MBA, CSPO, former professional trader for Goldman Sachs and founder of OptionStrategiesInsider.com
The world is continuously changing, as we go through time, the same situations seem to play themselves out over and over again, just under new circumstances. Hopefully, we can all learn NOT to make the same mistakes as our ancestors.
If we look back to the old mining days, there was a wealthy miner named George Hearst who owned three of the highest producing mining operations in American History. However, acquiring those mines did not come easy for Hearst, as rumor has it, he used an arsenal of intimidation, manipulation, and trickery to get people to sell their claims for pennies on the dollar. One of his best tactics was to buy the local newspaper to circulate what we now call “fake news” to sway people’s views.
Hearst goal was to acquire claims on the cheap by scaring individuals into thinking the government was going to swoop in and seize their land. Fear started to settle in on the town, people would rather sell their claims at a deep discount to Hearst and let him take all the risk with the government versus taking a chance on losing everything. The problem was, the government was never really a threat as it was Hearst who started the rumors to begin with.
The strategy worked and Hearst made a fortune. Homestake, Hearst’s South Dakota gold mine turned out to be the highest producing gold mine in American history, producing 43,900,000 ounces of gold during its run between 1876 and 2002. In today’s prices, that would be more than $55 billion worth of gold.
Since the start of the year, I cannot go more than a couple of days without hearing about how a government is going to crack down on cryptocurrencies, some kind of investigation, or how the Securities Exchange Commission is going to try to regulate things they technically have no right to.
All this is happening while the investment banks are starting to take notice. Wouldn’t traditional money institutions taking an interest in cryptocurrencies cause the market to go up?
Jamie Dimon, the CEO JP Morgan has been bashing cryptocurrencies in the media while his London trading desk has been buying them up. That seems a little odd? Why would he be talking bad about cryptocurencies to the media and at the same time buying cryptocurrencies for himself? Oh wait, maybe it’s the George Hearst strategy.
Shortly after the first decline of cryptocurrencies in 2018, Poland’s central bank was accused of hiring a YouTubers, including Marcin Dubiel, one of the countries most popular YouTubers to create bad publicity for this new asset class. Why would they do that? Oh wait, they don’t want to buy cryptos when the price has already run up? It makes more sense to implement the George Hearst strategy.
Let’s also not forget the investor who came in to buy $400 million worth of bitcoin after the markets declined who wanted to remain anonymous. I wonder if their identity was a mystery because their actions did not match up with what they were saying in the press.
Mainstream media is being flooded with negative news about the cryptocurrency space, despite the fact that more and more big-league players are getting into the mix. From investment banks, massive hedge funds, to whole countries, measurable interest is continuing to pick up, yet prices continue to stay down.
The combination of bad press mixed with the “give me everything right now” attitude has developed fear within unexperienced traders, resulting in a panic-selling across the board. The big-time players are now able to buy in at exceptionally low prices compared to where prices were just a few months ago. They will continue to do so until people realize they need to stop selling.
Over the last couple of months, I have seen several eye-opening changes in the space that things are starting to move in the right direction. We need to ignore the rumors and look for the things that actually matter.
Bloomberg launches the Galaxy Crypto Index fund (BCGI). This is part of the Michael Novogratz’s Galaxy Digital Capital Management firm. Bloomberg will own and administer the index fund.
Facebook added Evan Cheng, the most senior director of engineering to its blockchain team.
Coinbase launches its custodial services for large institutional investors, minimum $10 million buy-in.
Goldman Sachs announces that it’s opening up a trading desk dedicated to cryptocurrencies.
George Soros, the billionaire investor is now buying up cryptocurrencies.
Andreessen Horowitz puts $300 million to work in a cryptocurrency fund.
The Rockefeller family venture capital firm is now said to be getting into cryptocurrency investing.
Susquehanna is now trading millions of dollars of bitcoin for its wealthy clients.
BlackRock, the world’s largest investment fund manager announces its intention to explore and most likely enter cryptocurrency markets.
Unfortunately, when it comes to investing, often the opposite of what we think we should do is the correct thing to do. When markets are high, and everything seems good, most people don’t even consider selling. However, this would ultimately be the best time to sell. Selling when markets are low just after being beaten up is never a good time to sell. This is the time to buy!
Just look back to the 2008 to 2010 real estate crash when no one wanted to purchase a home. Most people during this time were too scared to buy a home, but that did not stop the smart institutional investors from jumping in and buying up hundreds and even thousands of houses in one swoop.
The same thing happened in the dot-com crash, from 2000 to 2002 no one wanted to touch those tech companies. Even the industry leaders, reason being, media outlets were continuing to pump fear into their customers.
One of the best indicators when it comes to investing is to look at where the smart money is going. Not just what they’re saying, but what they’re actually doing. When I continue to see more and more tried and true financial institutions getting into the space, I know things are about to turn around. These companies are investing massive sums of money, not only into the crypto assets themselves, but into the next generation of architecture, the smartest people, and knowledge to dominate the space.
Don’t fall for the George Hearst misdirection strategy, keep your eye on what’s important and what’s actually happening, and not all the hot air that’s going to get you to sell your cryptos for pennies on the dollar. The big boys want you to sell, so they can get in at a price that makes sense for them.
Learn how to invest in cryptocurrencies with confidence.