2017 has been the year of Bitcoin. It’s been a heck of a year for cryptocurrencies in general. But the grandfather of them all has seen gains of 1,945% since this time last year. Heck, by the time you’re reading this, it may be up over 2,000%. The way it moves, it might even be up that far by the time I get done writing.
That’s how fast Bitcoin has been moving. And that’s one of the reasons lots of folks are calling this a bubble.
Now, before I trigger all the Bitcoin fanatics out there, let me explain some things about a bubble. It’s not necessarily a bad thing. I mean, it’s not a good thing, either. It’s just a thing.
A bubble, as my colleague Briton Ryle explained two weeks ago, is defined by Investopedia as:
An economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy the elevated price, a massive selloff occurs, causing the bubble to deflate.
From tulips to internet companies to real estate, there have been tons of these. And there always will be. As long as economics determines the price of things, bubbles will occur. When demand skyrockets and supply is slow to keep up, prices skyrocket as well. It’s just something that happens.
Bitcoin is no different.
Even hedge fund manager Michael Novogratz, a renowned Bitcoin bull, knows what’s going on. Just a few weeks ago at a cryptocurrency conference in New York, he said, “This is going to be the biggest bubble of our lifetimes.”
But that’s not to say you can’t make money from a bubble. You can generate profits on the way up. And you can even cash in on the way down.
But as I write, there’s no real way to profit from the imminent bursting of the Bitcoin bubble. Just like the infamous Tulipmania, there’s no way to bet against Bitcoin.
You can short a stock. You could buy credit default swaps to bet against the mortgage bonds. But you can’t short cryptocurrencies — at least not with a meaningful position. You can’t buy insurance against them plummeting. You can’t even execute any conservative strategies like buying put options.
But this weekend, that’s all going to change. And it’s going to usher in a new era…
2018: The Year of Crypto Derivatives
This coming Sunday, December 10th, is going to mark a historic day in the cryptocurrency market. That’s because the Chicago Board Options Exchange (CBOE) is going to debut the first ever Bitcoin futures contracts.
They’ll trade under the symbol “XBT,” and for the month of December trading will be fee-free. They’re going to be cash settled. And the CBOE has teamed up with a pair of Bitcoin fanatics to determine the prices of bitcoins. The exchange is working with Gemini Trust Company, a digital asset exchange and custodian that lets customers buy, sell, and store things like bitcoins.
Gemini was founded — and is still run — by the only two Bitcoin billionaires in existence. The Winklevi, as they’ve been dubbed, gained fame by suing Mark Zuckerberg for stealing their idea for an exclusive dating site and turning it into Facebook.
You’d think it would have been their Olympic rowing performance, but no. It was the Facebook thing.
They made millions from that lawsuit and invested a large sum of it in bitcoins. Now they’re billionaires. And Tyler and Cameron Winklevoss put that money to work by founding Gemini.
The CBOE’s contracts are coming online sooner, but they’re not the only game in town. The Chicago Mercantile Exchange (CME) is debuting its own set of futures contracts just one week later, on December 17th.
When news that the two exchanges would be offering futures contracts hit, Bitcoin prices surged as fans of the cryptocurrency took the announcement as a good thing. They assumed the CBOE and CME would only offer derivatives on something they were optimistic about.
Well, let me tell you something about these kinds of companies. They offer derivatives on things they think can make them money. Plain and simple. And one of the main purposes of derivatives — be they options, futures, or forwards — is to bet against the underlying asset. They’re used to establish naked positions when a trader thinks the asset is going to drop in value. They’re used to hedge portfolios containing long investments in the asset against losses.
Sometimes, they are used as a bullish bet on the underlying security. But for the most part, they’re pessimistic.
Farmers enter into futures contracts on their corn, soybeans, and hogs to make sure they get a good price even if the market for those commodities drops. Traders scooped up credit default swaps (another form of derivative contract) to profit from the collapse of the U.S. economy.
So, this move by CBOE and CME doesn’t have anything to do with them being optimistic about Bitcoin’s price appreciation. It’s got everything to do with cashing in on massive amounts of trading volume. And it’s also about giving investors an option to bet against the cryptocurrency.
The Next Big Short
Hedge funds, which have mostly stayed on the sidelines, are licking their lips in anticipation.
That’s because futures contracts make it easy to short an asset.
And there are a lot of people out there who think Bitcoin’s in a bubble and approaching the top. There are some who’ve called it a Ponzi scheme.
Some have gone so far as to call it a “next-dumbest” trade. As in, with prices so high, you’ve got to find the next-dumbest person to buy yours to make money from it.
But the thing with bubbles is that you can’t prove you’re in one until it’s over. And once it’s over, you can’t profit from the fallout.
The other thing with bubbles — and it’s especially true of this one — is that you can never tell how long they’ll last. And you don’t want to lose your shirt betting against them or miss out on massive gains while the bubble continues to grow.
While this bubble will burst, it’s not likely to happen for a while. And prices have the potential to soar much higher.
Make Hay While the Sun Shines
So while it keeps growing, I’m content to make some money from it while I can. And I suggest you do, too.
We’ve put together an investment guide for cryptocurrencies that’s got all you need to know to become an expert and rake in big bucks while the sun’s shining on the market. You can get access to it by visiting this webpage.
And if you’d rather stay away from Bitcoin but still want to get involved in the cryptocurrency market, then my colleague Alex Koyfman has just the thing for you. He’s zeroed in on some cryptocurrencies that are poised to topple Bitcoin from its throne. And they’re still practically unknown. That means you can get in on the ground floor. It’ll be like investing in Bitcoin back in 2010 when you could get one for just a few cents. And the potential profits are just as massive.
However you do it, you don’t want to miss out on the rest of this rally. If you’re not making money from Bitcoin and other cryptocurrencies already, it’s time to get in. The mania is still growing. The bubble is still expanding.
The price of a bitcoin has gone up about $1,000 while I’ve been writing this article. Don’t miss those gains.
And use those derivatives to hedge yourself against losses. Then you’ll walk away richer no matter what happens to Bitcoin.
To your wealth,
Follow me on Twitter @AllBeingsEqual
P.S. The 12-month gains hit 2,038% by the time I finished writing. Take advantage of the bubble. Get our cryptocurrency guide and get started investing in Alex’s cryptocurrencies that’ll be even bigger than Bitcoin.
Marijuana stocks are going hyperbolic again.
This is coming in waves as new states and countries open up various aspects of legalization.
The most recent salvo is coming from Canada, where Bill C-45 is slated to legalize cannabis nationwide.
Prime Minister of Canada Justin Trudeau announced recently via Twitter:
We’re one step closer to legalizing & regulating marijuana. #BillC45 means less money for organized crime and harder access for our kids. Tonight, it passed third reading in the House and it’s now headed to the Senate. It’s expected to pass, with full legalization occurring by July 1, 2018.
And a new superstar investment team has just unveiled what could be the single biggest breakthrough the legal marijuana industry has ever seen.
This revolutionary strategy has been used by precious metals companies to overwhelming success…
After Franco-Nevada launched this new business model, its shares rocketed 811%.
When Royal Gold employed this strategy, its shareholders raked in 4,265% gains.
The brand-new company I’m going to tell you about is the very first to employ the exact same strategy for marijuana companies. I believe it could do even better than the two gold companies I mentioned — combined.
The best part is that the stock very quietly launched this year. Hardly anyone knows about it. So, if you want to be among the first in line for life-changing profits, you need to act fast.
News of this company’s revolutionary model will start making the rounds very soon, and once it does, there’s no telling how fast it will fly.
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