Time to be Contrarian
“History demonstrates that investors who buy assets that are out of favor and avoid assets that are in favor will enjoy superior results over the long term.”
— David Dreman
Bitcoin has corrected approximately 15% since the end of January. To us, the current market environment feels reminiscent of just 14 months ago when Bitcoin was trading at ~$44,000. During those uncertain times, we maintained our conviction in Bitcoin as a store of value and in crypto assets as a new frontier for generational wealth creation. While that belief had few supporters at the time, it ultimately delivered a stellar 100%+ CAGR return.
In line with our previous newsletter, we believe that factors such as the Trump administration’s policies, the direction of the Russia-Ukraine war, trade tariff uncertainties, currency devaluations, and a shifting global interest rate environment could contribute to continued market volatility over the next six months. However, such uncertainty often creates significant investment opportunities by driving a wedge between an asset’s price and its long-term intrinsic value. Market inefficiencies arise when investors react emotionally to uncertainty, leading to mispricing.
Those with a contrarian mindset can capitalize on these inefficiencies by going against the consensus. Based on our analysis and experience, we have seen how such environments generate substantial wealth for contrarian investors who dare to swim against the tide.
“Be fearful when others are greedy, and greedy when others are fearful.”
— Warren Buffett
Historical Examples of Contrarian Investing
- Apple (AAPL) – In the late 1990s and early 2000s, Apple was on the brink of bankruptcy and considered irrelevant in the PC market. Investors who bought Apple before Steve Jobs’ turnaround—marked by the introduction of the iPod, iPhone, and a Mac resurgence—saw massive long-term gains. Apple’s market capitalization grew from $2.3 billion in September 1997 to nearly $100 billion by the time the iPhone launched in 2007.
- Amazon (AMZN) – During the Dot-Com Bubble burst, Amazon’s stock crashed over 90%, plunging from ~$107 to below $10. Many assumed e-commerce was dead. However, investors who believed in Amazon’s long-term potential and held onto their shares saw it evolve into a trillion-dollar company.
Contrarian Investing in Crypto
The same pattern repeats in crypto markets, and we are already seeing green shoots.
The cryptocurrency market is experiencing significant developments, particularly following President Donald Trump’s announcement of a U.S. strategic cryptocurrency reserve. This initiative aims to strengthen the nation’s position in digital assets by incorporating major cryptocurrencies such as Bitcoin, Ethereum, Ripple, Solana, and Cardano. Following the announcement, these assets saw substantial price surges.
At Myrtle, we firmly believe that with continued regulatory clarity, growing awareness, and increasing adoption of Bitcoin and other crypto assets, we are headed in the right direction. Patience is key.
CIO’s Corner
[market commentary by Pawan Mishra, Co-Founder & Chief Investment Officer]
The cryptocurrency market has faced significant challenges over the past month, marked by heightened volatility and weakened sentiment. Despite substantial capital inflows—such as MicroStrategy’s acquisition of 20,356 bitcoins, increasing its total holdings to 499,096—Bitcoin has struggled to maintain stability. Major altcoins, including Solana and Ethereum, have also experienced sharp declines.
Key Drivers of the Downturn
- Geopolitical & Economic Pressures: President Trump’s announcement of new tariffs—25% on most imports from Canada and Mexico, plus a 10% tariff on Canadian oil—set to take effect on March 4, 2025, along with the doubling of U.S. tariffs on Chinese goods to 20%, has heightened fears of trade wars and inflation, exerting pressure on risk assets like cryptocurrencies.
- Major Exchange Security Breach: On February 21, 2025, Bybit, a prominent cryptocurrency exchange, suffered a significant security breach resulting in the theft of approximately $1.5 billion in virtual assets. The FBI has attributed this attack to North Korean-linked hackers, specifically the Lazarus Group. This incident underscores the vulnerabilities within crypto platforms and has contributed to the recent market instability.
- Liquidity Drain from Celebrity Coins: The rise of high-profile tokens, such as Trump’s $TRUMP and Melania’s $MELANIA, has diverted substantial capital away from the broader crypto market. These speculative assets have attracted liquidity that might have otherwise fueled growth in established projects, exacerbating the downturn.
- Market Capitulation Signals: Near-negative funding rates and increased retail selling suggest widespread panic among investors. However, emerging signs of institutional accumulation indicate potential long-term confidence in the market.
Market Outlook & Strategy
Despite current volatility, Solana continues to lead in decentralized exchange volumes. Broader industry developments, including potential regulatory clarity and increased institutional adoption, remain critical factors to monitor.
While an altcoin recovery has yet to materialize, our portfolio has outperformed the market in two of the last three cycles, demonstrating the resilience of our strategic approach. Our long-term conviction in the cryptocurrency sector remains unwavering. By focusing on early stage blockchain investments with a 12-18 month horizon, we are strategically positioned to capitalize on the industry’s anticipated growth. While short-term challenges persist, we believe that cryptocurrencies are poised for long-term leadership.
Crypto ownership worldwide is up 30% year over year, and is expected to approach 600 million users by the end of the year. This spike in participation has come with an increased interest in the use of digital currencies for payments. The use of digital transactions has been increasing year over year and are expected to cover 20% of all global transactions by 2025. This expansion of reliance on instant digital transactions paired with a building interest in using digital currencies bodes well for the demand of digital assets going forward.
The impressive performance in the industry is further highlighted by the projected overall revenue for the year. By December, the Worldwide market for crypto is expected to reach an astounding $45.3 billion, with $9.4 billion of that being generated in the United States, the highest of any nation.
This is important to note as we navigate the recent volatility of the market. The increased participation and expansion of digital asset use around the world will ensure that despite the ups and downs associated with an evolving market, the profitability will remain and will continue to grow as crypto becomes further embedded in the economic functions of society.
