Monday, 20 May 2024

By Ryan Dinse Editor, Crypto Capital and Alpha Tech Trader

[4 min read]

Dear Reader,

The numbers coming through last week were simply extraordinary.

Senior analyst Eric Balchunas at Bloomberg called it ‘mind-boggling’.

12 of the 25 largest US hedge funds were outed as buyers.

As were 11 of the largest 25 Registered Investment Advisors (RIA).

Even a top 10 state pension fund — The Wisconsin Investment Board (US$118 billion fund under management) — has put US$100 million in since January.

And this wave of buying has all come in in just one quarter (Jan-March) of trading.

As Eric Balchunas noted:

‘… we ended up with 414 reported holders in its first 13F season (quarterly report), which is mind-boggling. Even having 20 holders as a newborn fund is highly rare.’

What am I talking about, what are they all buying, and why does it matter to you?

That’s the topic for today.

Let’s begin…

A mad scramble

So what were all these folks investing in?

Bitcoin [BTC] of course!

Or, more accurately, the newly approved Bitcoin ETFs that went live on 11 January this year.

When these new ETFs launched earlier this year, traditional finance had its first real opportunity to invest in Bitcoin.

I said the floodgates would open.

And that’s exactly what we’re starting to see.

In May, we had the first quarterly reporting season where regulated US entities had to disclose any investment in these Bitcoin ETFs.

And as you just saw, the take-up has been very broad across the industry.

Which might surprise you…

I mean, you’ve probably heard for years that Bitcoin had no ‘intrinsic value’, was ‘worthless’ and was only ‘used by criminals’.

And yet, here are the biggest institutions in the US now putting money into it.

If you’ve been sceptical about Bitcoin and the whole cryptocurrency movement in general, this should at least give you some pause for thought.

At the very least, you should acknowledge there’s a disconnect between what big finance says about Bitcoin in public and what they’re actually doing with their own money.

To be clear, this isn’t retail buyers (the mug punters) buying in on these new ETFs but professional money managers with fiduciary duties — and big reputations — at stake.

This isn’t your typical ‘exit liquidity’.

These are buy-and-hold investors with long time frames and strong investment mandates.

One of the more interesting individual companies investing in Bitcoin was Mass Mutual.

They’re a US$570 billion insurance company.

It was revealed they have US$100 million invested in one of the Bitcoin ETFs.

Mass Mutual investing in Bitcoin is notable for a couple of reasons.

First, the company is a conservative investor, meaning it goes for investments that are traditionally low-risk.

Their CEO, Roger Crandall, has said previously that the company gravitates towards tried-and-tested investments. Assets like real estate and stocks.

So, for such a company to plough $100 million into the notoriously volatile Bitcoin signals a changing attitude even in the conservative segments of finance.

If other insurers, pension funds and RIAs follow in these footsteps, the upside gains over the next year or two could be immense — mind boggling, even!

The biggest risk you face

Right now, Bitcoin is still a relatively tiny U$1.2 trillion asset class.

And although the big end of town has started to buy, they’re not doing so with huge sums…yet.

US Bitcoin firm River shared this helpful chart:

If you look at that RIA figure (RIAs are what we’d call financial planning groups here in Australia), those 405 RIAs probably collectively manage over US$405 billion.

Just US$2.5 billion of that has gone into the Bitcoin ETFs (less than 0.6%) so far.

It’s still a small overall amount in percentage terms, but it’s a big start.

Remember, we’re only one quarter into the new world of Bitcoin ETFs, and most RIAs, pension funds and banks still have ZERO allocated to Bitcoin.

Indeed, in a weird paradox, Bitcoin will have to grow larger to attract the bigger money.

Many investment mandates have rules around minimum liquidity and market size before funds can invest serious dough.

But as the Bitcoin market grows, those same rules will compel them to invest in Bitcoin, causing a flywheel of buying as more and more industry participants race to join in.

For you, the biggest risk you face is being late to this party.

Right now, most of you reading this are probably sitting on zero Bitcoin too.

My strong urge to you today is to think about your own portfolio.

What would a 1% BTC, or even a 3% allocation, look like to you?

Or maybe you’re younger, have cashflow but can’t afford a property, and have no investment plan; maybe you should start thinking about saving in Bitcoin.

Get this…

I did some maths on this the other day, and if you’d put $2,000 per month into Bitcoin over the past five years (starting in 2019), you’d be sitting on over $1.5 million by now.

Yep, $1.5 million!!!

Will the same happen over the next five years?

No one can say for sure.

Of course, Bitcoin is a risky and highly volatile investment.

And yet, right now, the world’s biggest investment institutions have started to buy in.

You’re telling me they’re the suckers, they’re the exit liquidity as the bubble prepares to pop?

I don’t think so…

Making it easy to get off zero

Anyway, do your own research and make your own decisions.

As with any investment, you need to think in terms of both risk AND reward. Bitcoin remains risky, but the upside gains are immense too.

That’s always been the bet and remains so today.

But my advice is to make a plan and at least get off zero.

If the best time to get off zero was yesterday, the second best is today.

Personally, I use the Bitaroo exchange to buy Bitcoin.

The Blockstream Green wallet is a good option to store your Bitcoin safely.

And if you need a bit more hand-holding, the team at The Bitcoin Advisor will be happy to help get you started.

[Note: We have no affiliation with any of these companies.]

Of course, I also run a service called Crypto Capital if you ever want to dive deeper into the wider investing opportunity crypto is unleashing.

I’ve run this service in various formats since 2017 when Bitcoin was trading at just $3,000.

But amazingly, I think the opportunity right now is almost better — more assured certainly — than it was back then.

Anyway, that’s for you to think about.

All the best…

Regards,

Ryan Dinse,
Editor, Crypto Capital and Alpha Tech Trader

Ryan is a former financial advisor who over seven years helped more than 600 clients and had more than $150 million under management. This experience taught him that the mainstream investment industry has no interest in helping clients strive for greatness. He was told to make ‘safe’ investment plays and settle for average returns. It wasn’t good enough for Ryan.

In 2016, he embarked on a renewed mission: to help ordinary people lock onto extraordinary trends before they go mainstream. He’s an experienced small-cap trader and an expert in cryptocurrencies. He first bought Bitcoin [BTC] in 2013, when it was around US$600. Today, it’s around US$30,000.

His crypto advisory is a must for anyone looking to make digital assets a part of their long-term portfolio. Check it out here.

His tech advisory Alpha Tech Trader aims to identify and latch onto strong emerging opportunities in the tech sector, wherever they are in the world. Get more info here.

By Bill Bonner Editor, Fat Tail Daily

[3 min read]

Dear Reader,

What a wonderful, wacky world. 

The Dow crossed the 40,000 mark yesterday. But, adjusted for inflation, it is still well below a genuine, new all-time high. If we’re right, stocks will become less valuable in the years ahead, in real terms, not more valuable. We’ll see. 

And there’s something funny about it... something phony... that we’re trying to understand. Are our companies really becoming more profitable? If real wages aren’t really going up, where are the buyers coming from? Is the nation really getting richer?  

Still not clear what is going on, we’ll keep plodding forward, looking at how corruption is self-limiting... and what it means. 

William Pesek in the Asia Times, writing on Tuesday: 

‘This week, Biden will unveil plans to quadruple taxes on Chinese electric vehicle (EV) imports and slap huge tariffs on other key industries. The new levies on mainland EVs will reportedly skyrocket to 102.5%. Other priority industries could see tariffs double or triple. 

‘It’s Biden’s latest ploy to out-Trump Trump, and ultimately a losing ticket in terms of raising American living standards. It also risks provoking China to retaliate in ways that backfire on US consumers and investors.’ 

Trying to out-Trump Trump may not be a wise move. But it follows the familiar pattern of corruption... making things worse for nearly everyone. 

Michael J. Hicks comments: 

‘Today’s tariff announcements will raise prices for consumer goods in the months to come.’  

Of course, they will. But why raise consumer prices? Because consumers won’t realise it until after the election? And in the meantime, there are powerful special interests — the auto industry and the United Auto Workers — who would like to be protected from competition? And Michigan just happens to be one of the ‘swing states’ that will determine the election’s outcome?  

Just askin’... 

In the long run, protecting US automakers from competition will almost guarantee that Detroit’s EVs will never be competitive. 

And so... say goodbye to another US industry. 

‘We think, they sweat’

But wait, bending steel (as in, making autos) is an ‘old’ industry; it’s something for other countries, not us, isn’t it? We think, they sweat, right? 

But what if the product of so much thinking isn’t so smart after all? 

For illustration, let us turn back to the Ukraine, where bending steel is extremely popular right now. The Russians bend it around tanks, and guns, and artillery shells...and seem to be winning the war. 

A question: how come ‘the West’ cannot win...even when the adversary is outnumbered (in GDP terms) 30 to 1? The US and its allies have 30 times the GDP of Russia. And yet, it is the Russkies who are gaining ground, not America’s proxy warriors.  

As we will explore next week, maybe bending steel is important after all... and maybe much of America’s stock market... its GDP... its ‘wealth’... and its military power is as phony as its fake dollar. 

Recall that back in May 2022, Zelensky and Putin almost had a deal to end the war. Last month Foreign Affairs magazine published the results of its investigation into how the peace deal got derailed. Kit Klarenberg reports that it failed because: 

‘British Prime Minister Boris Johnson offer[ed] President Volodymyr Zelenskyy the blankest of blank cheques to keep fighting.’ 

The US and its allies wanted to keep the war going. They said it ‘weakened Russia’. There has been no evidence of that; Russia has actually grown stronger, economically and militarily. But one thing NATO aid accomplished for sure was to move more of the public’s wealth to the firepower industry and its many fans in Congress and the media.  

This is a natural, organic kind of corruption...a normal part of life. Like grey hair or age spots, it can be creamed over...but the decay continues below. 

And now, victory seems unattainable. But the Biden team surely won’t permit a settlement now... not before the November election. It would be bad ‘optics’ for the re-election campaign. Alas, more Ukrainians and Russians will have to die to keep the chimera of victory alive. 

Looking more closely, we see that the Pentagon and its firepower industry partners prefer big budgets. They also prefer expensive, sophisticated weapons; the margins are bigger... the follow-up ‘support’ and ‘training’ and ‘maintenance’ bills are bigger... and when they fail, which is often, the replacements are another huge source of profit. 

National security concerns take second place. Andrew Cockburn: 

‘Successive “game changing” systems - such as the Switchblade drone, the M-1 Abrams tank, Patriot air defense missiles, the M777 howitzer, the HIMARS precision missile, GPS-guided bombs, and Skydio drones endowed with artificial intelligence, were all dispatched to “the fight,” as the military like to call it, with fanfare and high expectations. All were destined to fail... The $60,000 Switchblade drone, produced in limited numbers due to cost, proved useless against armored targets and was quickly discarded by Ukrainian troops in favor of $700 Chinese commercial models ordered online. The $10 million Abrams tank not only proved distressingly vulnerable to Russian attack drones but in any case broke down repeatedly and was soon withdrawn from combat...’  

Gustav C. Gressel adds detail: 

‘This is why Ukraine holds back the heaviest western fighting equipment like the M1 Abrams main battle tank. It is too heavy, and if it gets stuck in the mud, recovering this vehicle takes too long, and necessitates the assistance of at least two other main battle tanks. Such an assembly would be immediately targeted by the Russians.’ 

The corruption that leads Washington to misspend money it doesn’t actually have leads it to undermine the ‘services’ — such as national security — that it is supposed to provide. It also seems to distort the whole economy into a strange, unnatural thing — like a sinister lover, who flatters her victim, and leads him to his ruin.  

More to come...  

Regards,

Bill Bonner,
For Fat Tail Daily