1 May 2021
Dear Fellow Investor,
Many of you have asked about crypto currencies so this week I will review a safe and straightforward way to invest.
Safety means that your assets are protected from fraud or having them stolen.
There are many private unregulated on line platforms that allow buying and selling cryptos . Hundreds of thousands of players open accounts and speculate on price movements. Most platforms are legitimate but every so often there is a collapse. Last week 2 crypto exchanges in Turkey collapsed with billions of client money lost.
As they are unregulated there is little chance of any recovery of funds. Over 60 dealers were arrested while the CEO escaped to Albania.
The other problem is service and order execution. As business is usually done on line you can not deal with a real person and it can take several days to get an email answer to a customer enquiry making it difficult to resolve a dispute. There are also delays in price settlement so the customer is in limbo not knowing the execution price. It can take several hours. There are also high and hidden fees.
Luckily as crypto goes mainstream there has become a very efficient and safe way to buy and sell . Exchange traded crypto funds have been set up. Two such funds are the BTCC.B bitcoin fund and the EHHX.B etherium fund. They both trade on the TSX, the Toronto Exchange in Canada.
Another safe bitcoin investment is the Greyscale investment trust which trades on the OTC exchange in New York.
These products are regulated by the securities and exchange commission and offer transparency, liquidity and reasonable commissions and fees. They are available on most on-line broker platforms such as Ameritrade so there is no issue with customer service. Fees are low. The other benefit is no risk in custody such as holding a digital wallet and losing the passcode. If you hold some bitcoins in a digital wallet and lose the passcode they are lost forever. It is estimated 13% of bitcoins mined since inception are lost forever by those who forgot of lost their passcodes.
One of my clients is a very successful crypto investor. He has a strong belief that governments will continue to debase their fiat currencies by such things as deficit spending, quantitative easing, and money printing. He fears inflation and his underlying belief is that to survive he must invest in assets which offer a store of value. These would include quality shares, property, precious metals and cryptos. These assets are of limited supply and are a store of wealth. He allocates not more than 10 % of his net worth to cryptos and uses a simple breakout method for buying risking to below the breakout point. He buys after a big correction and then waits for the breakout. For selling he waits for the trend to bend and price to break down.
Below is an article by coinbase, the world’s largest digital crypto exchange on its IPO last week. Presently it is trading at a high premium so I am waiting for the premium to drop before buying.
Welcome to a brave new world. History is unfolding before us as we witness the evolution and acceptance of cryptocurrencies within the global economy.
This week, Coinbase launched its much-anticipated Initial Public Offering; not only is it the world's largest digital currency exchange, but it is now the first publicly traded cryptocurrency company. This is an important milestone for the sector and is a testament to how quickly consumers globally have embraced digital currencies like bitcoin, ethereum, and litecoin, among others.
Last week, billionaire Bitcoin investor Michael Novogratz made headlines worldwide when he said in an interview on CNBC's "Squawk Box" that he was surprised with how fast the cryptocurrency is being accepted within the financial landscape.
"Adoption's happening faster than I predicted. It's shocking to me how fast people are moving into the system," he said.
Novogratz added that he thinks bitcoin is on track to eventually surpass the gold market's capitalization.
Novogratz is also not a lone voice in the pack. Goldman Sachs' CEO David Solomon told CNBC in a recent interview that he has also been surprised with the adoption of cryptocurrencies.
To put the pace of growth from cryptocurrencies into perspective, it has taken only 12 years for bitcoin to reach a market cap of $1 trillion. It took Apple 42 years; it took Amazon 24 years to reach that milestone.
But this market is more than just bitcoin. Famed investor and a member of ABC's Shark Tank Mark Cuban is paying more attention to Ethereum and thinks it will eventually surpass Bitcoin as the primary global digital currency.
"I think the application leveraging smart contracts and extensions on ethereum will dwarf bitcoin. Bitcoin, right now, has evolved to be primarily a store value, and it's very difficult to use it for anything else… You really have to work a lot harder on bitcoin than you do on ethereum," he said in an interview on the Unchained Podcast.
"In a few years, I think Ethereum and maybe 2 or 3 other blockchains will have their place, and those will be the winners," he added.
Major institutions and investors are paying attention to digital currencies, so we can expect to see further exponential adoption as consumers and merchants look for ways to protect purchasing power and for modern mediums of exchange.
When you look at all that is happening in the global economy and the evolution of technology adoption, it is not surprising to see consumers embracing cryptocurrencies as a form of payment and as an investment.
The Federal Reserve and other global central banks continue to downplay the looming inflation threat; however, companies that are having to buy expensive commodities are sounding the alarm bells, warning consumers that prices are going up.
The alarm bells are only going to get louder as the global economy recovers from the COVID-19 pandemic. There is renewed optimism that life will get back to normal and the economy will see robust growth this year. Still, we don't know what impact the unprecedented amounts of stimulus will have on the growing global deficit and global currencies.
Contributing to kitco.com
Last week Joe Biden announced his massive tax and spend plans but markets did not react much. Technology shares continue to be well supported. With continued liquidity flooding into the market and slow Covid recovery in Asia expect Asian markets to slowly move higher. The Hang Seng was hit because of technology crackdowns on Ali Baba and Tencent by the China authorities. Our technology shares were not affected.
Take care
Bill
Doge coin started as a joke a few months ago and now has over 1 billion USD in capitalization. Stick with Bitcoin and Ethereum for investing.
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