🧨Is Ethereum Primed For a Pop?

What’s on the Menu 🍴

Blowout earnings & crypto breakouts: these are the themes of Q1 so far this year.

Euphoria is a dangerous emotion, but so is pessimism when things are moving!

Today we’re diving into a balanced view on the hottest topics in the markets this week:

• Is Ethereum Primed For a Pop? 🧨

• The Nvidia Train Keeps Rolling 🚂 

• What Should Your Savings & Investing Rate Be? 🤑

• Boom, Bust & Back Again:
  The Wild State of the Real Estate Market📺

Today’s newsletter is a 5 minute read.

Is Ethereum Primed For a Pop? 🧨

When does it make sense to take on the extra risk of buying a crypto-asset other than bitcoin?

Well, for me, the only time I want to buy an altcoin is if I think it can go up MORE than bitcoin’s gains.

A common mistake new crypto traders and investor make it only looking at their crypto gains in fiat terms.

For example, it’s great if ABC coin goes up 50% in USD terms…

But what if Bitcoin went up 75% in USD?

That means, instead of just holding bitcoin, you took on MORE risk and made LESS profit trying to get cute and “diversify” into another crypto-asset.

So, how do we measure the opportunity cost (or gain) of holding an altcoin?

Instead of only looking at a ABC/USD chart, look at an ABC/BTC chart…

Where it shows you how the alt is performing compared to bitcoin.

For example, in this chart you can see 3 phases:

1. Green shaded area is where Ethereum was going up more than Bitcoin

2. Yellow shaded area is where Ethereum and Bitcoin were about flat

3. Red shaded area is where Ethereum was going down more than Bitcoin

So, it makes sense to hold ETH during “altcoin seasons”, and sell before it starts losing ground to Bitcoin again.

And over the past couple of months I started buying ETH again.

Why?

Well, not only is it up about 40% in USD terms…

But I’m also seeing potential for Ethereum to have gains above bitcoin’s gains.

ETH is at multi-year support compared to bitcoin, and is showing a potential inverse head-and-shoulders reversal pattern at this price zone.

So, my thesis is: since capital is flowing into crypto again, and ETH is still #2 on the crypto leaderboard, I think some of the capital that’s been flowing into bitcoin through the new spot ETFs will flow down the pipeline into Ethereum too.

And if things get over-hyped again, I’ll look to sell into that euphoria and run away with my profits.

This is the same strategy I’ve been using since we started buying ETH at $1.50, and I expect it to continue working until I’m proven wrong.

On to the next opportunity!

The Nvidia Train Keeps Rolling 🚂 

Nvidia delivered yet another blowout quarterly earnings report on Wednesday afternoon, with revenue up 265% and earnings per share up 486% year-over-year. 🤯

The stock responded by gapping up 16% to almost $800 per share on Thursday:

NVDA now sports a market cap of $1.9 Trillion, and it passed Amazon this week to become the third largest company in the US and fourth largest in the world.

The company is still firing on all cylinders, which is good news for the overall market.

Some investors had feared a disappointing report would kick off a broad market correction, but instead the Nasdaq index surged almost 3% on Thursday!

So when will the momentum slow for NVDA?

Quarterly revenues are showing no signs of slowing:

NVDA quarterly revenues 2021-2023 via Koyfin

Founder CEO Jensen Huang said on the conference call that “conditions are excellent for continued growth, calendar '24 to calendar '25 and beyond” due to:

• The continued shift from CPUs to GPUs in datacenters

• More generative AI applications & usage

• Sovereign countries & governments building out AI infrastructure

• New products such as their B100s & H200s

Skeptics will say that Nvidia is like Zoom during the pandemic or Cisco during the dotcom bubble, destined to eventually see demand cool and the stock fall.

That seems pretty likely at some point BUT things could still get crazier before that time comes…

Cisco traded at ~25X market cap to revenues at the peak and Zoom traded around ~50X at peak, while NVDA currently trades at ~18X this year’s expected revenues.

Slower growth is inevitable at some point, so valuation will compress when the market sees evidence of that.

That day is not today however!

What Should Your Savings
& Investing Rate Be? 🤑

If you’ve never sat down to see how much of your income you’re saving and investing, it’s time.

Part of a solid financial plan is knowing that you’re hitting your investing metrics every year to grow your wealth.

First, we should explain the difference between saving and investing… because, there is a difference.

Oftentimes, the two terms are used interchangeably which isn’t telling the proper picture.

Money that you’re saving is for just that: being in a savings account, safe from any losses and earning whatever the going interest rate is.

Typically, you want your emergency fund saved + savings for any short-term goals (think a down-payment on a car or house).

Once you get these things taken care of, you have to be careful because you CAN over save.

I’ve even seen millionaires with a million plus dollars in a checking account (very much over-saving and not even earning the proper interest).

A good savings rate for someone trying to finish funding their emergency fund and short-term goals can be anywhere from 10-20% of your income.

However, the faster you get this done the better. Then, you can move into more investing for that wealth building machine to really pump into high gear.

So, how much should you be investing from your income?

Many people max out their retirement plans at work or if they have a self-employed retirement plan. For someone making $150,000 a year gross pay, maxing out their 401(k) at $23,000 (2024’s max amount), that’s 15% of their income. So a 15% investing rate if that is all they’re doing.

This is just an example to give you some perspective. So, if you make a lot more money than this, and all you’re doing is maxing out your salary deferral to your 401(k) plan, your investing rate will be lower.

Generally, you want to be investing on the low end 10% of your income, up to 20%.

Anything over 20% is a healthy investing rate and will likely get you to early retirement quicker (aka: front-loading retirement as we call it).

After saving and investing, you shouldn’t be strapped for cash to pay for everyday life.

If you find yourself in this situation, pull back on investing until you get a better hold on your situation.

I’ve come across multiple times people plowing money into their 401(k) only to have to take loans from it later (which is bad, and means your financial life needs a recalibration).

In short, 3 main things you should track every year:

1. Your net worth. This is your assets you own MINUS your liabilities.

2. Your savings rate. Ideally, get the money funneled to your emergency fund and short-term goals asap so you can invest more. Again, 10% on the low end up to 20% is a good rule of thumb.

3. Your investing rate. Focus on investing after you’ve built up your financial foundation. Don’t jump to this too soon or else you’ll have to backtrack. A 10% investing rate is on the low end, 20% on the healthier end. However, there is no limit to this, the higher you can get your investing rate, the better.

Video Of The Day: Boom, Bust, & Back Again:
The Wild State of the Real Estate Market 📺 

We've been getting a ton of questions about the real estate market…

And how to build wealth with property.

So in this week’s We Talk Money, we’ve invited a real estate pro who’s been crushing one of the hottest real estate markets in the world!

Austin Stowell is an investor, developer, and broker in Austin, Texas…

And in this episode, you’ll learn:

• What’s next for real estate after a massive boom-bust cycle?

• How can a new investor build wealth in real estate?

• Why is the market heating up again?

• And much more!

Food For Thought 🧠

"It is not the strongest of the species that survive, nor the most intelligent,
but the one most responsive to change.”
- Charles Darwin

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.