The Wolf Den #1022 - Pick Up The Phone - Bitcoin Is Calling
Ring Ring, It's Morgan Stanley Calling.
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In This Issue:
Pickup The Phone—Bitcoin Is Calling
Bitcoin Thoughts And Analysis
Legacy Markets
Arch Public’s Gateway Strategy: Protection In Turbulent Markets
The Nikkei Recovers… And Then Some
ARK Buys The Dip
Trump And Elon Are Scheduled To Talk
Ethereum And Solana News
Global Market Meltdown - $6.5 Trillion Erased! Is This Just The Beginning?
Pickup The Phone—Bitcoin Is Calling
The phone rings. The caller ID reads 'Morgan Stanley.' You pick up.
Client: Hello?
Advisor: Good afternoon, Mr. Johnson. This is Linda from Morgan Stanley’s wealth management division. How are you today?
Client: Good afternoon! I'm doing well, thank you. How about yourself?
Advisor: I'm doing great, thank you for asking. I'm reaching out because Morgan Stanley has some exciting news. We now have the approval to offer Bitcoin to our clients who meet specific eligibility criteria, and you qualify. Do you have a minute for me to share more?
Client: Bitcoin, huh? That's interesting. Yes. I've heard a bit about it but never really considered it seriously. Why was I selected?
Advisor: We sent out a survey to investors whose accounts are larger than $1.5 million, you selected a high-risk tolerance and the intention to invest in speculative assets. This opened the door for me to share Bitcoin with you as an alternative asset in your portfolio. Does that make sense? Can I share more?
Client: Yes, I’ve been waiting to talk about Bitcoin. Tell me more.
Advisor: Amazing. Bitcoin is a digital asset with no physical properties. It's decentralized, operating independently of any central bank. Often referred to as 'digital gold,' Bitcoin has a limited supply and increasing demand. Many investors see it as a hedge against inflation and a potential store of value. Does this make sense?
Client: Yes, but isn't it very volatile? I've seen headlines about its price swinging wildly.
Advisor: You're right, Bitcoin does have a history of volatility. However, it's important to consider its long-term growth. Over the past decade, Bitcoin has significantly outperformed traditional assets like stocks and bonds. As part of a diversified portfolio, a small allocation to Bitcoin can potentially enhance returns and reduce overall portfolio risk. Morgan Stanley is now recommending a small starter position.
Client: Hmmmm, but how secure is it? I've also heard about hacks and fraud in the crypto space. How easy is it for Bitcoin to be hacked?
Advisor: Security is a top priority, and that's where Morgan Stanley’s professionalism comes in. We offer Bitcoin investments through regulated and secure platforms and familiar vehicles, ensuring your assets are protected. Additionally, Bitcoin's underlying technology, blockchain, is inherently secure and transparent, making it very difficult for fraud to occur. There has never been an instance in history, Mr. Johnson, where Bitcoin itself was hacked. While exchanges and other third-party services have experienced breaches, the Bitcoin network has a perfect record of remaining secure and robust.
Brief pause… have you thought Mr. Johnson about how Bitcoin could fit into your investment strategy?
Client: That explanation is a bit reassuring, but truthfully, I have no idea how it would fit into my portfolio.
Advisor: Given your current portfolio, Morgan Stanley is recommending a small allocation to Bitcoin, we are suggesting somewhere between 1-5%, to provide diversification benefits. Bitcoin's low correlation with traditional assets means it can perform well even when other investments are underperforming. Your portfolio is designed to manage risk and seek growth opportunities.
Client: Interesting. What about the regulatory environment? I've heard different countries have different stances on Bitcoin and the sitting administration is against it.
Advisor: That's a valid concern. Regulation around Bitcoin is evolving, but we're seeing increasing acceptance and integration into the financial system. Countries like the U.S. are working on clear regulatory frameworks, which is a positive sign for the future of Bitcoin. The election outcome will be important for this asset, but we take a much longer view of the asset. We are thinking in terms of decades.
Client: That makes sense. What are the logistics of investing in Bitcoin through Morgan Stanley? What is needed of me to manage it?
Advisor: We make it straightforward for our clients. At Morgan Stanley, you can invest in Bitcoin through our approved investment vehicles. These include two of the largest ETF providers for Bitcoin: BlackRock Inc.’s iShares Bitcoin Trust (ticker IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC). The Bitcoin in your portfolio would act the same as all of the other ETFs you own.
Client: Sounds good. What kind of returns can I realistically expect from investing in Bitcoin?
Advisor: While past performance is not indicative of future results, Bitcoin has shown impressive growth over the years. Analysts have varying opinions, but many believe Bitcoin still has significant upside potential as adoption increases. However, it’s important to have a long-term perspective and be prepared for price fluctuations. We are asking our clients to view Bitcoin’s price on a year-to-year basis.
Client: I appreciate the detailed explanation. I’ll need to think it over, but let’s start with rebalancing out of some of my lower-performing positions and begin with a 1% allocation in the meantime, could you send me some more information to review?
Advisor: Of course, Mr. Johnson. I’ll email you our comprehensive Bitcoin investment guide and a report on the rebalance. Based on our estimates, we should have the Bitcoin purchased by the end of trading today, totaling approximately $32,000. This would correspond to around .56 BTC in the ETFs. In a few weeks, we’ll schedule a follow-up call to discuss any questions you might have about the performance of the position and the reading material we’ve sent.
Client: Thank you, I’ll look out for that. Talk to you soon.
Advisor: You're welcome. Have a great day, Mr. Johnson.
What you just read is a hypothetical sales call between a Morgan Stanley financial advisor and a qualified high-net-worth client. I simulated this scenario to illustrate how such a conversation might unfold. Starting today, Morgan Stanley’s 15,000-strong advisor base has been authorized to offer Bitcoin to clients with a net worth of over $1.5 million who have expressed a high-risk tolerance and an interest in speculative assets.
This initial phone call will likely take between 5 and 15 minutes. Consequently, a well-trained advisor specializing in these calls could manage approximately 32 to 96 sales calls in a typical 9 to 5 day. In the example above, the client agreed to start with a 1% allocation, indicating a portfolio worth around $3.2 million. I believe it will be relatively straightforward and easy for clients interested in this asset class to gradually ease into a position.
Clients want in and sales agents want sales—it’s that simple.
I imagine this is largely what has been happening with other major asset managers and their clients. For small family offices and boutiques looking to partner with an issuer to consolidate their accounts, the process likely involves more due diligence and takes longer. However, between advisor and client, the process itself isn’t particularly complex. It may take months for clients to consider increasing their position, but this will happen naturally and gradually.
As for older money, we are still very much in the 0% to 1% allocation phase—and that’s where the real money is.
Trillions of Wall Street dollars are considering allocation to Bitcoin, with Ethereum poised to be the destination where future products are built to facilitate this access.
Think bigger. It’s all going to happen in a 15-minute phone call.
Bitcoin Thoughts And Analysis
Markets have recovered nicely, but we are not out of the woods yet. It has only been two days, and a reactionary bounce often follows any drop. If we experience another decline, I will be looking for the setup mentioned above. Since the daily RSI is already oversold, a dip below the recent low close (not the wick) would likely result in bullish divergence, a reliable sign that the bottom of this move is in for me.
This is just an idea and may not happen, but it’s what I would need to see to consider going long again for a trade.
Legacy Markets
Stocks and US futures surged as the Bank of Japan (BOJ) eased market fears following last week's unexpected interest rate hike. S&P 500 and Nasdaq 100 futures rose, driven by a wave of dip buying that saw underlying indexes rebound over 1%. The Stoxx Europe 600 index also climbed more than 1%, supported by mixed earnings reports. Japanese stocks led a broad rally across Asia.
BOJ Deputy Governor Shinichi Uchida's commitment to avoid hiking interest rates during market instability helped calm nerves, resulting in a more than 2% drop in the yen against the dollar. This dovish stance follows a turbulent period triggered by the BOJ's rate hike on July 31, which caused a significant selloff in Japanese shares and a surge in the yen, impacting global risk assets.
The volatility in US markets is waning, with the S&P 500 recovering from its worst drop since September 2022, and the Cboe Volatility Index declining sharply. However, recent market turmoil serves as a reminder of potential rapid changes, according to St James Place's Chief Investment Officer Justin Onuekwusi.
Treasury yields and the Bloomberg dollar index both ticked higher, while the weaker yen boosted higher-yielding currencies like the Mexican peso and the Australian and New Zealand dollars. In premarket trading, Fortinet Inc. shares soared on positive earnings forecasts, while Super Micro Computer Inc. and Airbnb Inc. faced declines due to margin pressures and a disappointing outlook, respectively.
In Europe, Novo Nordisk A/S shares fell after a profit forecast cut, and other companies like Commerzbank AG and Puma SE also reported earnings misses. On the positive side, Continental AG saw shares rise due to improving returns at its car-parts unit, and ABN Amro Bank NV gained on an improved lending income outlook.
Commodity markets showed oil extending its recovery amid geopolitical tensions, while copper prices fell to their lowest since March due to surging stockpiles, highlighting weak demand in Asia.
Key events this week:
US consumer credit, Wednesday
Germany industrial production, Thursday
US initial jobless claims, Thursday
Fed’s Thomas Barkin speaks, Thursday
China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 1.2% as of 6:58 a.m. New York time
Nasdaq 100 futures rose 1.5%
Futures on the Dow Jones Industrial Average rose 0.8%
The Stoxx Europe 600 rose 1.5%
The MSCI World Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0918
The British pound rose 0.2% to $1.2715
The Japanese yen fell 2% to 147.21 per dollar
Cryptocurrencies
Bitcoin rose 1.4% to $57,385.11
Ether rose 1% to $2,514.43
Bonds
The yield on 10-year Treasuries advanced four basis points to 3.93%
Germany’s 10-year yield advanced eight basis points to 2.28%
Britain’s 10-year yield advanced four basis points to 3.96%
Commodities
West Texas Intermediate crude rose 1.6% to $74.34 a barrel
Spot gold rose 0.3% to $2,397.45 an ounce
Arch Public’s Gateway Strategy: Protection In Turbulent Markets
Arch Public’s Gateway Algorithm has been a relative safe haven over the past several months for investors. Yes, you read that correctly. We’ve discussed annualized returns of nearly 140% over the past decade, but total returns don’t tell the full story. What happens when markets whipsaw lower, and volatility rules the day, month, or quarter?
Risk mitigation and liquidity become paramount when downside risk and volatility inevitably appear and reduce static investments to ‘tax loss’ strategies.
In the past 90 days Arch Public’s Gateway Algorithm (S&P500) has returned better than 17% for clients. At no point in that 90 days has it taken a trade that resulted in a loss larger than -1.93%. Programmatic decisions disallow our strategy to take unwise trades, and our 2% stop loss protection protects every position to the downside.
Couple the above truths with 24/7 liquidity and you have an alternative asset that performs better than most.
The history of this strategy goes back a decade and has proven itself to be remarkably wise and resilient in tough market environments. This past week (and month) nearly every asset class has taken a hit; some more than others. Our Gateway Algorithm has not participated in the pain.
S&P500, Nasdaq, Dow, and Bitcoin are all flat to negative in the past month. Our Gateway Algorithm is up +17.37%. Join us.
The Nikkei Recovers… And Then Some
Following its steepest nosedive in 37 years, the largest since the Black Monday crash in 1987, Japan's Nikkei has not only rebounded but closed higher than its pre-drop level. The Nikkei soared by 10.23%, closing the day at 34,675.46. This marks its largest daily gain since October 2008 and the highest point increase in its history. In addition to the Nikkei rebounding, other notable markets recovered well: Toyota rose 12.8%, Computer chip maker Tokyo Electron rose 16.6%, Honda rose 14.7%, and Mitsubishi UFJ Financial Group rose 5.8%.
ARK Buys The Dip
Cathie Wood’s ARK took advantage of the dip and made its first COIN purchase since June 2023 and first HOOD purchase since February of this year. ARK bought the 93,797 shares of Coinbase ($17.78M) and 681,885 Robinhood shares ($11.12M) through ARKK, ARKW, and ARKF. At its lowest point, HOOD dropped to $14.63, down 40.6% from its recent high of $24.58 less than a month ago. Similarly, COIN fell to $162.11, a 38.5% decrease from its recent high of $265.15 during the same period.
Trump And Elon Are Scheduled To Talk
All we know right now is that the interview is scheduled for Monday night, August 12th. My guess is that Bitcoin might get a mention, but I doubt it will be the primary focus. If Trump attended the Bitcoin conference and only spoke about Bitcoin for one minute out of every five, I wouldn’t expect this conversation to be centered on the topic. While the internet will undoubtedly buzz with speculation about what will be discussed, I think it's a toss-up whether crypto or Bitcoin will even come up.
Ethereum And Solana News
From Jame Seyffart, “Nasdaq and BlackRock's filing to add options on Ethereum ETFs has hit the SEC site. Final SEC decision on this from SEC likely to be around April 9th, 2025. (SEC is not the only decision maker on adding options here. Also need signoff from OCC & CFTC)”
In other news, Solana is about to enter price discovery against Ethereum. How well an asset recovers from a dip is very telling of its future performance. I expect great things from Solana this cycle and still anticipate Ethereum to pick up the pace at some point as well.
Global Market Meltdown - $6.5 Trillion Erased! Is This Just The Beginning?
Black Monday 2024 led to massive losses. Is the worst over? Or should we expect markets to fall further? Noelle Acheson will join me in discussing this and more.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.