Ready for another market rodeo?
We spent a fair bit of time on the action in gold silver last week – both exploded in price, with the former finally making it past its all-time high in dollars it hit in 2011.
While gold was already at or near all-time highs in every other currency (including pounds of course) the dollar hurdle is an important one, as the dollar is the world’s reserve currency – and crossing the 2011 hurdle marks a change in investor psychology.
I mentioned in last week’s note that I was clueless as to why the Austrian Mint was minting silver coins with Robin Hood’s face on them. A reader offers a compelling explanation:
If ever you visit the little Austrian town of Durnstein, on the Danube, and climb the (steep) hill up to the ruin’s of the Castle, where Richard the Lionheart was imprisoned and ransomed, you will be bombarded with information about Richard, and Robin Hood gets a mention.
Richard’s ransom was 65,000 pounds of silver (£2 Billion today and rising). Perhaps that is why the Austrian Mint produced a Robin Hood coin.
Now that’s a proper King’s ransom and no mistake. I wonder if a hostage taker demanded such a hoard today, how long it would take the authorities to comply with it..?
But gold and silver make up only two thirds of what I call “The Wingnut Portfolio” (fringe assets hated by the mainstream, and held by those who are sceptical of the status quo).
We haven’t been dwelling on the third part of TWP, which interestingly was having a whale of a time last week too: bitcoin.
At the time of writing (pre-pub on Sunday) the BTC price is flirting with Elysium, the sunlit lands where ₿1= $10k. It’s met some resistance around $9,900 however, so the road to paradise is getting rocky:
Source: ByteTree
NOTE: BTC broke $10k overnight, and is at $10,100 as of this morning:
Happy days
Source: ByteTree
Nothing wild appears to have taken place on the network during this price rise over the past week – at least when it comes to payments. The largest batch of transactions to be spent on the network was worth $386 million and was spent on Tuesday morning. While that would’ve been an awful lot a couple of years back – and it still is in many ways – we’ve seen much larger transactions take place in the past.
Harry Hamburg over at Coin Confidential has pointed to a key shift in how bitcoin can be acquired and stored, which might illustrate how the price could be rising rapidly without anything out of the ordinary going on “under the hood”. It’s a change in the American financial system, which allows much bigger players to take custody of el crypto numero uno. Here’s a snippet from his latest note to subscribers:
This week, everything changed. It’s going to take a while for this change to play out. But make no mistake. This is the tipping point.
This is the point where investing in crypto will become as common as investing in stocks, shares and savings accounts.
Why?
Well, the US government just declared that national banks can offer crypto custody services to their clients.
In a public letter, dated 22 July 2020, the Office of the Comptroller of the Currency (OCC) announced (emphasis mine):
This letter responds to your request regarding the authority of a national bank to provide cryptocurrency custody services for customers. For the reasons discussed below, we conclude a national bank may provide these cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency.
This letter also reaffirms the OCC’s position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.
So basically, it’s now legal for US banks to provide crypto custody services to the public.
Why does this matter?
It’s just turned crypto into a mainstream investment that is as safe and easy to store as stocks and cash.
Once the ball gets rolling on this, anyone will be able to walk into their bank and buy, sell, store and trade crypto…
With all manner of internet stocks surging strongly during lockdown, it seemed strange to me that the crypto space wasn’t going bananas as well, as crypto is fundamentally an internet-based technology. Looks like BTC is finally catching up, right as we start “getting back to normal”.
But will things get back to normal post lockdown?
Not for at least one sector, which is having capital thrown at it left and right…
Stepping up to bat
Kit Winder will be pleased – the “game of empire” is the first sport in the UK to be allowed spectators post lockdown.
It wasn’t the most high-profile cricket match being played which folks could attend (the England/West Indies test) but Surrey vs Middlesex was allowed 1,000 fans in attendance yesterday.
This is a “back to normal” example which I’m sure Kit, our resident cricket nut (and player), will be pleased to see. But as he’s been telling us for some time here at Southbank Investment Research, there’s one sector of the economy that won’t be going back to normal post-WuFlu – a shift that is creating some ludicrously lucrative investment opportunities.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Investing in Bitcoin