#FINANCIAL_LITERACY

Jamie Dimon bashes bitcoin while profiting from bitcoin … the case for bitcoin at $500K … a potential price catalyst to keep on your radar … is gold about to turn north?

Jamie Dimon is the CEO of JPMorgan.

He’s also a master marketer.

Earlier this week, he called bitcoin “worthless.” It’s far from the first time he’s slammed the cryptocurrency. Here’s a quick trip down memory lane featuring some of Dimon’s greatest hits:

2014: “terrible store of value”

2015: “will not survive” “will be stopped”

2016: “going nowhere”

2017: “a fraud”

2018: “don’t really give a shit”

2020: “not my cup of tea”

2021: “I have no interest in it” “fool’s gold” “worthless”

The press has pounced on Dimon’s latest “worthless” attack.I’m seeing it covered by CNBC, Reuters, CNN, MarketWatch, Fortune, Bloomberg, Yahoo… Basically, everyone – not to mention all the social media talking heads.

So, why is Dimon a marketing genius?

Because the same articles/talk segments that trumpet Dimon’s disparaging remarks just happen to include the fact that JPMorgan now allows its customers to buy and sell bitcoin.

In other words, Dimon just racked up hundreds of millions of dollars’ worth of free advertising for JPMorgan’s crypto services…by being a crypto bear.

Bravo, Sir.

***At the same time Dimon has been slamming bitcoin, its price has been surging, pushing back toward its all-time-high

In April, bitcoin topped out at $64,863, then lost 53% over the next three months.

© Provided by InvestorPlace Bitcoin's price dropping over 50% in the spring

Since then, the crypto has surged 87%, putting its all-time-high back into play.

As I write Wednesday morning, Bitcoin is roughly 16% beneath its record. As you’re likely aware, that’s not a huge distance to cover for an asset this explosive.

***Given the crypto’s surging momentum, financial pundits are increasingly asking where bitcoin’s price will end the year

Many are suggesting $100,000.

You can count our crypto expert, Luke Lango, amongst that group. But yesterday, in Luke’s issue of Hypergrowth Investing, he included a longer-term forecast that caught me off-guard…

$500,000.

From Luke:

A lot of folks think that Bitcoin is going to end the year at $100,000.

I’m one of those folks. But the other day, when one of my analysts said, “Bitcoin is going to $100K,” I responded by sarcastically joking, “Stop being so bearish!“

Because while our year-end price target for Bitcoin is $100,000, we believe that Bitcoin prices will soar much, much higher in the long run.

Like 5X higher.

That’s right. We think Bitcoin is going to $500,000.

What’s the rationale behind this projection?

It has to do with a yellow rock that we recently profiled here in the Digest.

***Has bitcoin usurped gold as an inflation hedge? At least temporarily?

As we noted in our Monday Digest, gold’s price has been comatose over the last 14 months, despite jarring inflation numbers.

(It’s actually climbing today! We’ll touch on that shortly.)

But isn’t gold supposed to come alive in an inflationary environment?

Yes, it’s supposed to. But many things are “supposed” to happen that never do (I’m looking at you, “transitory” inflation).

Why isn’t gold responding to record inflation numbers?

It was back in April that our macro specialist, Eric Fry, provided a clue. From an interview Eric did with our CEO, Brian Hunt:

If you were to take past precedent and apply that to the current situation, you would have a current gold price that’s $4,000 an ounce, or at least something much higher than it is. That isn’t happening.

What is happening is bitcoin is going up…a lot…

Once that settles down, you might see a return to a more-traditional connection between monetary policy, fiscal policy, and the gold price…

I think gold still has a good shot at moving a lot higher over the next year or two. But if current trends continue, and bitcoin goes to $100,000 or $200,000, you probably won’t get a gold rally.

As part of the interview, Brian added a great line. He wondered if gold has been watching market prices, wondering “have investors broken up with me?” Is bitcoin the better-looking version of me?”

Is it?

What’s the case for bitcoin usurping gold as the new, younger and sexier inflation-hedge?

***Charting the relationship between yields, bitcoin, and gold

Let’s jump back to Luke. In his case for bitcoin at $500,000, he included the chart below.

I’ll let him describe it:

The blue line tracks Bitcoin prices.

The purple line tracks the 10-year Treasury yield, which is widely seen as the market’s dynamic proxy for inflation.

And the green line tracks the price of gold.

© Provided by InvestorPlace Chart showing the relationship between yields, bitcoin, and gold

The blue and purple lines correlate strongly to one another. The green line doesn’t correlate to either.

That’s super interesting.

To us, it means that the market has already confirmed Bitcoin as the digital version of gold – and, indeed, as a superior version of gold.

Let’s use this to dovetail into the case for bitcoin at $500,000.

If bitcoin is turning into the new gold, then we basically just compare overall market sizes to arrive at a loose price projection.

Back to Luke for the quick math:

The gold market is an $11 trillion market.

If Bitcoin gets that big, you’re talking an $11 trillion market on 21 million tokens, which implies a price per token of about $500,000.

Of course, that back-of-the-envelope math rests on the huge assumption that Bitcoin is, indeed, the digital version of gold.

But as Luke’s chart illustrates, it’s increasingly looking like that may already be the case.

***One quick bullish note on gold before we move on

We’ve beaten up on the precious metal this week. But there’s one thing gold has going for it that might spur a rally. And we could be seeing the beginning of that rally today, as gold is up nearly 2%.

In short, the pessimism has reached an extreme – and by one indicator, it’s turning.

Below, we look at the Gold Miners Bullish Percent Index (BPGDM). This measures the extent to which gold miners (a proxy for gold) might be overbought or oversold, based on technical analysis.

As you can see below, it just bounced off the fourth-lowest reading in five years (far right side of the chart).

© Provided by InvestorPlace The Gold Miners Bullish Percent Index

The last three times BPGDM bounced from such deep, oversold levels, the price of gold ripped, as you can see below.

The top line is the BPGDM while the bottom line is the price of gold.

© Provided by InvestorPlace The Gold Miners Bullish Percent Index and the price of gold

Even if bitcoin is replacing gold as an inflation hedge, that doesn’t mean gold can’t race higher from here.

For now, we’re long gold. Its long-term support level is $1,700. We’re above that and climbing. So, let’s give this turn in the BPGDM some time to play out.

If a rally doesn’t materialize and we drift back down toward $1,700, we’ll let you know.

***Back to bitcoin, keep your eye on this potential catalyst

The crypto community has been waiting for the SEC to approve – or not approve – a bitcoin ETF. And we’re getting close.

From Yahoo! Finance:

The U.S. Securities and Exchange Commission (SEC) is largely expected to approve a bitcoin ETF that invests in futures contracts later this month.

Applications from Proshares, Invesco, Vaneck and Valkyrie are primed to get the go ahead, according to a Bloomberg report.

The crypto market has long-awaited such an approval, believed to be behind bitcoin’s current bullish run.

Now, there’s no guarantee that SEC approval will send bitcoin’s price north. After all, many investors were expecting El Salvador’s official launch of bitcoin as legal currency to be a positive price catalyst for bitcoin, yet the opposite happened.

However, the bullish case is that an SEC approval would signal that regulators are willing to work with crypto investors, therein paving the way for broader adoption.

From Bloomberg:

It’s all raising hopes in the $6.7 trillion U.S. ETF industry and beyond that after years of delays, the world’s largest market may finally be ready to join the party…

In a move that further raised hopes among crypto advocates, the regulator asked two issuers to withdraw their Ethereum-futures ETF filings over the U.S. summer, but made no such demands on similar Bitcoin-based applications.

Either way, we’re unequivocally long bitcoin. If an SEC ETF approval does lead to a sell-off, we’d see that as a buying opportunity.

Before we wrap up, when might we hit that $500,000 mark if bitcoin plays out as Luke anticipates?

From Luke:

No one really knows. Our best guess is about 10 years – and if so, you’re talking about an asset that will increase 10X in value in 10 years.

That’s an amazing return.

It truly is.

At the same time, Luke and his team of blockchain experts are targeting not 10X returns, but 50X returns with their altcoin recommendations. To learn more, click here.

We’ll keep you up to speed on the SEC and its decision on a bitcoin ETF here in the Digest.

Have a good evening,

Jeff Remsburg