Great Crypto Bank Run: Make This Move Today
America 1.0 banks are scared.
And they should be.
Crypto is coming for the old-world institution.
And that is incredibly #BOP (bullish, optimistic, positive) for us!
It’s only a matter of time before new digital finance apps and crypto trading companies like Coinbase and Robinhood come out on top!
The FUD (fear, uncertainty, doubt) reactions you probably see in the media only make us more #BOP, and sure that you should invest in crypto now.
The path is set.
Find out how in this week’s IanCast. Plus, if there were one trade I could make today, it would be this… Watch here:
Paul Mampilly: Hey Ian. How are you, man?
Ian Dyer: Hey. Doing well. How are you?
Paul: It’s Thursday afternoon and it’s time for the IanCast. This week we are going to do two topics: cannabis and crypto. We are going to cover the stock market at the end because that’s what we have been focused on for the last several weeks. Let’s go on crypto.
Crypto Has A LOT Going On!
You and I have been watching this stuff and there’s a lot going on. The number one thing, Cathie Wood was on with Bankless. Bankless, who I went and looked up, is on Twitter. He has a newsletter and a podcast. You listened to the podcast. I didn’t. I went and read this article.
He put this up on his website: “The War on Crypto. The SEC wants to protect us from earnings, air drops and interest. Do you feel protected?” In it, he talked about a lot of this pressure coming. We talked last week about the lawsuit the SEC has going with Coinbase.
Then there’s the stuff with payment for order flow (PFOF) with Robinhood which the SEC is doing. Then there’s all this other stuff that’s been going on. Of course, XRP and Ripple have been in a war with the SEC for a year. Talk a little bit about what was said on that podcast.
Then, I have some other numbers to show you why the banks — like whoa, this may be small at $2 trillion but it’s just starting to hurt.
Ian: It’s super interesting. The whole thing with Coinbase the SEC gives a reason they are going to sue because their lending product is a security. I have looked into it and I don’t understand how that makes sense at all. Coinbase was also confused. They asked how it’s a security.
The SEC basically said, “If you don’t nip this we are going to sue you.” They didn’t really answer the question. I think the banks are starting to feel a little threatened by crypto and what it’s become over the past couple of years. Like you said, it’s a $2 trillion industry.
The global financial industry has become many times that. Why is it that crypto is having such a big effect? It’s because the way the banking industry makes their money and are able to have growth is by having more of these lending and borrowing accounts.
That’s exactly what Coinbase is targeting now. If institutions can switch from Wells Fargo or Bank of America to Coinbase and earn 4% or 5% on their money, why wouldn’t they do that? That’s stealing the growth from the banking industry. Obviously they are not happy about that.
I would venture to say they have some control of the SEC and they don’t want Coinbase to have this.
Paul: 100%. Many people think just because something is small it’s irrelevant. On an absolute basis it might feel that way, but Cathie made the point during that podcast which Bankless reinforced. The growth on the margin is what matters. We know this from growth stocks.
When that growth even just starts to slow or even the rate of growth starts to slow for high-multiple stocks, you can see investors start to exit out. I have focused on Wells Fargo a great deal because for such a long time this was a Warren Buffett favorite.
He used to own 10% of it. Essentially that was seen as a stock he would never sell. He has all these insurance companies. These companies have be feeling that one extra dollar or five extra dollars they were getting is now going into Aave and Compound and is getting staked at Ethereum.
The value of these currencies just keeps rising. For all those folks who say this is a bubble, a fad, dumb, stupid, is going to go away or go to zero, they are being proven wrong every day.
Ian: Exactly. If the bank makes 1% profit margin or something like that, it’s not that hard to eat into that if you are a new competitor who is growing exponentially and beating the banks in every aspect of their service. It’s definitely starting to pose a threat even though it’s so small.
You mentioned Aave and Compound. I think between those two apps there is $25 billion or $30 billion in those apps already and they weren’t even around a year ago. There was nothing in there a year ago. It’s very interesting to watch this unfold.
Paul: To connect the dots to some of this, I was reading this Moody’s report. They are talking about how digital currencies have the potential to do exactly what we are talking about, which is really start to eat at revenue sources for these banks. This was written from a global basis.
It said that the revenue banks generate from cross-border transactions is significant. Globally, banks generated about $230 billion. We’re talking about actual revenue here, we’re not talking about the size of the companies.
Of that, Asia Pacific is $100 billion and the rest is the rest of the world.
When you think about the potential of something like XRP which is designed for transaction speed and they really want to go and gut the wire system and all these expensive ways to transfer money. Then look at this chart of what it costs.
This is the average cost of remittances in 2020.
Nigeria, South Africa, Thailand — in Nigeria, if you go send $1 to somebody they will take 16 cents. That’s some combination of intermediaries. Then think to Bitcoin (BTC) now being legal tender in El Salvador. People are sending BTC for almost nothing.
Just think what is going to happen to all these bank transfer remittances businesses where they are charging hundreds of billions of dollars for something. I remember someone doing an experiment where they sent several million dollars’ worth of BTC for, I think, a few thousand dollars.
Ian: If that. I’ve seen multi-million-dollar transactions in BTC go through for a few bucks recently. It’s super cheap. El Salvador is actually putting ATMs in the U.S. so people can send money to El Salvador and avoid the remittance fees. It’s way cheaper.
Actually, I think in El Salvador they are planning to not even tax BTC capital gains. There are going to be some huge advantages there for people who want to own or send BTC. There’s also Revolut, which I believe is a UK company. They are a digital banks.
They are paying their fees to WeWork, an American company, in BTC in order to bypass remittance fees. We are already seeing pockets of this. Any time people can save money on things that’s what they are going to do. It just makes sense.
Paul: That’s right. The path of innovation is always cheaper, more convenient, more access to more people. I’ll put up the headline for the story you just mentioned. Revolut is not so small. They have 300 employees and are planning to pay WeWork in Dallas using BTC.
It’s not so small. Circling back to the point that Bankless seemed to be surprised by is that many people see this regulatory pressure on crypto as a bad thing. Cathie’s viewpoint was very much like our viewpoint. It’s actually a sign that they are starting to crack through that initial adopter layer and starting to get much more adoption.
Ian: I think that eventually what’s going to happen is the regulators are going to see how they can work with crypto rather than the other situation where they go in and crush the entire thing. I don’t think that’s going to happen at all. I think this technology is way too disruptive and great for people not to be able to defend.
As fast as it’s grown, the total amount in these ETH apps is more than $100 billion. There’s some serious money in here. There’s definitely going to be some pushback from the crypto community like we saw in the infrastructure bill. Those policies don’t even go into effect until 2023.
There’s plenty of time for adjustments to be made. Like you said, it’s a sign that crypto is starting to make a difference. It’s bullish and I am positive on the future with this.
Paul: Two more things associated with crypto. Uniswap did an airdrop that I never got and you didn’t get it either because we are both U.S. citizens and the SEC in all its wisdom decided to protect us from an airdrop. What was the crypto? We should define an airdrop. Tell folks what it is.
Ian: An airdrop is when a crypto platform gives you free coins for using their platform. It’s usually done in the early stages like when Uniswap first released their second version of their app, they gave free tokens to those who used the first version. It was very early stages.
It was really before it was well known at all and hard to use. They were rewarded by being given these tokens. Obviously that coin has exploded in the past two years and it ended up being a lot of money. This time around the SEC wanted to protect us by not letting us get the most recent airdrop.
Paul: It was for dYdX. Well, maybe we can petition through our unelected officials to allow us. In this article, Bankless has a way with words. He apparently interviewed the former FTC commissioner.
He asked if Americans lived in a financial prison and if he thought the restrictions, threats and barriers from aggressive regulators were starting to drive out the immense amount of capital that exists in America. So many of the crypto projects started here.
BTC is a global project but it was really taken on in a big way and adopted in the United States.
Ian: Now we are starting to see some of these bigger projects being developed internationally. Aave is international. Uniswap and Compound are both American, but there are plenty that are being developed internationally. I believe Chainlink is international and Tezos.
People are going to go where the governments and institutions are most friendly to this and willing to work with them. We saw with the whole Chinese situation where they banned miners, people just left and now they are mining in other countries. That was probably on some level an economic hit for China.
I don’t think the U.S. is going to make that same mistake once they realize this is for real and there is some serious value to cooperating with these up-and-coming crypto companies.
Paul: The path is now set. People can talk a good talk. The truth is, for every stock we have put in Profits Unlimited past year two when we stopped buying into companies like IBM and GE, because when we first started disruption companies were harder to find. Today, it’s easier.
Every single stock I put in or any crypto I put in there is always this drumbeat of people willing to tell you a big company is going to wipe them out, BTC is going to go to zero, ETH is worthless. This drumbeat is always there.
The truth is, having been in capital markets and investing for a very long time, I can say that when you hear that it’s actually the sound you want to hear. You want to hear the skeptics who don’t own it, don’t know it and have no idea but are happy to tell you their opinion.
Ian: Once people start using it they are going to realize it is the future, which is why we are starting to see bigger companies buy into BTC. Coinbase, like we said last week, are starting to see big time adoption with their institutional business.
Slowly but surely these bigger companies are waking up and seeing that there’s so much more potential here than what was realized even a year or two ago.
Paul: I don’t think anybody or most regular people are going to shed any tears for the banking and financial industry given the path we have been on for the last 10 years is as a result of all the things they did that led to 2008.
I can tell you when I went and found out the kind of leverage that was being employed at Goldman Sachs, it was 100 to 1. It’s great if it works out for them, but if they lose the capital they have then you have to have the government come and bail them out. I don’t think any tears are going to be shed.
The banks were asleep. The crypto revolution has taken them by surprise and it’s 10 years later.
Ian: I know. Most of that has been in just the past two or three years. Since the big bull market in 2017, that quite period of 2018 and 2019 is when most of these projects got developed that are now seeing huge success.
It’s a recent thing but I don’t think anything has captured this much attention or money this fast in recent history.
Paul: Usually once you start to see this kind of tension it’s right before mainstream adoption. I saw another news story. There’s a wealth managers conference called SALT. It’s held in New York.
Apparently at the SALT conference it was recommended by financial advisors, who are among the most conservative people you will ever meet because their clients hold them to a standard to never lose money. They are now starting to tell their clients they should have between 1% and 5% in crypto.
Ian: That’s a step in the right direction. Also, it’s somewhat surprising that’s being talked about in a big forum like that.
Paul: Yes, it’s a mainstream advisor forum. What it points to for us is why we have these preposterous forecasts for BTC and ETH. Go ahead and give your forecast for BTC.
Ian: That would be $350,000 per coin by the end of next June.
Paul: My gutless one is for $250,000 and then $20,000 for ETH in the next year. I don’t even think it will take that long. Nobody now thinks El Salvador is going to be the only country to adopt BTC. You have financial advisors, the most conservative people you can find, saying they are going to put big money in crypto.
What are they going to buy first? It’s not going to be the hundredth smallest coin. We are talking about billions and billions of dollars trying to enter. There are only five coins that can absorb that kind of money.
Ian: We’re already starting to see BTC and ETH coming off exchanges. I just saw the amount of BT on exchanges is at a three-year low. Keep in mind, in those three years more BTC has been mined every day and added to the supply and we are still at a three-year low for the supply on exchanges.
It suggests people are taking it out and saving it. They don’t want to send it anywhere, sell it or do anything. They just want to hold onto it because they believe it will go up in price. That is a huge bullish sign in my opinion.
Paul: We’ll bring this crypto segment to an end by making sure you understand our point. All this stuff you are seeing in the news, all the FUD, is actually a positive. Whether it be on crypto, Coinbase or Robinhood, it’s a sign these companies are starting to pressure the incumbents.
Also, when you hear El Salvador and FUD on that, of course there’s going to be some troubles if you introduce a new currency. You should have seen it when they introduced the euro. It was chaos for a year. This idea that BTC is going to be held to a different standard is crazy.
All this news is FUD. This is the time to be in. If you want a great introduction into crypto, Ian runs Crypto Flash Trader. It does three things for you. It gives you a bit of an education into crypto. It introduces you to all the coins you would never about.
Even if you heard them, you would never know which ones are good or bad. It gets you into this sector that we think is about to explode higher.
You will learn so much and be given incredible trades. What’s the track record? Have we taken a loss yet?
Ian: No, we haven’t. We’ve closed out four trades so far and they’ve all been for a profit. We have seven trades open right now and I think all except for one are up. So it’s looking good.
Paul: Nice job. Once again, check into Crypto Flash Trader.
Is Investing In Cannabis A Good Idea?
We promised we would spend a little time on cannabis because you sent me a message and said, “If I could do one trade…” what was that message?
Ian: I said if I could start a portfolio for anybody right now the first thing I would put in is long-term call options on MJ, which is the marijuana ETF. That was half joking, but not really. It’s ridiculous how much these cannabis companies have fallen.
These stock prices in the last few months make no sense considering the underlying growth there. I think it’s a very good buying opportunity.
Paul: I got a question I answered today in Paul’s Secret Portfolio on The Green Organic Dutchman. I researched this company. We got shelled in this thing. We put it in at the wrong time and we are down huge. Still, they are not bankrupt. If you looked at the stock you would think that.
You would think they have no operations and aren’t selling anything. No, actually they are growing nicely. They have everything under control. Then we saw other news. I mentioned to you that Canopy Growth is now selling CBD vapes under the Whisl brand.
You mentioned another company to me and a piece of news on cannabis.
Ian: Yes, Tilray. The big push now is expanding into the U.S. because we are the biggest cannabis market in the world by far and it’s still not even legal everywhere. So there’s huge potential. Tilray is investing big time in this company called MedMen.
It was one of the hot ones a few years ago but got way too ahead of themselves and got into some trouble with debt. They have really straightened themselves out. I think Tilray is going to benefit huge from this one. They are in six states already.
As for Canopy, the vape news is huge because it’s their first real push into the U.S. with a very popular product. They also bought out TerrAscend, which is one of the fastest-growing companies in the U.S. The stock prices don’t reflect that at all. If you looked at them you would think these companies are dying.
It’s not even close to the truth. It’s actually the opposite. It’s so crazy. I remember when Tesla was at $200 pre-split, we were talking about how it doesn’t make sense it was that low. Then when BTC was at $8,000 last year we said it doesn’t make sense that it was that low.
I have an even stronger feeling right now about MJ and pot stocks. I think the next couple of years are going to be huge.
Paul: It definitely has that super contrarian feeling. Usually when the one side has taken it too far, when demand comes in and all the people who have suffered through this crash, they aren’t going to sell.
Ian: These are still really illiquid. Another one of these companies is Aurora. It only trades maybe $10 million worth of stock on your average day. It doesn’t take much money to come in to push up these stocks. We’ve seen it before. I remember last year Aurora Cannabis went up 300% in a week.
It’s crazy but it’s possible when you have stocks that have been pushed down this much and are this illiquid.
Paul: That’s that screw being turned really tight. Even a small amount of demand can push that up. Many people think there is some committee that sets these stock prices. No, folks, it’s set by that demand and supply balance. Things can go one way in an extreme and then revert with no notice.
Plenty of good things going on that are not reflected in stock prices. We are BOP on cannabis.
Stock Market Talk!
Let’s quickly talk about the stock market. What are you seeing out there, Ian?
Ian: A lot of America 2.0 stocks have still been in a range the past couple of months. We are starting to see strength build up in some of these areas like software and semiconductors. Even Tesla and some of these fintech stocks like Square and PayPal. There are pockets of strength for sure.
I think it’s still a matter of time before there is a big push back into these stocks. I think the reopening trade where a lot of the America 1.0 stocks and the big indices have been going up, I think it’s going to come back and that money is going to go into growth stocks.
We are going to see the same action, maybe not to the same magnitude, but the same action we saw last summer and into early 2021 where growth stocks outperformed the indices. I think that’s going to happen again.
Paul: One of the things — and I will get some hate directed at me — that is good is that Apple seems to have hit a peak after getting that lawsuit where they won on 9 out of 10 counts. However, the 10th count was very meaningful. It means that it allows people to direct people away from the app store for in-app purchases. It again gets to Cathie’s point.
It’s not like 30% of their revenue or anything like that, but it’s 8% to 10% and it hits growth on the margin. Stock investors care about that.
Ian: If the part of the company that is the most profitable, which it is for Apple by far, if that gets hit then it’s not good. People are going to sell. I remember that day Apple went down 4% in an hour. It takes a lot of money to do that. They are the biggest publically traded company in the world.
There was some huge selling and I think it might be a reversal point for Apple.
Paul: It was actually the moment the judgment was announced. Someone was a seller immediately and continued to sell. Even after the unveiling of iPhone 13 nothing on a stock market basis. From our perspective we have always told you that Apple acts as a Death Star.
Because when the big money comes and they want stock market exposure, they look at 3D Systems and say, “I can’t buy that even if I want to.” What can they buy? What can they stuff $1 billion into and make no impact? It’s Apple.
Ian: There’s not many stocks like that. When money comes out it is a catalyst for growth stocks. It’s money looking to go somewhere else. The most opportunity there is is still in the companies that are disrupting. There are so many. Every area of industry is being disrupted right now.
There are so many stocks for this money to go into.
Paul: It’s been a long six-month correction. We have definitely felt it. We feel for you. However, hang in there with those strong hands. There’s more and more signs with each day that we are going to see a surge in our America 2.0, Fourth Industrial Revolution, new world stocks coming.
Ian, let’s close the IanCast off. You say goodbye and then I will say goodbye next.
Ian: Everybody, thank you so much for listening. Have a great weekend and happy Friday. We will see you next week.
Paul: See you next week. This is Paul saying bye.
Editor, Crypto Flash Trader
Editor’s Note: You want to know another big disruptor coming for the banking industry? Blockchain. It is like no other technological revolution we’ve seen in our lifetime. It’s replacing the decades-old foundation of virtually every industry in the world. And the window of opportunity for you to get in is now. Click here for the full story and action you can take.
I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.