 is only up 10% and the Toronto Venture Exchange is up nine percent.

There was no better alternative.

October was another good month for Bitcoin, punching in a nine percent gain (or what the US and Canadian junior markets have reported for the year).

But no surprise there, as October is almost always a good month for Bitcoin:

The last time Bitcoin finished in the red in October, was 2018.

Also, look at the blue boxes. Bitcoin tends to do very well in the fourth quarter every four years, which also coincides with presidential elections (although a data sample of only two points is not enough to bet the house on).

All-in-all, take a step back and things look good with potential for a year-end that will make 2024 even better.

So why is everybody so miserable in the land of crypto?

Because, outside of Bitcoin, it wasn’t a good year.

Let’s look at Ethereum, the second-largest asset in the crypto by market cap:

That’s just plain ugly. Sure, it’s up six percent for the year (big whoop) but it’s down 36 percent from the yearly high.

It’s been sloping downward since March.

All year, Solana has been stealing market share from Ethereum. From $100 to start the year, it’s now trading at $166, for a 66% increase.

But far more people own Ethereum than Solana, and the market cap of Ethereum at $300 billion is still almost four times bigger than Solana ($78 billion).

Now, before I go further, I must apologize. But I do have to mention Bitcoin miners, the largest sector in the public market that has crypto exposure.

Bitcoin should have SOME correlation to the price of Bitcoin, am I right?

Unfortunately, no.

The year-to-date performance of Nasdaq-listed Bitcoin miners:

Mara Holdings -29%
Riot Platforms -38%
Cleanspark -5%
Bitfarms -31%
Bit Digital -6%
Core Scientific 278%
Iris Energy 33%

Take a bow Core Scientific, easily leading the pack with a 278% gain, albeit that’s coming out of bankruptcy.

Iris Energy also gets a golf clap with a 33% gain, although that’s not even beating Bitcoin’s YTD return.

What happened?

The Bitcoin miners went manic raising funds with at-the-market offerings (ATMs) and so watered down their stock that, after March, the entire sector went toxic.

It’s no surprise that Core Scientific, because it was forbidden to water its stock as a condition of coming out of bankruptcy, was the only Bitcoin miner to do well.

Conclusion

If you bought Bitcoin at the beginning of the year and did nothing else, you have nothing to complain about.

But how many investors religiously follow that strategy? Where is the fun in that?

Even if you just bought Bitcoin, if you bought after March, you are still a bit underwater.

That’s why the crypto-community is in a state of high anxiety. Many people need a fantastic fourth quarter, or this year will be disappointing.

Cross fingers.

DJ