What Bitcoin Needs to Go Totally Wild
Yesterday I told you that I wanted to buy some bitcoin last week. I didn’t get to transfer the money across to my crypto account until first thing Monday this week — and I mean well before 9:00am.
Even so, the money didn’t show up until this morning. In the meantime, bitcoin is now well over AU$6,000. This delay is becoming expensive.
It’s been a massive comeback for bitcoin since the fuss about China shutting down its exchanges last month.
Don’t let that price point put you off if you’re thinking of buying some.
You don’t have to buy a full bitcoin.
You can buy it in tiny parts, in the same way you don’t have to buy a full troy ounce of gold to get some exposure to the yellow metal.
This can give you a gateway to the other cryptos too…
What crypto needs to go wild
I saw something interesting in The Australian Financial Review this morning that confirmed something I’ve previously thought.
Governments regulating bitcoin and cryptocurrencies will probably make them more appealing, rather than less.
I know, I know. Part of the crypto appeal is the big middle finger they give to the establishment. I like that.
But if bitcoin is going to go to $10,000 and beyond, we need big institutional money to come in.
That will only happen once they’re legally in the clear. The compliance rules around anything to do with money are so onerous nowadays that this is only going to happen slowly, and cautiously.
Here’s what I saw in the paper this morning, from an Asian hedge fund manager.
Check it out …
‘“Cryptocurrencies are here to stay and given the world is searching for things to invest in, this bubble could continue to rise,’’said Danny Yong, the co-founder of the $7 billion Dymon Asia Fund.
‘But Mr Yong said he would not invest in cryptocurrencies because he could not get ‘‘comfortable’’with the security of the system.
‘‘‘It’s difficult for cryptocurrency to go institutional scale until we have more regulation. Right now the infrastructure is not secure enough.’’’
Ultimately, it’s guys like him who decide how to allocate the big chunks of capital swishing around the system.
Another interesting point on the appeal of crypto for institutional capital is that returns are so compressed everywhere else.
This entire space could run for years. You could also consider watching the ‘picks and shovel’ plays around the crypto space.
I’ve mentioned US stock Nvidia [NASDAQ:NVDA] in these pages before, for different reasons.
The crypto miners need powerful computers, and Nvidia’s are the best in the business. At the moment, its chip sales are growing from the crypto space. But they’re still a reasonably small percentage of its overall sales. It was only 6.7% of second quarter revenue, according to The Wall Street Journal.
The stock has had a big rise this year already — but there could be plenty more to come. Of course, should the crypto space run into trouble, it could spook some holders of the stock.
So there’s a bit of a canary in the coal mine about it (it went up 2% overnight, our time).
Then the next thing to watch for is…
Watch money pour in when this appears
A bitcoin exchange traded fund (ETF). There are two pain points when it comes to dealing with crypto.
One is the security of your holdings. The second is setting up your account and learning the ropes of this new market.
If an ETF can take these two hassles away, I think money will pour in from people chasing the price higher, and who are prepared to pay a management fee to ride the wave while it lasts.
This is why, if you’re going to join the bitcoin party, you need to take action now.
If you wait around until it actually gets going, there’ll be less and less people to sell your holdings to when it’s time to get out.
Tomorrow, I’m going to show you how to get started.
In the meantime, here’s my colleague Jim Rickards on why the US Fed and the markets are at a mismatch…and what it means for the world outlook.
Editor, The Daily Reckoning Australia