My Zurich meeting and the $2.6 mn missed opportunity
Abraham George Market Musings
The past few weeks have been very tough for the crypto markets. We have been hit with what feels like a public relations campaign of negative stories about cryptocurrencies. Celebrities, China, tax collectors, central bankers, politicians and even prominent religious leaders have all spoken out against the crypto markets.
On the surface the main factors for the sell-off are China’s renewed crypto ‘ban’ threat, Elon Musk’s tweets and some other discouraging news items like the US treasury Department now wanting records of crypto transactions of more than $10,000.
The legendary investor Warren Buffet said at the depths of the 2008 crisis “When others are fearful it’s wise to be greedy.” Same time we can add “do not panic and do your own research.” Owning cryptocurrencies is distinctly different from owning shares of major , earnings generating companies like Apple or Amazon. Bitcoin should not be treated like owning Microsoft in your portfolio.
As an asset class cryptocurrencies are only about 13 years old. And they appear to be experiencing major sell- offs as the US banking and financial system had crises and panics in the 18th century (1791 ,1792 ,1796 ) when it was just starting to mature. Yet Bitcoin and other cryptos also present a different kind of upside than stocks or other investments that one might consider ‘traditional’ today.
The Crypto Fear and Greed Index recently hit its lowest point since March 2020. As you might have guessed the index measures the prevailing sentiment among cryptocurrency investors. Created by software company Alternative, its calculated by measuring volatility readings, crypto trading volume, social media sentiment, market- share data of the major cryptos and alt coins and other trend behavior. When the reading is near 100 it indicates extreme greed in the markets. This typically suggests a correction in the market. On the other hand, a rating near zero signals extreme fear in the markets. And that could be a signal for a buying opportunity.
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Currently, the index reading is around 15. A rating this low means that crypto diehards are the only ones with any optimism left. Yet there is much volatility. So as the saying goes “If you can’t handle the heat, get out of the kitchen.” I personally think at these levels and lower the institutional investors are buying. I am still not convinced about Bitcoin. So I have not bought any but I am very convinced about XRP and know much about it . So in the next few reports, I will write more about XRP.
I will leave you with this small real life story. In 2013, I was invited to Zurich by Saxo Bank to attend a very special closed door meeting comprising about 30 high net worth individuals. I was there only because the Saxo sales head was a close friend of mine for nearly 30 years from his UBS days and I had given him a lot of business from my trading days in Abu Dhabi. In a way he was reciprocating that by introducing me to some very rich people as I was on my own and setting up a fund. According to my friend, there were about 8 or 10 billionaires in the group. The main discussion and presentation was all about Bitcoin. There was one billionaire who made investments in Bitcoin at 5 dollars and took profits at 200 and made 150 mio dollars or so.
But the interesting part was this. There was a very pleasing young man probably in his early 30’s from Singapore making a very high pitch presentation about Bitcoin. In the end we all asked him where do you see Bitcoin in 5 years. With a straight face he said “around 100,000 dollars”. Everyone laughed. Later I went out for dinner with my host. So he asked me what do you think of the Singapore guy. I said I like his passion and energy but I have no clue what is this stuff Bitcoin. Seeing his confidence, I feel like sticking 10,000 dollars and forgetting about it. My host also concurred with me.
But the truth was that we never did it. The price was around 230 dollars at that time. When Bitcoin was $60,000, I checked what it would have been if I invested 10,000 dollars. My holdings would have been $2.6 million had I bought and held it. But then such is life. You win some. You loose many. In the end, you succeed if the value of your wins exceed that of your losers.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.