Stocks have taken a big hit over the past month, and many investors are panicked. They’ve stopped buying and started unloading everything.
While such fear-based actions are understandable psychologically, they’re usually huge mistakes. If you manage your financial portfolio poorly right now, you’ll soon end up in the poor house.
That’s why I’ve set you all up with my five tools for beating choppy markets.
With these tactics at your side, you’ll avoid mistakes, turn turbulent markets to your advantage and sleep in peace.
And today I want to give you another option.
Millions of investors dedicate a portion of their portfolio to gold or some other precious metal as a hedge – as “insurance” – against trouble in other markets.
Now, some of these folks go overboard, and you probably know a “gold bug” or two. But at its base, this is a sound strategy, because precious metals generally aren’t effected by the ups and downs of the stock market.
This isn’t a “gold service,” however. Our interest is in tech.
So let’s spend today investigating what I think of as “the gold of tech.”
Not only can you use this investment as a hedge, but big banks, credit card companies and other financial players are beginning to eye the technology behind it as way to disrupt the $500 billion payments industry.
If that upheaval in payments transpires, this “safety” play could soar triple digits or more in the coming years.
Up From the Underground
I’m talking about Bitcoin – the encrypted digital currency that’s been the talk of “underground” tech and privacy circles for years.
I’ve been following Bitcoin intensely during its short history.
I follow Bitcoin news both here at Money Morning and around the Web. And I talk about it on my social-media accounts with hundreds of cryptocurrency investors and entrepreneurs.
And because of my expertise in monetary economics and cybersecurity, I like to think I have a better grasp on it than most.
Today, I’m going to use that know-how to show you why Bitcoin’s rise really is only just getting started – how it’s become a true “unstoppable trend.”
Besides that, I want to point to several ways to invest in Bitcoin, whether you want to invest in the cryptocurrency as a long-term hedge… or you’re hoping for some of the huge gains I’ve seen batted about.
Now, I have to admit that some of the chat around Bitcoin is pretty negative. There are plenty of folks out there saying this innovative investment is already over – kaput.
(Whether they believe what they’re saying or are just “trolling” for clicks – well, I know what I think…)
Indeed, The Wall Street Journal recently ran a story about Bitcoin with the forbidding headline “Is Bitcoin About to Break Up?”
The mid-January story came in the wake of Mike Hearn, one of the currency’s key developers, resigning from the Bitcoin project. Not only did he walk away, but Hearn wrote an extremely negative essay that called the highly secure payments system a “failed” experiment.
Hearn went on to say that he has sold all his Bitcoins because he feels the network supporting the global system is getting log-jammed.
I’ve lost count of how many Bitcoin “obituaries” I’ve read, but it’s in the hundreds. And all of them – including this latest one – miss a key point: Bitcoin is a global force so massive in its reach that no one person or event can stop it.
Now, Hearn’s action did prompt Bitcoin’s price to dip about 25%. However, since then, Bitcoin has traded as high as $455 before settling back into a range of around $370 to $410.
Bitcoin isn’t going anywhere because it’s become an unstoppable trend that I believe will disrupt the global payments system. When you add in the value of credit cards, electronic payments and remittances, that’s a $500 billion sector.
And that leaves Bitcoin – and its underlying technology – plenty of room for some to cause some convulsions that would be beneficial to those invested in it.
The power of Bitcoin is in its backend/grid system, known as the blockchain.
The blockchain is like the “grids” that allow you to make credit card purchases, transfer money between banks or buy stocks through online brokerages. Except its main purpose right now is for folks to buy and sell Bitcoins.
The blockchain’s main advantage over all those other grids is its status as a peer-to-peer system, or one computer to another. That means there is no central bank or government involved.
Plus, by employing cryptography and other security protocols, the blockchain’s developers have made sure that everyone had access to buying and selling Bitcoins through secure transactions.
Moreover, anyone with a computer can access the blockchain, and each transaction is listed on it in chronological order.
This unique combination of security, privacy, openness and accountability has become a huge lure for companies all over the globe.
And that helps explain why major financial firms are getting in on the blockchain and Bitcoin.
For example, Goldman Sachs recently co-led a nearly $50 million investment in Bitcoin payments startup Circle Internet Financial.
And in October, Robert Greifeld, the CEO of the Nasdaq-OMX Stock Market, demonstrated Linq. That’s a platform which uses blockchain technology to manage shares of private companies – that is, a Nasdaq for startups and other closely held firms.
As Silicon Valley’s $1 billion-valued “unicorns” and other companies stay private longer, an easy, inexpensive way to manage asset trading is critical. Linq, powered by the blockchain, could meet that need.
Also getting behind the blockchain is UBS Financial Services. The Swiss firm, in partnership with Clearmatics in London, is rolling out a blockchain-based “settlement coin” that banks can use to settle transactions involving stocks and bonds.
Some blockchain experts estimate banks could save $20 billion dollars by using Bitcoin’s backbone in this way.
There are also real-estate companies that see blockchain as a great way to buy and sell property with reduced costs and fees – and fewer governmental regulations. And manufacturing firms (including the big biopharmaceutical companies we follow here) like the blockchain’s potential for tracking production.
There’s no pure play on blockchain technology right now. But this tech is growing so quickly that I expect to see some solid investments in the near future.
As far as “right now” goes, let’s examine three of the best ways to invest in Bitcoin.
An Investing Goldmine
If you choose to invest in Bitcoin, you could think of it as “the gold of tech.”
That means using it as insurance – a hedge – against today’s volatile market. Like gold, Bitcoin won’t plunge along with stocks. And if the blockchain truly disrupts the payments sector, then the cryptocurrency’s value will soar over time.
Also, I’d advocate allocating just a small portion of a portfolio to Bitcoin – like you would gold – no more than 5%.
Trading around $375 a “coin,” the price movement in the past two years has been volatile, to be sure – at point it traded for more than $1,100.
But the Bitcoin’s Wild West days are coming to an end, and we are entering an era of price stability for the currency as it gains financial and political acceptance. In October, the European Union declared Bitcoin a currency and, as such, tax-free. The move paves the way for Bitcoin acceptance throughout Europe.
Right now, there are two ways to invest in Bitcoin – and one more to put in your “watch” file.
- Bitcoin: For now, the best way to invest in Bitcoin is buying the cryptocurrency itself. You can always buy and sell Bitcoins through exchanges like Coinbase. It’s an online “wallet” that connects to your bank account so you can buy and sell Bitcoin. Coinbase recently launched the first Bitcoin-based debit card for the U.S. market. The Shift Card it allows people to spend Bitcoins anywhere that accepts Visa. A brand-new exchange option is Gemini. It was developed by Cameron and Tyler Winklevoss – the ostensible creators of Facebook. The twins call Gemini, where you can buy and sell Bitcoins (or fractions thereof, “the Nasdaq of Bitcoin.” Gemini is now the No. 11 Bitcoin exchange – but it’s growing quickly. Gemini launched on Oct. 8 with just 31 trades. By early November, it had 11,600 trades under its belt and about 2,000 daily.
- Tech ETF: If you don’t want to buy Bitcoin directly, take a look at ARK Web x.0 ETF (NYSE ARCA: ARKW). It’s a “next-generation Internet” exchange-traded fund focused on the cloud, Big Data, the Internet of Everything, e-commerce and social media. It’s also invested in Bitcoin Investment Trust (OTC: GBTC), an ETF that tracks the price of the cryptocurrency – but is only open to hedge funds and wealthy accredited investors. Its largest holdings include Netflix Inc. (Nasdaq: NFLX), Amazon.com Inc. (Nasdaq: AMZN) and Facebook Inc. (Nasdaq: FB). In other words, ARKW is a “twofer” that gives you limited exposure to Bitcoin and a stake in several leading Web giants.
- Bitcoin ETF: While GBTC is closed to most of us, the Winklevoss twins are working to launch the first Bitcoin ETF, which will track the price of the currency. The Winklevoss Bitcoin Trust (Nasdaq: COIN) is awaiting approval from federal regulators. Like ARKW, COIN will be a good choice for investors who want exposure to Bitcoin but don’t want to hold the currency itself.
In markets like these, investors need to stay as objective as possible. And one way to do that is to always have some portfolio insurance on hand. Consider making “the gold of tech” your hedge.
Moreover, we’re still in the early stages of a global shift toward Bitcoin and its underlying technology… the blockchain. That means this is a trend with many years of growth ahead.
And that makes Bitcoin good long-term insurance – with the potential for huge gains in the years to come.
That’s just the kind of investment we’re looking for in this – the worst market since 2008.
Beyond “insurance,” our job today is to find the specific stocks – the best stocks – for right now. I’m talking about the companies that can produce outsized gains no matter what the stock market does.
And I’ve just spotted a tiny $5 firm whose product is going to completely disrupt the smartphone industry. It controls 41 patents for this technology. So while almost no one knows this company’s name right now, it’s prepared to make its executives and investors into millionaires.
And the hardware this firm develops and markets is just one of six hugely disruptive tech trends that I’ve investigated for my latest special report. I’ve also found a “best stock” to go along with each of these trends – exactly the kind of companies that have the potential to soar right in the face of these rough markets.
I want you to see this right away… before the market begins its comeback.
I’ll see you Friday.
- Strategic Tech Investor Special Report: How to Beat Choppy Markets.