Dow Down 800! Will Institutions Move Into Crypto?
The stock market’s taking a hit today — especially in the Dow, off more than 800 points in midday trading.
Big institutions are worried about the COVID-19 Delta variant, what it could do to earnings and the rising risk of rampant inflation.
And with those risks rearing their ugly head, institutions are having more trouble finding undervalued blue chips.
The crypto market, by contrast, thrives on those risks. The more that investors fear threats like inflation, the more investors want crypto.
Much like digital gold or digital silver.
Moreover, unlike the stock market, the crypto market right now is broadly undervalued — especially after a recent correction.
That’s why several institutions are turning to cryptocurrencies.
The most well known is Tesla, Inc. (Nasdaq: TSLA). Founder Elon Musk put $1.5 billion of Bitcoin onto the electric car marker’s balance sheet earlier this year. Despite his tweets griping that Bitcoin mining is not eco-friendly, Tesla still holds all its Bitcoin.
MicroStrategy Inc. (Nasdaq: MSTR) now holds over 105,000 Bitcoins on its balance sheet.
Capital International Investors, a subsidiary of the investment manager Capital Group, bought 12.2% of MicroStrategy as a Bitcoin proxy investment.
Other large buyers are Galaxy Digital Holdings Ltd. (TOR: GLXY.TO) with 16,400 Bitcoin, Voyager Digital Ltd. (OTCPK: VYGVF) with 12,260 Bitcoin and Square Inc. (NYSE: SQ) with 8,027 Bitcoin.
So, what’s driving these big firms to invest?
For starters, cryptos are decentralized and trustless. They lie beyond the reach of central banks, government policies and earnings speculations.
And many can be staked (like “deposits”), offering yields that leave Treasury yields in the dust.
This month’s Consumer Price Index (CPI) inflation data showed the largest increase since June 2008, and the Fed has done nothing to stop it. Quite the contrary, its nonstop money printing continues to fan the flames.
And that’s plenty of incentive for big investors.
Bitcoin is their main focus and a good mainstay in a crypto portfolio. But if you’re looking for the kinds of gains Bitcoin used to offer — 12x, 55x or even 125x your initial investment — you have to look beyond the King of Crypto to find the best candidates for the old Bitcoin-style returns.
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Good luck and God bless!
Martin D. Weiss, PhD