Big profit opportunities in the bubble?

Friday 6th October 2017

Big profit opportunities in the bubble?

The world of money is like a piece of put-it-together-yourself furniture from Ikea….

When you unpack all the bits, it can be difficult to figure out exactly how everything fits together….

You can get things back-to-front, upside-down and the wrong way around….

And sometimes you end up with an extra screw that should be helping hold the whole thing together….

  • Bubbles can be profit opportunities….

I’ve called bitcoin a speculation bubble. Catch up herehere & here.

My mind hasn’t changed. But there’s an extra screw to deal with – something I haven’t made clear….

Bitcoin might be in a bubble, but that doesn’t necessarily mean there isn’t money still to be made….

Mike Novogratz makes an interesting point….

Market-watchers might recall that Novogratz was chief investment officer of the Macro Fund run by Fortress Investment Group in America – which closed-down in 2015 owing to heavy losses….

Novogratz went quiet for a while. Now he’s broken cover again and the cryptocurrency sector is where he’s pitched up….

  • Early success – and hungry for more….

Novogratz got into cryptocurrencies ahead of the recent interest surge….

In 2015 he bought $500,000 of ether – the Ethereum network cryptocurrency token….

Back then ether was trading at cents. Just weeks later it was up 500%+. Great timing? Good luck? Who knows….

Novogratz bought more and, over the next two years, Ether rose to $400….

Novogratz banked profits of $250 million – a figure that dwarfs profits from any of his other career trades….

And Novogratz, a man already referred to as ‘King of Bitcoin’, is hungry for more….

He’s reportedly setting-up what will be the world’s biggest hedge fund devoted solely to investments in cryptocurrencies, initial coin offerings and related assets….

  • Getting the animal spirits going….

Novogratz is putting up $150 million of his own money as capital. And he’s seeking to raise another $350 million by January….

He happily refers to bitcoin as a bubble….

‘This is going to be the largest bubble of our lifetime,’ he told Bloomberg TV.

But he doesn’t see the bubble as a bar to getting involved and making more profits. Far from it….

‘Prices are going to get way ahead of where they should be. You can make a whole lot of money on the way up, and we plan on it.’

In other words, Novogratz believes the bitcoin bubble is a long way from bursting. He expects to make profits as the bubble continues to inflate….

Novogratz ranks cryptocurrencies alongside key technologies and innovations that changed the way we now live….

‘Remember, bubbles happen around things that fundamentally change the way we live. Railroads fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going….’

  • The end of the story is not the focus….

I don’t know about peering 10-years ahead. Ten days is difficult enough for most of us.

Will bitcoin even exists in a decade? Won’t it have disappeared?

Might it not be usurped by some other cryptocurrency yet to emerge? Or will a current competitor replace it?

Or will the government shut the whole thing down with legislation?

I don’t know. On any count. Nobody does. Who could bet for or against any scenario with any real sense of certainty?

Nobody knows where bitcoin is going or how the story will end.

But, of course, for speculators and short-term profit-seekers, bitcoin’s long-term prospects are not the issue….

  • Capacity and sentiment….

Speculators and short-term profit seekers are focused only on trying to gauge how much capacity there might be in the bubble.

All the signs are that bitcoin will get plenty bigger yet….

Day-to-day developments suggest bitcoin is gathering momentum again – rather than fizzling out.

There may be wobbles and corrections along the way. Bitcoin wobbled and plunged in September – but just a fortnight on, most of those losses have been recovered and the ship has steadied….

And every day that dawns seems to bring positive news of one sort or another for crypto-bulls….

News that encourages and increases optimism; news that builds positive sentiment which finds expression in rising prices; news that suggests bitcoin is gradually moving along the road to wider acceptance, wider adoption and proper regulation….

  • Good news for crypto-bulls….

Samir Halimeh’s high-end jewelry boutique in Knightsbridge now accepts bitcoin.

So too do Lamborghini and luxury yacht broker, Nami. Mayfair-based gallery Dadiani Fine Art accept bitcoin payments for paintings.

These are high-end retailers selling their wares to very-high-net-worth individuals. Your local newsagent probably isn’t thinking about accepting bitcoin yet….

But each new high-end business offering bitcoin as a payment option brings us a step closer to some mass-market business taking the plunge and giving bitcoin some real mainstream legitimacy as an alternative currency or means of payment….

There was a rumor last month on Squawker that Amazon, one of the most prominent companies on the planet, might begin to accept bitcoin as a payment method as early as this month.

That development would be sure to send bitcoin values rocketing to new highs….

The rumor is unsubstantiated. Nobody knows the origin of the story. There has been no official announcement.

But you can imagine Jeff Bezos and his Amazon team are at least thinking about it….

I can guarantee that speculators will be hoping they are…. wishing they are…. fervently praying that they are….

  • Big boys climbing onboard?

Goldman Sachs are thinking too. Thinking about creating a cryptocurrency market place that would enable its client investors to trade directly in bitcoin….

If Goldman takes that step, it would be the first major Wall Street operation to allow investors direct access to the cryptocurrency sector.

There’s no firm plan in place and no timetable for implementation. But discussions are taking place with crypto-experts and there is a clear desire to provide a service that investors indicate they want access too….

The Wall Street Journal reports that Goldman’s currency-trading and strategic investment divisions are involved in the discussions – leading the newspaper to conclude that Goldman ‘believes Bitcoin’s future is more as a payment method rather than a store of value, like gold….’

Whatever the powers at Goldman believe, the fact that they are considering getting involved at all is more good news for crypto-traders….

Increased understanding, acceptance, adoption and usage will only drive the values of cryptocurrencies higher still….

Maybe, like Mike Novogratz says, bitcoin is set to go much higher yet….

And maybe he’s right when he says there’s still plenty of time to get in and out of this rising market with a big profit….

I can certainly see where he’s coming from. And who am I to argue with a man who has already banked a quarter of a billion dollars from cryptocurrency trades?

That’s how it looks from here….

More to come on Tuesday….

All the best,

Dave Gibson

Money Truths