Wednesday, 25th July 2018
Mixed signals & opportunity….
I had intended to bring you my idea of the next big thing this week….
But that can wait. It isn’t going anywhere. And my attention has been focused on something else over the last few days….
I’m starting to get very interested in the mixed signals we’re getting about cryptocurrencies….
- Don’t get me wrong….
Now, people will say that I’ve been negative about cryptocurrencies myself in this column….
But that would be to miss the point….
I was negative about the price activity of Bitcoin last summer….
I believed that prices were in a speculation bubble that was unsustainable and sure to end in tears….
And I was right about that. 100% right….
But I am not and have never been negative about cryptocurrencies as a concept….
I believe cryptocurrencies have a role to play in the future financial system and that they are here to stay in one form or another….
So, it is very interesting to me that so many dyed-in-the-wool financial establishment people and institutions are out there banging the drum AGAINST cryptocurrencies….
- A bombardment of negativity….
In May, mild-mannered octogenarian super-investor, Warren Buffett, described Bitcoin as ‘rat-poison squared….’
His sidekick, Charlie Munger, went further. He said:
‘Suppose you could make a lot of money trading freshly harvested baby brains. Would you do it? To me Bitcoin is almost as bad….’
Then 94-year-old Munger went further still and compared Bitcoin traders to clueless people with dementia trading fecal matter just to keep up with everyone else….
‘[It’s] like somebody else is trading turds and you’re being left out….’
Bill Gates was not quite so graphic the same month. He kept it on the down-low and painted cryptos as a simple tool of heinous criminality….
‘Right now, cryptocurrencies are used for buying fentanyl and other drugs, so it is a rare technology that has caused deaths in a fairly direct way….’
Bill Harris, the founding CEO of Paypal Holdings Inc, stuck to the tried and tested route of referring to Bitcoin as a scam – calling it a ‘colossal pump-and-dump scheme’….
Google has very publicly banned all Bitcoin and cryptocurrency advertisements on its platform. Facebook and Twitter – the other social media heavyweights – have followed suit….
Fed Chairman, Jerome Powell told members of Congress this about Bitcoin: ‘Relatively unsophisticated investors see the asset go up in price, and they think: ‘This is great; I’ll buy this.’ In fact, there is no promise of that. There are investor and consumer protection issues as well….’
Billionaire Howard Marks, co-founder of Oaktree Capital Management, said last week that he believes Bitcoin will fizzle out. ‘In the long run, I think it will be shown not to have any substance.’
Hedge fund billionaire Ken Griffin says this: ‘I don’t have a single portfolio manager who has told me we should buy crypto….’
Just last week, Larry Fink, the Chief Executive of BlackRock Inc (with $6.3 trillion in assets under management, BlackRock is the world’s largest asset manager) said he doesn’t see any ‘huge demand for cryptocurrencies’….
- Saying one thing and doing the opposite….
I’m not sure how to take Mr. Fink’s comments – just to focus on one critic….
It seems odd to me that while he says he doesn’t see any ‘huge demand for cryptocurrencies’, the asset management company he oversees has openly set up an internal working group to study blockchain technology and cryptocurrencies….
There’s clearly some interest in the area. But the statements Mr. Fink makes for public consumption is careful not to reflect it….
And I think this ‘say one thing and do another’ policy is becoming a consistent theme….
The mainstream media – the media that informs the masses – has been disseminating a lot of negativity for several months about cryptocurrencies generally and Bitcoin specifically….
We’ve seen a fraction of it from the likes of Buffet, Munger, Gates, Marks, Google, Facebook, Twitter et al….
These influential individuals and institutions are actively peddling the message – through words and/or actions – that Bitcoin and other cryptos are bad news. For society and for investors….
And they are not alone. Dig around and you find no end of ‘influencers’ coming out and condemning cryptocurrencies – particularly Bitcoin – as one form of evil or another….
Depending on who or what you read, Bitcoin is a scam, a tool for criminals, a fad for fools and geeks, an investment destined to hit zero or a threat to democracy and civilization as we know it….
The message is quite clear: stay away because this thing is bad news and anybody who gets involved with it is going to get badly burnt….
- On the flip side….
The interesting thing is that while that negative message is being propagated and transmitted via the mainstream media platforms, big financial institutions – the savvy and streetwise major players who manage investments and assets worth hundreds of billions – are busy getting involved or preparing to take stakes in the cryptocurrency sphere….
That’s right, the major players are moving into the very sphere the rest of us are being warned to stay out of via the mainstream media….
And they’re doing it at a time when Bitcoin is a long way off the high-water-mark prices of 2017….
Convenient? Conspiracy? Or just coincidence?
We don’t know. But what we do know is that the Rockefeller family is getting into cryptocurrencies. So too George Soros.
Goldman Sachs has already announced its intention to set up a cryptocurrency trading desk. Wellington Capital has announced its intention to start trading bitcoin. Plenty more institutional players are warming up on the touchline….
Coinbase – a major player in the world of cryptocurrency exchanges – has set up custody services targeted specifically at high-net worth investors and institutions….
The big insurance companies are starting to tailor products that target risks in cryptocurrency investment….
The CFA Institute has announced it will add cryptocurrency and blockchain questions to the grueling test required to become a Chartered Financial Analyst (CRA) starting in 2019. That’s a sure sign that Wall Street is increasingly including cryptocurrencies in its investment plans….
And if the CBOE Bitcoin Exchange Traded Fund (ETF) gets the go-ahead from the Securities & Exchange Commission in the next few weeks, that could be a real magnet for institutional money and a real game-changer….
- The bottom line….
The major players are slowly but surely accepting that cryptocurrencies are here to stay. And the infrastructure, development and support required to attract their participation is being built and put into place….
That acceptance is not generally being reflected in the public announcements of officials and big players. Quite the opposite….
But I’m not interested in what the big players are saying. I’m much more interested in what they are doing….
In the background, the big money from institutions and major investors is starting to make its way into the crypto-sphere….
Right now, it represents a trickle. But that trickle will grow into a swollen river amounting to tens of billions – a flood of cash that can’t help but increase the value of all the major cryptocurrencies….
The conspiracy theorists will say that the crypto-sphere has been intentionally depressed – with the little men scared-off – so that the big money can buy at value prices. There may be something in that argument….
But the bottom line is this: the money from big investors and institutions is the fuel that is going to drive another crypto bull market….
I’m starting to think about emptying the piggybank….
That’s how it looks from here….
All the best,