How to Make Money Off Bitcoin Without Actually Owning It

It’s the equity investor’s conundrum: how to get access to the skyrocketing returns of bitcoin and blockchain without actually owning the tokens.

To Thomas Lee, a major bitcoin bull who heads research for Fundstrat Global Advisors, a dozen stocks should do the trick.

“We believe investors should have exposure to blockchain, particularly given bitcoin has essentially zero correlation to equities, bonds and commodities —- hence, as a portfolio strategy, bitcoin is a good diversification tool,” Lee wrote in a note to clients Friday. “But this is impractical for many equity managers, given the parameters of their mandate or because of practical issues (custody of tokens, etc.).”

Investors recently have sought ways to participate in the eye-popping bitcoin rally without having to purchase the cryptocurrency on the unregulated exchanges that have proven susceptible to hacks. Absent from Lee’s list are bitcoin futures, regulated derivative products that will debut on Cboe Global Markets Sunday and CME Group Dec. 18.

Lee has long been one of Wall Street’s biggest advocates of the cryptocurrency. Two weeks ago he doubled his price target on bitcoin to $11,500 by the middle of 2018. It went for $15,552 as of 10:31 a.m. in New York on Friday, according to Bloomberg composite pricing.

He suggests equity managers look to these ideas to leverage blockchain in their portfolios:

  • Bitcoin Investment Trust (GBTC)
  • MGT Capital Investments Inc. (MGTI)
  • HIVE Blockchain Technologies Ltd. (HIVE)
  • U.S. Global Investors Inc. (GROW)
  • DigitalX Ltd. (DCC)
  • NVIDIA Corp. (NVDA)
  • Advanced Micro Devices Inc. (AMD)
  • CME Group Inc. (CME)
  • Cboe Global Markets Inc. (CBOE)
  • Overstock.com Inc. (OSTK)
  • Goldman Sachs Group Inc. (GS)
  • Square Inc. (SQ)

The looming availability of futures weighed on these equity proxies this week, as speculators may be shifting away from stocks of companies that have benefited as bitcoin’s price rose more than 15-fold this year. Both HIVE Blockchain Technologies and U.S. Global Investors are down near 10 percent this week. Nvidia and Advanced Micro Devices have also suffered losses in the five days ending Dec. 8.

As for the totality of Lee’s picks, an equal weighted basket of these stocks is up 136 percent this year, according to the note. But as impressive as that may seem, he points out that it still lags bitcoin’s 1,685 rise in 2017.

    Read more: www.bloomberg.com

    Bitcoin Mania Interrupted, for Now, After Outage Triggers Selloff

    It takes a lot to startle fans of bitcoin, the digital gold of the moment. But Wednesday was, well, a lot — a wild run of exuberant peaks and white-knuckled declines that left even diehards breathless.

    The dizzying rally in bitcoin, a bull market with few precedents in investing history, was abruptly interrupted by a market outage in the U.S. that seemed to captivate Wall Street even more than the day’s selloff in high-flying technology stocks.

    Only hours after soaring past $11,000 — a price that represents a gain of more than two-fold since September — bitcoin plunged nearly 20 percent in less than 90 minutes.

    Whether the swoon represented a brief setback or the start of something worse, the wild ride underscored just how volatile the cryptocurrency has become in what some warn could be one of the biggest bubbles of all time.

    “Bitcoin trading isn’t for the novice investor,” said John Spallanzani, chief macro strategist at GFI Securities LLC in New York, who does technical analysis on the cryptocurrency. “Corrections are fast and furious and you can get run over just like in the movie.”

    The day started with a touch of frenzy in the air, as the digital currency took its first trip past $10,000 and yet another celebrity — this time, pop icon Katy Perry — tweeted about her fascination with the rally. But things suddenly seized up during U.S. hours when traffic swelled on on-line exchanges.

    Confusion reined in the market for hours. Investors fearful of missing out on the frenzy were greeted instead with service outages and delays. Coinbase tweeted that traffic on its platform hit an all-time high at eight times the peak demand experienced in June. Access remained unavailable to some users.

    The selling reached furious levels shortly after 1 p.m. in New York, when bitcoin fell back below $11,000 and didn’t stop until $9,009. It hovered just below $10,000 as of 4:30 pm.

    “Issues in the exchanges add to it without a doubt,” said David Mondrus, chief executive of Trive, a blockchain-based research platform. “When you have a lack of ability to exit, then people dump in order to exit faster.”

    For many, the retreat was overdue after bitcoin had rallied 20 percent in just four days in a run-up that drew increased warnings it was headed for a sharp retreat. The cryptocurrency ended September at $4,171.25.

    “It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down,” Nobel Prize-winning economist Joseph Stiglitz said in a Bloomberg Television interview Wednesday. “Bitcoin is successful only because of its potential for circumvention, lack of oversight. So it seems to me it ought to be outlawed.”

    He joins a host of economists and financiers who’ve denounced the crypto rally as a craze, including most recently Vanguard Group Inc. founder Jack Bogle, who advised investors to “avoid bitcoin like the plague.”

    Proponents have heard those warnings for years, and watched bitcoin’s price rise 935 percent this year alone. Those kind of gains have grabbed Wall Street’s attention, evident Tuesday as buttoned-up financiers and analysts piled into CoinDesk’s cryptocurrencies conference in Manhattan, turning the event into a standing-room-only affair.

    Still, Wednesday’s jarring reversal had Spallanzani reminding investors that the ride down might not be over, at least for now.

    “If bitcoin can’t hold above $10,000, a technical correction could be underway, with a drop to as low as $8,400,” he said. “Asian trading tonight should be an interesting session.”

      Read more: www.bloomberg.com

      Bitcoin Soars Past $8,000

      Bitcoin’s relentless and volatile rally shows no sign of abating, with the world’s largest cryptocurrency defying growing bubble fears to hit yet another milestone.

      Bitcoin rose as much as 7.7 percent to a record $8,290 as of 2:47 p.m. in New York. It’s been a tumultuous year for the virtual currency, with three separate slumps of more than 25 percent all giving way to subsequent rallies.

      Even the most bullish analysts can’t keep up with bitcoin’s rally. Standpoint Research’s Ronnie Moas, who says bitcoin’s market cap will one day catch up to gold at $8 trillion, is raising his 2018 price target for the digital currency to $14,000 from $11,000. He had increased it from $7,500 last month.

      “The inflation in this thing is massive,” Luke Hickmore, a senior investment manager at Aberdeen Standard Investments in London, said in an interview with Bloomberg TV. “When will it collapse? Who knows. It will cause a lot of pain.”

      Even as many skeptics call the asset a bubble waiting to pop, it’s becoming too big for many on Wall Street to ignore. CME Group Inc., the world’s biggest exchange, will start offering futures trading on bitcoin next month, while senior executives at Goldman Sachs Group Inc. and Citigroup Inc. have said they are researching cryptocurrencies and the blockchain technology that underlies them.

      Terminal users can read more on bitcoin and bitcoin cash with our Q&A.

      Recent volatility has stemmed from a pickup in people switching to alternative virtual currencies, notably bitcoin cash. That’s gaining popularity due to lower transaction costs and faster speed. New cryptocurrency iterations are springing up as disagreements over bitcoin’s design persist and opportunities for making a quick buck prove hard to pass up.

      Bitcoin cash dropped 0.6 percent on Monday to trade at $1,189, down from a high of $1, 388 on Nov. 12, Coinmarketcap.com prices show. Bitcoin has advanced more than 700 percent this year and now boasts a market value of more than $130 billion.

      “I find it remarkable and somewhat frightening how, no matter how much bitcoin is pummeled by sellers, it simply bounces back even stronger,” said Lukman Otunuga, an analyst at currency brokerage ForexTime Ltd. “Will bitcoin hit $10,000 before year end? This is the question every investor is asking.”

        Read more: www.bloomberg.com

        Bitcoin Crashes and Then Surges in Wild Weekend Action

        Bitcoin is proving that investing in digital currencies isn’t for the faint of heart.

        After plunging as much as 29 percent from a record high following the cancellation of a technology upgrade on Nov. 8, the largest cryptocurrency came roaring back in early trading Monday before fluctuating between gains and losses.

        “Crypto trading is not for the novice investor,” said John Spallanzani, chief macro strategist at GFI Securities LLC in New York.

        While multiple reasons are being cited for the price volatility, one of the more viable is that some investors are switching to alternative coins. Bitcoin cash, an offshoot of bitcoin that includes many of the technical upgrades being debated by developers, has more than doubled in the same period.

        “We have seen similar steep falls in bitcoin throughout the year — specifically in June and September — but every time a considerable decline occurs, new investors jump in to experience the new asset class,” Hussein Sayed, chief market strategist at ForexTime Ltd., a currency broker that uses the brand FXTM, wrote in a note Monday.

        While markets had been focusing on bitcoin’s more than 500 percent surge this year, bitcoin cash was gaining popularity because of its larger block size. That’s a characteristic that makes transactions cheaper and faster than the original.

        When a faction of the cryptocurrency community canceled plans to increase bitcoin’s block size on Wednesday — a move that would have created another offshoot — some supporters of bigger blocks rallied around bitcoin cash.

        The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called its rapid advance a bubble, the asset has become too big for many on Wall Street to ignore. Even after shrinking as much as $38 billion since Nov. 8, bitcoin boasts a market value of about $110 billion.

        Supporters of bitcoin’s technology upgrade “are now switching support to bitcoin cash,” said Mike Kayamori, head of Tokyo-based Quoine, the world’s second most-active bitcoin exchange over the past day. “There’s a panic about what’s happening. People shouldn’t panic. Just hold on to both coins until we see how it plays out.”

        Read more: A QuickTake on the bitcoin community’s infighting

        The cancellation of last week’s bitcoin upgrade has left users to choose between the two versions of the cryptocurrency. On one side is the original bitcoin, powered by so-called SegWit technology, which aims to improve its performance by moving unessential data off of its underlying blockchain. On the other side is bitcoin cash, which allows its blockchain to handle eight times as much data as the original.

        Proponents of bitcoin cash believe their approach is simpler and closer to the original goal of bitcoin, which was described primarily as a payment system in its white paper. Supporters of the original bitcoin say that vision is too limited, and that by improving the blockchain with SegWit technology, bitcoin can become a new digital-asset class that not only supports payments but countless other functions.

        Upgrade Called Off

        While bitcoin cash has been around for months, it saw limited support as the community awaited last week’s technology upgrade for the original bitcoin, which promised similar features. Now that the upgrade has been called off, businesses that use the cryptocurrency primarily as a payment method are expected to increase adoption of bitcoin cash.

        While bitcoin cash surged over the weekend, it hasn’t been a straight line up. The cryptocurrency was trading at $1,300 at 4:45 p.m. in New York, down from a high of about $2,478 on Sunday, Coinmarketcap.com prices show.

        Bitcoin has been similarly volatile; it initially rose after news that it would avoid another split, but the gains were short-lived. Its plunge earlier Monday to as low as $5,605 compares with an intraday record $7,882 on Nov. 8.

        Volume across bitcoin exchanges jumped to 436,021 bitcoins on Sunday, the highest since September, Bitcoinity.org data show. BitMEX, an exchange for cryptocurrency derivatives that allows shorting, saw record activity on Sunday, Chief Executive Officer Arthur Hayes said.

          Read more: http://www.bloomberg.com/news/articles/2017-11-13/bitcoin-plunges-29-from-record-high-as-civil-war-intensifies