October was an excellent month for crypto markets. Bitcoin rose 29% in October, bringing returns on the original cryptocurrency to 109% for the year. Ethereum was up almost 10% for October, and the long-sleeping Solana jumped 77% for the month. Yes, up 77% in a MONTH.
Whilst Bitcoin went up, we also saw some sharp drops in the $hitcoin market, including 53% drop for Wall Street Memes, 44% loss for Shiba Saga and a 29% loss for the ironically named SafeMoon. The selling of junk to buy quality made us almost feel that the crypto markets were starting to mature… and then we saw that ridiculous and useless frog-faced memecoin PEPE v2 was up 642% for the month. Remember when NFTs shot up like a rocket, then crashed 99%? Some markets do ‘ave ‘em…
As market regulations get closer, we feel junk coins may sink, and there will be a flight to quality. Stay tuned to watch what happens to most altcoins when they have to become registered, audited and counted for tax, just like traditional fund managers…
Regulations are incoming
After many reissues and redrafts, the UK Treasury has released its final proposal for crypto asset regulation. The document states that firms undertaking crypto asset activities must now be authorised by the UK's Financial Conduct Authority. The authorisation will include a stipulation for crypto exchanges to create detailed requirements for admission standards and mandate disclosures when listing new assets. Treasury states that DeFi will be addressed at a future date.
If you have not been following the crypto news, or if you missed our ETF updates here, our ETF price prediction from six months ago here, ETF update here, the $400 000 price prediction here or the 300% charting forecast here, then you may be unaware that many major financial institutions are applying for Bitcoin ETFs or exchange-traded funds.
In the $400 000 price prediction link above, we commented on the hypocrisy of the Securities Exchange Commission (SEC) in the USA, and the fact that the US government was missing out on innovation (and income!) whilst other regions such as the UK, EU and Asia were much friendlier to crypto companies.
The US Court of Appeals heard last month’s case between Grayscale and the SEC, and decided that the SEC was wrong and capricious when declining the BTC ETF application. The SEC has stated that they will not contest the court's decision, thus laying the path for possible approval of several Bitcoin ETFs in the next 90 days.
The SEC had previously stated their “come one, come all” philosophy; if one Bitcoin ETF were to be approved, then they would approve all other complying applicants on the same day. This would mean that no institution received an unfair advantage by being able to accept funds before anyone else.
Theoretically, we could see Bitcoin ETFs launched by Blackrock, Fidelity, Grayscale, ARK Invest, Wisdom Tree and half a dozen others, all on the same day. What do you think will happen when ten new storefronts open to sell a simple way into crypto, and there is a severely limited supply?
(For a hint, refer to what happened when an ETF was created to allow a simplified way for people to buy gold. After having sat flat for almost thirty years, the gold price rockets up over 300%, at the exact time when the new ETF was introduced.)
We cannot guarantee that the Bitcoin price will rise 300% when a slew of ETFs appear on the market, but we will say that a higher demand with a low supply generally makes prices go up.
There will be other factors pushing prices up, and those who want to sell for a profit and crystallise some gains may cause prices to drop after a rise, so we could see a saw-tooth pattern with a few sharp drops on the way up.
Crypto from your financial planner?
If you have dealt with a financial planner (FP) or financial adviser (FA) in the last few years, you may know that some are independent, and some are bonded. For example, the planner inside Westpac could only recommend products that were branded Westpac or BT (as Westpac owned BT). The planner inside CommBank could only recommend products from CommBank or Colonial (as CBA owned Colonial). Ditto for ANZ and OnePath, NAB and MLC, and AMP and AMP.
This may have seemed like a conflict of interest, as the financial planner would not necessarily recommend the “best” product for you, but just the best one that they happened to have on hand.
We could compare this to any other product or service provider. If you visit the Toyota dealer, they will not recommend you buy a Ford, and the person in the Ferrari showroom will not tell you to buy a Lamborghini. For a truly independent point of view, you must visit an independent financial planner (or an independent car broker).
It has been an industry standard for decades that your financial adviser would receive an upfront payment for placing your investment, as well as an ongoing payment for monitoring the investment and keeping you appraised of any changes required. This could be compared to the car dealership making a few dollars when you first buy the car, and then a few dollars every year when you have it serviced.
Up until now, financial advisers, accountants and other financial professionals have not been able to charge clients for advising them on cryptocurrency, nor placing crypto investments or monitoring them. This meant an absolute dearth of financial advice around crypto: why would a professional adviser give crypto advice if they are not being paid for it?
And then, all of a sudden, everything changes. With the advent of Bitcoin ETFs, Ethereum ETFs and other crypto-ETFs to follow, crypto will become a regulated financial asset. That means that your financial adviser can start charging you for crypto advice, crypto placement and crypto monitoring.
We shared a post on LinkedIn a while back, showing that over 80% of financial advisers have had clients ask about crypto, and almost 25% of financial advisers own crypto in their own name. Still, less than 10% of advisers put their clients into crypto.
There is a possibility that the advisers do not recommend crypto to the other 70% of clients because
- crypto is unregulated (for now), and/or
- crypto has no ongoing adviser payments (for now)
The perfect storm
If upcoming regulations, ETFs and crypto-planners were not going to be exciting enough for you, here’s a little more fuel for your rockets.
All of these events will happen around the time of the next Bitcoin halving. We have spoken of the Bitcoin halving (or “halvening”) several times, here, here, here, and here. Without labouring the point, when something becomes twice as scarce, Economics 101 tells us it should become twice as valuable.
This math is not always perfect: when Bitcoin became twice as scarce in 2012, the price rose not by 100% but over 1000%.
When Bitcoin mining rewards halved again in 2016 and BTC became twice as scarce, the price did not rise by 100% but almost 3000%.
The previous Bitcoin halving event in early 2020 saw not a 100% gain but a completely fantastical 1000% gain.
Of course, after these massive run-ups, the BTC price did crash somewhat, but a 3000% gain followed by a 60% crash is still a net positive result (even if it feels tough on the blood pressure!)
There is a slim possibility that we will see a perfectly rational market, and the Bitcoin price will react to the next halvening event by only doubling its price to match the doubling of its scarcity.
However, based on past market history (histrionics?), it is more probable that the Bitcoin price will massively overshoot its target before scaling back to normality. Grab your popcorn and stay tuned.
Quick updates:
Do as we say, not as we do: We reported on Facebook that legendary investor Warren Buffett has been making money from crypto in private, despite him insulting it in public. Buffett’s investment in crypto-friendly Nubank is up 73% this year.
Thailand’s fourth largest bank has just paid $100M for a crypto exchange and will allow crypto custody services for its banking clients. https://blockworks.co/news/thailand-bank-stake-crypto-exchange
Swiss bank Sygnum offers crypto purchasing, crypto custody/storage and staking of ETH, ADA, ATOM, ICP and XTZ for its clients. https://www.sygnum.com/digital-asset-banking/staking/
Large Swiss bank SEBA is also allowing ETH staking for their customers https://forkast.news/seba-bank-ethereum-staking-services/
If your friends wonder if crypto is a fad or is here to stay, let them know that the banks are stepping in.
It’s all Greek to me (or how to sound smart at parties)
There is a lot of jargon in investment circles. In addition to acronyms such as ASX, NASDAQ, DJIA, PEG, NTA and fancy words for income (rent, yield, dividend, premium), pointy-headed investment boffins also like to use Greek words. (Maybe the lawyers used all the good Latin words?)
You may have heard of Alpha, which is outperformance. If the broad market returned 10% and XYZ investment returned 12%, it has a 2% alpha. All investors want to beat the average, so they all seek alpha… but
There is also Beta, which is volatility, or ups and downs. Assume that XYZ investment returned 12% whilst the market went up 10% (2% alpha). Imagine that the broad market made 10% by going up 15% and down 5%, which is common enough. Now imagine that XYZ made its 12% by rocketing up 45% and then dropping 33%; that is a little scarier.
A beta of 1 is the same as the average market. A beta of 0.5 means the investment is only half as volatile as the average market, which is reassuring for those who like lower risk.
A beta of 3 means that the investment has three times as much up, and three times as much down as the average market. For example, if the market goes up by 10%, XYZ could zoom up 30%. Also the reverse: if the market drops 10%, XYZ could drop 30%. Whilst investors all want additional alpha, they usually want to minimise beta. Great returns with less rollercoaster; that is the dream 😊
For those who want to get super complex, yes, there are more Greek letters in investment circles, such as Gamma (and 20+ more letters we won’t go into today).
Bitcoin has been facing a Gamma Squeeze (or ‘short gamma’) in the last month. This is fancy Greek terminology for “there is not enough Bitcoin to go around”.
Traders can buy or sell options contracts for an asset (e.g. Bitcoin) at any time. Whenever that happens, the entities that offer options contracts take the opposite side of the trades. This is called “gamma hedging”, and market makers do this by buying/selling the underlying asset (e.g. BTC) as prices move.
Recently there has been huge demand for Bitcoin call options, as traders expect prices to rise. As prices increase, market makers need to buy more BTC to hedge and maintain their position. The result is something called a “gamma squeeze” (like a short squeeze).
BTC prices go up → so market makers need to buy BTC → which pushes BTC prices higher → forcing market makers to buy more BTC → so BTC prices go even higher → leading to big green candles.
Many believe that this is part of the reason why Bitcoin saw such a big pump last week. Wall Street Analysts think it could happen again soon.
According to Alex Thorne, head of research at Galaxy Digital, said on Twitter, “if BTC moves higher than US$35 750, options dealers will need to buy $20m in BTC for every 1% upside move, which could cause explosive (price rises) if we begin to move up towards those levels.”
As Bitcoin is already up almost 30% for the month and over 100% for the year, any gamma squeezes that require Wall Street to buy more Bitcoin is great news for those who are already in, and good news for those who get in before regulators and financial planners open the floodgates.
WARNING: with institutional inflows of funds comes institutional behaviour and institutional algorithms.
- [ ]This next year could be the very last of the crazy crypto gains where prices rocket up 300% to 1000% or more. The reason is that large institutions often use algorithms, formulas or artificial intelligence to trade. For example, if prices on an investment drop more than 10%, the computer can buy, driving prices back up. If prices rise by over 20%, the computer can automatically sell, driving prices back down. The reason that crypto has had crazy rises of 3000% and crazy drops of 80% is because crypto has been traded by emotional or irrational humans and not unfeeling robots. Gains and dips in the stock market are generally no more than 10-20% in a single day due largely to automated trading. When automation comes to crypto, prices may be far more stable than we have ever seen before. Gains and losses may become more in line with the stock market averages of 10-20% per year.
You have now been warned.
How did we go this month?
Bostoncoin
In addition to the gains made by BTC, ETH and SOL mentioned in the first paragraph, we have seen some nice action in the altcoins and look forward to more.
XRP up 127%
Litecoin up 125%
Assemble up 119%
As at Oct 31 2023
BOS NAV USD 46.7181896
BOS Price USD 51.3900086
BOS NAV AUD 67.8335743
BOS Price AUD 74.6169318
The Bostoncoin portfolio has a 53% gain for the year, 166% gain over three years and 197% gain for the past five years. There have been some dips along the way, but consistency and persistence always pay off.
DARTcoin
Now that you have learned about Beta, you will know why the DARTcoin outperforms in bull markets and drags the chain in bear markets. For those who have the patience and the intestinal fortitude, you could consider a small amount in the unhedged DARTcoin fund, noting that it is far higher risk than the more balanced and comparatively conservative Bostoncoin fund.
Thorchain up 556%
Render up 460%
TRON up 152%
Fantom up 109%
As at Oct 31 2023
DART NAV AUD 94.4308824
DART Price AUD 103.873971
DART NAV USD 60.4357647
DART Price USD 66.4793412
The DARTcoin portfolio has only been around two years versus the Bostoncoin seven-year history. Year-to-date gains are 134%. We are focusing forward on what the next altcoin season will bring.
Share the love and win big
Please share the love by sharing this post with a friend. If you are not motivated to help your friends make great returns whilst learning more about crypto, we will not assume that you are a terrible person; no judgment. We can assume you may need to be bribed with an exclusive Bostoncoin umbrella...
A quality folding brolly, the same size as a thin water bottle, the Bostoncoin umbrella will fit easily into a handbag, briefcase or backpack. Easily compared to a Davek brolly that retails at $169, the Bostoncoin umbrella will protect you from sunburn on a clear day, save you from soaked hair on a wet day and can also be used to (if you happen to be Sean Connery).
To get your hands on the best-looking protection for your best-looking asset, be sure to share the newsletter link, add the hashtag #Bostoncoin and tag @TradingBoston on Twitter (X) or @BostonTradingInc on Facebook (META). We will give ten umbrellas to random people who correctly follow the sharing instructions. Good luck!
If your crypto-curious friends do not like to read, and prefer to watch videos, send them this link and tell them to watch the first 15 minutes. This is a very simplified overview of how to make money in crypto, and comparing Bitcoin to the gold rush and gold mining days of old.
We are happy to do more “bite-sized” 15-minute live updates followed by 15 minutes of Q&A; your demand will lead this, so reach out and ask. We will create a webinar based on your questions and requests.
JB
