Imagine you know that some product — a widget — will one day be the most popular thing in the world by a massive margin.You’re confident almost everyone will use this widget, to do virtually everything, at nearly every waking hour of the day.Just one issue. You don’t know exactly when this will happen.Still, you don’t want to risk missing out. So you invest in the companies making the widget before anyone else is really talking about it.Eventually, people start to learn about the widget. They also believe it will take over the world. They invest.Prices rise and that attracts more attention, which makes prices rise even faster. Then things get out of hand.People know the potential of the widget, but they soon realize how few people are actually using it. Turns out, the companies made 40 million widgets but could only sell 2 million of them.Big problem. The trend quickly ends, the companies’ stock prices unwind before the widget takes over the world, and you just went on a wild ride for very little profit. Maybe even a loss.So you throw your hands up and sell. Clearly you were wrong about this world-changing widget. Time to move on.Flash-forward 20 years, and you realize you made the biggest mistake of your life.The widget did indeed become the most popular thing in the world, and the top-performing companies all wound up revolving around this one widget you gave up on a decade ago.These companies command trillions of dollars in value, and you missed out on the ride they took to get there.You were right … but you were also early.This is one of the most frustrating experiences an investor can have. It’s also the situation investors faced with Global Crossing and similar companies in the 2000 dot-com bubble.Today, “right but early” also describes one niche sector that got obliterated by the 2022 bear market.And that sector may be turning around.
The Right Idea at the Wrong Time
If you’ve been around the block a few times, you might have a funny feeling my “widget” has to do with the internet in the late ‘90s. You’d be right.Since you’re reading this right now, I can guarantee you’re on the internet. So are the quarter-million other people we send this newsletter to.We take this for granted. We rarely think about the fact that someone had to build the ability for us to be on the internet. Or that the foundation for the internet is as simple as cables in the dirt.Yet, those cables are the widget many investors were right about, but too early.In the 1990s, companies built 40 million miles of fiber optic cables. This cost billions of dollars.Internet users at that time only needed 2 million miles of cable. With no market for 95% of the infrastructure, many companies went bankrupt.But in the decade to follow, demand increased enough to use the available networks. But that was too late for companies like Global Crossing and other pioneers in the sector.Global Crossing laid high-speed fiber between 700 cities. It owned and operated one of the largest segments of the internet in 1999. The company peaked at a value of $47 billion.Unfortunately, Global Crossing was too ahead of its time. The company filed for bankruptcy just three years later in 2002. It never turned a profit.Global Crossing was right. High-speed fiber was an important new market. It would eventually create hundreds of billions in wealth.The problem was that Global Crossing was also early. For some investors, “early” can mean large losses. But smart investors see opportunity in those losses.The assets Global Crossing took into bankruptcy delivered large gains for investors after the company reorganized. The stock gained over 650% as the economy recovered from the 2008 global financial crisis.
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Those gains were only possible because the company made large investments into fiber optic cables 10 years earlier. Eventually, those cables found their customer. And these days, fiber optics are the basis for the best high-speed internet connections available.Many parts of Global Crossing’s network are still around today. Different companies own them now. And investors in those companies are still reaping the rewards of Global Crossing’s losses.I was thinking of this because there’s another early technology that recently cost investors trillions of dollars.Today though, with the dust cleared, it’s time to pick through those assets.Those assets are cryptocurrencies.
Crypto Is 2022’s Global Crossing
Just like in 2000, people buying cryptocurrency in 2021 ignored the fundamentals.The technology behind crypto — blockchain — showed some promise. But that promise has so far found limited real-world use.That didn’t stop companies from spending billions in creating blockchain infrastructure. And those that did were handsomely rewarded … until the bubble popped in late 2021.The crypto bear market we’ve seen since has brutally shaken investor confidence in the sector. The entire crypto market cap is down more than 60% from its highs.But, because the full potential of blockchain has yet to be realized, a lot of that infrastructure is still built out and waiting for users to catch up.This is similar to Global Crossing in 2022. Just like fiber optic cable was the backbone of the internet and a bit ahead of its time, blockchain is the backbone of crypto … and may be the right idea at the wrong time.You should know that I’m not personally interested or invested in crypto. It does fascinate me, and I like trading it with my One Trade subscribers.But I’m also very skeptical of the fraud that erupted in the last year — especially with Sam Bankman-Fried and FTX.However, I have to give our chief crypto expert Ian King a major kudos for how he handled the last crypto bull market.He not only led his subscribers to lock in quadruple- and quintuple-digit gains in the last bull market … he did so while sidestepping much of the damage in the crash.Now, Ian believes the crypto market has bottomed. He sees signs that the next bull market has already started.This isn’t the first time he’s made a call like this.Twice before, Ian’s released new research into cryptocurrencies. Each event came out in markets just like this one — just before cryptos rocketed to new highs.And each time, Ian’s readers had the chance to make a ton of money.The first report featured two picks — Balancer and Nexus Mutual — which resulted in gains of 430% and 594% in six months.Plus 1,900% on Solana in four months … and a peak of 15,000% within the year.That same year also produced some of the biggest gains ever recorded in our business — 3,900% in three months on LUNA … followed by the incredible 18,000% gain in 13 months.In his second report, Crypto’s Third Wave, Ian’s readers had the chance to see peak gains of 100% on ThorChain and 322% on Livepeer in one month… And 960% on Sandbox in just 45 days.Now, for the first time in over a year, Ian’s going public with his latest research. He has three new picks that he believes could go 10 times higher in the next year.If these picks are anything like the last ones, they stand to make a lot of money. Learn how you can get your hands on them right here.Regards,
Michael CarrEditor, Precision Profits
I’ve been nibbling in cryptocurrencies again. My goal is to dollar-cost-average my way into a “permanent” crypto allocation to balance my stocks, bonds and real estate.I keep this allocation smaller than the others, due to the volatility. But another consideration every crypto investor should have is security.Here’s why…If the bank where I keep my cash goes under, Uncle Sam has my back. FDIC insurance will make me whole. Likewise, if the broker where I keep my stocks and bonds fails, SIPC insurance protects me. I have reasonable faith in those systems.But crypto? That’s a different world. Most cryptocurrency exchanges are offshore with little or no regulation. Sam Bankman-Fried was able to pull off his epic fraud precisely because no one was overseeing him. FTX pooled client accounts with the firm’s proprietary investment capital, and that’s what got them into trouble.I work far too hard for my money to allow some shyster with a bad haircut to steal it. And the beauty of crypto is that I don’t have to. I self-custody the bitcoin and Ethereum I own.Now, I’m not going to tell you what to do. The best course for you will depend on your own comfort level and tech savvy. But this is what I do personally.Step 1: Get Your Dollars Into the Crypto EcosystemWhile I don’t like keeping my money on a crypto exchange, you really can’t avoid them at the beginning. You have to get your dollars invested, and the cleanest and easiest way to do that is by opening an account with a crypto exchange.I use Coinbase. That’s not an endorsement, per se, but my reasoning is simple enough. It’s a public company subject to at least modest regulation and is headquartered in the United States.I deposit my dollars with Coinbase and use its platform to buy bitcoin, Ethereum and a handful of other cryptos. But while I buy them there, I don’t keep them there.Step 2: Move to a Noncustodial WalletAn account at an exchange like Coinbase is what is known as a “custodial wallet.” This can be thought of as a “bank account.” I use air quotes here because, as you know, you have none of the protections of an actual bank account.A noncustodial wallet is something you use outside the exchange. Think of it like taking your money out of the bank, stuffing it in mason jars and burying it in your backyard.It’s safe from bank failure there. But if you forget where you buried it… you’re on your own. There’s no one to help you.Once I buy crypto in my account at Coinbase, I immediately move it off exchange to my noncustodial wallet. There are infinite noncustodial wallets to choose from, but I personally use the Coinbase Wallet app because it’s relatively user-friendly.Now, this is the important part, so pay attention!You absolutely must, must, MUST keep a copy of your recovery keys in a safe place, and preferably offline. If you lose or break your phone or computer and don’t have the recovery keys, your crypto is gone forever. There is no tech support to call and no one to help you.My recommendation is to print them out, on paper, and put them in a safe deposit box at your bank. Just don’t leave the paper floating around, because anyone with those codes could potentially steal your crypto.So, again, I recommend a good-old-fashioned, low-tech safe deposit box at the bank!My final piece of advice is to keep really good records. If you buy and hold your crypto, there is no taxable income to report. But if you exchange one coin for another or decide to sell them for dollars, you have potentially generated taxable gains. You really don’t want to deal with an IRS audit, so just make sure you keep good records of your purchases and sales and store them in a safe place.Regards,
Charles SizemoreChief Editor, The Banyan Edge
