(The importance of remaining vigilant in the space following the rapid increase in institutional adoption.)
There has been manipulation and other malicious practices taking place in investment and
trading markets since the inception of these concepts. Over the past year, the clear and blatant
manipulation taking place in the traditional stock markets has been truly unfathomable. From
the repeated injections of funny money by the Fed to help artificially inflate stock prices, to
questionably timed sell-offs by CEO’s and other top tier executives, to social media posts by
company ownership commenting on the current value of their shares. And let’s not forget the
massive portfolio dumps perpetrated by politicians immediately preceding the nationwide
lockdowns back in early 2020. Every one of these examples has had a direct effect on the
respective market(s) or stock price(s). Yet, these things continue to happen, without any
repercussions or consequences to those involved. And on and on it goes.
When it comes to the digital asset investment space, we are just now starting to see the
negative effects of these massive, bloated companies dipping their toes into the proverbial
water. Several weeks ago during the most recent televised Federal Reserve/Jerome Powell
speech, Scott Minerd, the CIO of Guggenheim Partners, an enormous global investment and
financial services firm, participated in a televised interview. During the interview, Minerd states
that Guggenheim began allocating capital towards Bitcoin since the price was at around $10K.
He goes on to state that the fundamental analysis conducted by Guggenheim places the price of
Bitcoin at around $400K. Of course, investors in the market ran with this news and the price
pumped over the next 3 weeks, topping out at $42K, before the substantial pullback over the
past half week, with Bitcoin’s price bouncing off $30K in the end.
So, what is the problem here? Well, nothing if you take it at face value. However, taking a
deeper dive into what just occurred does bring to light the clearly manipulative chain of events,
which at a minimum, contributed in some capacity to the massive sell-off and subsequent dive
in price. This past Sunday, Scott Minerd of Guggenheim, the same individual calling for Bitcoin
to go to $400K a few weeks earlier, sent out a series of tweets suggesting that investors “take
some money off the table” and that Bitcoin’s price increase is “unsustainable” (as if those who
have been in the space for years aren’t keenly aware of the potential for an imminent pull-back
at any time). Other Twitter users were quick to respond to the tweets, advising Mr. Minerd that
they would not heed his advice under any circumstance. And rightly so, because guess what?
Although Guggenheim may have been “allocating” towards Bitcoin since the price was around
$10K, they have NOT purchased any interests as of yet. You see, Guggenheim is still awaiting
regulatory permission to enter the market through none other than…Grayscale Bitcoin Trust
(GBTC). And while we’re on the topic, guess which investment vehicle re-opened to new
investors immediately following the most recent Bitcoin price retraction? That’s right, Grayscale
Bitcoin Trust, as well as many of their other Trust offerings that had been previously on hold
from accepting new investors. They seem to have a knack for the most advantageous timing.
This is all problematic and troubling, though. As an enormous investment and financial services
institution, why is Guggenheim making the boldest of claims relating to an asset class that they
barely have any exposure to? An asset class that they presently (or at that time) have zero
financial interests in. It is because that is what these global investment and financial giants do,
and have been doing for decades. We would even go out on a limb here and anticipate that
Guggenheim will receive approval to purchase their GBTC interests imminently. The information
we have gathered indicates that it may even be prior to January 31, 2021. And assuredly, one
can purchase a significant amount more when the asset’s price is hovering around $33K, as
opposed to $49K, which was the direction Bitcoin was headed.
Of course, we can’t place all the blame on one individual, or one company. Coinbase, the
well-known retail exchange (now shifting focus to provide a white glove OTC experience for
institutions who want to get involved in the Bitcoin space), had yet another partial outage
during this most recent price dip. Users were unable to successfully execute orders, the
exchange was not registering buys, and all of this ultimately helped to pull down the index price
used in futures speculation. This created a domino effect, that pulled the price of Bitcoin down
even lower. And to add insult to injury, can you venture a guess on what parent company owns
Coinbase? If you guessed Grayscale, you would be right once again. The Coinbase outages have
been persisting for years, and at this point the outages are expected each time there is
significant movement within the space. And in the end, those who are targeted and forced to
suffer the consequences of these types of blatant manipulation and malicious behaviors are the
retail investors, buyers and sellers. This behavior is inexcusable.
Under normal circumstances, we would not name names, as they say. But in this instance, the
effects of these combined transgressions are too significant to ignore. These behaviors and
actions are unacceptable in any market, and we will not welcome them into our industry
without making them known to others. Undoubtedly, it is unlikely that our position on this
front will be of any consequence to anyone. And it is certainly not going to stop them the next
time they want to shut down their retail exchange(s), or push the market in one direction or the
other. What we can do, however, is bring awareness to these actions so that it becomes harder
for them to successfully drag the market down, or pump it up for their inevitable dump. This is
exactly why it is important to take the time to do the appropriate research when choosing an
exchange to utilize. For larger investments, it is important to engage a trusted source for advice
and guidance on choosing the right investment vehicle for your needs.
Hopefully these companies are enjoying the reputation they are garnering for themselves,
because after all of that, Bitcoin’s price has rebounded and at the time of this writing on
Wednesday the 13th, it has breached $37K again, rapidly approaching $38K. We all know
where Bitcoin’s price is ultimately headed this year, and try as they might to shake out the weak
handed retail investors, they are going to have their work cut out for them. Don’t let anyone
dictate to you where the market is going, and steer clear of the poorly operated exchanges.
Secure your assets and have a solid exit strategy that is consistent with your specific needs and
financial situation. And for higher net-worth individuals developing an appetite for Bitcoin and
other digital assets, seek out a trusted source and know your options. The best option for you
may not be the global investment giant throwing it’s $230B worth of weight around in a space
they have yet to buy into for 1 cent. A wiser man once said, “You just don’t know what you
don’t know.” And when it comes to the historical cycles, supply halvings, volatility, price
fluctuations, sell-off patterns and overall sentiment related to Bitcoin, they just don’t know.
How could they?