The 'Crypto' Mania Is Officially Dead
The 'crypto' mania is officially dead... CBOE Global Markets is throwing in the towel... Signs of a bottom in bitcoin... Don't forget to reserve your spot for this week's Cannabis Investing Event...
On Sunday, December 10, 2017, CBOE Global Markets made history...
As regular Digest readers may recall, that was the day the firm – one of the world's largest exchange holding companies – launched the first-ever bitcoin futures contracts.
At the time, the move was cheered not only as an important milestone in the legitimatization of cryptocurrencies... but one that would also allow "big money" institutional investors to buy bitcoin for the first time.
Of course, we know now that wasn't exactly the case...
Instead, the move marked the unofficial peak of 2017's "crypto" mania. Prices of bitcoin and most other cryptocurrencies peaked within weeks... and went on to lose 80% or more of their value over the next year.
Why do we bring this up today?
Because earlier this month, CBOE made cryptocurrency history again. This time, it became the first exchange to abandon bitcoin futures trading, as well. As financial news network CNBC reported last week...
The major U.S. exchange company that paved the way for bitcoin futures has had a change of heart.
[CBOE] Global Markets, which rolled out the first bitcoin futures contracts in December 2017, has decided to stop adding new ones.
In a statement last week, the [CBOE] Futures Exchange said it will not add new bitcoin futures in March. It did not rule out the possibility of other cryptocurrency derivatives, though, and "is assessing" its approach for how it plans to continue.
This is noteworthy...
It suggests traders have simply lost interest in bitcoin. And as our colleagues Ben Morris and Drew McConnell noted to their DailyWealth Trader subscribers last Thursday, another important measure is sending a similar message today...
[Google Trends] is one of the best ways to gauge the hottest topics and fads of the day. The website combines users' search data to identify the most commonly used keywords in Google over a given period. Then it compares the keyword search volume each week to the overall period. And finally, it ranks the lowest to highest volumes from 0 to 100.
Extremes in Google Trends readings are often strong contrarian indicators for financial assets. When no one is interested in a topic (or a value of zero), it's likely near a bottom. And when everyone is interested in a topic (or a value of 100), it's likely near a top.
As an example, from December 23 to December 29, the search volume of "bear market" on Google soared. Its "interest over time" jumped to 100. And that was the week stocks bottomed. Now, the benchmark S&P 500 Index is up about 20% from those lows.
In the chart below, you can see that searches for "bitcoin" soared from six to 100 in 2017. The peak in search volume was the same week bitcoin topped out. Last week, the Google Trends rank for bitcoin closed at five...
In other words, today we have the exact opposite of the situation in late 2017...
Few traders or investors are bullish on bitcoin. And hardly anyone is searching for information about it on the Internet.
As Ben and Drew noted, if cryptocurrencies have a long-term future – which frankly, no one can be 100% certain about today – then sentiment suggests this is likely a great time to buy.
But this isn't the only reason they're getting bullish today...
As Ben and Drew explained in the issue, bitcoin's "technical" picture is finally looking bullish as well...
On January 5, 2018, after bitcoin had fallen and bounced, it put in a "lower high"... the first piece of a downtrend. And on January 16, 2018, the downtrend was official when it made a "lower low." The main event of the speculative mania in cryptocurrencies was over.
As you can see in the chart below, from its peak on December 18, 2017, bitcoin fell 83% to its recent low on December 13, 2018...
Bitcoin was crushed. And a lot of folks who jumped into cryptocurrencies in 2018 took enormous losses. But these are exactly the conditions that often mark major market bottoms.
In particular, they noted that since falling to a new 52-week low last December, bitcoin has been slowly climbing higher...
Since bitcoin's December bottom, it has put in a series of "higher lows" (one of the pieces of an uptrend). But its recent rallies have stalled just below $4,064...
If bitcoin can break out above this level, it will mark the first 'higher high' in more than a year...
And after such a huge collapse – and with sentiment so bleak – Ben and Drew believe the upside could be tremendous.
But again, bitcoin remains incredibly risky. So if you're going to speculate on it, they urge you to keep your position sizes small and don't risk anything you can't afford to lose...
We recommend allocating no more than 1%-2% of your investment assets to the space (and possibly far less). Whatever you do put in, know that it could go to zero. We don't think that's likely, at least for bitcoin... But it could happen.
If you were to use a 50% stop loss on your bitcoin position, your upside potential could be 10 times as much. The possibility of a 500% gain over the next few years isn't crazy. A lot of folks are calling for prices far higher than that...
A mania in cryptocurrencies came, and went. Investors have given up on bitcoin. And the price action is finally starting to improve.
The signs are clear. It's time to buy bitcoin.
Regular Digest readers know we've also recently become more bullish on another controversial trend...
Of course, we're referring to the rapid growth of the legal cannabis market.
As we've discussed, our initial skepticism on "pot stocks" has gradually been replaced with a cautious optimism.
In short, for the first time, we're now seeing legitimate investment opportunities in the space. And these are only likely to multiply in the months and years ahead.
That's why we're holding our first-ever Cannabis Investing Event this Wednesday, March 27, at 8 p.m. Eastern time. (If you haven't yet reserved your spot for this free event, click here to do so now.)
In the meantime, don't miss tomorrow's Digest... Our newest senior analyst, Thomas Carroll, will share the five key ideas investors must understand to profit from this burgeoning trend.
New 52-week highs (as of 3/22/19): General Mills (GIS), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), and Wheaton Precious Metals (WPM).
In today's mailbag, we're sharing one subscriber's "boots on the ground" perspective on the economy. As always, send your notes to feedback@stansberryresearch.com.
"Good morning! I have [my own economic indicator] I first recognized in 2006-2007, when I was commuting weekly between Springfield, IL and Louisville, KY: Empty interstate highway billboards.
"It starts with a few billboards out in the sticks with 'Rent Me!' messages. It then spreads to boards nearer and nearer the metropolitan areas as the malaise spreads and business owner confidence declines. By 2008 there were empty billboards along the interstates in downtown Indianapolis.
"I am starting to see 'Rent Me!' messages between Ocala and Tampa..." – Paid-up subscriber Ron A.
Regards,
Justin Brill
Baltimore, Maryland
March 25, 2019