Cryptos Rocket

This chart of the Ether price looks good but Bitcoin looks even better.

The effect of including on the chart the initial incredibly sharp rise is to flatten the rest of the chart. I don’t usually show the whole chart like this but it could be relevant because it suggests that all the trading since 2014 could be a large, 10-year, upward-sloping consolidation, able to support a spectacular rise.

We have a Bitcoin halving on 24 April which has been a bullish event in the past. We also have retail money pouring into the newly launched Bitcoin ETFs. This new source of demand is going to hit a largely fixed supply which could be a recipe for fireworks.

Barely discernible on this chart but we have a recent golden cross buy signal, marked by the yellow smiley, which suggests that a new uptrend has begun. The absence of fundamentals which many investors find so disconcerting makes Bitcoin the perfect speculation. There is never a reason to say the price is too expensive because any price is just a figure drawn out of thin air.

Could they go to $2m as some excited observers have suggested? In the case of Bitcoin, it is just a number so why not?

When Blackrock launched IBIT, its Bitcoin ETF, I suggested that shares in the ETF should be bought in opening dealings as that was likely to be a good decision long term. The problem is where to buy them given the po-faced attitude of the regulators who are so terrified that some granny in Cheshire might lose some money that they stop millions of the rest of us from making any. The 20mph speed limit mindset, is taking over the country.

In answer to a query, I got this reply.

No, you cannot buy IBIT ETF shares in the UK. The FCA (Financial Conduct Authority, the financial regulator in the UK) has restricted access to crypto derivatives, such as CFDs and ETFs, and is yet to approve Bitcoin ETFs in the UK.

Hargreaves Lansdown, 17 January 2024

Some pimply little w****r at the FCA knows more than millions of investors looking after their own money. Of course, he does(n’t)!!! The mindset in this country and I guess in Europe is so pathetic. It is even more absurd because with an account with say Coinbase you can buy Bitcoin directly so what on earth is the difference?

B****Y KIDS

Key Information Documents (KID)

Overview: 

IBKR [InteractiveBrokers] is required to provide EEA and UK retail customers with Key Information Documents (KID) for certain financial instruments, and Key Investor Information Documents (KIID) for funds.

Relevant products include ETFs, Futures, Options, Warrants, Structured Products, CFDs and other OTC products. Funds include both UCITS and non-UCITS funds available to retail investors.

Generally KIDs or KIIDs must be provided in an official language of the country in which a client is resident.

However, clients of IBKR have agreed to receive communications in English, and therefore if a KID or KIID is available in English all EEA and UK clients can trade the product regardless of their country of residence.

InteractiveBrokers

It seems a large number of exciting ETFs don’t have KIDS.

Polar Capital Technology Trust is an alternative to tech-focused ETFs. It has been a good performer, there is a recent buy signal and it is all about US technology. Below is what PCT partner, Ben Rogoff, had to say in a recent blog post about the impact of AI.

However, the reasonable market environment and valuation setup are secondary to the seismic change we believe is beginning as the AI opportunity inflects. We are at a unique moment in the evolution of the technology landscape and expect the pace of AI adoption to prove a key determinant of sector fortunes during 2024. Our constructive stance here is based on the belief we are in the early stages of an extended period of sustained robust investment in AI, which we believe is a general purpose technology (GPT), more disruptive than the smartphone and every bit as important as the internet. In addition, the diffusion rate for AI (how long it takes to become widely adopted) is likely to be far quicker than those earlier technologies given the low barriers to adoption and wide range of use cases.

We also expect it to become apparent that a wider range of companies are directly benefitting from generative AI, either as enablers or users/beneficiaries or as new markets/applications become apparent. The largest technology companies’ outperformance has been a formidable headwind for active managers’ relative performance, but a strong tailwind for absolute returns. Going forwards, we expect mega-cap returns to be solid (reflecting their core growth rates) further aiding absolute returns, but not creating the same challenges for performance versus the benchmark as the market broadens. Historical periods of very concentrated market performance suggest the broader market can perform quite well thereafter, but the strongest contributors typically underperform.⁸ While several of the largest companies – especially NVIDIA and Microsoft – are AI enablers and/or beneficiaries and are therefore among our largest absolute positions, we expect the benefits of accelerating AI innovation to be felt more broadly. We have positioned the Trust to take advantage of this, with c.80pc of the portfolio accounted for by companies we believe are enablers or beneficiaries of AI.

Perhaps the most significant economic change AI could bring about in the medium term is in supporting a sustained acceleration in productivity growth. Productivity is notoriously difficult to measure, but there are some early signs that productivity growth could be turning higher after a prolonged period of weakness; AI could provide a further lever to an already improving picture. Along with falling inflation and interest rates, this should provide a supportive backdrop for the broader sector – as well as better aligning with our growth-centric investment style and playing to our strengths with a larger team with over six years’ experience running a dedicated AI Fund. A challenging 2022 and a strong 2023 represented the transition from the end of the ‘pandemic era’ to the start of the ‘AI era’; we are extremely excited about the AI-related investment opportunities ahead.

Ben Rogoff, Polar Capital Technology Trust, 10 January 2024

Strategy – Buy Bubbling Cryptos if Possible

Below is a slightly different chart of Bitcoin.

On this chart, we can see the latest consolidation more clearly, which is already three years or more in duration. The smiley buy signal is already telling us that the odds favour an upside breakout. If we get it there is plenty of power to support a big rise and the scramble to buy bitcoin could be something to see.

Bitcoin, like many technology shares offers no return, so falling interest rates when they eventually happen would be a major bull point.

Share & Crypto Recommendations

Ether ETHUSD. Buy @ $2786

Bitcoin BTCUSD Buy @ $52,160

iShares Bitcoin Trust. IBIT. Buy @ $29.56

Polar Capital Technology Trust. PCT. Buy @ 2860p