Mike Novogratz is coming out of retirement to launch a $500 million cryptocurrency fund. He’s forecasting bitcoin to reach $10,000 within 6-10 months. We agree with his comments however have a more bullish thesis on Bitcoins price targets overall:
'I can hear the herd coming…it’s a decentralized/blockchain revolution in a digital world…this is digital gold, a store of value, in a digital world you need digital currency…bubbles happen around things that fundamentally change the way we live…bitcoin as the bellweather is set to become the biggest bubble of our lifetime…current market cap of cryptocurrency is $200 billion compared to $6.5 trillion for tech in 1999, this can go a lot longer and a lot higher.’
....we are a long long way from what a mania looks like'
Watching the full interview is highly recommended → https://www.cnbc.com/2017/10/10/bitcoin-heading-over-10000-in-six-to-10-months-former-fortress-hedge-fund-manager-says.html
So Bitcoin did it: Made an all time new high surpassing the $5000 level and is now Bitcoin surpassed the $5,000 level just yesterday and is now trading near $5,500 after a high of $5846 so far.
We've been saying this over & over again, ad nauseam, to get in step with what's happening here. Many want to write it off as a cultural fad or manipulated hype, or as often referred to by skeptic media that Bitcoin is in a bubble. For perspective, back in 1999 the technology sector alone had a market cap of 6.5 trillion dollars before the .com crash. Now compare that to the current market cap of Bitcoin & digital currencies which is collectively around $170 billion. Based on historical context, there's a lot of runway much higher from here before a reasonable argument can be made that Bitcoin & the digital currency space is in some kind of bubble.
But why is Bitcoin really rising so fast? January 1 of 2017 Bitcoin crossed over the $1000 mark. Here we are 10 months later and now Bitcoin is trading above $5600. So what gives? I'm going to make this really simple here...it's not about Bitcoin, bur rather about the underlying BLOCKCHAIN TECHNOLOGY that Bitcoin has inspired. And with it, we are in the midst of an entirely new economy being built from the ground up all derived from blockchain technology..and so the saying goes → "it's the technology, stupid"
This is beyond Bitcoin. There are over 1000+ digital currencies presently. These are each their own project that's built upon some aspect of blockchain technology. The king currency that is required to perform any part of their value transaction, purchase, transaction will almost always be rooted back to Bitcoin and/or Ethereum (both more often than not). For the first time since Bitcoins inception, we have seen remarkable stability with Bitcoin having the most shallow corrections in it's entire trading history. Before 2017, it was not uncommon to see Bitcoin go to $1000 and then crash all the way back down to the mid 100s. We haven't seen that at all this year as the deepest correction has only ever gotten to around -40%. Each time Bitcoin has only reversed and broken out to new all time highs. You have to really ask why? The rise is coming from too many reasons, many of which we've reiterated in several post pasts. This quick recap from a MarketWatch is a good one that recaps many of the points we've addressed. Take notice of the Amazon highlight...now think of our $OSTK calls on Overstock.com:
The rise is attributed to remarks from hedge fund manager Mike Novogratz that bitcoin will reach $10,000 within a year in addition to positive news from China. A report by CryptoCoin News citing Chinese state-owned news company Xinhua, said that bitcoin trading will likely resume with more regulation. This could include new licensing and anti-money laundering regulations to be implemented by exchanges. ‘Speculators are bullish on bitcoin's value with the anticipation of China's reintegration with global crypto markets,’ Aurelien Menant, CEO of cryptocurrency exchange Gatecoin, told CNBC.
As for JP Morgan CEO Jaime Dimon who last month referred to bitcoin as a fraud, today he said he’s not going to talk about bitcoin anymore. His CFO then clarified, ‘We are open-minded for digital currencies that are properly controlled and regulated.’
OUR $MGTI PRICE FORECAST TARGETS & HIGHLIGHTS:
→"MGT Capital Announces Purchase of 2,000 additional Bitmain S9 Antminer Rigs" announced yesterday October 12
Now compare that to the last press release back on August 25th where MGT announced the purchase of 1000 more mining rigs: https://www.gurufocus.com/news/558280/mgt-capital-announces-further-purchases-of-bitcoin-mining-rigs
So what do you think that's going to mean for MGTI. They will soon be mining more than 400 Bitcoins per quarter. There is only more upside on MGTI especially
MGT’s John McAfee is being proven right on this bitcoin revolution. We are still in the early stages. MGTI has underperformed bitcoin over the last two weeks, nevertheless, we believe in the long term economics of this company. We're still squarely in the bullish camp that MGTI has the potential to trade near $12 to $15 conservatively by next year.
As of their last press release, we can extrapolate that MGT plans to generate 350 bitcoins per month from mining operations by early next year. Before the announcement of those 2000 more mining rigs, expected value was $1.3 million in revenue per month with the addition of the 1000 mining rigs that was announced in August that revenue jumps to around $2 million as costs remain fixed at $800,000 per month due to their energy sourcing model to operate their mining rigs. We'll find out more color on this Q4 earnings call. Suffice to say, I think we'll all be pleasantly surprised with growth prospects that MGTI has been investing in. And again, remember that Bitcoin price appreciation has a long ways to run. The more Bitcoin appreciates, the more MGTI has to appreciate as well. Just because this week we saw underperofrmance to Bitcoin doesn't mean that will continue. That relationship will very much correct to the upside for MGT.
Currently there exists 180 different global currencies at a total market cap of $60 trillion. Bitcoin’s current market cap is $88 billion. If it captures even a fraction of global currency then this thing has a long ways to go. We’re confident that MGTI will have its day of outperformance. Perhaps we’ll look back and wish we had put all available capital into MGTI when it was priced in the $2 range at a market cap of $100 million. Expect this performance narrative to only improve from here:
This section of the post post is a follow up to earlier this week’s analysis of the VIX
As for the VIX trade watch for $UVXY puts, Q4 2017 represents a significant moment in time for the stock market. Not only is the Federal Reserve embarking upon quantitative tightening for the first time in nine years, but according to 2017 Nobel laureate Alan Ruskin, other central banks around the world will soon join the United States in order to avoid getting left behind. Ruskin is forecasting global central bank liquidity will drop from $2 trillion per year to $0 within the next 12 months. Coordinated action makes it more difficult to manufacture a soft landing. Such a policy shift implies increased volatility from current lows. Owning UVXY calls would qualify as the investment of a generation if and when volatility returns.
On the flip side, it appears Trump’s Treasury Secretary Steve Mnuchin has taken over the reigns of the president’s ‘Working Group on Financial Markets’ and is now operating the Treasury as if it’s a Goldman Sachs trading desk. Positive market sentiment has turned into a key tool utilized by the Trump administration. This is largely why we're considering buying UVXY puts as this syncs with the status quo trend.
With massive potential on both the put and call side of UVXY this creates an ideal straddle situation. On one side you want to own UVXY puts for the continuation of Mnuchin’s manipulation of low volatility and on the other side you want to own UVXY calls in case central bank QT or North Korea nuclear war jumpstarts a return to volatility. Whichever side of the straddle outperforms is likely to dwarf the losses of the loser. This action will be monitored closely throughout Q4. No position yet taken on this straddle. But we're exploring it further.
The current scoreboard reveals UVXY puts are throttling UVXY calls as Mnuchin immediately squashes all signs of volatility. They won’t allow this market to drop even 3% for fear it would spur a rush to the exits. And think about it ...if you're the Federal Reserve, and there's nothing you can really do to stop Bitcoin's price appreciation and the whole boom of digital currencies....wouldn't this especially be the time to ensure Market stability? Most certainly....the last thing you want is for investors in the stock community to lose confidence and pull their money out and rotate their capital to Bitcoin & crypto in general. The FED definitely doesn't want to see that happen. So they will continue to foment healthy impressions in the stock market for as long as they can. For now, investing in the trend of low volatility is a more secure strategy than anticipating a trend reversal. Investors have been too early in anticipation of trend reversal time and time again over the last 20 months the bears have got burned. This is exactly why we have yet to take any short positions on the equity markets. As the say in show business....The Show Must Go On!
Therefore we will manage this straddle by heeding momentum points. Both sides of the straddle will be in the portfolio watch list and the winner will be rewarded with exposure.
Resources:
https://seekingalpha.com/symbol/MGTI/key-data
http://www.prnewswire.com/news-releases/mgt-capital-announces-purchase-of-2000-additional-bitmain-s9-antminer-rigs-300535993.html
https://www.cnbc.com/2017/10/10/bitcoin-heading-over-10000-in-six-to-10-months-former-fortress-hedge-fund-manager-says.html
http://www.marketwatch.com/story/5-reasons-bitcoin-has-roared-to-its-highest-level-ever-defying-dimons-fraud-call-2017-10-12