Bitcoin BTCUSD, +9.18% in your IRA? Dude, that’s so last month.
Sure, bitcoin is hitting new highs, and just broke through $23,000. OK, it’s up 200% this year. But bitcoin is old-school, man. It’s the “OK Boomer” of crypto.
You should be in “Aave.” It’s up nearly 10,000% this year. Or “Kusama,” which is up nearly 5,000%. Or “Band Protocol,” which is up nearly 3,000%. Or “yearn.finance,” about 1700%.
Ditto the “OMG Network.” Ticker: OMG.
I’m not making this up.
According to CoinCodex.com, the world’s cryptocurrencies now boast a total “value“ — meaning price — of $639 billion.
Even more than Tesla TSLA, +3.84%, if you can imagine. About three times as much as Pfizer PFE, +0.33%. Hmmm, which would I rather own? A third of the world’s cryptocurrencies, or all the stock in Pfizer?
Crypto is a great, great short term trade. The momentum is crazy. And because no one can actually value this stuff, no one can say when it’s too high.
There’s no point debating the “investment case” for bitcoin because it is unknowable. Ditto the “value.” What we have now is the classic speculative mania, straight out of Extraordinary Popular Delusions And The Madness Of Crowds.
Among the bubble stocks during the South Sea mania, wrote financial historian Charles Mackay, was a company ”For carrying on an undertaking of great advantage; but nobody to know what it is.”
And if you don’t believe me, look no further than the stampede into the Bitwise 10 Crypto Index Fund (OTC: BITW), a statutory trust, much like a closed-end fund, that just became freely tradable this month.
It’s a clever new fund. It gives you exposure to the 10 “biggest” cryptocurrencies with a single click of a mouse (though it is dominated by bitcoin). You can own it in your IRA, saving on all the taxes and paperwork. And you can buy it through your regular broker. No setting up “wallets” and apps and trying to keep track of various digital “keys.” (I think I still own some “Ethereum” somewhere. Heaven knows where.)
The price skyrocketed from $12 at the start of the month to $140 on Wednesday, before plunging to $90 Thursday. The fund was valued at the peak, theoretically, at $1.2 billion.
There’s just one problem. It’s 85% air. No, really. The actual underlying assets of the fund are just $170 million, or about $20 a share. The remaining price rise is pure speculation, with nothing underpinning it.
In other words: “ether,” not Ethereum.
“As of 3:12 p.m. ET, the fund is trading at $136 and the estimated NAV is $18.48,” confirmed Bitwise spokesman Matthew Hougan to MarketWatch Wednesday. “The publicly available shares of the fund can trade to a premium if the demand for public shares exceeds the amount of shares that are available for sale,” he added. “Bitwise has no control over the demand for shares in the secondary market or the premiums or discounts.”
But sure, the action in this market all makes perfect sense.
Trading can be great fun and you can make great money. Many congratulations to all those making out like bandits. But never confuse brains with a bull market. This is all gambling. Just make sure you get out in time.