Bostoncoin update Aug-Sep 2022
A whole lotta nothing going on
Crypto markets are gradually climbing up from their June doldrums, yet still have a long way to go to recover their previous highs. Amidst the general uncertainty of struggling economies “returning to normal” after the COVID pandemic, and the pointless ongoing war in Ukraine, not a lot has changed in the global sense.
Some things that may be impacting market prices are further warnings by the US Fed that interest rates may rise another percentage point by the end of the year. Recent comments by Fed chair Jerome Powell contributed to a flash crash as stocks dived lower in fear of further interest rate hikes.
Bitcoin prices are up around 10% from their June 2022 lows but investors who bought a year ago are still sitting on around 50% losses. (Congratulations if you bought in anytime before December 2020, as you are still in front!)
It is possible that suppressed pricing may occur due to the release of 137 000 Bitcoin from the 2014 Mt Gox hack. Bitcoin investors who held funds on the Mt Gox exchange lost access to their Bitcoin eight years ago when the BTC price was under $400. Now that funds are finally in the process of being restored, many of these forced long-term holders may be looking to sell. This selling would naturally keep prices down, even as Wall Street is stocking up.
Wall Street buying whilst Main Street sells
As many Mt Gox clients are selling their Bitcoin for 7500% gains, and some of last year’s investors may be selling for a loss, some of the largest companies in the world are buying up billions of dollars worth of crypto for the future.
· 40 top companies and financial institutions invested more than US$6 billion into blockchain enterprises in a 10-month period
· Samsung is investing $980 million and launching a Bitcoin and crypto exchange
· Google (Alphabet) has invested $1.5 Bn into blockchain and crypto companies
· Fund manager Blackrock has invested $1.2 Bn into crypto
· Morgan Stanley has invested $1.1 Bn
· Goldman Sachs $700 million
· NY bank BNY Mellon $690 M
· Paypal invested $650 M
· Microsoft another $480 M
· Commonwealth Bank of Australia has invested $421 M
· Citibank $215 M
· Wells Fargo $165 M
· LG $129 M
· Amex $115 M
· One of Malaysia’s largest banks, Kenanaga, is launching a platform that will allow 500 000 customers to buy stocks, cryptocurrency and foreign currency all from the one app
· According to a report by KPMG, investment in Singapore’s crypto and blockchain companies has surged to a record US$1.48 billion, 10 times the previous year’s total
· Fidelity Funds management has added crypto asset investing to members’ 401K accounts (for those outside of the USA, this is all of Fidelity’s “superannuation” or retirement funds)
It is interesting to note that the vast majority of people rate themselves as “smarter than average” (which is statistically impossible). Most people will think they are wise to line up around the block when the local supermarket or appliance store is having a 25% off sale. Yet when stocks, shares, property or crypto are showing price drops of 25-50%, the average person wants to run the other way.
Legendary investor Benjamin Graham (and mentor to Warren Buffett) advised savvy investors to “buy straw hats in winter”; that is, buy when demand is low and sell when demand is high.
One can see that the “smart money” on Wall Street is stocking up on cryptocurrency and blockchain technology, months before proposed regulations come into the space. If you wish to be an extraordinary investor, perhaps emulate billion-dollar hedge fund managers and avoid the naysayers. If your friends or the Youtube bobbleheads were great predictors of stock or crypto markets, they would probably be earning seven figures on Wall Street, not just talking about it…
If you study the charts, it may well see that there is “a whole lotta nothing going on”, with many crypto projects tracking sideways or making modest gains in the past few months. But look a little deeper and you will see that the wisest money managers are buying what the less-wise are selling.
We anticipate much higher gains in the market when Main Street catches onto what Wall Street has been doing. Those gains could then increase exponentially when crypto legislation passes, making cryptocurrency another asset that your accountant or financial planner can recommend for your portfolio.
At present, there is over $10 Trillion in institutional fund managers’ portfolios invested into regulated stocks and bonds. Imagine what will happen with a regulated crypto market, if 5-10% of that institutional money is allocated to cryptocurrency. Some quick math indicates that many of the popular cryptocurrencies could easily double in price. This dramatic rise may in turn lead to further gains, as “FOMO” (Fear Of Missing Out) sets the broader markets aflame.
When the stock and crypto markets surge rapidly upwards, general market psychology will see fools rushing in, at the exact time that Graham and Buffett may be walking out.
What are we up to?
Long-time readers of the newsletter will know that Bostoncoin was not only the world’s first diversified crypto fund, but also the first crypto mutual fund to be listed on Morningstar, as a first step toward institutional adoption.
We continue to actively market to financial planners and accountants as we count down to the proposed crypto regulatory environment. If your friendly local CPA or CFP has not yet heard of us, make sure to provide an introduction as soon as you can; we anticipate a stampede of demand after January 2023. Yes, we will provide rewards for you, if you introduce us to a “crypto-curious” client.
The flagship Bostoncoin portfolio is mostly down along with the broader market (again: a great buying opportunity!) yet there are always some standout performers when you have diversification.
Whilst Bitcoin is still down (-)54% for the year, we saw gains from our investments in:
Cronos CRO up 118%
Gala GALA up 284%
Kadena KDA up 442%
As at Aug 31 2022
BOS NAV 70.9892386
BOS Price 78.0881624
DART NAV 102.062147
DART Price 112.268362
POLLY NAV 0.909
Polly Price 1.00
That is all from us for another month. Take care out there in Cryptopia, as well as in the broader investment world. There may well be some more short sharp shocks along the road to recovery. Grab some bargains if you are able, buy the dips if you can, hold if you cannot, and stay focused on the longer-term horizon. Our puppy pack know that crypto and blockchain are the future; we are just waiting for others to find out.