Chapter 1: Breaking the Cycle of Losses

It’s all too easy to fall into a repetitive cycle of losing money in cryptocurrency, often due to a lack of strategy. I found myself repeatedly making poor financial decisions driven by hearsay and emotions, diving in with nothing but impulsive enthusiasm and sensational headlines.

Each time, the thrill would quickly dissolve into a gut-wrenching fear as my portfolio would nosedive by as much as 80%, reminiscent of a malfunctioning elevator. Even during these turbulent times, I stubbornly held on, refusing to sell. While I’m glad I didn’t capitulate, the stress was immense.

What I wish I had known was that there exists a systematic approach to navigate this chaotic environment—an approach that isn’t as convoluted as it seems. This methodology allows for a clearer understanding of market direction and helps you maximize the potential of your trades.

Rather than predicting exact price movements, this framework offers a reliable gauge of whether prices are likely to rise or fall within a 22-month timeframe. Known as the "ISM Framework," it may sound intimidating, but once you grasp its essence, you may experience your own enlightening moment. Let’s explore this crucial tool that helps illuminate the path forward.

The first video discusses Raoul Pal’s crypto portfolio and his insights on why Bitcoin and altcoins are set to soar.

Chapter 2: Understanding Market Liquidity

Macro investors emphasize that liquidity is the driving force behind both crypto and financial markets. It’s quite straightforward: when the crypto markets expect a tightening of monetary policy, prices tend to drop. Conversely, if there are indications of an influx of stimulus, a buying frenzy often ensues.

As fresh capital enters the market at the beginning of a new cycle, it gradually flows into alternative assets as investors become more willing to take risks. The ISM serves as a critical data point that forecasts productivity, which subsequently affects corporate profits and, ultimately, cryptocurrency prices.

It's crucial to dive deeper into this topic instead of skimming through it. I consume a vast amount of crypto-related information from various sources, and I frequently hear references to the ISM survey. Initially, I was perplexed by the mentions from figures like Jerome Powell and other macro traders. However, my understanding has evolved.

The ISM survey gathers sentiment from over 50,000 executives managing supply chains, querying them about their perceptions of employment, new orders, production, inventory levels, stock prices, backlogs, and imports. This survey encompasses 400 manufacturing companies in the U.S. and is a reliable indicator of anticipated productivity.

The ISM index, updated monthly, is widely regarded as one of the most trustworthy predictors of both the U.S. and global economies. According to the Motley Fool, “From the start of 1948 to January 2023, the ISM Index dipped below 43.5 on 14 occasions, and with the exception of a sharp decline in the early 1950s, a drop below this threshold has consistently signaled a U.S. recession for seven decades.”

An ISM score below 50 indicates economic contraction, while a score above 50 signals growth. Scores exceeding 60 reflect a booming economy. Macro investor Raoul Pal highlights a key insight:

“What you don’t want to do is look at where the ISM is today. The secret is the ISM goes up and down in a cycle — when it goes down, it usually goes all the way down into a recession, and when it goes up, it goes up to a boom — once you know that, you know how to invest, and I find the ISM the single most important indicator.”

At present, the ISM score stands at 47, indicating a potential bottom, which may explain the recent rally in the crypto market.

Source — Trading Economics

Final Thoughts: A Framework for Confidence

This framework provides a significant advantage in predicting economic trends and asset valuations, reducing the uncertainty involved in investing. With the ISM showing signs of recovery, I now monitor additional indicators for safety.

The Federal Reserve has indicated that interest rates may soon decrease, a positive sign for liquidity. Although it may not feel like it during your routine shopping, inflation has dropped from a high of 9.06% to 3.15%. As the U.S. prepares to refinance its debt, the necessity of utilizing the money printer due to a debt level at 122% of GDP will likely continue to stimulate asset prices.

Moreover, the Bitcoin halving event is approaching, which historically reduces the supply of the leading cryptocurrency. Past halving events have shown that prices have surged significantly in the following years:

• First Halving: Price at halving: $13; Following year peak: $1,152
• Second Halving: Price at halving: $664; Following year peak: $17,760
• Third Halving: Price at halving: $9,734; Following year peak: $67,549

Armed with this comprehensive framework and supporting data, I can confidently dismiss skeptics who label Bitcoin and other cryptocurrencies as mere market bubbles. While temporary setbacks may occur, this strategy grants me the confidence to make more substantial investment decisions.

This framework is invaluable for anyone looking to navigate the complexities of crypto investing.

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Note: This article is for informational purposes only and should not be construed as financial, tax, or legal advice. Always consult a financial professional before making significant financial decisions.

The second video provides a practical demonstration of phishing techniques using the Social Engineering Toolkit and Kali Linux.