Yesterday, we perhaps had a glimpse of the future.
A future of how the Bitcoin price would react if the Securities & Exchange Commission (SEC) approves a Bitcoin exchange-traded fund (ETF).
What did the future foretell?
To be honest, not much.
A Bitcoin bounce of about 2%… maybe a little more.
But if that’s the extent of the Bitcoin move if the SEC approves the ETF… it’s sure to disappoint.
So how did we get that “glimpse of the future”? And is there anything to take away from it?
We’ll share some takes on thoughts on that below. First…
Market Data
The S&P 500 closed down 0.6% to end the day at 4,783.45… the NASDAQ gained 0.8%, to close at 14,969.65.
In commodities, today’s prices and the gain or fall over Friday, West Texas Intermediate crude oil trades at $71.32 down 86 cents…
Gold is $2,027.40 per troy ounce, up $7.90…
And Bitcoin is $46,185 down $525 from yesterday.
Now, back to our story…
Fake News
If you don’t know what we’re talking about, a hacker “compromised” the SEC’s X account.
The hacker caused folks to believe the SEC had approved the ETFs:
Source: Financial Times
Apparently, the tweet stayed active on the SEC’s X account for 10 minutes before they could issue a denial and take it down.
Of course, as you’d expect from Bitcoin, the price went wild:
We’ve circled the period covering the fake announcement.
The price gained around $1,000, or 2%. Not the kind of gain hardcore Bitcoin fans would hope to see from the real announcement… assuming the real announcement is to approve the ETFs.
But then again, there’s the argument that all the good news is already baked into the price.
After all, if we extend the chart out to cover the past year, it looks like this:
It’s up more than 164%… not all of those gains are the result of anticipating a Bitcoin ETF.
Here’s the thing. While it’s entertaining to watch the price wobble up and down each day, it’s meaningless to anyone except a trader.
It’s no more meaningful than whether the gold price is up or down today. But we watch the price anyway. We guess it gives us comfort or helps boost our ego watching prices and portfolio values go up.
But with Bitcoin and gold, it’s important to remember these aren’t stocks. They don’t have the same qualities and influences.
It’s reasonable to watch a stock price closely (even though plenty of long-term investors say you shouldn’t). A company’s stock price reflects – or should reflect – the underlying value of the business.
The sales, profits, margins, product launches, and so on… all the things that go into making or breaking a business. Those things can change on any given day.
Everything Was Fine Until the Window Fell Out!
As an example, Boeing Inc. (BA) was doing just fine. As the chart below shows, after an average year, the stock price rallied hard from late October to the end of the year…
… Until one of the window panels fell out of an airborne plane. Now, the stock is down around 20% from its recent peak.
That makes sense. That incident could affect Boeing’s future sales… it will likely result in greater costs to service and check other planes in various fleets… not to mention creating an overall lack of confidence in the airline industry.
But assets such as Bitcoin and gold are different. We know for a fact that we could lock a one-ounce bar of gold in a safe today and when we take it out of the safe tomorrow, it will still be a one-ounce bar of gold.
Nothing will change. It’s a similar story with Bitcoin. Nothing about it changes.
So if we get back to the point of the Bitcoin price… on any given day, the price doesn’t matter. Colleague Teeka Tiwari perhaps explained it best in a December video update to his subscribers. He told them:
If you remember, in March, I said, “You can put opportunistic capital to work in Bitcoin if you see sub-$20,000 Bitcoin,” which we did.
And then we’ve been off to the races. And I’ve continued to say, “Just keep dollar cost averaging into Bitcoin. Yes, Bitcoin will be volatile, but the supply-demand dynamics are so favorable for Bitcoin that we’ll be fine no matter what level of volatility we see…” And that’s certainly proved to be true.
Now, here we’re up trading at $43,675.
Of course, everybody is enthused about the ETF. And yes, the ETF is very important.
But this is a story of the larger adoption of this asset. This is a story of people understanding that Bitcoin is worthy of their investment and their faith in the asset.
We’re asked by our government to put our faith in fiat currency, and they co-opt our belief in a higher power by putting “in God we trust” on the money. And God and money are two completely separate things.
For a state to try to co-opt our belief in a higher power and attach it to a currency that they control, manipulate, and abuse is wrong. It’s a misuse of faith.
Whereas Bitcoin keeps your faith in a higher power and faith in your currency completely separate, as they should be, in my opinion.
What Bitcoin asks you to put your faith in is the sanctity of the code and the incentive mechanisms that have created Bitcoin and have now made it one of the most valuable assets on the planet.
So I think we’ll continue to see a loss of faith in fiat currency and a continued rise in faith in programmatic stores of value such as Bitcoin.
I say stores of value. There is only one programmatic store of value that has survived, and that is Bitcoin. Everything else is a use case within the blockchain world.
There’s no competition for Bitcoin. Bitcoin has won.
Taken alone, Teeka’s call last March to buy Bitcoin at $20,000 tells you everything you need to know. In fact, we asked Teeka today to share a word or two on what investors should do today.
His response?
All I can say is if it sells off, it’s a buying opportunity.
Every sell-off this year will be a buying opportunity.
Bitcoin sold off after the SEC tweet turned out to be fake… the price has risen since then. It sold off again today, after a strong rebound. The price has risen again.
We’re sure Teeka is talking more about the longer-term trend sell-offs rather than the minute-by-minute moves. Even so, if you’re looking for a plan for when to buy Bitcoin… just look for the sell-offs.
Maybe that sounds too simple. But often, simple is best.
What’s Your Freedom Number?
Last night Teeka held a special event titled, “Freedom 2024”. We’ve written about it here in these pages, and elsewhere in Legacy Research.
Teeka believes that events will play out over the next few weeks that will lead to big gains, not just in Bitcoin, but also in a select sector of the crypto market.
Gains, that Teeka believes will help you find your “freedom number”. To find out more about what that means, and how you can achieve your “freedom number”, go here.
More Markets
Today’s top gaining ETFs…
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Xtrackers MSCI Japan Hedged Equity ETF (DBJP) +2.7%
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iShares Currency Hedged MSCI Japan ETF (HEWJ) +2.5%
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WisdomTree Japan Hedged Equity Fund (DXJ) +2.4%
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Franklin FTSE Japan Hedged ETF (FLJH) +2.4%
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JPMorgan BetaBuilders Japan ETF (IHI) +1.7%
Today’s biggest losing ETFs…
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Siren Nasdaq NexGen Economy ETF (BLCN) -1.9%
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Invesco Energy Exploration & Production ETF (PXE) -1.5%
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iShares U.S. Oil & Gas Exploration & Production ETF (IEO) -1.3%
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First Trust Nasdaq Oil & Gas ETF (FTXN) -1.2%
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Invesco Dorsey Wright Healthcare Momentum ETF (PTH) -1.1%
Mailbag
If you have any questions or comments for our experts here at Legacy Research, we’d love to hear from you.
Write to us at [email protected] and just type “Daily Cut mailbag” in the subject line.
Cheers,
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Kris Sayce
Editor, The Daily Cut