A little crypto knowledge is a dangerous thing…

Tuesday, 1 May 2018
Melbourne, Australia
By Bernd Struben

  • What about all that ‘mining’ energy?
  • Leverage up!

We take up today’s Port Phillip Insider where we left off yesterday — with cryptocurrencies.

Cryptos, at risk of stating the bleatingly obvious, are notoriously volatile — and risky.

Prices can rise 40% or more one day, only to tumble back down the next. It’s a market where you can make or lose a fortune in a matter of weeks — or even days.

Just take a look at EOS. With a market cap of US$13.76 billion, it’s the fifth largest crypto. I wrote about EOS yesterday. Here’s the relevant snippet:

EOS gained an impressive 62.14% over the week. That’s as of last Wednesday, when it was trading for US$14.61.

How has it done since then?

At time of writing one EOS token is worth US$19.68 — a 34.7% gain following on a stellar run.’

At the moment EOS is trading for US$16.65. That’s down 15.4% since I checked the price yesterday. And it’s down 21.3% from its peak in the last 24 hours, according to Coin Market Cap.

Bitcoin’s down a ‘bit’ too, having lost 2.35% in 24 hours. The lesser known bitcoin private, on the other hand, is up 16.95% in that same time.

It’s this kind of volatility that has some people believing putting your money into cryptos is more like gambling than investing.

Like Warren Buffett, for example, in an interview with Yahoo Finance on Saturday, said:

If you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more…

“There’s nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”

The Oracle of Omaha and CEO of Berkshire Hathaway is a legendary investor. His skills and knowledge in the markets have seen him become one of the world’s richest men.

So I say this with all due respect.

But taking advice on cryptocurrencies from an 87-year-old ‘buy-and-hold’ value investor who looks for companies with business models that are simple to understand is well…sort of like fishing for tips on the latest cybersecurity software at your local retirement village.

With that said, Buffett is right — to an extent.

If you don’t know what you’re doing with any investment, you are taking on a lot of additional risk. And jumping into any old crypto based on the day’s news is indeed not unlike betting that black comes up on the next roulette roll.

This is precisely why our in-house crypto expert Sam Volkering, alongside publisher Kris Sayce, are releasing a cutting edge ‘Crypto Summit’ next Monday, 7 April.

A little crypto knowledge can be a dangerous thing. A lot of crypto knowledge could see you getting into — and out of — some of the most profitable digital tokens of 2018.

More, after the markets…or you can click here to get all the details now.

Markets

Overnight the Dow Jones Industrial Average closed down 148.04 points, or 0.61%.

The S&P 500 lost 21.86 points, or 0.82%.

In Europe the Euro Stoxx 50 index finished up 17.74 points, or 0.50%. Meanwhile, the FTSE 100 gained 0.09%, and Germany’s DAX rose 31.24 points, or 0.25%.

In Asian markets, Japan’s Nikkei 225 is up 39.38 points, or 0.18%. China’s CSI 300 is closed for Labour Day holiday. The CSI 300 re-opens tomorrow.

In Australia, the S&P/ASX 200 is up 29.47 points, or 0.49%.

On the commodities markets, West Texas Intermediate crude oil is US$267.99 per barrel. Brent crude is US$294.35 per barrel.

No! Not really.

At time of writing West Texas Intermediate crude oil is US$68.68 per barrel. Brent crude is US$74.78 per barrel. But a leading oil hedge fund manager has tweeted that US$300 per barrel oil looks possible within the next few years.

From The Australian Financial Review:

Pierre Andurand, one of oil’s most prominent hedge fund managers, said the current reluctance of energy companies to invest in new production meant $US300 a barrel was “not impossible” within a few years.

Andurand, who’s often espoused bullish views, said in a series of tweets on Sunday that concern about the impact of electric vehicles on future demand was limiting investment in projects with long lead times.

“So paradoxically these peak demand fears might bring the largest supply shock ever,” he wrote. “If oil prices do not rise fast enough, $US300 oil in a few years is not impossible.”

At risk of calling the kettle black, I’d say Pierre’s $300 per barrel call is more about grabbing your attention than hard evidence backed analysis.

Yes, oil has had a strong run up over the last year, rallying in seven of the past eight months. Brent is now at three-year highs. A strong global economy and concerns over escalating tensions between the US and Iran — a major oil producer — are likely to keep pressure on the oil price for the coming weeks.

But before you go long on oil, consider that Trump may yet reach an amended nuclear deal with Iran. Even if he doesn’t, the fear of the fallout in the energy market from renewed US sanctions on Iran is likely larger than any actual consequences will be.

If you’re a regular reader, you’ll know I believe the oil price is heading the other direction — down. It all has to do with the resurgence in US oil production, predominantly through shale oil.

The massive increase in US production caught the market flatfooted in late 2014. Oil prices fell off a cliff into 2016, when WTI traded below US$30 per barrel. And it looks like history might repeat itself.

The picture below paints a thousand words:



chart image

Source: Bloomberg
Click to enlarge


And if you need the words to go with the picture…here’s this, from Bloomberg:

Oil drillers are working extra hard with crude prices rising near $70 a barrel.

Texas oil production jumped to 4.01 million barrels a day in February, almost 21 percent higher from a year earlier, according to the Energy Information Administration, the highest in EIA data since 1981. That helped push total U.S. crude output in February up 2.6 percent to a fresh record of 10.3 million.’

With US oil output at record levels…and growing…I wouldn’t hold my breath waiting for $300 per barrel oil. I suspect $50 is much more likely by the end of the year.

Turning to gold, the yellow metal is trading for US$1,315.03 (AU$1,745.23) per troy ounce. Silver is US$16.33 (AU$21.67) per troy ounce.

One bitcoin is worth US$9,061.01.

The Aussie dollar is worth 75.35 US cents.

What about all that ‘mining’ energy?

Not only will you hear that investing in cryptocurrencies is akin to gambling, but you’ll hear it’s environmentally unsustainable.

Why?

Because of the massive amount of computing power — and thus energy — required to mine new bitcoins. Not to mention the energy hungry networks supporting the other major cryptos.

As The New York Times notes:

‘[T]he computer power needed to create each digital token consumes at least as much electricity as the average American household burns through in two years, according to figures from Morgan Stanley and Alex de Vries, an economist who tracks energy use in the industry.

The total network of computers plugged into the Bitcoin network consumes as much energy each day as some medium-size countries — which country depends on whose estimates you believe.’

Those are some boggling statistics.

I asked Sam Volkering his thoughts during our filmed interview at Port Phillip Publishing’s ‘Paradox of Prosperity’ conference last month.

Sam cut right through the smokescreen.

First, he said, bitcoin miners and other crypto networks are already moving towards renewable energy, like solar, wind, hydro and even geothermal. And that process is likely to accelerate.

Second, he asked readers to ponder how much energy goes into supporting the world’s fiat currencies.

Think about the resources and energy that go into the global cash system. Not just the credit card and smart phone transactions, but creating the coins and bills. Storing and transferring cash from retail outlets, ATMs and between banks. Imagine all the people, vehicles, and buildings involved across the world every day to keep the system running.

And then there’s gold. A metal for which there’s little productive demand. One that’s most likely to spend its days locked in a vault. How much energy is involved in exploring for, mining, refining, shipping, and storing one ounce of gold?

I don’t know, to be honest. But it’s got to be a lot!

Now you won’t hear Sam and Kris discussing cryptos moving towards a smaller environmental footprint during next Monday’s ‘Crypto Summit’.

What you will hear about is Sam uses to spot the most promising cryptos out there — or ones about to be released. It’s a system that enabled Sam to help Aussie investors see gains like 1,168%; 1,176%, and 679% in July last year.

Sam will also explain why a US stock market event that occurred on 4 January this year, signals how Wall Street looks set to potentially pour vast sums of new money into the crypto market.

And if you’re after actionable advice, Sam has three crypto plays he believes could return 10 times your money this year.

All of that…and much more…at next Monday’s ‘Crypto Summit’. And Kris has decided to make the event free for any paid subscribers to Port Phillip Publishing’s advisory services. If you’re reading this, I assume that’s you.

But you will need to sign up in order to access the broadcast. You can do so, at no cost, right here.

Leverage up!

Got debt?

No worries.

Despite all the good news the government has been spruiking about the state of the economy, it’s apparently not rosy enough to bear an interest rate rise.

Today the Reserve Bank of Australia (RBA) left rates at the historic low 1.5% for the 19th month running.

Now before you sign off, here’s the latest in government intransigence from The Australian Tribune:

Major Parties Wilfully Blind to Benefits of Drug Testing

In an ideal world there would be no illegal drugs. And no reason to take them.

The real world, unfortunately, is awash with illegal drugs. And thousands of young — and older — Australians believe music festivals are reason enough to consume them.

With even hard-core law and order proponents forced to admit the drug war has been an abysmal failure, the time has come to look at harm minimisation. A strategy the ACT adopted in its drug testing trial at a weekend festival.

Despite the ACT trial weeding out two potentially deadly…’

If you’re fed up with 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.

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

Cheers,
Bernd