A visionary investment call

Monday, 24 June 2019
Adelaide, Australia
By Bernd Struben

Before we get into your latest stock alert, I should point out that I’m not actually recommending a stock today. I’m still recommending an investment — of sorts — it’s just not a stock.

Confused? OK, let me get right to the point then. Your latest investment recommendation is to buy bitcoin.

Sam Volkering, 23 November 2016

Have another read of the opening quote above. And take note of the date.

When Sam Volkering decided to recommend bitcoin to his subscribers of Revolutionary Tech Investor our publisher at the time, Kris Sayce, had his doubts. And he wasn’t alone.

Port Phillip Publishing’s range of investment advisory services covered stocks, options, commodity plays and fixed income advice. But cryptocurrencies?

Did our readers, many over the age of 50, know anything about this then niche market? Were they even interested?

And would they be able to clear the technical hurdles needed to act on Sam’s cutting edge advice?

But Sam was adamant.

He’d been closely following bitcoin’s development since late 2010. That was a year after Satoshi Nakamoto — bitcoin’s elusive inventor (or inventors) — released the whitepaper detailing bitcoin.

In 2010, Sam became fascinated by the fact that you could use a home computer to ‘mine’ this digital currency. One that was actually worth money.

While he never ended up mining any bitcoin himself, he kept a sharp eye on its slow slog to mass adoption.

Bitcoin’s biggest selling point, according Sam, is that it’s ‘the anti-financial system’. Meaning, you can cut government manipulated fiat currencies and the banks out of your transactions and savings. Surely there would be a market for that…

By 2016, Sam was convinced the time had come for ordinary Australian investors to add bitcoin to their portfolios. And by November, he’d managed to win Kris Sayce over to his side.

Knowing Kris’s anarchistic streak, I reckon the tipping point was hearing that bitcoin could be a real poke in the eye for global governments. But whatever convinced him, you can see Sam’s November 2016 call to action below:

Familiarise yourself with bitcoin further. Set up a bitcoin wallet. Buy some bitcoin and transfer into your wallet at the available price at the time. Bitcoin currently trades at AU$1,009.39 (although it constantly fluctuates). Secure and store your wallet safely. Keep your bitcoin long term for its potential future purchasing power.’

I recall when this recommendation went out. And I recall thinking that at over AU$1,000, bitcoin was likely overvalued.

Ahem.

At time of writing, one bitcoin is worth AU$15,364.26.

Now, I don’t have to tell you that’s still well below its high from 17 December 2017. Yet despite the chorus of financial experts calling for bitcoin’s demise ever since, it’s looking increasingly likely that it could retest those levels…or exceed them. That would be around AU$28,000 at today’s exchange rate.

The trend, in either case, is certainly up.

At a current price of US$10,678.16, bitcoin gained another 9.3% since I last wrote to you on Friday.

You can see the six-month performance (in US dollars) below:



chart image
Source: CoinDesk
Click to enlarge

After reaching a low of US$3,360 on 8 February, bitcoin’s rally really kicked off in April. And in what could be setting up for a repeat of 2017’s hyperbolic price gains, the rally is only picking up speed.

As you’d expect, the regular price surges are driving a fresh round of FOMO (fear of missing out).

From CoinDesk:

The price rise is backed by a 12 percent jump in trading volumes. As per data source CoinMarketCap, $21 billion worth of bitcoins have traded across cryptocurrency exchanges in the last 24 hours.’

That’s almost a $1 billion worth of bitcoin changing hands every hour. And if FOMO does entrench itself as in 2017, we could see those volumes surge from here.

One of the tailwinds still ahead for bitcoin is an upcoming halvening. Though that’s not scheduled to take effect until May 2020.

Subscribers to Secret Crypto Network will be familiar with this term and date already. I also touched on this in last Tuesday’s Port Phillip Insider regarding litecoin’s impending August 2019 halvening.

In a nutshell, it means that bitcoin miners will only receive half the reward they currently do following the May 2020 halvening. With bitcoin this happens every four years. And it tends to put upward pressure on the price.

It’s an event worth marking on your investment calendar.

Now we pause for a quick look at the markets…

Markets

Over the weekend, the Dow Jones Industrial Average closed down 34.04 points, or 0.13%.

The S&P 500 closed down 3.72 points, or 0.913%.

In Europe the Euro Stoxx 50 index finished down 1.16 points, or 0.03%. Meanwhile, the FTSE 100 fell 0.23%, and Germany’s DAX closed down 15.47 points, or 0.13%.

In Asian markets Japan’s Nikkei 225 is up 21.41 points, or 0.10%. China’s CSI 300 is up 0.01%.

In Australia, the S&P/ASX 200 is down 2.38 points, or 0.04%.

On the commodities markets, West Texas Intermediate crude oil is US$57.74 per barrel. Brent crude is US$65.37 per barrel.

Turning to gold, the yellow metal is trading for US$1,406.04 (AU$2,023.08) per troy ounce. Silver is US$15.39 (AU$22.14) per troy ounce.

In the world of cryptocurrencies, one bitcoin is worth US$10,678.16.

The Aussie dollar is worth 69.50 US cents.

A timely reminder on risk

Up top we looked at the remarkable gains for bitcoin over the calendar year so far. And why it could have a lot further to run yet.

But I’d be remiss to dangle the ‘fat gains’ carrot in front of you without a reminder that blindly following this carrot could lead you off a cliff.

So a few words of caution.

First, never invest any money into cryptocurrencies — or stocks, for that matter — that you cannot afford to lose.

Second, there’s no guarantee bitcoin hasn’t topped out for the year already. And even if it is heading back to AU$28,000…or more…it almost certainly won’t get there in a straight line.

For example, on 9 November 2017 bitcoin traded for US$7,751. By 12 November, it had fallen to US$5,791. That’s a crash of 25.3% in only three days! Enough to have scared the timider investors into selling at or near that low. Of course, for those brave souls who held on, bitcoin would reach more than US$19,500 on 17 December.

But it’s more than price volatility you need to be prepared for. You need to prepare…and educate…yourself about the scammers out there plotting to steal your hard earned money.

And there are more coming out of the woodwork every year.

This headline comes from CoinDesk, ‘Australian Crypto Scam Reports Rose Almost 200% in 2018’.

The article continues:

Australia saw a surge in reports of scams involving cryptocurrencies last year, according to the country’s consumer watchdog [the Australian Competition and Consumer Commission (ACCC)]

Online scammers generally tricked consumers into buying various cryptocurrencies through fake platforms, but when consumers tried to cash out their investments, scammers “made excuses or were no longer contactable,” according to the report…

ACCC deputy chair Delia Rickard, said that total combined losses (fiat and cryptocurrency) reported to the ACCC’s Scamwatch program and other government agencies were higher than AU$489 million...’

There you have it. Almost a half billion dollars scammed away in 2018.

So, proceed with caution. And make sure you’re not handing money over to fake platforms that can disappear into cyberspace with a single mouse click.

Above all else stay informed.

You can do that by clicking here.

Cheers,
Bernd