In today’s issue:

• Market Minute - Bitcoin Breaks Out of Pre-Election Slump…

• Deep Dive - One reader isn’t sure how to start investing in crypto without getting ripped off…

• Wealth Hack - Chopping your taxes on crypto trading…

• Brain Food - WTF is the Bitcoin Halving…

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WEEKLY WISDOM

ENGAGING IDEAS

The crypto world took a collective sigh of relief as the more pro-crypto candidate was elected…

Looks like the SEC’s “regulation through litigation” era is about to get rekt harder than an NFT holder in 2022…

Crypto prices are up, so naturally, the scams are, too. Watch out for fake apps!

The U.S. might buy 5% of the total crypto supply—maybe they’re planning to pay off the national debt with Bitcoin? 🤔

MARKET MINUTE

Bitcoin Breaks Out of Pre-Election Slump

With election uncertainty behind us, where does the crypto market go from here?

The crypto market’s ups and downs often follow the Bitcoin Halving Cycle (Check out WTF is the Bitcoin Halving in the BRAIN FOOD section). Basically, after the halving, fewer new Bitcoins are mined, which tends to drive the price up.

Right now, we’re mid-cycle: after the halving but before the mania kicks in and starts making headlines.

Bitcoin has quietly climbed back to its previous all-time highs, but it hasn’t made that big leap to new peaks yet.

The outlook is optimistic, with experts like Bernstein predicting Bitcoin reaching $150,000 by 2025, and ARK Invest’s Cathie Wood aiming even higher at $1.5 million per Bitcoin by 2030.

Meanwhile, Ethereum, Solana, and other altcoins are lagging behind—pretty typical for this stage. Historically, altcoins have rallied later in the cycle, once Bitcoin gains momentum and excitement spills over.

If past market cycles repeat, here’s what we might see:

1. Bitcoin remains strong through late 2025.

2. Altcoins take off, eventually outperforming Bitcoin during the mania phase.

3. A crypto bear market hits in 2026, before the next halving in March 2028.

4. Institutional shake-ups during the bear market, creating new buying opportunities.

No one can predict the future, but if history repeats, this could be a big opportunity for crypto investors.

DEEP DIVE

Not Sure Where to Start with Crypto Investing…

Tim wants to invest in crypto but is worried about getting scammed and doesn’t know where to begin.

About Tim:

• Mid-30s

• High-income tech job

• $1.5MM investment portfolio

• Recently married

Tim has time to ride out the ups and downs of the crypto market, but he’s smart to be cautious. The headlines can be intimidating, and crypto investments work differently than other assets, so some extra knowledge is key.

Let’s explore what Tim should consider before diving in.

Why Invest in Crypto?

The first question is: Why invest in crypto at all?

It’s risky, complicated, and can be volatile. Many people have lost money, so why do others still invest?

1. Growth Potential: Bitcoin has been the fastest-growing investment of the past decade. Early adopters made fortunes.

2. Financial Flexibility: Owning crypto gives you a way to move wealth across borders or outside the traditional financial system.

If you’re mostly interested in growth, buying crypto ETFs or using platforms like Robinhood can be simple. But if you want control over your assets for greater flexibility, you’ll need to buy actual crypto on an exchange.

Know why you’re investing before you start.

Which Digital Assets to Buy?

While diversification is a key strategy in stocks, crypto is more of a winner-takes-all game. The best projects dominate the market, capturing developers and mining interest.

Take a look at CoinMarketCap: the top 3 crypto assets (Bitcoin, Ethereum, and Solana) cover 77% of the total market cap, with Bitcoin alone holding 59%.

For comparison, in the S&P 500, the top 3 stocks cover only 20% of the market cap with the largest being $NVDA at 7%.

This means a simple portfolio of Bitcoin, Ethereum, and Solana can give Tim solid exposure to crypto without getting too complex.

Where to Buy Digital Assets?

It all depends on why you’re buying.

If you’re focused on financial returns, crypto ETFs or platforms like Robinhood are easy options:

1. Open a brokerage account (or use one you already have).

2. Choose ETFs like $IBIT or $FETH.

3. Buy them, and download your tax forms at the end of the year.

But if you want more control over your assets, like using crypto as digital gold, you’ll need to buy native tokens. This is more complex but offers greater autonomy:

1. Buy a hardware wallet like the Trezor.

2. Set up your wallet following the instructions.

3. Back up your seed words in at least two safe places (consider using a Cryptosteel to protect them from fire).

4. Open a crypto account with a trusted U.S.-based exchange like Coinbase or Gemini.

5. Secure your account with a Yubikey for two-factor authentication (2FA).

6. Choose the cryptocurrencies you want to invest in.

7. Buy your tokens using a limit order on the exchange.

8. Transfer a small test amount to your hardware wallet first.

9. Once the test is successful, transfer the rest in 2-10 smaller batches.

10. Store your hardware wallet safely, away from your seed word backups.

11. Keep records of all your transactions for tax purposes.

12. Track your future buys and sells to report them to the IRS when needed.

If you just want returns, ETFs and platforms like Robinhood are great. But if you want full control, prepare for a more involved process.

One last thing: The IRS is cracking down on crypto tax reporting. New rules require you to track every transaction by account and wallet. Failing to do so could lead to serious penalties.

Plan accordingly!

WEALTH HACK

Chopping Your Crypto Taxes

How can you make big profits without paying big taxes?

The issue with high-growth investments like crypto is that selling them means facing hefty taxes. But there’s a smart way around this—using a Roth IRA.

By following the strategy Peter Thiel used from Shrewd Investor #0002), you can hold crypto in your Roth IRA. This way, you can buy, sell, or invest in DeFi contracts without ever paying taxes on your gains.

For high-growth assets, even a small investment can grow into something substantial, and the best part? No taxes!

How Do You Do It?

If you’re investing in crypto ETFs, the process is straightforward:

1. Open a brokerage account under your Roth IRA at an exchange that offers crypto ETFs (not all do).

2. Buy your chosen ETFs through that account.

But if you want to invest directly in native tokens, NFTs, or DeFi strategies, it’s a bit more involved:

1. Find a self-directed IRA custodian who can handle crypto investments.

2. Set up your Roth IRA account with them.

3. Set up a crypto exchange account owned by the IRA

4. Transfer funds and purchase tokens—this process can take a few extra weeks, but it can be worth it for the tax benefits.

By using this strategy, you can grow your crypto investments tax-free and avoid the pain of capital gains taxes when it’s time to cash out.

BRAIN FOOD

WTF is the Bitcoin Halving and Why Should I Care?

What is a Bitcoin Halving?

Bitcoin is designed to have a limited supply—only 21 million Bitcoins will ever exist. Every four years or so, something called a "halving" event occurs.

This means that the reward miners receive for validating transactions is cut in half. The result?

The rate at which new Bitcoins are added to the market is reduced, which limits the supply of new coins.

How Does This Affect the Market?

The halving creates a scarcity effect.

With fewer new Bitcoins entering circulation, but demand remaining strong (or even growing), the price of Bitcoin tends to rise.

Historically, Bitcoin’s price has surged after a halving event, leading to a "mania phase" where everyone wants to buy in, pushing prices even higher.

But it’s not just a smooth ride up. After this surge, there’s usually a bear market where prices drop as the excitement cools off and some investors take profits.

These cycles of boom and bust are typical in the crypto market.

Why Altcoins Lag Behind Bitcoin

Altcoins (alternative cryptocurrencies like Ethereum, Solana, and others) usually don’t see their prices rise until after Bitcoin has already made its big move.

Bitcoin is the original and most widely recognized cryptocurrency, so it often leads the market. When Bitcoin gains momentum, it grabs all the attention and money first.

As Bitcoin’s price starts to peak, some investors shift their focus to altcoins, hoping to catch similar gains.

This is when altcoins tend to rally, but they can also become the most frothy—meaning their prices get inflated as people buy in simply out of fear of missing out (FOMO).

The Pattern to Watch For

1. Bitcoin halving happens: New Bitcoin supply is cut in half.

2. Bitcoin price rises: Scarcity drives up demand, leading to a mania phase.

3. Altcoins lag but then catch up: Once Bitcoin peaks, money flows into altcoins, often pushing their prices to extreme levels.

4. Bear market follows: Eventually, prices drop as the market cools off, setting the stage for the next cycle.

By understanding these patterns, investors can better time their moves in the crypto market and avoid getting caught up in the mania when prices are at their peak.

The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, please consult with a qualified tax professional or financial advisor.

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