I don’t need to tell you that yesterday was brutal for investors.
The US inflation shock — the fact that it isn’t easing — put US equities in a spin. Logically, the data suggests that Powell will have no other option than to keep raising interest rates…even if it means driving the US economy into the dirt to get what he wants.
Naturally, that is bad news for a lot of the market, which is why we saw such a vicious sell-off. And while Australia’s situation isn’t totally the same, it is impossible to avoid some spillover. That’s why the ASX followed US markets into the red yesterday.
It wasn’t just stocks feeling the pinch either. Almost every asset you can think of took a beating.
Even oil, which has been one of the big winners throughout 2022, couldn’t avoid the sell-off…
But, despite all the doom and gloom, it is worth reminding you that these tough times also lead to big opportunities. Because as hard as it can be to take a step back from the day-to-day movements of markets, you’ve got to remind yourself of the bigger picture sometimes.
After all, while everyone was transfixed by yesterday’s bloodbath, you probably missed a huge development…
Old money goes all in on new money
See, as the Nasdaq, NYSE, and Dow were getting trounced, a group of US investment firms made a rather unexpected announcement.
It seems as though American investors will soon have access to a new market exchange — a project that is known as EDX markets…
But this market isn’t for stocks, bonds, or commodities.
No, EDX is the newest cryptocurrency exchange set to launch in the US early next year.
And I know what you’re thinking — so what?
We’ve seen plenty of crypto exchanges come and go as the speculative sector peaks and troughs over the years. It isn’t exactly an industry that is known for stability.
Well, EDX is a little different. Or rather, its backers are a little different.
Unlike most crypto exchanges that try to build a foundation from scratch, this one has some serious money behind it. Amongst the cohort of investment firms backing EDX, you’ve got the likes of Fidelity and Charles Schwab.
If you’re unfamiliar with these names, all you really need to know is that they’re big. Very big…
Fidelity handles money for more than 40 million people around the world. In total, they have roughly US$11.8 trillion worth of assets under their management.
Charles Schwab, similarly, provides its services to 33.9 million investors globally. And with US$7.3 trillion worth of assets under its belt, it isn’t far behind Fidelity in size and scope.
The point is that these are two of the biggest players in the investment game. And together they are both backing this new EDX crypto project.
While this may seem like poor timing considering yesterday’s sell-off, it is likely anything but. After all, crypto markets as a whole have been in the red for months now. One more bad day isn’t going to be the deal breaker for this new exchange.
No, I suspect the timing is very intentional.
The 401(k) bitcoin boom
Fidelity and Charles Schwab aren’t naïve. They almost certainly both know that Bitcoin [BTC] — and crypto in general — is here to stay for the long term.
Their only concern is how they profit from it. That’s why volatile prices don’t mean much for them when their whole gig is taking a brokerage or transaction fee.
Whether bitcoin is trading for US$1 or US$1,000,000 doesn’t matter. As long as a lot of people want to buy and sell it, these firms will take their cut. By making their own exchange they can ensure they get a bigger piece of that cut than if they use a third party.
That’s why EDX is big news.
Does that mean you should be excited to use this exchange yourself?
God no.
If you’re even remotely interested in crypto, you should be learning the ropes now. Dipping your toes into this new asset class can certainly be scary, but the reward can also be life changing.
Our in-house crypto expert, Ryan Dinse, knows this firsthand. He’s helped readers understand and invest in crypto for years now. It’s a cause that can help turn a small portion of your overall wealth into some of the best-performing assets most people have ever seen.
And that is exactly what I believe Fidelity and Charles Schwab are gunning for with EDX. They want to be able to provide their clients with the ability to invest directly in crypto. This new exchange is simply the logical first step to catering for it.
The endgame, at least in my view, has to be 401(k) accounts. It’s a type of retirement savings scheme that is similar to the superannuation that we have in Australia. After all, Fidelity is the US’s biggest provider of these services.
Just imagine if in the near future all these retirement savers could opt to invest a small portion in bitcoin…
The demand would be huge.
In fact, Fidelity already knows the demand would be huge. That’s why they’ve been considering direct investment options in bitcoin for a while now. As I’ve already said, EDX is simply the catalyst that will allow them to do it more freely.
With all that potential demand, particularly from less tech-savvy investors, the price of bitcoin and crypto could take off like never before. And that is one big takeaway that investors can’t afford to overlook as everyone else focuses on the current market turbulence.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
