GM everyone,

Let me give you some good news:

Crypto is set for a rally in 2024 and 2025.

Stock markets around the world are already rallying.

The benchmark for American stock performance, the S&P 500, which tracks the stock performance of 500 of the largest companies listed on stock exchanges in the United States, hit an all-time high this week.

In Australia, where I live, the ASX 200, the benchmark for Australian share performance based on the 200 largest stocks listed on the ASX, also rose to a new all-time high.

Stock markets are rallying because they are forward-looking and are anticipating that:

1. Inflation appears to have peaked in all major economies.

2. Central banks have hinted at interest rate cuts in the second half of 2024. (Lower interest rates encourage spending and investment.)

3. The United States will elect a new president in November. Therefore, Washington will not lightly enter into new conflicts. (This is not to say that the existing wars, conflicts, and flashpoints in Ukraine, the Middle East, the Red Sea, and the Taiwan Strait will abate.)

Crypto will follow the stock markets.

The main driver of the crypto market rally will be the bitcoin halving that will occur in April. Historically, bitcoin rises to a new all-time high 12 to 18 months after the halving. And all the other cryptocurrencies, the so-called altcoins, peak shortly after. It's called altseason.

To help you make the most of the coming bull market, I've listed the top 8 rookie mistakes people make in crypto. If you avoid these mistakes, you're likely to do well in this cycle.

But before we start, let me remind you that the list below is not financial advice. It is general in nature, does not take into account your financial situation, and is for educational purposes only. So always DYOR, which is crypto shorthand for Do Your Own Research. (There are a lot of acronyms in crypto!)

Now, here's the list of the top 8 rookie mistakes:

1. FOMO

FOMO stands for fear of missing out. Let's face it, most people don't pay attention to what's going on in the financial markets. They get excited when something goes up and is all over the media. Then fear and greed kick in. And so they buy.

Unfortunately, that's exactly the opposite of what they should be doing. If something is all over the media, it has probably peaked. Remember, you want to buy low and sell high, not the other way around.

So resist the itch and don't FOMO into something just because it seems like the next hot thing. The good news is that you still have a chance to get ahead of the FOMO buyers. The bitcoin ETFs are less than a month old, the halving is almost three months away, and Ethereum ETFs won't be approved until May. There is still time to get in before everyone else.

2. Chasing winners

Crypto is known for big returns, much bigger than in traditional finance. While that's a great opportunity, some people treat this space like a casino, betting on anything that shines and goes up in price. The problem is that if you try to chase the winners and trade or rotate frequently, you'll most likely be too late to capture the upside of the coin you're chasing AND you'll lose the upside of the coin you rotated out of.

My general advice is to keep it simple. Don't get bogged down in a myriad of metrics and don't engage in overly complicated strategies. Make bitcoin the anchor of your crypto portfolio and buy only the top 3 to 5 cryptocurrencies by market cap. (You can find a list of cryptocurrencies by market cap here.)

3. Short-term thinking

A lot of people come into this space thinking they are going to get rich quick. I hate to break it to you, but it doesn't work that way. One of the most important skills you need as an investor is patience. You need to learn how to hodl, which is crypto-speak for hold. Remember that crypto works on 4-year cycles that are driven by the halving. So to make decent returns, you need to hold for at least 4 years.

My general advice is to choose an investment strategy (either lump sum investing at a low price or dollar cost averaging) and then go about your life and let the market do its thing. Don't fiddle around. You will find that doing nothing is actually pretty damn hard. But to quote the late Charlie Munger, Warren Buffett's former business partner at Berkshire Hathaway: "The big money is not in the buying and the selling but in the waiting."

4. Expecting smooth sailing

Crypto has a lot of upside potential. On the other hand, crypto is very volatile. Huge drawdowns are normal. Between November 2021 and November 2022, bitcoin dropped more than 70%, while altcoins tanked even more. And even in bull markets, drawdowns happen. In January 2024, bitcoin dropped more than 15%. Volatility is the price you pay for performance. But if your risk tolerance is low or you expect things to go up in a straight line, crypto may not be for you.

5. Using leverage

Here's a personal story: In the bull market of 2021, I thought I was a badass investor and used leverage to buy more bitcoin. Shortly thereafter, the market turned and I got squeezed out of my position. The loss wasn't ruinous, but I burned money that my wife and I could have used when we moved to Australia a year later. So for me, not using leverage was a lesson I had to learn the hard way. Don't be like me. Play it safe and don't use leverage. To quote the late Charlie Munger again: "There are only three ways a smart person can go broke: liquor, ladies, and leverage."

6. Not thinking about custody

When buying crypto, you need to decide how you want to hold your assets. The easiest way to buy crypto is to buy an ETF. However, currently, only bitcoin ETFs are available. Ethereum ETFs are expected to be available in May.

This means that for buying altcoins, you currently still have to use a crypto exchange. After buying crypto on an exchange, many people leave their crypto there. While this is convenient, it poses security risks, as exchanges are vulnerable to hacking.

Therefore, the safest way to store your crypto is in a cold wallet, which is a hardware wallet that isn't connected to the internet. Think of it as a USB drive with advanced encryption. While this is the most secure way to store your crypto, it comes with a lot of hassle. You have to learn about wallet addresses and seed phrases. And if you lose access to your wallet and seed phrases, your crypto is gone forever.

In short, custody is a very serious issue and you need to think about it thoroughly. As for me, I stick with a cold wallet, but I understand that not everyone is willing to jump through all the hoops of self-custody.

7. Not thinking about the taxman

Even crypto cannot escape the gravity of the idiom that "in this world, nothing can be said to be certain, except death and taxes". So, just like any other asset class, the tax office is going to ask for its share once you make a profit in crypto.

Of course, different countries have different taxation around crypto gains. In Germany and Portugal, for example, your gains are tax-free if you've held your assets for more than 12 months. In Australia, you only get a 50% discount on your capital gains tax if you hold your assets for more than a year.

In any case, when you see gains coming your way, don't get delusional. Plan for when you want to take those gains. And make sure you take the taxman into account.

8. Not getting started

You can always find a million reasons why you haven't started investing yet. You're too busy, you’re broke, and you still don’t understand bitcoin. Sure, go ahead. But you will miss out.

Between 2011 and early 2021 (when bitcoin was worth around US$60,000), bitcoin's cumulative gains exceeded 20 million percent, far outpacing the cumulative gains of any other asset class.

On an annualized basis, despite its notorious volatility, bitcoin returned 230%.

In short, bitcoin was the best-performing asset class of the past decade. And while past performance is not indicative of future results, it still has a lot going for it. So do some of the other top 5 cryptocurrencies.

So you better get started.

Before you go, please help me get better! 🙏 

I hope you found this newsletter useful. Please feel free to email me or dm me on Instagram, LinkedIn, or Twitter with any feedback or topics you'd like to learn more about!

Thank you! 🤜 🤛 Talk to you guys next week!