Sun Tzu Had the Right Idea…
Sun Tzu would’ve been a pretty good crypto trader. I feel certain of that.
I read Sun Tzu’s famous The Art of War probably 40 years ago. I’d gone to see the movie Wall Street (still my all-time favorite, though only barely above Lost in Translation and, probably, Crash), and there was this scene in which Bud Fox impresses Gordon Gekko by quoting the 5th-century BC Chinese military general/strategist.
If your enemy is superior, evade him. If angry, irritate him. If equally matched, fight, and if not split and reevaluate.
Now, that’s not exactly what Sun Tzu said verbatim, but close enough. I know because a couple days after the movie, I popped into Claitor’s Bookstore in Baton Rouge and bought a copy of The Art of War and read it.
Now, all these years later I’m sitting in front of my computer, plinking out this dispatch on crypto and I’ve suddenly remembered a Sun Tzu quote from the book that has stuck with me all these years: In the midst of chaos, there is also opportunity.
Crypto, let it be known, is chaos synthesized.
Every day is the promise of something new. Something bold. Something scary. Something that can cause your wealth to plunge… or to soar higher than you could have ever imagined.
And that paragraph right there is why so many people are so scared of crypto.
Sure, they love the “soar higher than you could have ever imagined” part. All of us in crypto love it. We pray to any number of crypto gods in hopes of manifesting that.
It’s the “can cause your wealth to plunge” part that scares the bejeezus out of people… and, so, they stay away because, well, who knows if tomorrow will be a red day or a green one.
Which is exactly why I’m dispatching this dispatch…
I receive emails from readers who are uneasy about crypto. They want to not be uneasy. They want to participate in all the wealth that’s flowing through crypto, despite those crazy-scary red days (and red weeks and red months) that happen, but they don’t know if they should really pull the trigger—particularly now that bitcoin is up more than 4x from where I called the bottom in January 2023.
Here’s my advice, borrowed from Sun Tzu: If the mind is willing, the flesh could go on and on without many things.
That might seem like a strange quote to pluck from a 2,500-year-old book packed with an abundance of useful quotes. But I chose that one for a reason: perseverance.
It’s the key to success as an investor of any kind, but it’s particularly well suited to crypto.
I am not going to blow smoke up your backside and try to convince you that crypto isn’t risky. It is risky. It bounces around like a drunken kangaroo on a pogo stick.
But there’s actual benefit in that.
Wealth comes to those who exploit a weakness.
Someone sees a need for a taco truck near a downtown office building—a weakness to exploit in the local lunchroom dining options—and they make such a name for themselves they end up building a successful restaurant.
Someone sees a need for a mobile phone that does more than phone a friend or send painful-to-type text messages—a weakness to exploit in the telecom industry—and you end up with Apple’s iPhone.
Investing is no different. Whether it’s stocks or real estate or crypto, wealth flows from exploiting opportunities.
Years ago, I had the opportunity to exploit lost real estate at a Sheriff’s foreclosure sale. I jumped at it and turned a $104,000 investment into more than $155,000 in about five months.
I tell you all of this because crypto is weak at the moment, relatively speaking.
Bitcoin has retreated from a record high near $110,000 to about $85,000 today. Another of my favorite cryptos, Solana, has pulled back from a record high near $300 to just under $140 today.
These are exploitable opportunities.
Crypto has a luminous future. But like every asset, it goes through ups and downs. Ebbs and flows. Valleys and mountaintops.
It’s to be expected.
Yes, the amplitude is generally wider than with most assets, but with the true quality crypto projects, the trajectory is ever higher… higher highs and higher lows.
For example, when I called the bottom of the crypto market in 2023, bitcoin was sitting at around $23,000. It then exploded forward to hit all-time highs above $70,000… and then above $100,000… in 2024. Today, crypto has fallen back from its all-time-highs; but its price is still more than three times what it was in 2023! In other words, its new “low” is what was once its all-time-high, just a year ago—in the $70,000 range.
This is what I mean when I talk about “higher lows”… and it’s a BIG indicator that higher highs are set to follow.
Once you accept that, once you see it in action, once you’ve experienced it, you understand it.
You’re absolutely annoyed by it. You want to take crypto out behind the shed and put a bullet in its head at times.
Yet you know every red day will turn to a green day.
You know that every downdraft begets a bigger updraft in time.
You learn to exploit the moments that are exploitable.
Right now is one of those moments.
I know pulling the trigger can still be hard. You don’t know if you’re buying before another red day. Or red month.
Here’s my advice, also snagged from Sun Tzu: Great results can be achieved with small forces.
In the context of this dispatch, read “small forces” as “a limited amount of capital.”
I regularly tell anyone who will listen to put just a tiny amount of your portfolio into bitcoin—as little as 5%. It’s nothing. If you lose it all, you’ve lost about a year’s worth of dividend and interest income. So what?
If my thinking on crypto is right, however—particularly my thinking on bitcoin—your 5% is going to wow you at some point with the wealth it generates.
You don’t even need an account at a crypto exchange. You can buy the iShares Bitcoin Trust ETF (symbol: IBIT) in your brokerage account in your IRA… simple as buying shares of stock.
So, I will wrap this up and leave you today with one final bit of Sun Tzu wisdom: Opportunities are multiplied as they are seized.
Seize the opportunity in bitcoin. Exploit the momentary weakness.
