Hang in, or Bail?

by JDH on May 8, 2021

A lot of green on the stock screens this week.  That’s good.  Everything is up.  Gold.  Stocks.  Crypto.

But we all know “sell in May and go away”, so is it time to take profits, move to cash, and wait for a correction?

Probably, but the correction could happen tomorrow or six months from now.  Do you want to be on the sidelines for six months while the markets are humming higher?  No, you want to generate as much profit as possible.  So what’s the play?

I don’t know, but I did do some selling this past week.  I was close to 100% invested, and that’s dangerous, for two reasons.  First, in a crash, you lose money, and second, even without a crash, you have no cash to take advantage of potential deals.  So, I took some profits and moved a small portion of my investments to cash.

My biggest winner so far this year is QETH – The Ether Fund, which, as the name implies, invests in the crypto asset Ethereum.  Ether is up around 400% year to date, and I’m guessing it won’t keep going up 100% each month, so some profit-taking was in order.  Ether briefly touched $3,600 USD this week, and it is quite likely it will hit $10,000 before the end of the year, but it is also quite likely that it will have a 30% correction at some point in the next month or two, so taking profits is never a bad idea.

I guess if the crash happens tomorrow I will wish I cashed in everything, but for now, some cash is the safe play.

We shall see.  More next week.

A Bounce Back Week for the Cryptos

by JDH on May 1, 2021

I assume some of you are growing bored with my continued commentary on the cryptocurrency world, as compared to comments on stocks, or gold, or some other asset class, but here’s the thing: crypto is fast becoming the most important asset class.

Really?

Yes.  Not the largest, of course, but it currently has a market cap of over $2 trillion (of which Bitcoin is $1 trillion), so it can no longer be considered a “fad” or something on the fringe.  It is real, and given the massive fiat currency debasement we are witnessing in every country, you have no choice but to understand it, and use it as a way to protect your wealth.

Most cryptos are fads, and won’t exist in a few years.  They will be wiped out, just like most of the companies that started during the dot com bubble, but some will survive.  Amazon still exists, right?

The two leading cryptos are Bitcoin ($1 trillion market cap) and Ethereum ($330 billion), and they both had a good week.

Last week, in The Crypto Crash, I said to “stay the course and see what happens.”  As I write this on Saturday morning, May 1, 2021, Bitcoin is up 6% in the last 24 hours, and over 17% in the last 7 days.  Ethereum was “only” up 3.8% in the last 24 hours, but is up over 30% in the last 7 days.  That is a good week.

And yes, I understand that everything could be down 30% today, or this week, or this month.  That’s very possible.  But over the last year, Bitcoin is up 577%.  How can you not have something like that in your portfolio?

If you are a highly risk-averse investor, and you think this is all a scam, fine, put a small percentage of your wealth in blue-chip cryptos, say 1% to 5%.

If you have a $10,000 portfolio, and last year you put 1% in Bitcoin and 99% in cash, your portfolio today is worth $10,577, for an annual increase of 5.77%.  That’s a portfolio 99% in cash, so essentially zero risk.

Tell me where else you can get those returns?

Had Bitcoin crashed to zero, your portfolio would be down 1% on the year.  That is a very good asymmetric bet.

To be clear, I don’t expect Bitcoin to go up 577% per year.  But over the last decade, it has more than doubled each year, so 100% per year gains are very possible.  Do you want to be on the sidelines when that level of growth is possible?

No, you don’t.

This is not financial advice.  Do your own thinking.  I’m just some dude writing a blog.  But I would suggest you do two things:

First, do your research.  Investigate it.  Learn about it.  Watch some YouTube videos.  (Most of them are crap, but I’d start with Benjamin Cowen and the always entertaining Tyler S). Then do more research.  Then pick a crypto exchange (I like Kraken), get a hardware wallet (I like Ledger) and invest a very small amount of money to see how it works.

Second, if you don’t want the hassle of trading on an exchange and storing your own coins, buy a fund.

There are two closed-end funds started in 2020 by 3iQ:

  • The Bitcoin Fund, denominated in Canadian dollars as QBTC, or in US dollars trading under the symbol QBTC.U.
  • The Ether Fund, in both USD and CAD, traded as QETH.U and QETH

The world’s first Bitcoin ETF started trading in February, the Purpose Bitcoin ETF, trading as BTCC.B.TO in Canadian dollars, or BTCC.U.TO trading in USD.

The second Bitcoin ETF also started trading in February, the Evolve Bitcoin ETF, trading as EBIT.TO in Canadian dollars, or EBIT-U.TO in USD.

All of these closed-end funds and ETFs have management fees, so you are paying a fee for the convenience of not holding your own coins, but for RRSP and TFSA investments they are a good option.

You can trade if you want, but I suspect that holding through this market cycle will be the easiest and best option.

Govern yourself accordingly.  I think we are in for a wild but profitable ride.

Good luck, happy month of May, see you next week.

The Crytpo Crash

April 24, 2021

Last week I asked: Has Bitcoin Topped?  In the short term the answer, apparently, was yes.  After hitting almost $65,000 on April 14, Bitcoin has “corrected”, trading as low as $47,400 last night, for a 27% drop in 9 days. Is this the end of Bitcoin?  I doubt it.  30% correction is very common, and […]

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Has Gold Bottomed? Has Bitcoin Topped?

April 17, 2021

Good questions.  I have no idea, but allow me to engage in some unfounded, uninformed speculation, because that is of course what you pay me to do. Let’s start with gold.  Gold had a great run, topping out well over $2,000 an ounce in August 2020, before starting a long slide to well under $1,700 […]

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The Cash Accumulation Phase Begins

April 10, 2021

The S&P 500 is at 4,127, an all-time high.  The DOW is also at an all-time high.  The Toronto Stock Exchange was down on Friday, but it too is just under an all-time high. Will the markets continue to make all-time highs, forever? No, that’s not the way math works. Historically, the saying is “sell […]

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Crypto on the Move

April 3, 2021

I know you come to this site to read my disjointed and rambling thoughts on real things, like the stock market and gold, and not unreal things, like the crypto market, but here’s the thing: the “real” world isn’t doing so well at the moment. While the United States appears to be “over the hump” […]

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Nothing is happening

March 22, 2021

Strange times.  Nothing much is happening.  Gold is stuck.  Cryptos are in a trading range.  The markets were higher on Friday, but they aren’t making new highs. The most interesting news is that a ship got stuck. Go figure. So, until something happens, I have nothing to say, so let’s see if by next week […]

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Tesla – Yes, I went there

March 13, 2021

Gold is fading, cryptos are doing well buy not exploding upward, so what does one do for fun? Buy TSLA – Tesla Inc. As readers of this blog will know, I am NOT a Tesla fanboy.  Quite the opposite, in fact.  I don’t think their cars are anything special and without massive government funding, they […]

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Gold, Bitcoin, and Inflation

March 6, 2021

Gold Well, gold isn’t doing well. From a peak of well over $2,000 in early August, gold has collapsed, dropping almost 19% over the last 211 days.  The chart shows an obvious downtrend, with no obvious signs of support, as gold closed on Friday under $1,700 per ounce. A drop to well under $1,600 is […]

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My QBTC Advice Last Week Was Completely Wrong

February 27, 2021

Oops. Last week I said it’s Time to Sell our Bitcoin Fund (But Not For the Reason You Think).  I said that QBTC was trading at a discount to NAV, so to prevent further erosion, it would be prudent to invest your funds in an ETF that trades closer to NAV. No. That’s completely backwards. […]

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