One of the Biggest Cryptocurrency Stories Ever

The broken record of more stimulus... A classic 'buy the rumor, sell the news' moment... Market tops don't happen in a day... One of the biggest cryptocurrency stories ever... The first federally chartered digital bank...

Eyes are back on Washington this week...

The presidential inauguration is scheduled to start at noon tomorrow in our nation's capital, amid a military presence of protection that we haven't seen before.

Plus, late last week and over the holiday weekend, we learned details of President-elect Joe Biden's "First 100 Day" proposals – including economic policies, which we'll focus on here...

The big-ticket item is a $1.9 trillion coronavirus aid plan. The number feels almost like when we're being sold a car at the dealer ($29,999 instead of $30,000) or groceries at the store ($2.99 instead of $3).

Did they not want to just let the digital money-printer run a few more nanoseconds to make it a round $2 trillion? It's as if they thought that would make the total bill feel less massive... or make anyone paying attention to the money printing's eventual value-crushing impact of the dollar feel a little bit better.

And today, as if we were living in some bizarro world, former Federal Reserve Chair Janet Yellen was on Capitol Hill testifying before the Senate Finance Committee as Biden's nominee for U.S. Treasury secretary... and saying that a Biden administration won't seek a weaker dollar, that currency exchange rates should be determined by the free market.

A doubling of the national minimum wage to $15 per hour (from $7.25) is also part of the Biden team's proposals... and more state and local aid, too... and more jobless benefits.

Those aren't insignificant details beyond the headline number.

It all sounds good if you are someone who needs the money...

But passing this third stimulus measure in the past 12 months might be messier than many expect...

Despite Democrats having control of Congress now, "control" is a relative term when we're talking about math of majorities and the complications of passing legislation in the Senate and the House of Representatives.

As Stansberry NewsWire editor C. Scott Garliss pointed out this morning, "the sobering reality of Congressional passage is beginning to take hold" among Wall Street institutional investors...

Despite Biden's request for quick approval, it could take longer than investors and the president-elect are hoping.

Already, we've seen disagreement on a number of these issues. Increased state and local aid is one of the primary objections of Republicans and some moderate Democrats.

Scott says there likely will be just enough opposition to certain details of this most recent stimulus proposal to at least delay its passage. In recent years, Republicans have repeatedly fought against the minimum-wage hike to $15, for instance. More from Scott...

It's not going to be smooth sailing. There's considerable work to be done and agreements to be made. Senator Marco Rubio (R-FL) has suggested breaking the plan into pieces so that issues both sides agree on won't be held up by trying to pass a larger package.

And then, of course, there's a question of how it's going to be funded. And according to Scott, that raises the major idea of higher taxes...

The major concern for Wall Street money managers is the tax implications of such a hefty bill. The incoming administration has already talked about hiking taxes for corporations and the wealthy.

A number of economists and policy think tanks have suggested that would be a horrible idea considering the fragility of the current economy. The consensus among those strategists is Biden should wait until his second year of presidency at the earliest before raising taxes. That would allow the growth picture more time to stabilize.

But, in the meantime, there are questions to answer. Don't get me wrong, it's not the end of the world. But it's reason for pause and reflection.

So, we pause and reflect...

When it comes to stocks, if you're looking for something to trigger a sell-off, this could be it...

The major U.S. indexes have been on a tear since Election Day, after all.

As Scott wrote this morning, the S&P 500 Index has rallied 12.3% on a total return basis over the past two-plus months. Over that same period, the tech-heavy Nasdaq Composite Index is up 16.7%, and the Dow Jones Industrial Average has rallied 12.7%.

It has been great if you're interested in a stock-heavy portfolio going up... But several of our editors are growing more and more wary of eye-popping valuations, and also that a near-term correction could be imminent.

I (Corey McLaughlin) can tell you that because I heard several of them voice their concerns on a 90-minute conference call today with colleagues from around the company. Stay tuned for more ideas that sprang from this call over the weeks and months to come...

For now, we want to share the thoughts of Ten Stock Trader editor Greg Diamond, who we'll point out is more short-term oriented in his trading service. In short, he said that we shouldn't be surprised if a broad pullback in U.S. stocks happens sooner than you might think...

As Greg wrote in his weekly market outlook yesterday, we may have just witnessed a perfect "sell the news" event around the announcement of the proposed new stimulus package from the Biden administration...

The old saying "buy the rumor, sell the news" comes from this idea of stocks trading up into "big" announcements (in this case it's the promise of more stimulus), and then often selling off shortly thereafter.

So whenever the event happens, you sell... as the market has already priced in the rally of more stimulus.

Let's add to the fact that there is record euphoria among investors in stocks, record short positions in bonds, and the environment is ripe for a big reversal... In other words, expect more volatility to come.

Greg pointed to a few technical indicators he's seeing, like the underreported fact that Big Tech stocks like Apple (AAPL) and Microsoft (MSFT) have been trading sideways recently while the indexes have pushed higher. He also included evidence of a last "wave" of this leg higher across several sectors and stocks. As Greg put it...

Tops are a process... Bottoms are an event.

It's one of the first things you learn as a technical trader.

Generally speaking, this means certain markets tend to send warning signals early in the topping process... Some time passes, and then other markets "catch up" and the top is complete.

Greg said in a series of posts over the past week that he has been seeing this play out in the U.S. markets – take oil or banks recently "catching up," for example – and much of the same with the leading Canadian index...

All these are warning signs within this topping process.

The decline we saw late last week may have completed the topping process... And a big decline is coming.

In other words, market tops don't happen in a day and can be much more obvious to many more people in retrospect. It reminds us of the advice embedded in the old idiom, "Don't miss the forest for a tree."

That said, we want to move on to a single big item – in the world of cryptocurrencies...

No, we're not bringing you details about more new bitcoin highs today... The rally appears to have lost steam for the moment, as we suggested it was due for.

Instead, we're talking about something at the intersection of cryptos and the banking system. We haven't seen many folks talk about it, but Crypto Capital editor Eric Wade is on the case...

In simple and stunning terms, on January 4... the U.S. Treasury department said banks can use cryptocurrencies if they want to.

A few days later, Eric shared with his subscribers the magnitude of this moment, which arrived in a short press release from the Office of the Comptroller of the Currency ("OCC"), a regulatory bureau within the U.S. Treasury department. As Eric said in the January 8 Crypto Capital weekly update...

My take on this is it could play out to be one of the five or 10 largest news items surrounding cryptocurrencies and decentralized money systems of all time since 2009. Why? Because this... means banks are given the green light that they can transfer stablecoins over independent nodes, and that's like your Ethereum or other blockchains, and they're not going to get in trouble from the OCC.

The same goes for bitcoin, given that – as longtime Digest readers know – blockchain is the underlying technology of the world's most popular cryptocurrency. In his update, Eric went on about the bigger picture of the new-age financial system...

I also think that this means that the Treasury is attempting to move faster in a very specific direction. Because if you remember the last time we talked about this, my take on it was they're still figuring out what regulations need to be passed so that they can offer a U.S. digital currency.

This move circumvents that. What this move does is this says there might be digital currencies out there that the government isn't using, but banks can use.

We can't tell you precisely what the endgame of all of this is... But if nothing else, it's a huge sign of mainstream adoption of bitcoin and other decentralized cryptocurrencies – something we've reported on for the past several months in the Digest.

To be clear, as Eric describes, this isn't the government saying it's going to start using cryptocurrencies (like sending stimulus money via bitcoin, for instance). Instead, Eric says...

This is the government saying, "We'll let the banks do it," meaning work with cryptocurrencies.

'The first federally chartered digital asset bank in history'...

Not long after the Treasury's first big announcement, it followed up with another...

Last Wednesday, the OCC announced it had given the South Dakota-based Anchorage Trust Company the conditional approval to convert to nationwide Anchorage Digital Bank, allowing it to have the same regulatory footing as other national banks in the country.

On its own, this would seem like a relatively unimportant piece of news... until you hear that Anchorage currently works with institutional investors to transact in more than $100 billion in digital assets like bitcoin and Ethereum.

Without hyperbole, this has the potential to be one of the biggest cryptocurrency stories ever...

Anchorage founders Nathan McCauley and Diogo Mónica, early employees of digital-payments company Square (SQ), started the company in 2017. And in an announcement, they said that this approval from the Treasury made them "the first federally chartered digital asset bank in history"...

This is a major milestone, not only for us as an organization, but also for the crypto industry and the wider financial world. Crypto deserves a bank, and we are immensely proud of being approved as the one to set the standard...

We are currently witnessing the rise of institutional crypto adoption. From large asset managers, to corporate treasuries, to endowments and family offices, institutional interest in digital assets has never been higher. As the space continues to mature and its use cases proliferate, we expect to see increasing demand for a wide range of services – services that exceed the expectations of traditional finance.

One of the more interesting details we found buried in a PDF attachment in the OCC's announcement is the list of the kinds of banking business that Anchorage will now be able to do at the national level.

It includes "staking," which Eric's Crypto Capital subscribers know means the process through which some cryptos pay you a percentage – like interest – just to hold them (because this is how blockchain decisions are made and transactions are verified).

Eric believes that this may lead to the emergence of private blockchains or "stablecoins" – pegged to the U.S. dollar – that banks and institutional investors will use for these purposes. And he also thinks that the world's most proven public blockchain could also get a boost...

If you think there's a possibility that some of the public chains may benefit from this, the absolute strongest public chain, which almost never comes up when people are thinking of instantaneous low-cost transactions, is bitcoin.

What may end up being the surprise move in all of this is that banks who don't necessarily want to build their own private chain, which is risky... or that don't necessarily want to go with the number two, number three, number four, number five provider out there... what about maybe using [bitcoin]?

I think that's going to be the surprise story, that in a year from now when we find out our banks are lowering our fees and doing more of this, that that system came into play maybe faster than anybody expected, all because of this green light.

Obviously, Eric adds, people have to own bitcoin to use the bitcoin network and the underlying blockchain technology. And institutional investors, like the ones Anchorage works with to the tune of $100 billion, are buying bitcoin because they need it...

That brings us to the scarcity argument for holding bitcoin as a "store of value" that you've heard our editors, like Director of Research Austin Root, make before. As Eric concluded his update...

There's only so much to go around. This is definitely good for all of us that are holding bitcoin and continue to hold.

We'll continue to track this story... But for now, we urge you to check out Eric and lead researcher Fred Marion's Crypto Capital service if you haven't already given it a try.

We don't know of any better place to get the latest developments in the cryptocurrency world and exclusive research on what they mean than from Eric and Fred in their terrific monthly newsletter and weekly video updates. Learn more about a subscription today.

Ron Paul: Banned (Briefly) From Facebook

American Consequences editors Trish Regan and P.J. O'Rourke spoke with former presidential candidate Dr. Ron Paul recently about the news of him being temporarily banned from social media site Facebook (FB)... the aftermath of the siege on the U.S. Capitol... questions around the First Amendment... and much more.

Click here to listen to the entire interview now from this special edition – "A Divided Nation" – of the American Consequences podcast. And you can find much more from Trish, P.J., and more every day over at AmericanConsequences.com.

New 52-week highs (as of 1/15/21): Asana (ASAN), Columbia Care (CCHWF), Cresco Labs (CRLBF), Maxar Technologies (MAXR), Travelers (TRV), and Ulta Beauty (ULTA).

In today's mailbag, feedback on a reader comment from Friday's Digest. Do you have a question or feedback for us? Let us know at feedback@stansberryresearch.com.

"I loved Walt C's letter about Internet security and home security, and it made me think about the issues surrounding Bitcoin security – particularly as we read about people who can't find where they wrote their password, or who threw away an old hard drive... Sounds a lot like the combination-lock-on-the-mailbox problem. Maybe worse." – Stansberry Alliance member Roger A.

All the best,

Corey McLaughlin
Naples, Florida
January 19, 2021