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MARKETS: Let’s talk about Bitcoin

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Crypto is everywhere, the marmite of the investing world.

You need to have an opinion on Crypto these days if you want to avoid being an outcast. Nobody wants to be the one being shunned at the water cooler. Not having a two-sentence quip on Crypto puts you in the same bracket as those lunatics following soccer who say, "Na, I don't really support any team; I just like to watch". These are people you can't be seen to affiliate with.

After 2017, we saw the crypto winter, where the entire space fell nearly 90%. Again, in March 2020, we saw Bitcoin lose half its value over a two-day period and most recently, we have witnessed the crypto world crash once again as Bitcoin fell from highs of $65,000 to $30,000 a coin.

There are multiple reasons for the most recent sell-off. China banned the use of cryptocurrencies for financial institutions. Other countries might be considering tighter regulation, particularly as cryptos become the currency of choice for ransomware hackers. Tesla stopped accepting Bitcoin as payment for vehicles, and Binance, a popular crypto exchange, is currently under probe by the US justice department and the IRS. All valid reasons for concern. Now investors fear that there is no telling when the selling might stop, given that there is no true intrinsic value in the crypto space.

My opinion: there are too many investors willing to buy it at a price far above $0 for this 'going to zero' argument to make sense. Not every financial asset will hold tangible intrinsic value. Take gold for instance, a 10 Trillion-dollar market built on socially constructed value; the belief that this will be worth more in the future than it is today.

My bull case for Bitcoin is probably somewhat different to the Bitcoin Ultras of the world. The Bitcoin true believers will tell you that it's more than an asset. It is the only monetary asset that survives and thrives – the cockroach in the financial nuclear winter of money printing, societal collapse and Government intrusion.

Don't get me wrong, the narrative is very compelling in a 'rage against the machine' sort of way but I fail to see any possible scenario where we all move to a decentralized world of the people, where governments politely step aside and the entire financial system as we know it dissolves.

But just because I am not entirely sold on the most bullish Bitcoin scenarios doesn't mean that I see no utility. I believe Bitcoin is a truly amazing breakthrough for the financial architecture of the world that will see more and more adaption from the institutional players in the years ahead.

You now have large investment banks like Citi Bank coming out as bullish on Bitcoin, Invesco setting up crypto custodian arms and the likes of PayPal setting up wallets. The more this happens the more you will see the real institutional money being pushed into this space. The recent market environment has function as a catalyst for change. High equity valuations and limited upside in bonds are forcing investors to look deeper into the potential of alternative asset classes such as Bitcoin.

In short, there is undoubtedly some significant regulatory hurdles ahead, and the 'Bitcoin as a currency replacement' argument still seems far-fetched to me. With that said, I believe it is a financial asset that is here to stay; continued adaption from the institutional space could well see demand run higher, but don't be fooled. Bitcoin is a speculative asset that will see mind-boggling volatility for some time to come. If you are looking to invest in the crypto space, do your research, start small and Hold on for Dear Life (H.O.D.L.)

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Broadening the Vacant Homes grant

By Ted Healy of DNG TED HEALY  Vacant property grants of up to €50,000 are to be extended to all vacant properties across the country in a bid to bring […]

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By Ted Healy of DNG TED HEALY
 

Vacant property grants of up to €50,000 are to be extended to all vacant properties across the country in a bid to bring as many unoccupied buildings back into use as family homes.

Until now the grant has provided financial supports to refurbished vacant properties in towns and villages only.

However, at the time of writing, it is expected that Housing Minister Darragh O’Brien will announce that he is bringing properties in inner city areas including Cork, Dublin, Galway, and Limerick as well as one-off farmhouses in rural locations into the scheme.

Over 400 applications for the scheme have been made to date since its launch in July of this year. While the qualifying criteria is to be broadened out, it is understood that there are currently no plans to increase the €50m which had been originally allocated for the scheme.

However, this could be reviewed if the scheme is oversubscribed.

Under the scheme, a grant of up €30,000 is available for the refurbishment of vacant properties for occupation as a principal private residence, including the conversion of a property which has not been used as residential heretofore.

However, people can apply for a top-up grant of up to €20,000 where the property is derelict and structurally unsound.

The grants, which are primarily aimed at helping first-time buyers to bridge the cost of refurbishing older and unused homes can also be combined with supports received under the Sustainable Energy Authority Of Ireland (SEAI) Better Energy Homes scheme.

Properties must be vacant for two years or more and built before 1993 to qualify.

Preliminary results from Census 2022 recorded more than 166,000 dwellings as vacant in the State.

While some of these may have been unoccupied on a temporary basis, more than 30% (48,387) of the dwellings vacant in 2022 were also out of use when the previous Census was carried out in 2016.

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Proceed with caution

By Michael O’Connor, theislandinvestor.com Stock Market Surge Last week we saw a considerable rally in the stock market. On Thursday, lower-than-expected inflation figures were well received, resulting in the largest […]

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By Michael O’Connor, theislandinvestor.com

Stock Market Surge

Last week we saw a considerable rally in the stock market. On Thursday, lower-than-expected inflation figures were well received, resulting in the largest one-day rally in over two and a half years.

Although US inflation remains near its highest level since the early 1980s, the latest monthly Consumer Price Index report brought some relief. Inflation rose at an annual 7.7% rate in October – down from 8.2% in September. This was enough to push the NASDAQ up more than 8%, while the S&P 500 added 6% for the week.

So as improving inflation numbers push markets higher, should investors be jumping in headfirst to avoid missing yet another market rally?

Not quite.

Not Out of the Woods Yet

In the last two years, we have seen rapid market recoveries play out at breakneck speed as Monetary support, ultra-low interest rates, and fiscal stimulus all conspired to drive markets higher.

In simple terms, when money is free, and governments are hell-bent on continuously printing more and more of it, asset prices increase.

This exuberance pushed prices and valuation multiples to questionable highs. Now, however, the money printer has been turned off, and interest rates have increased dramatically, leaving us in a far less supportive environment. Unsurprisingly, asset prices have fallen accordingly.

This recent pullback has stripped out much of the excess from markets, leaving stocks trading at much more attractive prices.

Household names such as Google, Microsoft, Amazon, Tesla, Disney, Nike, Netflix, and Facebook have fallen between 30% and 75% in recent months. Now, the entry points into some of the best companies in the world are much easier to digest. This is welcome news for investors with a long-term outlook. But over the short term, it is vital to realise that many of these names are trading lower for a reason.

It can be tempting to assume that we will return to all-time high valuations now that inflation is starting to turn and markets have stripped out much of the excess in valuations. However, as we stare down the barrel of falling earnings, slowing economic activity, a less supportive monetary policy and persistent inflation, it would be naive to think that it’s all upside from here.

The positive momentum from last Thursday’s inflation print will fade, leaving market participants wrestling with the looming recessionary pressures.

Taking all the above into consideration, I believe the stock markets will remain within the 10% range it has traded in over the last month. This is likely to result in volatile horizontal trading over the coming weeks and months as positive moves due to falling inflation give way to market declines as earnings growth continues to slow.

Summary

The market appears to be moving past its overwhelming obsession with inflation, but unfortunately, this paves the way for all new worries. The slowing economic activity that is allowing inflation to fall in the first place now becomes enemy number one. Softer demand will lead to lower spending, leading to lower earnings which should theoretically lead to lower stock prices.

Unfortunately, the ferris wheel of worry continues to spin.

Considering all the above, I believe the stock market will remain within the 10% range it has traded in over the last month. This is likely to result in volatile horizontal trading over the coming weeks and months as positive moves due to falling inflation give way to market declines as earnings growth continues to slow.

Over the long-term, opportunities are more plentiful than ever as valuation multiples improve but for those expecting to make a quick buck over the coming weeks and months, proceed with caution.

If you have any questions reach out at www.theislandinvestor.com, I’m always happy to help.

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