Why the crypto market could hit US$21 trillion

Tuesday, 2 January 2018
Melbourne, Australia
By Bernd Struben

  • It certainly wasn’t dull
  • Could cryptos cause the next global financial crash?
  • Our editors’ best ideas for 2018

Well that’s it. Another year done and dusted.

Welcome to 2018.

I hope you took some time to unplug over the holidays to enjoy some festivities with friends and family. Not to mention a little ‘you time’.

That is, after all, what we work hard for. Whether that’s scouring the markets for the next big investment opportunity or tolling away at our day jobs…or both.

At the end of the day it’s not the money in your bank — or crypto — accounts that matters. It’s what that money enables you to do.

Speaking of making money…I hope you also enjoyed the guest essays from our charting guru, Terence Duffy over the holiday break.

Terence is a long-time acolyte of Phillip J Anderson, the editor of Time Trader and Cycles, Trends & Forecasts. And the charting skills Terence shares in Money Morning Trader has me thinking that the student may be surpassing the teacher.

Or at least drawing even…

Five days per week, Terence details how the day’s charts can tell you everything you need to know about the economy…and the stocks about to move. Once you know how to properly read a chart, Terence explains, the stock market itself tells you which stocks to buy.

That’s a bold claim. But Terence backed this claim up over and over again in 2017. And he aims to do the same in the year ahead.

In this morning’s issue he profiles an ASX listed gold minnow. One the charts indicate may have a profitable run ahead of it. Certainly one to watch.

If you haven’t already, you can check out Money Morning Trader here.

Now a look at the markets.

Markets

In the last day of trading in 2017 before the holiday weekend, the Dow Jones Industrial Average closed down 118.29 points, or 0.48%.

The S&P 500 fell 13.93 points, or 0.52%.

In Europe, the Euro Stoxx 50 index finished down 20.35 points, or 0.58%. Meanwhile, the FTSE 100 gained 0.85%, and Germany’s DAX fell 62.30 points, or 0.48%.

In Asian markets, Japan’s Nikkei 225 remains closed for the holidays. China’s CSI 300 is up 1.23%.

In Australia, the S&P/ASX 200 is down 19.73 points, or 0.33%.

On the commodities markets, West Texas Intermediate crude oil is US$60.24 per barrel. Brent crude is US$66.87 per barrel.

Gold is trading for US$1,306.43 (AU$1,673.84) per troy ounce. Silver is US$17.02 (AU$21.81) per troy ounce.

One bitcoin is worth US$13,863.53.

The Aussie dollar is worth 78.05 US cents.

It certainly wasn’t dull

You can say what you like about 2017, but it certainly wasn’t dull. Even if the US did manage to avoid — or at least delay — a military confrontation with North Korea. One which, despite Kim Jong-un’s latest overture to South Korea, I believe remains all but inevitable.

But we’ll leave that depressing prospect, and how best to prepare your portfolio, for another day.

Riding on the coattails of booming US markets, the ASX 200 enjoyed its best performance in years, finishing 2017 up 7.1%…not including dividends.

The average superfund — including dividends earned — returned 10.5%. With inflation tracking around 1.8%, you won’t hear too many complaints about that.

Small-cap stocks did even better. The ASX Small Ordinaries —  the benchmark for small-cap Australian stocks — returned 15% last year, again without including dividends.

But I don’t have to tell you where the real action was.

That’s right, cryptocurrencies.

In the beat of a single year, cryptos went from the obscure plaything of geeks to mainstream investment assets.

On 10 December, the Cboe Futures Exchange — followed shortly by the much larger CME Group — launched the world’s first bitcoin futures contracts.

I reckon it’s only a matter of time before ether, ripple, and a host of other upcoming cryptos get their own futures’ exposure.

Which leads to the question…

Could cryptos cause the next global financial crash?

This is a question I gave a good bit of thought to over the holidays.

As at writing, the total market cap of all 1,300 odd cryptocurrencies stands at around US$633 billion (AU$811 billion), according Coinmarketcap.

That’s a fair chunk of change. But not nearly enough to send world markets into a tailspin, even if they all went to zero overnight.

However, take a look at the chart below:



chart image

Source: Coinmarketcap
Click to enlarge

This chart gives you an idea of the meteoric rise of cryptos over the past 12 months. It’s hard to tell on the graph, but on 1 January 2017 the total market cap of all cryptos was a measly US$18 billion.

That works out to a 3,416% rise in their combined market cap in just one year.

If 2018 sees digital tokens come even close to repeating last year’s performance, then they’ll be in a much stronger position to influence global wealth…both up or down. Especially as more investors take advantage of futures trading.

Already, analysts at Nomura are predicting that the massive gains made by bitcoin could see Japan’s GDP (gross domestic product) bump up by 0.3% this year. That’s in the world’s third largest economy, mind you.

From Bloomberg:

The digital coin’s 1,500 percent rally this year has left crypto-crazed Japanese investors likely sitting on hefty gains that Nomura thinks will spur consumer spending.

“Rises in asset values often result in a rise in consumer spending, too, known as the wealth effect,” the team, led by Yoshiyuki Suimon, wrote on Friday. “We estimate the wealth effect from unrealized gains on bitcoin trading by Japanese investors since the start of fiscal year 2017, and estimate a potential boost to consumer spending of 23.2-96.0 billion yen.”

The note points out that trading volume in the bitcoin market is roughly 40 percent yen, which is larger than even the U.S. dollar’s share…“[W]e estimate a potential boost to real GDP growth on an annualized quarter over quarter basis of up to about 0.3 percentage points,” Nomura said.’

This time last year, who would have thought bitcoin could have a material influence on the Japanese economy?

Certainly not your editor.

And this time next year, what will the crypto market look like? A US$21 trillion behemoth?

Perhaps.

Though I think the rate of growth will slow. (At some point it has to!) But I do believe it will be much larger than what we’re looking at today. Meaning if cryptos are the ‘black swan event’ to take down global markets, that’s likely a few years off yet.

Whether you’re investing in cryptos or not, it’s certainly a market to watch. And to stay atop a brand new market that moves this fast — growing 3,416% in one year — you need analysts who are well versed at thinking outside the box.

That’s where advice from Sam Volkering and Ryan Dinse, our in-house crypto experts, can prove invaluable.

At their introductory service, Secret Crypto Network, they keep their readers atop of the most important moves in digital assets. They’ll tell you which tokens look likely to go up…and which ones to avoid like the plague.

You can get all the details here.

Our editors’ best ideas for 2018

Just a quick reminder to our Alliance Partners.

You should have received the ‘Christmas Best 2017’ report on Christmas morning. If your Christmas was anything like mine — I have an eager four-year-old — you might have missed this.

So be sure to check your inbox from 25 December.

You’ll find the single best investment idea from nine of our editors and analysts. These aren’t official recommendations. Rather, they’re nine different ideas for you to chew over in the new year. If any of them strike your fancy, you’ll want to do your own research before investing.

This is just one of the ways we like to say ‘thank you’ to our valued Alliance Partners each year.

And finally…

In today’s Australian Tribune: ‘Trump Blasts Pakistan Over “Lies and Deceit” in First Tweet of 2018

You could forgive US taxpayers for being frustrated with lack the results from America’s foreign aid. Particularly when it comes to the war on terror.

The US$33 billion handed over to Pakistan since 2002 is a case in point. And President Donald Trump has now turned his ire on the Pakistani government.’

The Australian Tribune is Port Phillip Publishing’s new, politically oriented newsletter and website.

If you’re fed up with reading sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

Or visit our website at https://www.theaustraliantribune.com.au/ to read the complete article now.

Cheers,
Bernd