The Weekend Edition is pulled from the daily Stansberry Digest.
The price of bitcoin has jumped back above $50,000...
And surprisingly, owners of the world's first and most popular cryptocurrency have the government to thank.
Testifying before the House of Representatives this past Tuesday, Securities and Exchange Commission ("SEC") Chair Gary Gensler said that the regulatory agency was not looking to ban the use of bitcoin.
This follows similar recent commentary from the Federal Reserve. Last week, Fed Chair Jerome Powell said the central bank would not ban cryptocurrencies in the U.S.
These comments – by two of the most notable figures in the U.S. financial system – are taking away some uncertainty around the regulatory landscape for bitcoin and other cryptocurrencies.
The worst-case scenario for many U.S. crypto bulls was a full-scale ban, like we recently saw in China – news that partly caused the 50% drop in bitcoin's price earlier this year.
Over the past few months, China has taken an extremely hardline stance on cryptocurrencies. First, it banned crypto mining within the country's borders. Then, last month, the People's Bank of China banned all crypto-related activities.
But just days apart, Gensler and Powell have ruled out that possibility in the U.S... for now, at least. However, Gensler pointed out that if any U.S. government body had the authority to ban bitcoin, it would be Congress.
Despite some worries, bitcoin jumped higher on Gensler's testimony to above $50,000 – its highest level since May. The cryptocurrency has now nearly doubled from its July lows and trades near $55,000 as I write.
It's up around 30% since September 29. That just a little more than a week ago.
And as I and others will explain today, the price of bitcoin – which signals enthusiasm for the crypto space in general – could be headed much higher in the near future...
Generally speaking, we are hearing a softer tone from the U.S. government on cryptocurrencies...
The Fed, the SEC, and some members of Congress, who have oversight over the bank and the regulatory agency, have been critical of digital assets in the past.
In the September 15 Digest, we noted that the SEC was looking at regulating cryptos... And our colleague and Crypto Capital editor Eric Wade explained some of the SEC's criticisms in a weekly update to his subscribers last month as well...
This week, U.S. Securities and Exchange Commission ("SEC") Chair Gary Gensler testified that he thinks most cryptos are law-breaking, unregistered securities that the SEC might go after.
That stance made it seem like a huge crackdown on crypto could be coming. But recent discussions on Capitol Hill have moved away from any talk of an all-out ban.
The clearer yet still broad-brush regulatory stance from Gensler and Powell, two important figures in the "system," is a relief to crypto investors right now.
We can see a bullish trend in crypto fund flows lately...
According to a weekly report from digital-asset manager CoinShares, $90 million flowed into digital-asset products in the week ending October 1. That marked the seventh straight week of inflows for crypto investment products, the company said.
That brings the total inflows into crypto products in 2021 to more than $6 billion.
CoinShares said the trend of inflows shows that investor confidence in cryptocurrency is gaining steam. Specifically, it cited these "accommodative statements" from the SEC and the Fed.
With current Fed and SEC leaders saying they won't ban cryptos, formerly reluctant businesses and investors can begin to wade into the space without fear of a massive crackdown.
That means the increased adoption we've seen – with massive companies like Amazon (AMZN), Apple (AAPL), and Walmart (WMT) all joining the fray – should continue to grow.
More and more banks and payment companies are "greenlighting" cryptos too...
On Tuesday morning, U.S. Bancorp (USB) announced that it would begin offering bitcoin custody services to its clients in the U.S. And it said it will roll out additional cryptocurrency services in the near future.
Essentially, "custodian" services means that USB customers can buy bitcoin, then safely store it with the bank.
Also on Tuesday, Bank of America (BAC) – the nation's second-largest bank – announced the launch of a digital-assets research arm with the publication of a report, "Digital Assets Primer: Only the First Inning."
The sector is now "too large to ignore," a group of Bank of America analysts wrote in a research note.
Yes... yes it is.
Bitcoin's market cap is more than $1 trillion today...
That's larger than all but four publicly traded companies – Apple, Amazon, Microsoft (MSFT), and Alphabet (GOOGL).
And bitcoin's market cap is larger than the combined market cap of traditional banks like JPMorgan Chase (JPM), Bank of America, and U.S. Bancorp... and the combined market cap of credit-card companies Visa (V), Mastercard (MA), and American Express (AXP).
We hesitate to make these sorts of market-cap comparisons because the valuations can change quickly based on the market's daily movement. But for now, it's true... And it shows us how quickly the crypto space has grown over the last few years.
At the same time, if you think you missed out on the opportunity to get into cryptos and the world of digital assets... that's not the case.
First things first: Where is bitcoin going next?
If you're a believer in a mix of fundamentals, technical indicators, and circumstantial evidence playing a strong role in any market, there is a compelling case to be made for a big move higher in bitcoin's price...
According to Eric, the stars could be aligning for a "breathtaking" move.
In his weekly Crypto Capital update to subscribers last Friday, Eric mentioned that one of the special features of bitcoin is its capped supply (21 million coins) and the inflation-proofing that is baked into its computer code.
Roughly every four years – the time it takes for 210,000 "blocks" in the bitcoin blockchain to be created by a network of computer users – the number of bitcoins rewarded to a "miner" is halved.
Let me break this down...
In 2009, the reward for each "block" created by a miner was 50 bitcoins. Today – after three halvings, the latest in May 2020 – the reward is 6.25 bitcoins per block.
You might think this lower reward would cause miners to stop putting in the effort to mine bitcoin... And for some, it might. But on balance, quitting the bitcoin game has not been worth it.
Bitcoin miners are making $40 million per day, according to blockchain-analytics firm Glassnode. That's a 488% increase since the bitcoin network's halving in May 2020.
In theory, lower bitcoin supply with every coin created, combined with higher demand, should lead to a higher bitcoin price – and that's exactly what has happened. Supply-and-demand theory has met reality.
Bitcoin's price has moved high enough that miners still think it's worth creating it... So the cycle continues.
Before the May 2020 halving, the previous one happened in 2016...
This is where we pick up with Eric's analysis.
In his weekly update video last Friday, he brought up a 2016 article from Forbes, when the headlines were similar to what they are today – focused on the nation's massive debt and the U.S. debt ceiling. Eric shared it with his subscribers...
The national debt will break $20 trillion before the end of 2016. The budget deficit was not that large, but the government borrowed extra to catch up after the last debt ceiling showdown... Is this a broken record?
As Eric said in his update... yes, it is. Recently, the debt ceiling "debate" came down to the wire again, headlined by political posturing.
But the point and the timing might be too similar to ignore, Eric says. It might indicate something about "patient" bitcoin investors who have looked at the cryptocurrency as an alternative to the "system" for years now – and what they've seen over that time.
If you look at bitcoin's price performance over the 336 days following the bitcoin halving of July 9, 2016, you'll see it gained 300%... then traded sideways for a bit before hitting a euphoric peak near $20,000 at the end of 2017.
Start to finish, that made for a rally of nearly 3,000% in the 525 days after the 2016 bitcoin halving.
Eric says today's bitcoin chart looks "remarkably similar"...
After bitcoin's most recent halving on May 11, 2020, its price gained 550% over the next 336 days to its most recent peak above $60,000 in April.
We're now 516 days from bitcoin's latest halving. If this pattern holds, 525 days post-halving would arrive in about two weeks... And we're nowhere near the thousands-of-percent gains that occurred after the last halving cycle. As Eric points out...
If cryptos, bitcoin specifically, repeat themselves like what happened in 2016 and 2017, any day now, we should see a breathtaking rally take place... It would be almost straight up with some bumps in it.
Of course, a 550% rally in 2020 and 2021 is steeper than a 300% one in 2016 and 2017. So it might just be taking longer to digest the enthusiasm of the early cycle gains before liftoff again.
Like we said, it's a compelling case...
As we wrote, bitcoin is up nearly 30% in a little more than a week.
And Eric says the gains from the next bitcoin rally could reach anywhere from 4 times to 10 times bitcoin's current price – though those rewards don't come without their risks. There is no guarantee this rally will happen, after all.
If you own cryptos in your portfolio right now – especially bitcoin – it's probably a good idea to keep holding and be rewarded for your patience. But if you're a new investor thinking about going "all in" on bitcoin today, hold your horses and think for a moment.
As Eric puts it...
You don't need to have all of your money at risk to participate in upside if cryptos are going to triple or quadruple or 10X in value from here. The answer is not to put everything in. The answer is to manage your risk.
In other words, don't put in any new money that you can't afford to do without. And follow a trusted guide who can give you vetted advice on bitcoin and the various cryptos.
Sell-offs happen, just like rallies. And drops in bitcoin's price have proven to come as quickly as the rallies. You don't want to be completely wiped out in the case of the former, no matter how compelling a bullish case for bitcoin – or any other asset – might sound.
At the same time, if your financial house is in order, you might want to allow yourself to take more risk and take advantage of great opportunities.
All the best,
Corey McLaughlin with Nick Koziol
Editor's note: Bitcoin is rallying once again... having soared above $55,000 for the first time since May 2020. With big-name banks and companies backing digital assets like never before, people have gone "all in" on cryptos. But don't rush in without hearing what crypto expert Eric Wade has to say... Click here to learn more.
