Nick’s Note: Palm Beach Letter analyst and colleague Greg Wilson has spent the past quarter following the growing trend of institutional investors preparing to jump into the cryptocurrency space.
And today, he shares the latest evidence of this imminent rush of capital… and the best way to act on it…
By Greg Wilson, analyst, The Palm Beach Letter
“Soon the risk of NOT being involved will out-weigh the risk of having a small allocation.”
That’s the conclusion reached by Dan Morehead, the CEO and co-chief investment officer of Pantera Capital.
The comment came from his latest monthly letter, and it was in reference to institutional investors and cryptocurrencies.
If you’ve never heard of Pantera Capital, it’s an investment firm focused exclusively on blockchain and cryptocurrency. Founded in 2013, it’s the first U.S. bitcoin investment firm.
Its portfolio includes notable names in the cryptocurrency/blockchain space such as bitcoin, Ethereum, Abra, ShapeShift, and many others.
It’s a well-respected firm in the industry. Crunchbase ranks Pantera in the top 25 out of thousands of venture capital firms.
So when Dan talks, it pays to listen. And my ears perked up when he started talking about institutions and cryptocurrencies.
It’s a theme we’ve been talking about since late 2017.
Today, I’ll share more thoughts from Dan, further proof of institutional involvement, and tell you what it means for your portfolio.
The Second Boom Narrative
We’ve been writing about the new Wall Street narrative on cryptos since December 2017.
In February, I told you about JPMorgan’s Bitcoin Bible. The report came to some startling conclusions—notably, that cryptocurrencies “are unlikely to disappear.”
And in March, I told you that two of the country’s largest asset managers, BlackRock and Wellington Management, were getting into the crypto act.
Palm Beach Letter editor Teeka Tiwari calls this new narrative the “Second Boom.”
You see, Wall Street has a history of developing “narratives.” And following them can be profitable…
Today, studies are showing that adding bitcoin to your portfolio gives better risk-adjusted returns.
We envision Wall Street’s pitch will be just that—by allocating 5–10% of your portfolio to bitcoin and other cryptocurrencies, you can actually bring down volatility and improve returns.
That’s when we’ll see trillions of dollars of institutional money come into this space from players like JPMorgan, BlackRock, Wellington, and others…
And that narrative is growing.
The Latest Voice Added to a Growing Story…
According to Dan:
“[T]he perceived risk-reward relationship is rapidly shifting towards institutional involvement.”
He gives three reasons:
The crypto market has grown over 10 times in the last year and is now large enough for even the largest institutions to buy in.
Blockchain is an “asymmetric trade.” You don’t need to risk a lot to make a lot. That means if you’re right, your financial standing can change materially. But if you’re wrong, you’re out just your initial small investment.
Wall Street custodians will soon offer their services to investors. This is a pain point for institutional clients right now. To be compliant, institutional investors need to follow custody rules set by the U.S. Securities and Exchange Commission (SEC). But the infrastructure needed is quickly coming to market.
According to Dan, Pantera is already having third and fourth conversations with large institutional investors. Each conversation is one step closer to an actual investment.
The Evidence Is Mounting
Dan isn’t the only one talking about institutions and cryptocurrencies. I attended the TokenFest conference in San Francisco last month and heard similar comments.
TokenFest featured thought leaders from the entire cryptocurrency space. CEOs, venture capitalists, and developers were all in attendance.
One leader present was Brent Traidman. He’s the chief revenue officer for Bread, a digital wallet provider.
Asked about institutions and cryptocurrencies, he said, “Banks are just waiting to pour money in. When the regulation happens, all the institutional money will pour in.”
Also in attendance was Jeremy Gardner. He’s the former co-founder of blockchain prediction platform Augur. Today he’s the co-founder and managing partner at Ausum Ventures, a blockchain venture capital firm.
When asked about institutions and cryptocurrencies, he said, “Real institutional money is coming in, like Yale Endowment who is seriously looking into crypto.”
That’s big news. Yale Endowment manages over $27 billion. And it’s considered a pacesetter among other endowments—meaning that when Yale makes a move, the others generally follow.
How to Profit From the Institutions
Generally, Wall Street is always in position to get into new trends before the public.
But we’re in a unique situation. Institutions are mostly on the sidelines as the infrastructure is developed and regulations get figured out.
That means you have the opportunity to get into cryptocurrencies before the new Wall Street narrative takes hold.
It’s a great asymmetric trade setup. With just a small investment, you can make life-changing gains.
Like Dan said, the risk now is NOT owning cryptos.
If you’re a Palm Beach Letter subscriber, you should use the pullback in the crypto market to take positions in the open projects in our portfolio. (Subscribers can view the portfolio right here.)
If you aren’t a PBL subscriber, but still want to get involved in the crypto market, buying bitcoin is a great place to start.
Analyst, The Palm Beach Letter
P.S. We know that the crypto space is still new and confusing to many investors. That’s why Teeka has partnered with media personality Glenn Beck to create our first-ever Crypto Master Course.
This course will teach you the ABCs of cryptocurrencies and their underlying blockchain technology. It includes video lessons, instructional guides, downloadable resources, and a free electronic copy of Teeka’s new book on cryptocurrencies, New World Money.
Here’s the good news… If you’re already a Palm Beach Letter subscriber, we’re giving you a free year of access to the course. Just click here and log in with your current PBL username and password.
If you’re not a Palm Beach Letter subscriber, you can learn how to sign up for Teeka Tiwari’s Crypto Master Course—and get a free gift from Teeka and Glenn—right here…
Today, some feedback on Teeka and Glenn’s Crypto Master Course…
Thank you for all your great work.
Like most courses, the information supplied is enough to supply the student with what’s needed to start his or her endeavors in the subject matter. It’s up to the student to make the best of it which depends on one’s own abilities and drive…
Thank you for the warning to make small steps in the beginning.
I have been intrigued with cryptos for a few years and once Glenn got on board, I had to just try it because I don’t know anyone I would trust more than him. I’m going to start small and get my feet wet and look forward to learning about this relatively new system.
The course made the starting steps very clear, unlike other articles I’ve read.
An excellent introductory to a new technology! Makes it easy to understand even if you’ve never heard of cryptos. The quizzes at the end help to reinforce the new info. Very well put together—great job guys!
While still a bit confusing in some respects, the material is laid out very well and Hector did a good job presenting. Thanks you for your continuing education.
And some thoughts on Teeka’s latest Palm Beach Confidential video update on crypto market volatility…
Dear Teeka, thanks for the recent lessons in investor psychology. I’ve read about stock market volatility in the past and understood on an intellectual level how to handle it, but I’ve never truly experienced it. It’s a lot different when you’re experiencing it firsthand!
The emotions one experiences in a market like this cannot be fully comprehended by reading what others have written… You have to be involved to understand what it’s like. Seriously Teeka, it’s been quite helpful to have your calm demeanor and fact-based historical perspective to help me through this negative volatility. All the best.
Do you think “PC” culture has gone too far? See this message from controversial millionaire Doug Casey…