Nick’s Note: On Mondays, we turn over the reins of the Daily to world-renowned cryptocurrency expert Teeka Tiwari for his big-picture view of the markets. It’s a feature you’ll only find right here.
Last week, Teeka trekked across Europe to speak to some of the smartest—and wealthiest—investors in the crypto space. Although they are the top players in the game, Teeka says even they are unaware of some of the major advances going on behind the scenes that will push cryptos higher.
What he told them set off lightbulbs from Moscow to Sicily…
By Nick Rokke, analyst, The Palm Beach Daily
Nick: T, you’ve been quite busy the last two weeks. You spent time in Switzerland, Moscow, Sicily… and even Birmingham, Alabama… What were you doing in Birmingham?
Teeka: I surprised my brother with a belated birthday gift: two days at the Porsche Sport Driving School in Birmingham. A team of professionally trained drivers taught us how to drive very fast around a track. It was great fun and a much-needed break.
Nick: You definitely deserved a break after traveling halfway across the world to talk to so many insiders.
So what did you learn about the crypto market on your trip to Europe?
Teeka: I learned that a lot of players in the crypto space don’t necessarily see the big picture yet.
I visited these places to meet with hedge fund managers, people who run family offices, and a lot of players who are very important—and very active—in the crypto space.
A lot of them are very smart people. They’ve made enormous sums of money in cryptocurrencies. But they don’t have a background in managing money.
They haven’t seen multiple market cycles and they don’t have the ability to draw investment conclusions from large-scale macro data. So they have tunnel vision. They don’t know how markets work.
For instance, I didn’t meet a single person who understood the value of the Intercontinental Exchange (ICE) announcing that it plans to launch its own exchange for cryptocurrencies in November.
ICE owns the New York Stock Exchange and 23 other exchanges around the world. It processes hundreds of billions—if not trillions—of dollars every year in trades.
For the last 14 months, ICE has been secretly working on the exchange project. Among other things, it will allow bitcoin futures to trade—but physically settle—in bitcoin.
That means we’ll see bitcoin removed from the market to settle trades. That’s going to drive up bitcoin prices.
One of the most important facets of the ICE announcement, though, is that it’s creating a fully confined trading platform for institutions.
This is incredibly bullish for cryptocurrencies…
But the news just didn’t click with any of these smart people I met… In fact, a lot of the people who I spoke to barely even knew about the ICE story.
Nick: What does this mean for crypto investors?
Teeka: The fact the market hasn’t grasped how fundamentally important the ICE announcement is… it’s really a tremendous opportunity for us.
And as I went across Europe spreading this message, I could see the lightbulbs starting to go off.
People were starting to realize, “Hey, this is actually a big deal.”
The next questions they had were, “Well, why should institutions even get involved in the cryptocurrency space? It’s so volatile, why would they want to?”
The answer is, we’re not blindly hoping institutions come in and take the market higher. There’s solid research to believe this will occur.
Let me explain…
Earlier this month, I told you that pension funds are getting closer to investing in cryptocurrencies.
That’s because U.S. pensions are woefully underfunded—government pension funds alone have $7 trillion in unfunded liabilities.
And their portfolios haven’t performed well enough to meet their obligations.
To improve their performance, pension fund managers have started to embrace alternative asset classes at the highest pace I’ve ever seen in my career.
We’re seeing enormous amounts of money going into alternative asset classes. That’s because historically, alternative asset classes have had higher overall rates of return than the stock and bond markets.
So what I believe is going to take place is… once institutions can actually participate in the crypto market, they’ll take a percentage of their assets and allocate it to cryptocurrencies.
Pension funds are just one example. Endowments, hedge funds, and traditional Wall Street firms are all jockeying for a piece of this new market.
Nick: Why aren’t all these smart people seeing what you’re seeing?
I’ve experienced three separate decades of market cycles. I’ve lived through the 1980s, ’90s, 2000s, and now the 2010s. I’ve seen more market cycles than 98% of the people in the crypto space.
That gives me a unique perspective that the average 20- or 30-something-year-old just does not possess.
So it should be no surprise that even the most informed crypto investors in the world haven’t made the connection yet.
If they haven’t made the connection… then it’s not shocking the rest of the market has yet to make this connection, either.
The last time I saw a disconnect like this was in July 2017, when I talked about the importance of bitcoin futures contracts. (See Teeka’s July 11, 2017 Three Minute Market Minder.)
I said once we see futures contracts launched, bitcoin volume would explode, and the price would follow.
At the time, bitcoin was at $2,450. Here I am banging the bull drum, and what did bitcoin do?
It dropped 24% to $1,850!
This is the tricky thing about markets… You can have great news, but if the sentiment is bad, markets can do dumb things like sell bitcoin down 30% in the face of massive bullish news.
For those who kept the faith, my prediction of increased bitcoin volume and price growth was proved correct.
You can just track it from that date—July 11—when I published that video, to the day that futures launched… Volume in bitcoin went up 11 times.
Along the way, bitcoin hit a near-high of $20,000. Even today, after the pullback, bitcoin is still 260% higher from when I made my bullish call in July 2017.
Nick: When do you think we’ll see another rally like that?
Teeka: You know, my crystal ball’s just not that good. I can’t give you an exact date. But I think we’ll see a similar set-up like we saw last July in the back half of this year.
Again, we’re going to continue to have volatility until we don’t have volatility anymore… And that will be when the market starts to wake up to just how important some of these announcements are.
In the meantime, keep your position sizes small and let the market do what it’s going to do.
Enjoy the rest of your summer. Spend quality time with the people you love and forget about the vagaries of the crypto market.
Nick: Great advice. Thanks for your time, T.
Teeka: You’re welcome.
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