How institutional investors are now reshaping the future of crypto
Ric Edelman: It's Tuesday, November 21st. Did you see the headline in Financial Advisor Magazine back on October 25th? Bitcoin has more than doubled this year in unforeseen resurgence. Unforeseen really? Maybe unforeseen by the idiot headline writer at a magazine who obviously doesn't know anything about crypto and obviously isn't paying any attention to it because the 120% increase in the price of bitcoin this year is anything but a surprise to everyone who follows crypto.
Let me give you an idea of what's been going on in crypto, not this year, just in the past month. The number of transactions of $100,000 or more on the Bitcoin blockchain has hit a new high; in October alone, 23,400 transactions of $100,000 or more. This is clearly institutional activity, and a metric of retail investors shows that their trades have hit a new all-time high as well. Visits to bitcoin’s Wikipedia page hit 13,500 on October 24th alone, the biggest number in over a year and a half. You're even finding more and more crypto ATMs all around the country and all around the world. They help ordinary people move money to bitcoin and back again without anybody needing a bank account. There are 32,000 crypto ATMs around the world, and inflows into digital assets reflect all of this. Inflows hit $767 million for the year as of October. That surpasses all the inflows of last year, with still two months of the year left to go.
Is any of this really surprising? Not really. AllianceBernstein said a couple of weeks ago that it expects the price of bitcoin to hit $150,000 by mid 2025. We're talking a year and a half. Bitcoin's current price around $35,000. AllianceBernstein says it's going to grow about 4 to 5 x 400% to 500% increase in 18 months. You think that's going to happen in the stock market, the bond market? You think your house is going to double in value in a year and a half. That's what AllianceBernstein says is going to happen to bitcoin.
Compare what they say about bitcoin to Warren Buffett, who says “Bitcoin is rat poison squared”. Who should you listen to? AllianceBernstein or Warren Buffett? Well, Warren says he was too dumb to invest in Amazon back in 1994 when Amazon was just an online bookstore. Warren Buffett had the chance to invest in the company, and he turned down the opportunity. He also didn't invest in Amazon when the company went public in 1997. If you'd invested $1,000 in Amazon's IPO, your $1,000 would now be worth $2 million. Warren Buffett recently said, “I was too dumb to realize what was going to happen. I didn't realize you could go from books to what's happened over there.” Warren Buffett made the same mistake about Apple. He didn't invest in Apple until 2016, long after Apple became the world's biggest company.
So sure, you can listen to Warren Buffett about soft drinks. He's a big investor in Coca-Cola or in insurance companies. He's a big investor in Geico, but you might want to ignore him when it comes to technology investments.
Speaking of technology and investments, you know what? Both of those are volatile. You know what's really volatile? Not just bitcoin prices but natural gas prices. The price of natural gas is down 50% from a year ago, while bitcoin is up over 100%. So what do you do if you're a natural gas miner? Well, you can sell your natural gas for a buck 50 per 1,000 cubic feet. Or you can use that gas to power rigs that mine for bitcoin, where you don't get a $150 per 1000 cubic feet, you get $10 per 1000 cubic feet.
In other words, when natural gas miners have high gas prices, they'll sell the gas. But when gas prices go down, they use the gas to mine bitcoin. Everybody's getting in on it these days. And AllianceBernstein isn't the only company that says bitcoin is going to rise sharply in price. J.P. Morgan says bitcoin is going to hit $140,000. Tiburon Strategic Advisors says it'll hit $150,000. Standard Chartered, the big British bank, says bitcoin will hit $175,000. Citibank says it's going to go to $318,000. Guggenheim Partners says $400,000 and Ark Invest says it'll hit $1 million. With all of these price predictions from so many established Wall Street firms, is it any wonder that investors are paying attention? In fact, not just investors?
Major corporations are getting involved in crypto as well. From the Norwegian Seafood Association to Parmigiano-Reggiano to Breitling, Dolce and Gabbana, Burberry, Tiffany, Starbucks, Nike, they're all now engaged in crypto and the latest addition is Disney. Disney has now licensed all of its characters to Dapper Labs, the online video game company that's behind the NFTs of CryptoKitties and NBA Top Shot. Dapper is going to create unique, collectible and tradable digital pens featuring Disney characters, including those from Pixar and Star Wars. They're going to start selling before the year is over.
And how about crypto haters? One who comes to mind is Nouriel Roubini. He's known by the nickname Doctor Doom. He's been saying for years that crypto is totally corrupt. Really? Well guess what? Nouriel Roubini is now launching his own crypto token. His company, Atlas Capital, is now launching the Atlas Climate Token, a stablecoin trading on a blockchain.
And you know how Jamie Dimon, the CEO of JP Morgan, keeps saying that bitcoin has no intrinsic value? Well guess what? JP Morgan has just teamed up with several blockchain platforms - Avalanche, Oasis Pro, Provenance Blockchain, Bioeconomy, Layerzero Labs and Accel-KKR to create a blockchain interoperability proof-of-concept for portfolio management. The project's going to let fund companies tokenize, purchase and rebalance real world assets across multiple blockchains. And guess who's leading the project? JP Morgan itself.
Hey, Jamie. I thought you said crypto was worthless. Apparently not. A JP Morgan spokesman said, “Our goal is to create solutions that bring significant efficiencies and enable better outcomes for asset and wealth managers and investors through personalized, highly-scalable portfolios, regardless of asset class or where those assets are managed and recorded.”
And this is just the latest example of how JPMorgan is using crypto. They've got their own digital coin called the JPM coin. It already handles $1 billion of transactions every day for its institutional clients, and JP Morgan is now doing automatic execution of payments via the JPM coin. They call this a “significant milestone in programmability, the holy grail of crypto”. Programable payments automate transactions based on preset rules. It eliminates the need for manual checking.
In other words, it eliminates humans from the process. This speeds up transactions and lets them get done when the bank is closed, like on weekends and holidays and at night. Big companies are already using the service like Siemens, FedEx and Cargill are going to start in a few weeks. Soon, every Fortune 500 company will be doing business this way because it's faster, cheaper and safer than the old way.
This is not just a US thing. We sometimes forget that crypto is a global technology. In Germany, their third largest bank, DZ, has launched a new blockchain platform to custody digital assets for their institutional clients. Another big German bank, Commerzbank, has they Commerzbank which has $500 million in assets, just got a crypto custody license so it can serve institutional clients as well.
And in London, HSBC, one of the world's largest banks, announced that they're launching a new custody service for tokenized securities next year for their institutional clients. They're going to give them they're going to provide them with tokenized gold, and they're testing tokenization for fixed income, foreign exchange and asset management products, all using blockchain.
And UBS, the big Swiss company, they're letting their clients in Hong Kong trade crypto ETFs. Guess what happens when those ETFs start trading here in the US? You think UBS won't let its 10,000 financial advisors sell the bitcoin ETF to its customers?
And have you ever heard of the National Pension Service? It's in South Korea, and it's the world's third largest pension fund. They manage $755 billion for workers in South Korea. They just invested $200 million into shares of Coinbase, the largest US crypto exchange. And Boyaa Interactive, the big Chinese gaming company that's listed on the Hong Kong Stock Exchange, they announced it's going to invest up to $100 million into crypto. It's going to put $45 million into bitcoin, $45 million into Ethereum and another $10 million into two stablecoins Tether and Circle. This will represent 38% of the company's total assets.
And in Singapore their monetary authority is doing a tokenization pilot with guess who?...JP Morgan, along with Deutsche Bank and Bank of New York Mellon, the oldest bank in America. They're going to be doing digital asset trades, foreign currency payments, multicurrency clearing and settlement fund management, automated portfolio rebalancing, and they're going to be doing all of it on a blockchain.
This is clearly a global activity in the Philippines. The government there needs to raise money like every government. So the Philippines is doing what every government does selling treasuries. The Philippines is selling $180 million worth of Filipino Treasury bonds. Every government does this here in the US; we've sold $40 trillion of treasuries. But what makes these Philippines treasuries different is that they are tokenized treasuries. Yeah, selling the treasuries via the blockchain. Philippines is not the first country to do this. Hong Kong issued $100 million of tokenized government bonds way back in February. The managing director, in fact, of the IMF, the International Monetary Fund, says CBDCs central bank digital currencies could replace cash in global finance, and the IMF has just released a new CBDC virtual handbook to help countries do exactly this.
You know, Eaglebrook Advisors, which is the largest crypto platform, surveyed advisors about their interest in the new spot bitcoin ETFs that are expected to come to market anytime. 82% of those advisors said they would invest in this ETF when it gets approved by the SEC.
Today I'm doing a big, long conversation with Laura Shin. Laura Shin hosts her own podcast [Unchained]. You've heard her on this podcast. She's also a member of my faculty in our CBDA program, the Certified in Blockchain and Digital Assets Faculty. Laura is one of the top journalists who covers the crypto marketplace, and she has a terrific podcast, the link to her podcast, and my interview with her that is airing today is that debuts today on Laura's podcast.
And we're all busy waiting for the SEC to say yes to the new spot bitcoin ETFs with crypto -- with bitcoin prices up 120% year to date and 12 applications in front of the SEC waiting for permission to have these bitcoin ETFs brought to market, with a Court of Appeals ordering the SEC to approve of these with letters from members of Congress demanding that the SEC approve these products, with editorials in the financial trade press urging the SEC to bring these products to market.
Well, everybody is waiting with much anticipation. And the big question is when will the SEC make these ETFs available?
So you know what I think? I think the SEC is going to say yes Wednesday, tomorrow late afternoon after the market stops trading, while a third of this country is on the road for Thanksgiving. Gary Gensler still hates crypto, and he's grudgingly recognizing he's got no choice but to approve them because everybody's ordering him to; from Congress to the courts to the financial services industry to the financial trade press.
Investors nationally, around the country, everybody wants this product, and Gensler is going to do it. My prediction is kind of a half joke here, grudgingly, by doing it when nobody's looking or paying attention, by approving these ETFs tomorrow, on Wednesday, when everybody's preparing for Thanksgiving. With the markets closed on Thursday and very little trading activity on Friday because the country is immersed in the holiday weekend, what better way for Gary Gensler to bring these to market in a manner that is the least noticeable? We'll have to stay tuned for 24 hours and see if I'm right.
Hey, you know, I mentioned briefly about natural gas miners. People are paying a lot of attention to natural gas and oil, fossil fuels as they are, as well as green energy, renewable energy, energy that isn't bad for the planet. And I'm often asked about these renewable energy resources. Fossil fuels versus renewable energy. Renewable is mostly wind and solar power. Wind energy is about 40% of the market. Solar is 30%. Hydroelectric. Geothermal. There are 5 or 10% each. Biofuels - tiny 1% of the market. Solar is the clearly long term big winner. We'll be using all solar all the time. The sun produces 10,000 times more energy than we use, and solar energy is free. All we got to do is collect it, store it, and transmit it.
Yeah. That's all. It's a pretty tall order right now. It costs about $20,000 to install solar panels. They're big and bulky, and they're not yet small enough to fit on the roof of a car or the edge of your smartphone. Wind has its own challenges. There are 75,000 wind turbines in the US, mostly in the Midwest. Half of them are in Texas.
Everybody's waiting for the tech to improve. We've got to make it cheaper, to make more efficient and their ability to collect and transmit power. There's a big push by governments all around the world to do this. 135 countries have set zero emission targets by 2050. That's only 25 years from now. So we've got to get on with it. And that means business is paying attention with lots of investment, lots of deployment of capital.
So if you want to add this exposure renewable energy to your portfolio, take a look at the Global X Renewable Energy Producers ETF. The symbol is RNRG. This ETF invests in companies that produce energy from renewable resources wind, solar, hydroelectric, geothermal, wind, solar, hydroelectric, geothermal and biofuels. It's the Global X Renewable Energy Producers ETF symbol RNRG. You can learn more at Global X ETFs.com. If you're an investor, ask your financial advisor about it. We'll find out tomorrow what the SEC has to say while we're all getting ready to be with our families on Thanksgiving on Thursday.