Bulls and Bitcoin: 1 Stock to Buy Post-Halving
Even the bulls are mystified!
But we’ve been saying it the whole time: This is a v-rocket recovery. And this rally — with new highs — is here to stay.
Bitcoin is making its post-halving move.
We asked you for your predictions on bitcoin’s next milestone. Watch today’s IanCast to see the results.
Paul also reveals how you can get the bitcoin “stock” for the bull run. It’s easy to buy and less volatile than physical bitcoin:
The Future of Bitcoin
I asked three questions. When will Bitcoin make a new high? By the end of June? I got a lot of LOL emojis back at that one. By the end of July? By the end of August? And then there was a request for never, it’s going to zero.
However, you are the one to actually tell me that in the last run in 2017 it went from $1,000 to $7,000 in the space of six weeks. It was a huge run very rapidly. It went from a few thousand to $20,000 in the span of a few months.
There’s a log scaling to Bitcoin that moved from $100 to $1,000, $1,000 to $10,000. The Halving has happened, the reward has been halved. The fees are skyrocketing to verify the transactions because the reward has been halved and a lot of miners have gone out of business or shutdown.
They were never able to generate their cost plus capital to sustain themselves in terms of Bitcoin.
Mining stocks are actually going up now. A couple have made new highs for 2020, which is a good sign. People are looking outside crypto for crypto investment because a lot of people are already in the stock market. Those have a lot of upside too. We’ve actually recommended a couple in $10 Million Portfolio that are up.
Those are looking good too. Those companies that survived The Halving are going to do really well because they can still do their business even when they are mining only half the Bitcoin.
In some way, shape or form, my theory is that the longer people are forced to wait to get their Bitcoin when they enter their order in, the more they want to get in even faster. It extends the delay, which pushes the fees up, which then pushes back into people coming to buy even more.
There’s a cycle. People want what they can’t have. I believe that’s true for Bitcoin. We also have to say that there was that move to $10,400 and that looked like someone getting in — a somewhat large investor coming in and buying a block. As a result, it bid it up.
Bitcoin has still got variable liquidity at size, which is why I believe it’s so volatile. In other words, if you want to buy 1,000 Bitcoin, you are going to have to bid it up. It does look like the bid-ask spread is at about $1,000 at the 1,000 block. That’s just my feel. I can’t tell you I know this from looking at order books.
If you go and look at the moves it’s $800 to $1,000. I’m thinking once you get past 300 or 400 Bitcoin, you are forced to bid it up a minimum of $600 to $800 to wipe out that side of the book. Then equally, I’m sure there are people going short and they figure out how many Bitcoin they need to make it whole.
That’s just a very natural action of the market. To me, that’s an indication there’s more money streaming in.
On Binance, which is the exchange I watch because I think it’s the most liquid for Bitcoin and all the alt-coins, there are 2,000 or 3,000 Bitcoin traded per hour on average from what I’ve seen.
If you want to buy 1,000 Bitcoin, it will take you a while because the sellers aren’t guaranteed and that’s what’s pushing the price up. Equally, it can push the price down if you get a big seller, which is what we saw when it went down below $10,000. Really it’s held up really well since then.
I think it’s around $9,700 at the time we’re recording this on Friday morning. I tweeted out a picture a couple days ago that the number of Bitcoin the exchanges own is falling pretty rapidly. It started earlier this year a few months before The Halving because people were anticipating the shortage coming.
It’s continued afterward. The supply is really running out. Fewer are being mined. That’s a really good thing for Bitcoin’s price going forward because you have supply and demand imbalance. Grayscale, that big Bitcoin investment firm, is buying a third of newly mined Bitcoin.
It’s going to be even harder for a buyer to get it now because you have this huge institution buying a bunch of Bitcoin and making their own funds with it. The supply of Bitcoin is being squeezed from The Halving and more demand from big institutions like Grayscale.
You saw the last report. Square, through its CashApp, and Grayscale combined are absorbing more than 50% of the mined Bitcoin as of the last quarter. There’s nothing that CashApp is doing to stimulate buying, people are just coming and buying.
I am on the Grayscale email list. There is no sign on any letup on demand. If the reward is halved, demand is coming in, the nature of demand is once people start to do well then other people want a piece of it. Personally, people think it’s a joke that I put at the end of June.
I understand with it now being the beginning of June it’s less likely we are going to get to $20,000. Still, I feel that timeframe is very reasonable. Bitcoin has never traded like a stock.
After the last Halving the price spiked pre-Halving. It got to almost $2,000 and then went down a lot. When it went back up to the former high, it went right past it. So maybe $20,000 won’t even be that big of a resistance point. Maybe it will just go right past it. Then after that, who knows?
The models are out there. We have thrown out a price target or goal of $100,000 by the end of this year. Again, that will probably get a bunch of different emojis back in return. However, I have looked at the Stock-to-Flow model. I’ve also looked at all of the log models based on market cap as well as price.
It definitely does suggest that the next peak is somewhere in the range of $250,000 to $270,000 if Bitcoin is going to continue in one of those model types.
Another thing with demand is the futures market. You have big buyers Paul Tudor Jones and Jim Simons buying into that. Of course, those futures need to be backed by actual Bitcoin. So futures companies like CME and Bakkt are going to be buying a bunch of newly mined Bitcoin too.
The amount of newly mined Bitcoin going to regular investors like us is a very small amount, but the demand is going to keep growing.
There’s a company called Celsius out there where you can actually deposit your Bitcoin. I believe they are charging 18% to lend Bitcoin out and charging 4%, or something in that range. There are all these new developments happening.
One woman got $500 million in funding to start a crypto bank from very established sources, including the pensions of Wyoming. Wyoming is apparently a very crypto-friendly jurisdiction. This is really rocketing off big time.
In terms of the general crypto world, there was an article about the first Ethereum-backed mortgage contract. I put an Ethereum-using tracker in the Profits Unlimited portfolio. If any of you are looking for America 2.0 stocks or alternative ways to get at crypto without having to get a Coinbase or Binance account.
What are the other ways? CashApp is easy. If you are looking to buy Bitcoin and don’t feel like funding a Coinbase account, which is easy to use, but there are still issues with getting money in, or CashApp, which is the easiest way to get in. However, if you just have a brokerage account, there is a way to own Bitcoin without actually owning native Bitcoin.
The benefits of that are that you don’t have the deal with very complicated tax stuff, it’s less volatile than native Bitcoin from what I can tell and you record for it like any stock transaction. I put a second crypto in the Profits Unlimited portfolio.
Main Street Bull Market
I am sure you have seen that people are freaking out because the stock market is going up. I saw an article in Bloomberg that said even the bulls are completely mystified by what is going on.
That’s stage one of a big rally. Stage two is everyone getting FOMO — fear of missing out — and buying in even faster. I think we will be back at new highs really soon. I am not worried about the current rally. The market dropped 30-35% in the period of three weeks, which has never happened.
I really don’t have any worry that we will be back near new highs. I don’t think this is a crazy spike considering we are still 5% below the 52-week high. I have been adding trades in both options services, so I do think we still have a ways to go.
A lot of stocks in our America 2.0 portfolio have been making 52-week highs. These are the stocks that are really seeing demand.
It’s interesting that people have no issues with the market going down 35%, but people are unprepared and unwilling to accept it can rise by that much in a similar period of time.
People didn’t think we were at the bottom when we were at the bottom. It’s been the fastest market crash in stock market history.
For some reason, even though the economy is reopening and the data is getting better and there’s a huge shift in the technology we are using and acceleration of adoption which is good news for any economy, people are still apprehensive to buy in right now.
That’s going to turn into FOMO. It follows the demand at higher prices rule where people will pay more for something if the demand is going up.
The reality is, the amount of money that’s still sitting in cash is extraordinary. You can go around the world and people have negative interest rates or interest rates at zero.
In the last couple of weeks — I don’t know if I showed you this article, but it showed the vast majority of asset managers are skeptical of this rally. Many of them have been selling into it. There’s another YouTuber, I believe his name is Daniel Pronk. He’s a pretty smart dude. He made a video yesterday, which is worth checking out.
He said the market is going up, why is Warren Buffett selling? I feel like people have false proxies in their mind. In other words, if Warren Buffett is not buying, everything is negative and something is wrong. The truth is, he buys from a different perspective.
He has an insurance company that generates funds that he puts money to work. He has claims he may or may not have to meet, which have a long tail. For him, he also has to put large amounts of money to work.
The one thing we know about America 2.0 stocks is the way the market was structured over the last 20 years, innovation and new technology stocks were just a tiny little slug. These companies are, in many cases, too small for the big companies to own.
This is a Main Street bull market. If you have a small amount of money, this market is for you.
A lot of the stocks I have seen making new highs have a market cap of $1 billion to $15 billion, which is not very big in the grand scheme of things. A large cap, which is the biggest group of stocks, is above $10 billion. So it’s barely into that. Then there’s a bunch of companies that are more than $100 billion.
There are these smaller companies that are doing really well. Those are the ones growing very fast and seeing the most demand from the market. They are still scarce. There’s not a lot of new tech stocks out there, especially fin tech. A lot of new, emerging tech companies are still private.
What I think is there’s going to be a big surge in IPOs that’s going to bring a whole new demand in the market for these new companies because people can’t really buy into a lot of them at this point.
Housing Market In High Demand
We continue to be bullish, optimistic, positive — BOP. Of course, liquidity matters, but I would tell you that the liquidity matters a lot more for the housing market, which is just naturally strong.
The Fed should be doing what it’s doing. There is natural demand out there. If it did not have that liquidity going out, we would crash an economy that doesn’t need to be crashed. There is strong housing demand, there is strong consumption demand. We have two generations — millennials and gen Z — where housing demand is insanely strong.
Mortgage applications now are actually higher than they were a year ago, which is crazy. We just went through a lockdown and Zillow, Redfin and those online platforms are seeing huge demand. One of them is saying they saw a 500% growth in virtual home tours in April.
The housing market is so strong it’s still seeing demand even when people are sitting at home and unable to go anywhere. People are still buying houses. There is a 2.5 million house shortage in the U.S. right now. These homebuilding companies have their work cut out for them for years after taking a big break after the 2008 crash.
There was no demand for houses, so they just stopped building them. They have years and years to make up for that. This is going to be a generational boom in the housing market.
That’s part of the America 2.0 thesis we have laid out. Housing booms, the stock market booms are based on technological developments and the rise of these two generations that come with income and spending power.
As they buy things to fill their houses and make up their lives, you are going to see the stock market rise. As they have discretionary income, some of that money is going to push into the stock market.
This is why I believe the other thing people don’t know is that in March when the markets were crashing, the vast number of millennials and gen Z were opening brokerage accounts. E-Trade, Fidelity reported the greatest number of brokerage accounts ever opened in their histories in March of this year.
That would tell you something as well: People are optimistic. People will say, “Paul, that’s contrarian.” No, it’s not. The kinds of stocks they are buying are scarce, valuable and they don’t reflect the value of the technology.
Now, people have enough money to put them in demand and bid them up. I believe that’s the market action we are seeing.
In retail accounts and 410(k) there was a chart put out by Vanguard that showed contributions spike at the beginning of this crash. They just kept buying throughout it. It’s not even the big institutions buying into this. They are bearish from what I’ve seen. It’s everyday people who are really confident about a rebound.
It’s the people who believe in America. They believe in this country. They believe looking out one, three, five, seven years, we are going to be strong, better, technologically take a leap forward, new industries like space, new techniques like space — we have so much going on.
Are there things our country can improve? Policing techniques? Absolutely. Could we be fairer as a society to each other? 100%. However, these things are not mutually exclusive. Many people have sold their stocks watching what’s going on in various cities.
I would tell you it’s important to keep things in balance and perspective. These things can go on at the same time. What you do with your money, with your stocks, should be unaffected by those things. There has never been a time of perfect peace and harmony in our country.
There will always be something we can change, get better and do better.
Editor, Rebound Profit Trader