Crypto Mania: Dawn of a New Era

Metals prices are up month over month. This is a nice thing to report and rare since last August. The news this week has been entirely about crypto, again. We report on them insofar as crypto seems to divert money and attention away from silver and gold. Perhaps the crypto mania is peaking. That would be a welcome development for many reasons not least of which shall be a further resurrection of physical metals demand and our ability to write about that topic instead.

Physical metal owners know they have a ringside seat to watch historic mania happen in crypto. We believe the root cause of crypto mania to be money printing. If so the mania shall come someday for physical metals. Until then we will continue to chronicle the stages of mania.

The plunge of Dogecoin, the fourth largest cryptocurrency by market cap according to coinmarketcap.com was nearly 30% over the weekend after Elon Musk’s Saturday Night Live appearance where he said “Dogecoin was a “hustle”, and howled “To the moon”. The relevance of comedy sketches to the pricing of a many billion-dollar asset class highlights the intense volatility in cryptocurrency. It is reported that the frenzied sell-off was so great that Robinhood’s crypto trading platform crashed.

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The cryptocurrency world has exploded to US$2.47 trillion with more than 5,000 names listed on the coinmarketcap.com website.  Around 215 of these cyrptocurrencies have a market cap of US$1 billion – with new ones being issued regularly.     

And more money is being put into the cryptocurrency world. With the news that block.one is investing $10 billion in a crypto exchange that will go by the moniker “Bullish”. This follows Coinbase Global Inc.’s debut last month on the NASDAQ.

The crypto world is also attracting veteran traders – in the top news stories on Bloomberg: “Wall Street traders like Trey Griggs are finding a new lease on life in the $2.4 trillion crypto Wild West. After two decades in energy trading, the 51-year-old was lured by a former Goldman Sachs Group Inc. colleague this February into a new world of market making in digital currencies. Now he’s in fighting spirits — unleashing old-school finance tricks to exploit the industry’s rampant inefficiencies, volatility, and downright weirdness.”

Cryptocurrencies: They are Here to Stay!

Blockchain technology and cryptocurrency are like the dot.com era here to stay. However, like the start of the internet era, the frenzy around the market has reached unsustainable levels. Who can forget pets.com, known for its sock dog puppet that made it all the way to a Super Bowl commercial in 2000, or etoys.com that stock surged from $20 to $76 on its first day of trading.

There was WebVan.com that raised more than $320 million in capital from going public with plans to expand its grocery delivery service.

Rise and Fall of Flooz

Then there was Flooz.com:  “Flooz was an idea for virtual currency accumulated like frequent flier miles: You would receive them as bonuses from online merchants, or you could go to the site and purchase more of them.  You then could redeem them for merchandise from participating merchants. The site was founded in Feb. 1999, and it became better known for having Whoopi Goldberg as its spokeswoman than for what it actually did.”

Sounds somewhat parallel to Dogecoin … which started as an internet meme and gained popularity through a prominent spokesperson.

And here is the rest of the story on Flooz.com – “The company announced its closure on Aug. 26, 2001, leaving people with completely worthless Flooz currency, even if they had purchased it as opposed to earning it.  It is estimated that the company had burned through as much as $50 million in venture capital by the time it shut its doors.

Then the founders of Flooz.com informed that “by mid-2001 the company had been informed by the FBI that it was targets by Russian criminals in a money laundering scheme.  It was discovered that as much as 19 percent of its transactions had been of a fraudulent nature” (www.technobuffalo.com).

A Bloomberg headline on May 11, 2021 “Crypto Fraudsters Made a Big Bet on Dogecoin, New York Claims” and The Guardian headline of “NatWest will refuse to serve business customers who accept cryptocurrencies”.  

Regulations of Cryptocurrencies All Around the World

The above exuberance in the cryptocurrency market is only one issue the assets are facing – others include tighter regulation.

Turkey has barred the use of cryptocurrencies to purchase goods and services in an effort to protect consumers against volatility and illegal activity, threatening a boom in the country’s fast-growing digital money markets. The central bank published a regulation in its official gazette on Friday that prohibits the direct and indirect use of crypto-assets as payments. The anonymous use of virtual money “may cause non-recoverable losses” and “undermine the confidence in methods and instruments used currently in payments”, a statement from the bank said” (FT, 04/16/2021).

And the Chair of the Securities and Exchange Commissions in the US says:

 Congress needs to create a regulatory framework to oversee cryptocurrency exchanges in the U.S. because current laws don’t really put any regulator directly in charge of them … Right now there’s not a market regulator around these crypto exchanges. And thus there’s really no protection against fraud or manipulation” (Bloomberg, 05/06/21).

These efforts may gain additional traction as the result of last week’s cyberattack on Colonial Pipeline which provides nearly 50% of the petroleum products (gasoline, diesel, jet fuel, and heating oil) to the East Coast of the U.S.

The East European entity responsible for the attack, “Dark Side” is reportedly demanding ransom payments in cryptocurrencies.

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The cryptocurrency market is in a catch 22 situation. It needs to be increasingly accepted as payment in order to continue to gain value. But as it does become more accepted and even more ‘influencers, trading veterans and individuals join the exuberance the more it will become a priority for government regulators and central banks to limit its transaction merits. Since history has shown central banks don’t like competition for its currency.

And the last word we give to Bank of England Governor Andrew Bailey (May 7, 2021): Crypto and currency are two words that don’t go together for me …

“I’m afraid that they have no intrinsic value, that doesn’t mean that people don’t put value on them, they can have extrinsic value … I’m going to say this very bluntly again – buy them only if you are prepared to lose all your money.


From the Trading Desk

Stock

We have continued to see good and consistent volumes over the last week and have excellent stock and availability on all Gold bars and coins. We will shortly be adding  250 gram, 500-gram gold Bars, and gold Buffalo’s to our offering. Keep an eye out on our website when these are added Gold Britannia’s remain on allocation basis, it delays at the Royal Mint are 6 weeks. Orders can still be placed and locked in as an official distributor for the Royal Mint orders can still be placed and locked in.  Silver 100oz and 1000oz. We have good availability on these bars VAT-free bars stored in Zurich Silver Coins. Premiums are still elevated but we are working closely with our LBMA approved suppliers to get these at lower levels where possible. However, we will have an update next week on Silver Britannia availability for our UK Clients. 

Market 

Gold– We got a strong move through 1800 last week with a nice follow through helped by the weekly unemployment numbers out of the US and the continued weaker USD.  However, Equity markets sold off heavily on Tuesday as ‘worse case’ inflation fears mount and Bond Yields rose. The next level Gold needs to get over and may find some resistance is 1850. We are a little overbought in the short term. So some consolidation at these levels would be good or another small step back before another move higher.  It is always worth remembering the magic word ‘Cost Averaging’. It is extremely difficult to time the market perfectly. Therefore it’s always best to cost average into these pullbacks when we get them as see them as a buying opportunity. 


GOLD PRICES (USD, GBP & EUR – AM/ PM LBMA Fix)

12-05-2021 1833.60 1830.70 1297.64 1297.05 1511.25 1513.62
11-05-2021 1837.15 1829.10 1299.97 1292.81 1510.14 1503.15
10-05-2021 1834.15 1840.45 1302.06 1304.14 1508.40 1513.40
07-05-2021 1820.50 1836.55 1308.39 1316.81 1506.83 1514.97
06-05-2021 1793.15 1813.15 1288.74 1304.92 1488.49 1503.10
05-05-2021 1778.05 1782.25 1280.02 1282.15 1482.18 1485.33
04-05-2021 1784.95 1797.75 1286.41 1298.16 1486.68 1495.55
30-04-2021 1768.80 1767.65 1271.59 1274.65 1462.62 1463.97
29-04-2021 1774.65 1762.65 1271.71 1264.53 1464.62 1455.95

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Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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Metals prices are up month over month. This is a nice thing to report and rare since last August. The news this week has been entirely about crypto, again. We report on them insofar as crypto seems to divert money and attention away from silver and gold. Perhaps the crypto mania is peaking. That would […]

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