Oh Yeah, the President Talked About Cryptos

More inflation (again)... Oh yeah, the president talked about cryptos... Big, overlooked news... The White House talks bitcoin – sort of... Eric Wade shares his take... The U.S. is not banning cryptos... The 'American approach'...

We haven't gone in depth about cryptocurrencies in the Digest lately...

Frankly, this is for two reasons...

No. 1: We've been wrapped up analyzing this year's volatility in stocks and the influence of the war in Ukraine. And No. 2: Prices of the headline cryptos have been as calm as they probably can be – trading in ranges close to $40,000 (bitcoin) and $2,500 (Ethereum) for about two months...

That's down more than 40% from their all-time highs back in November... in line with similar sell-offs in many growth and tech stocks over the past few months.

Those wondering if bitcoin is a true inflation hedge are probably doing some hard thinking, since its price hasn't risen substantially while record high inflation numbers are being reported...

Then again, maybe bitcoin has risen in relative value, given its capped supply and steady-ish price lately.

On the flip side, one could argue it's bullish that bitcoin hasn't dropped any further lately, given what has been happening in the world... since cryptos, in their young teenage life, have been more volatile than other risk assets.

All in all, though, here's what we do know...

As I (Corey McLaughlin) will explore in today's Digest, with help from our Crypto Capital editor Eric Wade, more people are getting more clarity on how cryptos may be a big part of the global economy in the future.

We'll tell you why today...

But first, a quick significant aside about that inflation...

As Stansberry NewsWire editor C. Scott Garliss reported today, Mr. Market received another piece of "highest inflation numbers in decades" news. As Scott wrote...

The U.S. Bureau of Labor Statistics' Consumer Price Index data for February jumped 7.9% year over year compared with Wall Street's expectation for a 7.9% gain and the prior month's 7.5% increase. On a month-over-month basis, those same numbers rose 0.8%, in line with the expectation but above January's 0.6% gain.

The headline number was the highest since 1982, but it's the small month-over-month rise that might be more concerning... It shows inflation still growing during the start of a period when market analysts expected the numbers to peak compared with last year.

Here's more important context from Scott...

Brokerage firm Morgan Stanley recently said its forecasts show inflation should begin to slow in the second quarter as economic growth increases. The comments are significant because the firm's strategy team has been one of the most bearish on Wall Street.

So, while today's number should not be a shock to institutional investors, it will still be a disappointment...

And a "disappointed" Wall Street does not drive up stock prices.

As Scott – who worked for more than 20 years with institutional investment firms – explained, the threat of higher costs combined with slower growth... given the Federal Reserve's plans to raise interest rates... could cause market analysts to reduce revenue and earnings estimates across the board.

Then selling ‒ because of lower expectations compared with current valuations ‒ could beget selling... This is one way bear markets happen...

Today, the tech-heavy Nasdaq Composite Index and benchmark S&P 500 Index ate away some of yesterday's gains, finishing down less than 1% each.

But back to cryptos...

Yes. Forgive me, it's easy to stray these days...

Here's what we mean... In many other news cycles, this report about cryptocurrencies would be front-page financial-website news...

Yesterday, the White House issued an executive order about "digital assets."

And as NewsWire analyst Nick Koziol reported, the contents of the order was better than some had feared... and laid out potential next steps for digital assets' regulation and development.

I deliberately say "digital assets" because that's the phrase in the title of the document, and it's important to note that "bitcoin" was not referenced at all in the 5,561-word order signed by President Joe Biden...

In essence, though, the order is of course relevant to bitcoin and to cryptocurrencies in general – not banning them, but regulating them. As Nick wrote yesterday...

Biden's order tasks multiple agencies – including the Treasury Department, Commerce Department, and Financial Stability Oversight Council – with looking into the risks of cryptocurrencies.

For example, the Treasury Department will now look into consumer and investor protections for the industry. It will also draw up a report on the future of money and digital currencies, which will show what kind of role crypto will play in that future.

The order tasks the Commerce Department with building a framework to make sure that the U.S. doesn't stifle innovation in the crypto space.

On a very significant related point, the order also details the administration's approach for developing a Central Bank Digital Currency ("CBDC")...

The document called for the heads of various government agencies to submit a report "on the future of money and payment systems" to the White House within six months...

It also calls for legislation to be proposed about a CBDC within seven months, in coordination with Treasury Secretary Janet Yellen and Fed Chair Jerome Powell...

There are definitely larger issues to address about CBDCs, but for now...

Biden's order was received favorably by those interested in headline cryptos...

Bitcoin surged 9% yesterday following the release of the order, and Ethereum jumped more than 6%. Why? More from Nick...

For one, it is another acknowledgment from the federal government that crypto is here to stay. We saw this last year when crypto was included in the bipartisan infrastructure bill. It shows that crypto is no longer a fringe technology and is a step toward the asset class hitting the mainstream.

Separately, investors are seeing that the order is not as strict as it could've been. In fact, Cameron Winklevoss – co-founder of the Gemini crypto exchange and massive crypto bull – tweeted that the executive order was a "constructive approach to thoughtful crypto regulation."

So the optimism is that the regulatory framework would not be a crypto "crackdown," but instead more of a loose list of guidelines for the crypto industry to thrive in.

Whether this ends up being the case remains to be seen. But for now, investors are seeing this as a bullish sign.

Our Crypto Capital editor Eric Wade is among those who see it that way...

Eric has shared his opinions on potential cryptocurrency regulation in the Digest before, making the point that no entity can "ban" cryptos completely... essentially saying the cat is out of the bag.

Eric's thesis has long been that if governments anywhere discourage cryptocurrency innovation, they do so at their own peril... because there are plenty of other countries and people who will find a use and value in bitcoin and other cryptos.

In the February 17, 2021 Digest, he said that banning cryptos "would be like banning the Internet in the 1990s."

To be sure, cryptocurrency is now a $3-trillion market... up from $14 billion just five years ago, and we've seen more "use cases" lately – for better and worse...

When China flatly banned crypto mining in September 2021 – and added digital-currency mining to its list of "outdated industries" (really?) – a whole bunch of mining rigs soon ended up in Texas, which probably wasn't China's hope (thanks for the capital investment)...

A month later, China's National Development and Reform Commission signaled it was considering the move an "oops" when it actually put out a request for public opinion on the crypto ban from "relevant units" and "people from all walks of life"...

Most recently, during Russia's invasion of Ukraine, everyday people fleeing war have exchanged money via cryptocurrency platforms and ATMs... yet crypto wallets and exchanges have also been considered a potential tool for avoiding financial sanctions.

With this in our minds, we asked Eric for his take on the executive order. He put together a comprehensive reply for Digest readers... and I'm sure he'll have more on the latest developments for Crypto Capital subscribers in his regular Friday video update, too.

Eric says the order was "as good as we could have hoped for" and continued...

Here's the context I want everyone to keep in mind when they are – I hope – thinking this through for themselves... The Biden administration had no choice but to issue exactly what it issued.

It went straight up the middle between warring factions. On one side – the "leave me alone" side: If the executive order had pleased this side, we would have seen breathtaking innovation, anything goes, record profits, yield for investors who want it... and very likely trillions of dollars of scams and crimes.

The other side – the "you can't let them do this" folks – would have been happy to see literally every penny's worth of every digital assets around the entire world be treated like toxic ill-gotten proceeds of creative financial crimes that can only be solved with infinite government oversight. That mindset would likely drive all blockchain-technology innovation overseas immediately.

Eric, who among other things once worked as a certified financial manager at Merrill Lynch helping folks plan for retirement, then told us not to forget this part of the story either...

It was the federal government that took a decade to get any traction on "Rule 613," which attempts to manage Consolidated Audit Trails of financial assets stemming from the Global Financial Crisis from 2008... the same financial crisis that wiped out trillions of dollars of wealth by way of supposedly fully licensed and regulated financial instruments and entities! Ironically... the seed bitcoin sprouted from was planted in that same Great Financial Crisis.

So when I read the executive order, which appears to have equal measure of protection for Americans as it does laying out an objective for us to become leaders in crypto innovation, it reads very balanced to me.

Granted, personally I would like to lean toward fewer rules and allowing cryptocurrencies and blockchain technology to continue to develop in much the same way it has for over a decade. But it's not realistic to be building the best technology innovations that allow numerous improvements to old, outdated financial systems and not to consider that millions of people will be drawn to them without knowing the risks.

This should become known as the 'American approach,' Eric says...

That is, innovation with reasonable safeguards for users. As Eric concluded...

I've been saying for years, "America can't regulate cryptos... but they can regulate Americans." This is what we are seeing: a message to programmers, developers, builders, and backers of cryptos... If you want the next wave of American consumers to participate in whatever you are building, there are going to be some strings attached.

Let's hope what actually happens turns out to be as reasonable and thoughtful as the "Executive Order on Ensuring Responsible Development of Digital Assets" is.

We'll keep you posted...

In the meantime, so far, the cryptocurrency market is still doing its thing... Since yesterday's pop, bitcoin's is back down 7%, and Ethereum is off 6% as of this writing. For cryptos, that's considered trading in range.

It's probably wise not to get caught up in the daily swings of anything, unless you're day trading... and keep the longer-term view in mind, which Eric and his research team do with cryptocurrencies better than anyone else we've come across.

Here's a snippet from Eric's most recent weekly update for Crypto Capital subscribers. He spent most of it addressing a reader question, along the lines of: Should you be taking advantage of lower prices on coins and tokens in the model portfolio? Eric replied...

Low prices can be great buying opportunities. But we all know that buying something just because it's cheap isn't always a winning strategy... because cheap can always get cheaper.

Whatever you do, make sure it fits within your position size and risk tolerance strategy.

And make sure you look for possible reasons we could see growth and higher token prices in the future.

Then Eric did just that for subscribers, detailing optimistic developments on several recommendations in the Crypto Capital portfolio... and the reasons for at least staying patient in the current market.

If you want to hear more from Eric and his team... and get immediate access to their industry-leading cryptocurrency research and recommendations, click here.

This Year's 'End Game' Is Looking Like 2008

"Wheat's price is almost a guarantee for a global recession," says Mike McGlone, commodity strategist at Bloomberg Intelligence. "It's a matter of time before gold passes the $2,000 mark... and bitcoin gets to $100,000."

In this exclusive interview with our editor-at-large Daniela Cambone, McGlone explains why the "end game" for 2022 is looking a lot like 2008, which – among other things – was the last time wheat and other commodity prices were this high...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

New 52-week highs (as of 3/9/22): Royal Gold (RGLD) and Telekomunikasi Indonesia (TLK).

In today's mailbag, feedback on yesterday's Digest, part of which showed sector performance in prior bear markets... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Wow. After looking at that sector performance chart in which almost every sector went seriously downhill, I would totally get out of the market and wait for things to settle, and try a few shorts and inverse funds." – Stansberry Alliance member B.M.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 10, 2022