Is the Crypto Winter Over?

Why Bitcoin is up 70% this year, far outpacing all other asset classes

Ric Edelman: It's Wednesday, June 28th. Gary Gensler, the chair of the SEC, and other federal regulators, a lot of them have been doing their best to kill crypto. It hasn't worked. All they've succeeded in doing is shutting down a bunch of banks and scaring ordinary bank depositors. Meanwhile, bitcoin is up 70% so far this year, far outpacing all other asset classes and Standard Chartered, one of the biggest banks in the world based in London, now says that bitcoin could hit $100,000 by the end of the year. That would be a 1,000% gain in 18 months.

Standard Chartered gives a lot of reasons for why they say this. They cite the recent turmoil in the banking sector, which is causing people to move money from bank accounts to bitcoin. They're citing the reduced risk of bitcoin thanks to the Fed. The Fed is stopping its increases in interest rates and the fact that Bitcoin mining is now far more profitable than it was just a couple of years ago.

And let's not forget the Bitcoin halving that's coming up. You see, roughly every four years the so called mining reward, the amount of bitcoins that a Bitcoin miner earns by validating the data that's on the Bitcoin blockchain, changes. That reward is currently six and a quarter bitcoins, but starting next year, that reward is getting cut in half.

This is called the halving. It happens about every four years. And historically, every time Bitcoin's mining reward has been cut in half, the price of bitcoin has far more than doubled. Basic economics. If you're getting half of what you were getting before, you want each one to be worth twice as much as before, right? Common sense. You can either give me one at $10 or give me two at $5. Economically neutral.

And so with a Bitcoin halving coming again next year, many are arguing that you can expect a substantial price increase next year. We'll have to wait and see if that proves true. We all know past performance doesn't guarantee future results, but nevertheless, this is what's always happened with Bitcoin in the past. There's also a lot of progress in the development and acceptance of this new asset class. For example, in Hong Kong, crypto has now been ruled to be property, giving bitcoin the same standing in Hong Kong as stocks and bonds. China's courts have made the same ruling. So did the United Kingdom. Even the IRS says the same thing. For tax purposes, crypto is property. Knowing what an asset is and how it's taxed is a pretty important prerequisite to investing in it, especially for institutional investors who have billions of dollars to invest. 

So will crypto blow up in the next year and a half or will it gain 1,000%? Well, that's an answer yet to be determined. But the question that you should really be asking is this Are you sure that it's not even worth a 1% allocation to your portfolio? Think about that.

In fact, there are a couple of ways that you can invest in the crypto arena without actually buying Bitcoin. You can invest in companies that are engaged in the crypto marketplace. This is called the crypto “Picks and Shovels” approach to investing.

Two of these funds come from Invesco, the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF. The symbol is BLKC, the Invesco Alerian Galaxy Crypto Economy ETF Symbol SATO, and from Global X, three ETFs: the Blockchain and Bitcoin Strategy ETF, symbol BITS. The Global X Blockchain ETF, symbol BKCH and the Global X Metaverse ETF Symbol VR. You can learn more about these at Invesco.com and Global X ETFs.com or talk to your financial advisor.

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