Bitcoin's Weakness = Your Opportunity
If you're just watching Bitcoin headlines, you probably think crypto's dead in the water. But Sam Volkering’s Crypto Kings have crushed it - even when Bitcoin is taking it on the chin.
Underneath the recent price weakness, momentum is building, adoption is gaining traction, and investors are adding to their positions
More and more want exposure to the cryptocurrency market that they can’t currently get through traditional financial options.
And that doesn’t bode well for the old school banks. They’re losing deposits to crypto exchanges like Coinbase and other platforms including Square, PayPal, and Robinhood.
In May, Coinbase reported $1.8 billion in revenue in its fiscal first quarter of 2021 – up from just $585 million in the previous quarter – with around $90 billion in assets.
That’s a whole lot of revenue and asset custody that Coinbase gained at the expense of traditional banks.
Robinhood on the other hand saw 17% of its transaction-based revenue come from cryptocurrencies. The platform’s crypto assets skyrocketed in the first quarter from $480 million to $11.6 billion on a year-over-year basis. That’s enormous growth – more than 2,300%.
And this massive shift hasn’t gone unnoticed by the banks…
On June 30, New York Digital Investment Group (NYDIG) announced a partnership with digital payment giant National Cash Register (NCR) to create a mobile app that will allow US bank customers to buy cryptocurrencies directly from their bank accounts.
More than 650 banks – with approximately 24 million clients – have already signed on to the platform.
This move by traditional banks into the crypto sector is incredibly bullish. That’s because the ease of a crypto allocation afforded by this partnership will reduce a huge barrier to entry that was preventing millions of investors from getting started.
The NYDIG/NCR platform alone opens the floodgates to 24 million potential new investors!
Think of it this way. Some of the more conservative banking customers may have been hesitant to move their money to crypto exchanges or related platforms in the past. But being able to stay within the comfort of their trusted bank removes that concern entirely.
If just 10% of those 24 million people actually buy cryptocurrencies through this new service, that’s still 2.4 million new entries into the market! And it represents a significant amount of money coming in.
The demand for crypto exposure is clearly strong. And this is a massive and important step by the traditional banking industry that will undoubtedly lead to increased adoption.
But this isn’t the only tailwind behind the crypto sector…
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Increased allocations from institutions and hedge funds
In PwC’s recently released 3rd Annual Global Crypto Hedge Fund Report 2021, total assets under management by crypto hedge funds around the world increased about 90% from $2 billion in 2019 to nearly $3.8 billion in 2020.
That’s a massive increase, but don’t be surprised to see another double in next year’s report.
Approximately 21% of hedge funds are now investing in digital assets, with an average of 3% of their total assets under management invested in the space. That’s an incredibly small percentage. Imagine the possibilities if it increases to 5%… or even 10%.
Plus, more than 85% of those hedge funds plan to deploy more capital into the asset class by the end of this year. And about a quarter of the hedge fund managers not yet invested in digital assets said they are either looking to invest or in late-stage planning to do so.
PwC’s comprehensive survey confirms that more money is coming into the space – and fast.
Bottom line, yes, this pullback hurts. But no, the reasons for being a crypto investor haven’t diminished – in fact, they’re only strengthening.
Now you just have to stay patient and enjoy the ride.
See you next week.
Managing Editor, The South African Investor