Nick’s Note: On Mondays, we turn over the reins of the Daily to former hedge fund manager Teeka Tiwari for his big-picture view of the markets. It’s a feature you’ll only find right here.
Regular readers know that Teeka is a world-renowned cryptocurrency expert. So it’s no wonder our Daily mailbag is often full of questions for him. I recently caught up with Teeka to get answers for you…
By Nick Rokke, analyst, The Palm Beach Daily
Nick: Hi Teeka. As you know, we receive hundreds of questions every month at the Daily about cryptocurrencies. Instead of answering them one at a time, I decided to pick out the most pertinent and run them by you. That work?
Nick: So our first question comes from Jose B. It’s about the recent “fake news” story regarding Goldman Sachs ditching its plans for a crypto trading desk.
As it turns out, Goldman Sachs says it’s not ditching its plans for a crypto trading desk… and on top of that, the firm is working on a custody solution for cryptos.
Jose wants to know why “fake news” causes the crypto market to go down quite a bit… but positive news doesn’t cause it to go up as much.
Teeka: It all has to do with investor sentiment.
When investor sentiment is high, good news gets magnified and bad news gets minimized. When sentiment is low—like in the current crypto market—bad news gets magnified and good news gets minimized.
The thing to remember is that sentiment is cyclical… It never stays very high or very low forever. It constantly rotates from elation to despair. This is the very nature of all markets… not just crypto.
Since crypto is a young, small market, swings in sentiment are magnified even more than mature markets like stocks. Our strategy is to use this low-sentiment period to scoop up the very best names we can find in the crypto space.
As sentiment swings back around to the upside, we’ll see massive moves higher ahead in crypto prices. The mistake many people make is thinking that sentiment will never shift again… and of course, it always does.
Nick: Good answer, T. We’re seeing the same thing in the U.S. stock market right now. It’s shrugging off all of the bad news because sentiment is bullish. The markets keep going up no matter what happens around the world—whether it’s trade wars or political uncertainty.
The next question comes from Tamara D. She says she hates to see all these big banks and institutions getting involved in the crypto market. She wants to know whether you’re concerned about their entry into this space, too.
Teeka: This is a great question. From a philosophical standpoint, I hate seeing big banks co-opt decentralized technology like bitcoin. The point of bitcoin is to decentralize the financial space by removing the middleman… not to build a whole new series of gatekeepers.
The beauty of bitcoin, however, is that it’s very easy to move, trade, and store. As more people come into the space (via the banks), people will learn they can hold their own bitcoin themselves. And that’s very encouraging.
From an investor standpoint, I’m extremely excited to see the big banks coming in. They will bring tens of millions of customers and trillions of dollars with them. Crypto can’t go mainstream without the help of traditional financial firms.
I believe early investors—such as my subscribers—will be well-positioned to make many millions of dollars as traditional firms take crypto mainstream.
Nick: I’m sure you’re right about that. That brings me to a question from Jerome S.
With cryptos in a bear market, he wants to know if now is a good time to double down on cryptos.
Teeka: So long as it doesn’t violate your position-sizing rules.
Nick: Good advice. With cryptos, we always recommend small position sizes. That makes it easier for you to ride out the volatility.
Back to the questions… Here’s an inquiry from Hayden G. He says there’s been considerable discussion about when we’ll see the approval of the first bitcoin exchange-traded fund, or ETF, in the United States.
However, he points out that there’s already a Swedish bitcoin exchange-traded note (ETN) available in U.S. dollars. He wants to know your thoughts on the Swedish ETN.
Teeka: The Securities and Exchange Commission (SEC) recently halted trading on that ETN. And U.S. firms, such as Merrill Lynch, won’t allow you to trade it. I never expected the SEC to allow a non-U.S.-issued bitcoin security to trade in the U.S. unmolested.
Nick: Yeah… regulators are going to regulate—that’s what they do. OK, here’s Aaron K. He asks, “How do you value your crypto ideas?”
Teeka: My primary metrics are usefulness and usage.
Does the coin solve a problem worth solving? Why will people use it? Are people using it? What’s the current trend in usage?
In my opinion, the ultimate arbiter of value in crypto is usage.
Nick: The final question comes from Aline C. She’s heard rumors that Citigroup and Nasdaq will launch crypto projects soon… and wants to know if you’ve heard anything about this.
Teeka: I have. I’m hearing rumors that all the major players—from Fidelity to BlackRock—are working on launching crypto investment projects. Here is the key takeaway: Crypto is on the verge of becoming a mainstream alternative asset.
It’s going to grow from a $200 billion asset class to a multitrillion-dollar one.
Nick: Thanks for taking the time to answer these questions, T. We appreciate it.
Teeka: You’re welcome.
Nick’s Note: We know that the crypto space is still new and confusing to many investors. That’s why Teeka has created 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.
Nick’s Note: Each morning, Palm Beach Trader editor Jason Bodner runs his proprietary “early detection system” to find quality stocks pushed higher by unusually high levels of institutional buying. Today, his system is signaling buying in this sector…
Look for Energy Stocks to Move Higher
By Jason Bodner
Last week, Brent crude oil quietly made a 52-week high…
Usually when crude goes up, so do oil exploration stocks. Right now, I’m looking at the SPDR S&P Oil & Gas Exploration and Production ETF (XOP). This fund holds many smaller companies which are leveraged to the price of oil.
The unusual volume indicator saw a bit of buying in energy names the last few days. That bodes well for XOP.
Right now, XOP is about $1 away from its 52-week high of $44.50. If it can break that level (and I think it will), it will be off to the races for energy companies.
The S&P 500 and Dow Jones Industrial Average have already made new highs… and are towing many sectors higher along with them. The energy sector looks to be headed higher next…
Keep the $44.50 level for XOP on your radar. Any positive headlines or a breakout in crude could send it a lot higher from here.
For the first time, angel investor and tech millionaire Jeff Brown is going on-camera to reveal:
Why small tech stocks are the best way to potentially make 10 times your money… why the next few weeks could be one of the best times ever to invest in them… and his secret investment blueprint.
For a sneak peak of “The Brown Blueprint,” click here…