Legacy Research Group

SushiSwap… Bonk… Dogecoin… Polkadot… Shiba Inu… Rocket Pool…

The list goes on.

Each name seems more ridiculous than the last.

And yet, these are assets valued in the hundreds of millions of dollars.

In fact, Dogecoin and Polkadot have market capitalizations of $11.2 billion and $9.2 billion, respectively.

That’s greater than Levi Strauss & Co (LEVI) at $6.5 billion, Hasbro (HAS) at $6.8 billion, and Wynn Resorts (WYNN) at $10.8 billion.

That’s why if you’re inclined to think crypto is a fad or just a silly game… think again.

Because while it’s easy to let the ridiculous side of crypto distract you (and there is plenty of that), don’t let it get in the way of what could help you make genuinely life-changing gains.

We’ll look at that in more detail in today’s Daily Cut. But first, let’s check in on today’s market action…

Market Data

The S&P 500 closed up 1.4% to end the day at 4,763.54… the NASDAQ gained 2.2% to close at 14,843.77.

In commodities, West Texas Intermediate crude oil trades at $71.05, down $2.85…

Gold is $2,033.20 per troy ounce, down $17.70…

And bitcoin is $46,777 up $3,008 from Friday.

Now, back to our story…

This Is Why Bitcoin Will Move

Your editor admits to having a nostalgia for the days long before we were born…

To a time when a company name alone explained what the company did…

American Beet Sugar… Chicago Rivet & Machine… Crum & Forster Insurance Shares… Inspiration Consolidated Copper… Butte Copper & Zinc… Union Bag & Paper… United Paperboard… and so on.

Those are real, old-timey stock names. We can picture them in our mind… in sepia, of course!

The point is, they felt real… they felt like they had real people, they were real industries, and had real… well, we guess, real substance.

That they produced, refined, or offered things that people actually needed at that time.

But with crypto, it often feels as though the individual coins and projects lack that reality. Your editor is a crypto ignoramus. We often find ourselves asking, “But what does it do?”

In some cases, even after we hear the explanation, we’re still none the wiser. In other cases, we hear it, and we think, “Well that sounds interesting, it’s a shame it has such a dumb name!”

This, in our view, is why it’s so important to have a “trusted voice” helping to separate the good from the bad in crypto.

Today, according to Coinmarketcap.com, there are more than 9,000 cryptos with a total market capitalization of $1.7 trillion. Bitcoin accounts for more than half that market cap at $915 billion.

So in the same way that it helps to have someone guide you through what’s good (or not) with stocks, it makes sense to have someone help guide you through cryptos.

Someone who can answer the question, “But what does it do?”

Arguably, it’s even more important with cryptos than with stocks as it’s far harder to get access to reliable data and information.

Over time, that’s likely to change. And the catalyst for that change could happen within the next few days.

As you’ve likely heard, the Securities and Exchange Commission (SEC) is sitting on a number of applications from big Wall Street firms to establish Bitcoin exchange-traded funds (ETFs).

The SEC has fought hard against approving a Bitcoin ETF. But with so many big Wall Street names fighting for it (BlackRock in particular), it almost seems inevitable that the approval will come soon.

If the SEC finally approves one or more of these ETFs – which could happen as soon as this week – many believe it will cause a flood of money to flow into those ETFs… which will drive up the Bitcoin price.

A comparison of this is the creation of the first gold-backed ETF in 2004. Until then, the only way a regular investor could access the gold market was to buy gold mining stocks, physical gold bullion or coins (or jewelry), or to have a futures trading account.

But there was no way to trade the actual gold price in a standard brokerage account. But with the launch of the gold ETF in November 2004, that changed.

You can see what happened to the gold price following that in the chart below:

At the time, gold was $450 per troy ounce. Seven years later, it traded just shy of $2,000.

Now, it would also be true to say that the economic environment supported a strong gold price. Government debt had begun to soar, and people had become more aware of gold as a potential “safe haven” against geopolitical threats.

So even without a gold ETF, there’s little doubt gold would have continued to trend upwards… after all, it was those reasons (rising government debt and geopolitical concerns) that created the demand for gold and a gold-backed ETF.

Better Than Bitcoin?

That makes it a valid comparison to Bitcoin today. Bitcoin doesn’t need SEC approval for it to continue to perform. The factors driving Bitcoin’s demand exist with or without an ETF.

But the approval of one or more Bitcoin ETFs will make it easier for folks to invest in Bitcoin. They’ll be able to trade in and out from a regular brokerage account, without the hassle of using wallets, passcodes, and all the other paraphernalia that goes into investing in Bitcoin today.

After all, according to some sources, more than 30% of the current Bitcoin supply is permanently lost. That’s due to people forgetting passcodes or accidentally throwing away hard drives or thumb drives containing their Bitcoin.

By our rough estimate, that’s $270 billion worth of Bitcoin at today’s market prices… $270 billion in permanently lost asset value. No wonder folks have been cautious to put significant amounts of capital into Bitcoin before now.

But if the SEC approves an ETF, that will change. If the likes of BlackRock or the other proposed ETFs can assure investors of the steps they’ve taken to ensure they’ll never lose their Bitcoin holdings, institutions will have an easy way to access Bitcoin for their clients.

Because it’s not as though wealthy investors haven’t asked for it. According to a recent Bitwise/VettaFi survey, 88% of financial advisors surveyed said they’d received a client inquiry about investing in Bitcoin.

Yet, the same survey revealed that only 19% of those advisors had currently been able to buy Bitcoin for their clients.

For that reason, it’s logical to think that a large number of those who have enquired to their financial advisor haven’t found an alternative way to invest… and so they’re just waiting for the ETF approval.

Aside from that, perhaps the most interesting part of this is the knock-on effect on other cryptos. From when the gold ETF launched in 2004 to when it hit a peak seven years later, it gained 292%.

From when the silver ETF launched in April 2006, to when it peaked five years later, it gained 239%. That beat the performance of gold during that five-year time frame (gold gained 195%).

So while colleague and crypto expert Teeka Tiwari is excited about the Bitcoin ETF approval, what has him perhaps more excited is the impact it will have on other cryptos… the “silver cryptos,” if you like.

Because once new investors get a taste for the kind of gains offered by Bitcoin, it’s only a matter of time before they’ll start looking at the wider crypto market.

And that will mean there will be many more opportunities to profit from the potential SEC Bitcoin ETF approval than just buying Bitcoin or the Bitcoin ETF itself.

Gold Stocks Beats Gold

Oh, here’s another example of the knock-on effect.

After the 2008 financial collapse, the gold ETF climbed from a closing low of around $85 in September 2008, to a closing high of around $171 in September 2011.

That’s a 102% gain.

Compare that to the VanEck Gold Miners ETF (GDX). It went from a closing low of $21 in October 2008 to a closing high of $63 in August 2011.

That’s a 199% gain.

Again, that’s why looking past the biggest stocks and cryptos can often provide the best rewards.

Teeka’s Freedom Number

Remember to tune in for Teeka’s “Freedom Number” event. It’s tomorrow night, Tuesday, January 9, at 8 p.m. ET.

As part of the event, he’ll reveal his top six cryptos in a key subsector of the crypto market.

You can register now here.

The Winners Circle

Today we include our first Winners Circle trades. As we mentioned in Friday’s Daily Cut, this is where we’ll showcase winning trades from our stable of experts.

We’ll typically publish these one or two days after they are published in the individual publications. That gives paying subscribers enough time to exit their positions.

You won’t see this feature every day in the Daily Cut, as it’s not necessarily every day that our publications close out gains.

But when they do, we’ll highlight them here.

Just note, in today’s Winners Circle, we’ve withheld the name of one of the sell recommendations, as this was only a part-sell. In this instance, Teeka has recommended his subscribers sell enough to cover their initial stake.

This is what we call a “free ride.” That’s where after an investment doubles, you sell half, effectively meaning you’re playing with “house money” on the remainder of the investment (of course, that doesn’t factor in any tax liability you may have from selling).

Anyway, we hope this gives you a little more insight into what’s happening around Legacy Research.

Loose Ends

One final note. For your interest, of the seven old-timey companies we mentioned at the top…

The American Beet Sugar Company is today the American Crystal Sugar Company.

Chicago Rivet & Machine Co (CVR) goes by the same name and is still listed.

Crum & Forster Insurance Shares celebrated its 200th anniversary in 2022. Today, it’s part of Fairfax Financial Holdings Ltd (FFH CN), a Canada-based company.

Inspiration Consolidated Copper operated a mine in Inspiration, Arizona. The town is now a ghost town. The mine is now operated by Freeport-McMoRan (FCX).

Butte Copper & Zinc appears to have been acquired by Anaconda Copper Mining Company, which itself was acquired by Atlantic Richfield Company, which became part of BP plc (BP LN) in 2000.

Union Bag & Paper Co. became Union Camp in 1956, following a merger with the Camp Manufacturing Company. In 1999, Union Camp was acquired by International Paper Co. (IP).

As for United Paperboard, after a name change to United Board & Carton, the trail goes dead!

More Markets

Today’s top gaining ETFs…

• Invesco Dorsey Wright Healthcare Momentum ETF (PTH) +4.6%

• ProShares Ultra QQQ (QLD) +4.1%

• Invesco Dorsey Wright Technology Momentum ETF (PTF) +3.6%

• VanEck Semiconductor ETF (SMH) +3.5%

• iShares Semiconductor ETF (SOXX) +3.3%

Today’s biggest losing ETFs…

• Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) -1.6%

• KraneShares MSCI All China Health Care Index ETF (KURE) -1.5%

• KraneShares MSCI China Clean Technology ETF (KGRN) -1.5%

• Invesco DB Commodity Index Tracking Fund (DBC) -1.5%

• VanEck ChiNext ETF (CNXT) -1.4%

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 feedback@legacyresearch.com and just type “Daily Cut mailbag” in the subject line.

Cheers,

Kris Sayce
Editor, The Daily Cut