Happy Holidays From Stormrake

The Rake Review: December 2022

a visual aide showing the history of hard forks of the Ethereum blockchain

Markets Panic But We Stay Calm

Firstly, a huge thank you to you, our readers and of course our loyal clients. We do it for you and we can’t do it without you. Thank you for sticking with us through thick and thin. It’s been on the thin end this year but there is still hope of a turnaround next year. The good news is that if you still hold your coins you can get it back if the market recovers.

Looking at the graphic above we might just be in the “depression” part of the market cycle. We've already seen Complacency, Anxiety, Denial, Panic and Anger following the Euphoria of last years all time highs.

At times like these it might be best to walk away from the screens and have a break. There’s not much good you can do now. Unless you are yet to invest that is in which case there is a lot you can do to set yourself up for future years.

With the year almost behind us we can use the holiday period for some much needed rest and relaxation. Traders often think they need to stare at the screens around the clock but it’s just not very good for you. Step away and find a sun lounge, get some vitamin D, drink some healthy shakes, do some exercise and rediscover the reason that you wanted to work so hard in the first place.

Time For Rest, Relaxation and Reflection

This is the time of year to spend time with family and friends. Rediscover relationships and read some good books. Some of us at Stormrake HQ plan to read “Start with Why” by Simon Sinek and “The Network State - How to Start a New Country by Balaji Srinivasan. These are must reads if you haven't had time. We will all listen to copious amounts of podcasts and videos by the best and brightest, while some will also be catching up with what AI can do given the huge leap in progress that field has made over the past year. Will we all be obsolete in 10 years time? We hope not, but if we are redundant in 10 years, at least we’ll have some Bitcoin to sustain our lifestyles.

If you don’t have time to read the Network State by Balaji, we'd recommend the marathon 8 hour podcast / video with Lex Friedman HERE. Yes, we know 8 hours is a lot but this can be broken down into multiple sessions and you'll be blown away by the diverse knowledge and deep thinking of this man. Maybe put the cricket on in the background.

Market Update

Top 10 cryptocurrencies by market cap

Here is the fast five of what you need to know about the crypto market in November 2022:

Bitcoin has remained rather rangebound for the month of December, having only shed 1.5% of its value so far. There was a brief reclaim of $18,000 USD and this will prove pivotal to break if we want to go higher. Bitcoin's market cap hovers over $300 Billion USD.
Ethereum continues to underperform against Bitcoin as the bear market continues. During the month of December it has shed 4.3% of its value. Its market cap floats around $140 Billion USD. ETH has strong support at $1,000 USD and if it holds, puts it in a strong position for a Christmas rally.
The total crypto market cap has reflected the sideways price action of the top 2 coins. It currently retains a value of $825 Billion USD, which is approximately 50 times smaller than the total market cap of the S&P 500. Some might say, we're still early.
The best performing coin for the month is currently ZeCash having put in a gain of 5.5%. This is primarily driven by a slight demand for privacy coins, as they tend to do well in a deep bear market.
The worst performing token for the month was Filecoin. As it was aggressively sold off due to concerns surrounding DCG, many of the Grayscale altcoin trusts experienced the same aggressive sell off.

Video of the month

Bitcoin experts Dylan LeClair and Pryston Pysh have a robust discussion about some of the risks facing Bitcoin heading into 2023.

Please note that this Video of The Month

is just over one hour in length but provides supreme insights into the tail risks still present in the Bitcoin ecosystem.

In the news

One of the most battle tested strategies that can provide investors an edge when taking on the markets is Dollar Cost Averaging (DCA). In this month's edition of the Rake Review, we will conduct a beginner's guide to the DCA strategy, where it works best and some of the drawbacks of the strategy. Let's dive in and start learning!

What is dollar cost averaging?

Dollar cost averaging is the act of making a fixed investment into an asset at a predetermined schedule and interval. For example, on the first Monday of every month, an investor allocates $1,000 to purchase Bitcoin.

Why is this effective?

It takes the emotions out of investing and it avoids trying to time the market.
By continually buying a fixed dollar denominated amount (e.g. $1000), you will automatically take advantage of dips and buy more when the market is low, (as well as less when the market is high). This reduces the average purchase price of a volatile asset.

When does it not work?

The strategy can come undone if one overcommits and exhausts their capital allocation too early or invests on a time basis that's too short to give them enough runway. For example, an investor may have $10,000 allocation to use on Bitcoin but chooses to make a $2,000 weekly DCA. In this scenario, they will run out of funds in 5 weeks and be at the mercy of the market for the rest of the year and not have enjoyed the benefits of DCA.

DCA will be less effective if you have a short time horizon or a high risk tolerance that might be better suited to aggressively buying dips.

When can you get started with a DCA strategy?

This is the best part, you can start right away as all it needs is an asset you wish to start averaging into, and to choose a time interval and amount that you'll be able to sustain over the longer period. DCA can also be used on top of an existing position to reduce the average purchase price and be better positioned for when the bull market returns.

Memes of the month

Activate Your Brokerage Account

If you enjoyed this Rake Review, feel free to open an account and gain access to more proprietary research and work with your very own dedicated crypto broker.

No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Stormrake is not a financial adviser and does not provide financial product advice. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. Stormrake is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this newsletter.

Disclaimer

All statements made in this newsletter are made in good faith and we believe they are accurate and reliable. Stormrake does not give any warranty as to the accuracy, reliability or completeness of information that is contained here, except insofar as any liability under statute cannot be excluded. Stormrake, its directors, employees and their representatives do not accept any liability for any error or omission in this newsletter or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided in this newsletter is owned by Stormrake. You may not alter or modify this information in any way, including the removal of this copyright notice.