Pay Close Attention to Who is Buying Bitcoin

Why the mainstream missed the best-performing asset of all time…and will continue to do so

In today’s Fat Tail Daily, are tech stocks overvalued? Many seem to think this is the case. If history repeats we could be at the start of a rotation out of tech and into commodities and energy stocks. And my geologist colleague James Cooper thinks there’s a rare opportunity in one particular oil stock. Read on for more…

The other day I had the enjoyable experience of being ridiculed as a ‘crypto bro.’

It made me laugh…

I mean, this chart shows what the person was ‘ridiculing’:

Bitcoin is the top-performing asset of all time across every single conceivable time period.

It smashes both gold and stocks.

And yet, I still often find that the general public’s perception is that it’s some sort of ‘scam.’

A ‘Ponzi scheme, only used by drug dealers,’ as another person replied to me on an online forum recently.

The mainstream financial media and well-known economists continue to push this view and mock crypto at every turn.

And yet, the good thing about markets is that opinions don’t make money. Only your results.

There is a truism here.

In my experience, the wider an investment idea is mocked or ridiculed by most people, the better it usually turns out to be.

The reverse is true, too.

But the facts don’t lie…

Bitcoin has delivered in spades for people who’ve been curious and independent-minded enough, to look into it for themselves.

So, yeah, laugh at Bitcoin and crypto all you want.

But so far, it’s the ‘crypto bros’ that are really laughing…all the way to the bank!

As I type (this is Friday as I’m writing ahead of the Monday public holiday), Bitcoin is knocking on the door of new all-time highs.

If it breaches the US$73,750 level, we enter price discovery mode.

And if other Bitcoin bull cycles are anything to go by, when this happens, things could get very interesting.

Check out this chart:

What’s really interesting, though, is who is driving this current price run.

You see, it’s not your usual retail-led rally.

Let me explain…

Demand intensifies

One thing that has held Bitcoin back over the years is that investing in it hasn’t always been easy.

To buy Bitcoin, you had to master new wallets, seed phrases, new exchanges, and a host of other challenges.

Back in 2014 when I first invested, things were a lot less developed than today.

It sometimes even meant physically meeting people to exchange cash for Bitcoin!

That’s how sketchy things were back then.

Over time, though, things matured.

Better exchanges sprung up, better wallets came online, banks got a bit more comfortable with it (though they can still be hard to deal with when it comes to crypto), companies like Coinbase listed on the stock market, and overall, the crypto industry got easier to use.

But until this year, it still wasn’t ready for the big time.

Enter the ETFs (exchange-traded funds)…

ETFs are a widely used product that makes it easy for investors to get exposure to a single asset or theme.

These days there are ETFs for everything – from AI, to biotech, and gold.

But nothing has matched the success of these new Bitcoin spot ETFs.

The success of the 11 Bitcoin ETFs that went live on January 11th this year can’t be understated.

As was reported in February, one month after launch:

Unambiguously, no exchange-traded fund has ever had a launch as successful as BlackRock and Fidelity’s Bitcoin ETFs.

100 days in, and things haven’t slowed down.

The ETFs are buying an average of 2,029 Bitcoin per day (US$143 million worth).

For comparison, only 450 new Bitcoin is created each day through a process known as ‘mining’.

ETF buyers are soaking up 4.5X new supply right now on average.

And last Wednesday, they bought a whopping 12,590 Bitcoin in just one day – a smidge off US$1 billion worth – as this table shows:

So, who is behind the ETF buying?

Senior Bloomberg ETF analyst Eric Balchunas explains:

That’s right, according to the average trade size, it’s not the retail minnows like you or me, but far bigger investors.

For further proof of this, check out this chart:

We’re knocking on the doors of new all-time highs, and no one in normie land is interested…yet!

The institutions, on the other hand…

Last month, through statutory regulatory disclosures, it was revealed a spate of big-name institutions had exposure to these Bitcoin ETFs.

The list of notable buyers included the 10th largest state pension fund in the US – the Wisconsin Investment Board.

The fund allocated 0.1% (US$160 million) to its portfolio—not huge, but it’s a start.

One Wisconsin professor who advises the fund expects this to rise to between 1-3%.

In my opinion, there will be a domino effect as one-by-one every financial institution scrambles to get exposure to Bitcoin as the price rises.

It used to be career suicide to own Bitcoin in financial circles.

Soon it might be suicide to NOT own any!

Luckily, we’re still in the early innings of this process.

As I continually tell people, Bitcoin still only makes up 0.1% of the world’s wealth.

Longer term I see this going to at least 5%.

In short, you’re not too late to take a considered – and sensible – stake in this exponential asset class.

1-5% is probably enough for most people, depending on their age and risk profile.

However, if you’re younger (in your 20s or 30s), you can afford to take on a lot more volatility and can consider upping this considerably, in my view.

And it just got a lot easier to do.

You see, Australia just got its first Bitcoin spot ETF last week.

Here’s how it works…

First Aussie Bitcoin ETF goes live

As I wrote to subscribers of my Crypto Capital service last week:

Australia’s first spot Bitcoin ETF went live this week.

Monochrome, a regulated company based out of Sydney, launched on Wednesday and trades under the ticker “IBTC.”

You can find out more about them here.

In many ways, this Aussie ETF has some compelling advantages over the US ones.

For example, the ETF allows you to withdraw your funds as Bitcoin [BTC] instead of just as cash.

That means if you ever wish to take custody of your Bitcoin, my understanding from speaking with accountants, is you can do so without triggering a taxable event (though check with your tax advisor on this).

You can also buy into the ETF using Bitcoin too, and the same tax advantages may apply (though again, get tax advice from a licensed tax agent on this first).

Another interesting thing about the Monochrome Bitcoin ETF is that they stated they’re looking to add partners that will let you borrow against your holdings in the ETF.

This feature may allow you to access funds without having to sell your Bitcoin at some time in the future.

Again, there are compelling tax reasons for this (as well as holding onto an asset we think will appreciate a lot over many years).

But the devil will be in the detail and I’ll await what kind of terms (i.e. interest rates) are on offer before I form a stronger view on this.

Still, borrowing against your Bitcoin in the future is an idea I’m very keen on exploring when we start to see the price close the gap with gold (about 14x from here!).

There’s a lot more going on in ‘crypto land’ than we have time to cover today.

But, in my opinion, you need to start ASAP before the opportunity to own the best performing asset of all time passes you by.

If you want to dip your toe into the Bitcoin space, this ETF could be a good place to start…


Ryan Dinse Signature

Ryan Dinse,
Crypto Capital and Alpha Tech Trader

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

thirty five  −  twenty six  =