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Would you pay $3.8 million for a digital drawing of a rock?
As I write, that’s the price floor if you want to own one of these digital pet rocks, called EtherRocks…
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EtherRock #55, which sold for $3.8 million in October [Source: Fractional]
EtherRocks are non-fungible tokens (NFTs), one of the biggest trends in crypto right now.
But they’re also a sign of the disconnect our editor, Nomi Prins, has identified between the markets and the real economy.
That disconnect is partly to thank for the higher prices we’re seeing across all markets.
And if you’re armed with the right tools, you can make considerable profits from it.
In today’s essay, I’ll show you one simple, low-risk way to use this distortion to your advantage in the crypto world…
A New $7 Billion Market
In early November, the value of all cryptos broke above $3 trillion for the first time. And that doesn’t include all the value locked in NFTs.
NFTs, like the EtherRocks above, are a type of digital asset. And they have exploded in popularity this year.
Some artworks and animal-themed pieces of digital art are selling for millions of dollars. As a whole, the NFT market is worth about $7 billion, according to JPMorgan.
Now, we’re not dismissing NFTs. And we won’t deny that these digital assets could be even more valuable in the future.
We use this example simply to show the massive disconnect between the real economy and what goes on in asset markets.
Greatest Money-Printing Experiment in History
You see, in the aftermath of COVID-19, the Federal Reserve threw out the last semblance of monetary sanity.
Between mid-March 2020 and the end of April 2020, it churned out $2.3 trillion. That’s about $55 billion created out of thin air daily.
This was the greatest money-printing experiment in history.
The M2 money supply (including cash and checking deposits) rose from $15.41 trillion in January 2020 to $21.19 trillion in October 2021.
This means that more than 27% of all the U.S. dollars in existence were printed in the last 22 months alone. You can see the huge spike in the chart below.
Now, while money-printing is nothing new, this sort of increase in the money supply is unprecedented. But the excuse is the same…
As you may recall, the Fed “printed” $1.2 trillion to combat the 2008 financial crisis. It claimed this would “stimulate the economy.”
Instead, the Fed ended up creating not just a housing bubble or a tech bubble, but an “Everything Bubble”… the biggest financial bubble in human history.
The extreme monetary distortions we’re seeing from the Fed today will create an even bigger bubble in all asset classes this time around.
No wonder people concerned about inflation are getting into cryptos and NFTs.
Now, we have no idea what the owners of the EtherRocks we mentioned above are going to do with them… Presumably, they believe they’ll become even more valuable in the months and years to come.
They may be right. And if you read our essay on the metaverse last week, you’ll know that anything is possible in the fast-developing worlds of crypto and the internet. [If you missed that essay, you can catch up here.]
But don’t worry if you don’t have $3.8 million to spare while you wait and see how the market for digital rocks pans out.
Because today, we have a simple way for you to invest in the crypto trend, without risking a huge chunk of your portfolio. It’s something lots of smart investors are already doing…
Corporate America Is Jumping Into Crypto
Billionaire hedge fund managers like Paul Tudor Jones, Mike Novogratz, and Mark Yusko have allocated a portion of their capital to bitcoin.
And we’re also starting to witness the early stages of corporate America adopting bitcoin as a cash reserve asset and store of value.
Take MicroStrategy (MSTR). It’s the business intelligence firm that rose to fame in August 2020, when it added bitcoin to its balance sheet.
At current prices, the company’s total bitcoin holdings are worth about $7 billion. That’s 95% of MicroStrategy’s overall market capitalization.
The payment giant Square (SQ) added $220 million worth of bitcoin to its balance sheet between October 2020 and February 2021. And its chief financial officer (CFO) said, “There’s absolutely a case for every balance sheet to have bitcoin on it.”
But bitcoin is still early in its adoption cycle. Less than 2% of the world’s population owns bitcoin today.
In America, while most adults admit to knowing about bitcoin, only 16% have invested in, traded, or otherwise used it, according to Pew Research.
That’s roughly 40 million people. And it’s still low, compared to the 56% of Americans (roughly 140 million) that own stocks.
Imagine what would happen to the price of bitcoin if another 100 million Americans invested in it…
If you decide to buy bitcoin today, you will still be an early adopter with a shot at high rewards.
Not Too Late to Get on the Right Side of This Trend
The bottom line is that the Fed has set the stage for rampant inflation. There’s still plenty of room for alternative assets – such as bitcoin and other cryptos – to shine.
The crypto king has been a big winner this year, soaring to almost $69,000 per bitcoin in November. But, despite the recent pullback in the price of bitcoin to around $50,000, I think this is only the beginning of a huge runup in the bitcoin price.
On the flipside, the most popular crypto’s recent retreat also means that it is currently on sale. So, if you haven’t yet, it’s definitely not too late to buy bitcoin.
There are many ways to do this. Buying it on a crypto exchange such as Coinbase and storing it in a crypto wallet is one.
But PayPal or Square’s Cash App may be more convenient options for someone buying bitcoin for the first time. With both of these popular apps, you can start your crypto portfolio with as little as $1.
It’s a good solution if you only want to buy a small amount of bitcoin.
With bitcoin adoption still in its early stages… plenty of room for growth in the number of people buying bitcoin… and more and more corporations adding bitcoin to their balance sheets… we believe the bitcoin story still has a long way to run.
Just remember that cryptocurrencies are speculative assets, so treat your investment in bitcoin accordingly. And please, never invest money – in any asset class – that you can’t afford to lose.
Regards,
Lau Vegys
Contributing Editor, Inside Wall Street with Nomi Prins
Note From Rogue Economics’ Senior Managing Editor
Last week at Rogue Economics, we welcomed our new editor, Nomi Prins. Nomi is a best-selling author and financial journalist. But once, she was a Wall Street insider.
Nomi worked as a managing director at Goldman Sachs… ran the international analytics group as a senior managing director at Bear Stearns in London… and was a strategist at Lehman Brothers and an analyst at the Chase Manhattan Bank.
Now, Nomi brings her keen understanding of the world of money to Rogue Economics. In these pages, Nomi will show you why she left her career as a global investment banker… and set out to demystify the world of money.
She will also put you on the right side of a disconnect she sees between the markets and the real economy. She’ll do this with help from her team of global experts – including 20-year gold and natural resources investor and trader Eoin Treacy… and longtime metals, tech, and cryptocurrency investor Lau Vegys.
Of course, if you prefer not to get daily insights from Nomi and her team, you can unsubscribe at any time. You’ll find a link to do so at the bottom of every Inside Wall Street with Nomi Prins email.
Best regards,
Maria Bonaventura
Senior Managing Editor, Rogue Economics
P.S. As always, let us know what you think – good or bad. Write us at [email protected].