One of the greatest pieces of advice I’ve ever received arrived on the sidelines of a football game at Louisiana State University. It came from an Associated Press photographer who was not even paying attention to what was happening on the field.
Hang with me for a few paragraphs. This has investment implications today.
I don’t recall which game this was, but it would have been 1985 or ’86, maybe ’87. I was a photo stringer for AP’s New Orleans bureau. It was a way to make extra cash in college and build my photography portfolio (thought I wanted to be a sports photographer).
LSU was on the cusp of scoring the game’s decisive touchdown. As I and every other photographer on the sidelines focused on the play that was about to happen, I noticed that Al, the AP bureau chief for photogs who was standing next to me, was focused on events behind us.
A woman in the stands—fraught and tense.
When LSU scored, she burst into tears. Al captured an absolutely stunning and emotional photo that ended up defining the game. It ran in newspapers all over the country.
After the game, in the photo studio deep in the bowels of Tiger Stadium, I asked Al why he wasn’t taking pictures of the play itself. Here’s what he told me: “Every photographer was taking the same pictures. What was I going to add that would be any different? Sometimes, Jeff, you have to turn around and look at what’s behind you to get a better understanding of what’s going on.”
Honestly, best advice ever.
And not just for photography.
For life in general, and for investing.
Investor Panic is a Great Opportunity to Buy Coinbase
I have used the advice throughout my investing career. To me, it’s the “go against the flow” advice. Maybe it’s the modern equivalent of that famous quote by 18th-century British nobleman Baron Rothschild to “buy when there’s blood in the streets, even when that blood is your own.”
I most recently put that advice to use the same day that the Securities and Exchange Commission sued Coinbase, one of the world’s largest and most important crypto exchanges. That lawsuit came just a day after the SEC sued Binance, the world’s other large and most-important crypto exchange.
Investors panicked.
Oh, dear Lord, they clearly thought, crypto is dead! The SEC has a vendetta! It’s clearly going to exterminate the industry! RUN FOR THE HILLS!!!!
In Al’s analogy, every investor was focused on the play.
But the real story was happening behind us.
The BlackRock Factor That Will Drive Crypto Higher
I’ve been around crypto since 2017. I have a deeper feel for this industry than most. I’ve long been a customer of both Binance and Coinbase. And I know neither one of them is going away.
Moreover, I know that a lot of institutional money has flowed into Coinbase, both as an investment in Coinbase shares, and as cash put to work in crypto through Coinbase’s institutional operations.
While the marquee event—SEC sues Coinbase!—was slapped on the front pages of newspapers, I was actively buying Coinbase shares. Ultimately, I grabbed a five-figure dollar value of Coinbase shares in one of my retirement accounts on the very day the SEC filed its lawsuit.
That day, Coinbase was tanking.
Blood in the streets.
And some of that blood was my own, because I own some Coinbase shares elsewhere, and because I own six figures worth of crypto assets, all of which were under assault that day.
But then the panic faded, as the reality of life set in.
Just days after the SEC attacked Coinbase, BlackRock announced it was filing to launch a new exchange-traded fund based on the spot price of bitcoin, and it had picked Coinbase to serve as the custodian to hold all the bitcoin BlackRock would be buying.
Two additional facts that provide deeper context are:
- BlackRock is the world’s largest asset manager with nearly $9 trillion of assets under management. If BlackRock’s assets were an economy onto themselves, they’d rank #3 in the world behind the U.S. and China.
- BlackRock is run by Larry Fink, arguably the most plugged-in human on the planet. He is quite literally one phone call removed from every single leader in the free and dictatorial world. There’s not a bureaucrat in D.C., Brussels, Tokyo, or Beijing that would not sit down with him or his staff.
So, the fact that the largest asset manager in the world, run by the most plugged-in CEO on the planet, announced that it’s A) launching a bitcoin fund and B) using Coinbase as its custodian is like the weather man telling you the hurricane is going to mean a lot of rain. Pretty much a certainty of what’s to come.
Two Plus Two Means a Much Higher Coinbase Stock Price
My Coinbase purchase is up 20% in a week or so.
But there’s much more to go. Coinbase remains depressed because of the bear market in crypto as well as economic uncertainty tied to inflation, the state of the U.S. consumer, and the Federal Reserve’s interest rate cycle.
All of that, however, is the play that’s happening on the field right now. And I really don’t care about it. I add nothing of value by focusing on that.
The real value comes in looking elsewhere, where others aren’t focused.
And that’s looking at the bigger picture of mass adoption of crypto among average investors and institutional investors like BlackRock.
When BlackRock launches its spot-price bitcoin ETF, we’re going to see huge dollar volumes flow in… which means huge dollar volumes heading into bitcoin… by way of Coinbase.
Two plus two means bitcoin’s price rises because BlackRock is so incredibly large it moves markets, and it means that Coinbase revenues fatten, which flows through earnings and the share price.
Which is why I grabbed a boatload of Coinbase stock for one of my retirement accounts.
No doubt, this is a volatile play… certainly not one I would advise for risk-averse investors… You need nerves of steel.
Still, I’m confident in the outcome.
In the middle of the play, I turned to look at what’s going on behind me.
And that made all the difference.
So, turn around. Don’t look at what’s happening in crypto in the moment. Look at what’s happening behind the scenes. Because that’s where the real wealth will be made.