My hat’s off to my InvestorPlace colleague Matt McCall for winning our friendly wager on which would reach 40K first – bitcoin (BTC) or the Dow.
On Saturday, bitcoin reached a new all-time high close of $42,000, after smashing through its previous record high around $20,000 on December 23, 2020. Bitcoin then hit a roadblock later in the weekend, plunging over 22% to around $32,000 on Monday, it’s largest two-day drop since March. It’s already gained back some of its lost momentum since, rising back to around $35,000 today.
Talk about market gyrations!
Since August 5, 2020, the day I made my bet with Matt, bitcoin climbed more than 260% to its all-time high on Saturday, while the Dow gained 14% over the same timeframe. In other words, stocks have also performed well.
But a bet’s a bet, so I’m going to donate $5,000 to the charity of Matt’s choosing.
I can also tell you this — I’m more certain fundamentally superior stocks will outperform this year than ever. Part of the reason why is a weak dollar and favorable year-over-year earnings and sales comparisons coming for the fourth quarter of last year and this year’s first quarter. I also think the Dow will hit 40,000 later this year, and when it does, we won’t see the accompanying volatility like with bitcoin.
The United Kingdom’s financial regulator, the Financial Conduct Authority, warned cryptocurrency investors on Monday they should be prepared to lose their entire investment due to volatility and the difficulty of valuing crypto assets.
Prices had grown so overheated, even cryptocurrency analysts had been warning about overbought conditions leading into the rapid drop, and that a stronger dollar and higher bond yields in recent days likely contributed to bitcoin’s fluctuations.
Recently, the correlation between bitcoin and the dollar reached -0.95, indicating they’re likely to move in opposite directions than in tandem. And on Monday, the dollar was 0.4% higher against other major currencies and trading at a two-week high, while the 10-year Treasury yield reached 1.14%.
The bottom line is that cryptocurrencies have had an amazing run, but they’re also extremely volatile.
Back on March 14, 2020, when the pandemic began to take hold and hit the markets, bitcoin dropped to a low of around $5,425. It’s been a long climb back as investors began to pour money into the cryptocurrency.
Despite bitcoin’s fall in recent days, the cryptocurrency is still up 90.6% over the past month.
Interestingly, bitcoin remains popular with a certain segment of investors, many of whom have had greater access to the cryptocurrency thanks to payments giants Square (SQ) and PayPal Holdings (PYPL).
In Square’s third-quarter earnings announcements, the company saw $1.63 billion in bitcoin revenue, up 11X from a year prior. Square’s Cash App allows users to buy and sell bitcoin, and the payments company recently said it will allow customers to get bitcoin back on every transaction, which is likely to drive even more interest in bitcoin.
In October 2020, Square rival PayPal launched its own cryptocurrency buying and selling, as well as crypto merchant payments. The cryptocurrencies held in PayPal accounts can be used to pay for purchases at 28 million stores around the world. And not to be outdone by its payments competitors, Visa Inc. (V) said it will partner with cryptocurrency lending business BlockFi to release a bitcoin rewards credit card early this year.
Some companies are even beginning to shift part of their own corporate treasuries into bitcoin.
In October 2020, Square joined firms like software intelligence company MicroStrategy Inc. (MSTR) and the Grayscale Bitcoin Trust, with $24.2 billion in assets under management, by adding $50 million worth of bitcoin to its own treasury. MicroStrategy Grayscale currently owns about $2.2 billion worth of bitcoin, while Square has about $150 million worth.
Legendary hedge fund manager Paul Tudor Jones has put 1% to 2% of his multi-billion-dollar portfolio into bitcoin, deeming it a store of value and inflation hedge similar in some senses to gold with its finite supply. He also said he’s confident digital currencies will dominate the world’s economies of the future. Jones even compared bitcoin to internet stocks in 1999, when investors were still trying to figure out which technology companies would come to grow and prosper on the internet.
While that all appears to be positive news for the sector, personally, I’m not a fan of bitcoin or cryptocurrencies.
Instead, I prefer high-quality stocks that have outstanding earnings and revenue growth and will continue to grow in the coming quarters.
Setting Up for a Prosperous New Year
Looking forward, I expect fundamentally superior stocks to step into the spotlight in January and lead the market higher in 2021. My Platinum Growth Club Model Portfolio stocks are directly in line to prosper, given that they are characterized by at least double-digit earnings growth and have benefited from positive analyst revisions in recent months. So, as investors return to their trading desks, I look for my Platinum Growth Club Model Portfolio stocks to continue to meander higher.
It’s why I made several changes to my Platinum Growth Club Model Portfolio in my Platinum Growth Club January Monthly Issue to ensure that my Platinum Growth Club subscribers are well-positioned to profit in the New Year, including selling four stocks and adding eight new names. I also recommended three new names in my Breakthrough Stocks service last Friday.
So, if you’re interested in my latest recommendations and want to get into position to take advantage of the coming strength with fundamentally superior stocks, now is the time to join me here at Platinum Growth Club. Currently, I have more than 100 stocks across all my services to choose from, and as a Platinum Growth Club subscriber, you have full access to each and every one.
Of course, you don’t have to invest in all 100+ stocks to grow and prosper this year. If you’d rather start small, I have you covered there, too. My Platinum Growth Club also comes with my exclusive Model Portfolio. I handpick all of my Model Portfolio recommendations from my different services – Growth Investor, Breakthrough Stocks and Accelerated Profits – so you can rest assured that you’re always invested in the crème de la crème.
Plus, you’ll also have full access to Power Portfolio 2021, a portfolio Matt and I created that currently hosts 11 growth stocks across a variety of sectors that we expect to surge this year. Just last Wednesday, we released a tech stock recommendation that is leading its market. This company makes semiconductors that have special capabilities which lends them particularly useful in the expansion of 5G and the Internet of Things (IoT). Its earnings are expected to surge a stunning 285% over the next couple of years, so there is no better time to invest than now.
P.S. Last Monday, I released my latest Portfolio Grader 500, a quarterly list of some of the best and worst stocks on the stock market right now. In it, you have access to 250 A- and B-rated powerhouses and 250 D- and F-rated sell immediately stocks. As a valued Platinum Growth Club subscriber, this reference guide is yours free. Read it here now.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
PayPal Holdings (PYPL), Visa Inc. (V)