Below is a complimentary issue of today's Weekend Update. Bitcoin is financial history unfolding, up over $2K in just the time it took me to write this update. We all want to be part of and profit from what is ahead. The case set out covers the risk, potential reward and how to profit from it with or without a subscription to our service. Your choice.
Basket of Bitcoin
by Allan Harris February 20, 2021
Because of, or maybe in spite of, all of the bullish sentiment and hype surrounding cryptocurrencies the powerful trajectory of Bitcoin has been relentlessly higher. My trading/investing premise is that Bitcoin is going to $100,000 this year. A basket of stocks linked to the performance of Bitcoin is a wholly uncomplicated way to make the most of this assumption.
Apart from opening a PayPal, Coinbase, or any account that allows direct purchase of Bitcoin, and/or setting up a hardware wallet to store it in your own private digital vault, these five stocks are the next best way to participate in such a move. Cathie Woods, of, "TSLA is going to $4,000," fame (it has gone to $4K taking into account last year's 5:1 split), says Bitcoin has the potential to reach $500,000. That is about 10X current levels. Any one or combination of the stocks below will likely come close, or within a margin of error, of that kind of return.
Alternatively, Bitcoin may crash to pre-run levels or lower, below $3,000. A few months ago, when Bitcoin was still in the $20-25K range, I wrote that $100,000 was a 50-50 bet. Now, with it trading north of $50,000 and with financial institutions and mega-companies with lots of cash
(TSLA, MSTR, SQ and MA among them) picking up the mantle of this new paradigm, the odds of six figures are up to 70-30, i.e., over 2 out of 3. The chances of a worst-case basis, a total collapse of the crypto sector, I peg at 10%. In sum, 70% chance of $100K, 10% chance of wipeout. That's the bet.
Allocation, Risk and Money Management
Bottom line: Putting 10% of your stock portfolio in Bitcoin and/or the stocks below is an odds-favorable risk worth taking. Just understand that it is a risk. As was TSLA.
The Bitcoin Basket
In no particular order, but buying at least two of these makes the most sense:
1. Grayscale Bitcoin Trust (GBTC) - Part Bitcoin ETF, part closed-end fund.
2. Grayscale Ethereum Trust (ETHE) - Part Ethereum ETF, part closed-end fund.
3. Microstrategy (MSTR) - Enterprise software company turned Bitcoin reserve fund.
4. RIOT Blockchain (RIOT) - Bitcoin miner.
5. HIVE Blockchain Technologies (HVBTF) - Green energy powered Bitcoin miner.
There will be more in a series of "Bitcoin, Again" posts, analogous to last years's, "Tesla, Again," posts. The trading analogue will be TSLA, 2020. There are options available in MSTR and RIOT. Expect that we will make strategic use of that leverage. That will add one or two zeros to the end of targeted trading returns.