In May 2018, Bloomberg announced that they had formed a cryptocurrency index called the Bloomberg Galaxy Crypto Index. Since Bloomberg only caters to institutional clients, an index of this nature was one of the first steps toward widespread institutional involvement. The index composition changes regularly but we will just show the graph because so many institutional investors follow it. Similarly, there are many indices for crypto that institutional investors now follow. For example, Bitwise has also opened the Bitwise 10 Crypto Index Fund and you can actually invest in. it. The index started in May 20218 at 1000. It reached a new peak in March 2021 of 3,765, dropped significantly until July 19th, and then set a new high on November 9th of 3,870 and has since dropped about 400 points.
Market Summary
BTC hit a new all-time high of $68,789.63 on November 10th but has had a sharp downturn since then.
We got a new buy signal in the Super Trader Bitcoin system on July 30th, getting in at $42,243.93 and on November 15th, we were up 51% on the position, having been in it for 108 days. That system is profitable in 11 of our 14 trades with an average gain of 169%.
In late 2017, I said that cryptoassets were the biggest institutional revolution since the Industrial Revolution and that they represented the investment of a lifetime. Institutions were not ready or capable of participating in that revolution so they “pooh-poohed” cryptos. What that really meant was that they needed the price to crash until they were ready to capitalize on it from all sorts of fee-based products. So, it crashed big time in 2018 (down 85%) and they called it all sorts of nasty names. The SEC cooperated nicely with the big banks by saying that most cryptos were securities and subject to their regulation. But today, you can trade most of the major cryptos on US exchanges. Many of the investment bank CEOs who have said negative things about it in the past now have major positions or services for their clients. For example:
- •In 2013, Michael Saylor, the President of MicroStrategy, said that BTC’s days were numbered. MSTG and Saylor now own huge positions in BTC.
- We still have institutional investors who “pooh-pooh” cryptos. Jaimie Diamond, CEO of JP Morgan, says they’re worthless, but they still have a desk for institutional clients to trade cryptos.
- Warren Buffet has said that it is “rat poison, squared” and it’s clear that a large percentage of institutional clients also believe that. Hmm… BTC is up 108% in 2021, was up 305% in 2020, and 92.7% in 2018. Ask Warren Buffet about his performance over the last three years.
- A number of the world’s most significant hedge fund managers have added BTC to their portfolios including Paul Tudor Jones, George Soros, and Ray Dalio. Dalio said he’d much rather own BTC than bonds.
- In 2018, the SEC decided that most altcoins were securities and that precipitated a huge bear market. Cryptos underwent an 85% decline into the last month of 2018 and BTC hit a low price of $3,236.76 on Dec. 15, 2018.
The following table shows the BTC change per year since January 2010.
In July 2020, VTI decided to put tuition money from new Super Traders into GBTC. We took all the risk but would credit them with 79% of any gains. Those who paid $10,000 or more for their tuition were able to cover all of their Super Trader Foundation level costs without paying any additional money because of the credit they earned from the gains in just six months. Those who paid $25,000 were able to use their gains to pay for ST Foundation and in most cases, also pay for ST Awakening. The crypto price gains were impressive. There was a period from October through November last year when our crypto positions gained over $3 million in seven weeks.
However, our attempt to go into cryptos and just hold for six months was not a great success. At one point we had gains of almost 70%, but when the May crash happened, we got out at break even. I wasn’t willing to go negative, so we got out of all positions. I think BTC still could go at least as high as $75,000 by the end of 2021.
The table below tracks the price of five major cryptoassets across three generations of the technology now along with Bloomberg’s index:
- Bitcoin, a 1st generation cryptoasset,
- ETH and NEO, 2nd generation cryptos,
- Iota, a 3rd generation crypto,
- Holo (HOT), and
- BGCI Index. I’ve also started including BGCI prices in the table.
Date of the All-Time High Closes
*Nov 10th, 2021 ** Nov 10th, 2021 ***Feb 12, 2021 **** Jan 15, 2017 ***** Apr 5, 2021 # May 7, 2021
Notice the huge gains in everything in the last year.
The following table tracks the amount of money in stablecoins in the top 100 of which have a market cap of over $100 million. The percentage of the total crypto market cap indicates one measure of health for the crypto market.
* Bitcoin went as high as 90% of the market cap of all cryptos at the beginning of 2017 to as low as 32% at the top of the market. Part of the difference is that there are now over 12,800 cryptocurrencies (but more than half are not on exchanges and don’t have a market cap) and the number keeps going up. BTC is up to 44% dominance and ETH is now up to 18.2%.
You can see the pattern here. Market cap for crypto has increased 21-fold since December 2019. Doesn’t that seem significant to you? BTC has gone from 55% market dominance down to 43%; however, the top five coins, not including Tether, are still more than 80% of the market cap.
The new rage now is Decentralized Finance and this group includes these new coins in the top 75: Wrapped BTC (WBTC), AAVE, UNI, DAI, YFI, COMP, SNX, UMA, CEL, LRC, and SUSHI. I’m sure some of these coins will become buzzwords in the near future.
I used to say that I only trusted those coins in the top 50-100; however, from June 2020 to the present, many coins fell out of the top 100. Some of them didn’t fall far but some of them even fell out of the top 500.
The table below shows the best and worst cryptos in terms of the SQN 100 of the 100 that we track. It shows the top 20 and the bottom 20.
Notice there are 19 strong bull and only 9 bear (one being strong bear).
The data below shows the top-performing cryptos of those we track. Top performing, in this case, means gaining over 500% since the start of 2021. The table below shows a comparison between this month and last month.
Notice that we have four coins up over 10,000% in 2021. We have a total of eight coins up over 5,000% in 2021 and 30 coins up over 1,000% in 2021.
That’s not bad. But remember, these are statics, not predictions or recommendations. I recently had a Super Trader candidate say the call for MANA was brilliant, but I didn’t recommend anything. I just showed people the current performance.
We looked at the top 300 coins in market cap and their year-to-date gains. We have 47 up over 2000%. For 20 of them, nearly half are from the top 100. But only 1/3 of those up over 10,000% are from the top 100. Overall, we have 85 out of the 300 coins up over 1000%, 127 up over 500%, and 215 up over 100%. That shows how good cryptos are as an investment right now. 71.67% of the top 300 are up over 100%.
In the top 100 coins, the stablecoins are all around zero or slightly negative and only one coin is negative for the year, NEM (XEM) down 18.47%. In the 2nd 200, only two are down: PAX Gold (a stablecoin based upon gold) is down 3.8% and Celsius (CEL) is down 19.68%. And in the 3rd set (201-3000), two coins are down significantly: EVER is down 13.09% and CCXX is down 39.79%. However, the third grouping has about 36 coins (some are stablecoins) with zero gain.
After writing an article on value, I actually bought DOGE and SHIBA INU (SHIB), but I sold both of them at a profit today. It’s hard for me to keep coins for long that I know have no real business model. Although, SHIB may have some possibilities.
People talk about BTC being volatile and risky. But where can you find something that has made over 1,000% in three of the last 12 years, over 100% in eight of those years, and had only two losing years? There is only one other asset class besides BTC with anywhere near equal performance – other cryptoassets. And despite the bloodbath starting on May 19th, it is up again over 100% in 2021.
I recently found a listing of 13 ETFs related to cryptos. Thus, you have an alternative way to buy cryptos if the idea of wallets and crypto exchanges scare you. These include:
- BITO (ProShares Bitcoin Strategy). This launched about a month ago and buys BTC futures. This is not something to buy and hold as you will lose money when they rollover contracts.
- BTF (Valkyrie Bitcoin Strategy). This ETF is very similar and launched a few days after BITO. It invests in the CME front month BTC futures through a Cayman Island subsidiary so that investors don’t have to file a K-1 with the IRS. Be very wary as this is a major area where the IRS is cracking down on US citizens.
- BLOK (Amplify Transformational Data Sharing). It has 47 holdings, the top 10 of which are 45% of its assets. However, it also invests in the two Canadian ETFs that directly track BTC. The direct exposure ETFs are 10% of the portfolio, whereas 28% are miners, and another 10% are venture capitalist companies.
- BITW (Bitwise 10 Crypto Index fund). This was launched in 2017 and tracks the large cap crypto index which is about 70% of the market. It is weighed by market cap, so about 62% of it is BTC. This is a little like GBTC and it currently sells at about a 10% discount to NAV.
- BLCN (Siren Nasdaq NexGen Economy). It tracks the performance of the NASDAQ Blockchain Economy Index. It opened in Jan 2018 and has 63 holdings. It only invests in companies with over $200 billion in market cap and is rebalanced twice each year. It invests globally with China representing 12% of its economy and India, 7%. Both countries are very anti-crypto.
- SPBC (Simplify US Equity plus GBTC). Launched at the end of May 2021, it basically buys IVV (iShares Core S&P 500 ETF) and invests 10% (extra) in the E-mini S&P futures, and 10% in GBTC.
- BITQ (Bitwise Crypto Industry Innovators). It tracks the performance of Bitwise Crypto Innovators 30 Index (85%) with 15% devoted to companies with a business initiative focused on the crypto ecosystem having at least $100 million in a liquid cryptoasset.
- BKCH (Global X Blockchain). It tracks the Solactive Blockchain Index. It invests in 1) stocks that derive at least 50% of revenues from blockchain activities; 2) or expect to derive at least 50% of their revenues from blockchain activities; or 3) other companies that get less than 50% from blockchain activities.
- DAPP (VanEck Digital Transformation). Launched in April 2021 and tracks the MVIS Global Digital Assets Equity Index.
- CRPT (1st Trust SkyBridge Crypto Industry and Digital Economy). It only launched on September 20, 2021. It was launched by a former communication officer of Donald Trump and will invest at least 80% of its net assets in the common stocks and American Depositary Receipts (“ADRs”) of Crypto Industry Companies and Digital Economy Companies.
Overall Commentary
This is a free newsletter to the VTI community. It’s not about making any recommendations for what to buy or sell. Instead, it’s about understanding how money is made in cryptoassets. Just for full disclosure, I personally own about 100 different cryptocurrencies, including many of those mentioned in this letter.
Until next month,
This is Van Tharp