What’s Woods’ “$20 Backdoor Bitcoin Trade?”

What's being pitched as the "Almost Perfect Bitcoin Play?"

By Travis Johnson, Stock Gumshoe, March 10, 2021

Today’s deteasification for our edutainment will be a look at a pitch from Jim Woods — he’s pitching a “$20 backdoor bitcoin trade” that has risen 5,900% over the past year… but he also says “please don’t think you’re too late for the train” and “I’m urging you to establish your position before it doubles again.”

So what’s the story? The pitch is for Bullseye Stock Trader, which is a monthly newsletter that they say will have at least 4-6 trades a month (stocks and options), helmed by Jim Woods, and they’re asking $995 for the “on sale” price (no refunds, this is a “if you don’t like it, we’ll give you another year free” guarantee, and in the future it will autorenew at whatever price they feel like charging at the time). We haven’t looked at this particular newsletter before, but the few past picks we’ve looked at from his more mainstream (lower-priced) newsletters have worked out reasonably well over the years, with IAC probably the best one in late 2019 and Blackberry the worst in mid-2018.

(And I should let you know up front, no, I have not internalized any rules about whether Bitcoin should be capitalized. So for the eagle-eyed copyeditors out there in Gumshoe land, I apologize in advance for my bitcoin/Bitcoin inconsistency.)

Here’s a little taste from the ad:

“While the rest of the world is literally stumbling all over themselves to buy bitcoin, we’ve uncovered a backdoor play that not only lets you stake a claim in bitcoin’s rise for under $20 a share, but also profit from the rise of virtually every big-name cryptocurrency on the planet, including Ethereum… and Binance… and Litecoin, just to name a few.

“I realize this sounds hard to believe…

“But, right now, there are four mutual funds that are already in on this stock, not to mention numerous insiders.”

And though it has obviously surged over the past year, as anything at all related to cryptocurrencies has, he thinks more good times are a-comin’…

“You’ll own the most profitable digital asset broker on the planet! If this trade works out as we forecast, you could see this stock double again as it did in the first week we recommended it.”

OK, so what’s the stock? Let’s get into the clues… we already know it’s under $20 (or has been at some point in the past couple weeks, this ad’s been running for a little while — the “cryptocurrency summit” that they pitched when they launched this ad apparently happened live on February 25), but what else do we get by way of clues?

“You can buy into this $20 bitcoin play without having to get involved with an exchange platform, create some kind of digital wallet, or worry that you may lose your password—like the guy who locked himself out of $240 million….

“All inside your own brokerage account—no different than holding shares of Amazon, Netflix or Tesla….”

OK, so it’s definitely a stock, not some actual cryptocurrency or alternative investment. What else?

Apparently it’s not really a bet on holding bitcoin directly, like Microstrategy (MSTR) or the various exchange-traded Bitcoin funds and trusts…

“… with this $20 backdoor play, you make money both ways: whether bitcoin and the other cryptocurrencies rise or fall.”

So how does it profit from the ups and downs? Apparently it’s a broker…

“The company is a digital-asset broker that provides retail and institutional investors a guaranteed safe solution to storing and trading cryptocurrencies and other digital assets.

“It was established by a team of Wall Street and Silicon Valley entrepreneurs to give investors a better, more transparent, and cost-effective system for trading digital assets in the marketplace.”

OK, so that’s a little bit like Coinbase, which is the biggest US-focused cryptocurrency “on ramp” for investors and is kind of like a broker, facilitating trades in Bitcoin and other tokens without really being a “bet” on whether the coins themselves will rise or fall (though bull markets are WAY better for brokers than bear markets, generally speaking — a rising tide of enthusiasm generates a lot more sustained trading activity than a splash of panic does, and brings in more new customers).

So that’s likely to generate a lot of attention, and a lot of comparisons — Coinbase is planning to go public with a direct listing in a couple weeks, and the private market trading to test the value last week reportedly gave them a $90-100 billion valuation… putting it in the same general market capitalization neighborhood as BlackRock (BLK), the world’s largest asset manager, or Fidelity and Charles Schwab, the largest discount brokerages.

By comparison, Coinbase reportedly had a profit of $322 million last year, on net revenue of $1.14 billion — those margins are fairly similar to Blackrock or Schwab, interestingly enough, only the top line is moved over a decimal point (SCHW had revenue of $11.7 billion, net income of $3.3 billion last year… BLK $16.2 billion and $4.93 billion).

That’s the sexiness of growth for you, Coinbase is coming public with a trailing PE of about 280 and revenue growth that was quite amazing last year (from $482 million to $1.14 billion, which is a little better than 130% growth), but depends heavily on what happens to Bitcoin prices from here… Bitcoin prices went up about 300% last year, but almost all of that happened in the last couple months of the year, and this year is certainly starting out lively, with Bitcoin prices jumping more than 50% just since January 1. By way of comparison, BLK has a trailing PE of about 22 and earnings growth in the 20% neighborhood, SCHW had a big revenue growth year, up 60%, but a down year on earnings and trades at 26X earnings, both were big beneficiaries from heavy trading and strong stock market performance.

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And when it comes to assets on the platform, which is another good measure of size, Coinbase at December 31 had $90 billion in assets — that’s not really the same as “assets under management,” since they’re a broker, they don’t manage the accounts and collect a fee, but it’s an indication of the size of the potential business as those assets are traded or moved and generate fees. The Coinbase S-1 is actually worth a read if you’re trying to get your head around cryptocurrencies, whether or not you think it’s worth betting on Coinbase specifically.

But Woods isn’t pitching Coinbase, of course, that’s not traded yet — I just shared that to give a little context. What’s the stock being teased here?

Other clues…

“… they were able to create a hybrid trading platform that profits not only from trading bitcoin and other cryptocurrencies, but also from storing them….

“… the company is making so much money that it can pay traders as much as 8.5% on their deposit holdings….

“… the company’s deposits doubled by $100 million in December alone….”

So… hoodat? A couple readers have posted their answers, and the Thinkolator can confirm that they’re right… this is Voyager Digital (VYGR on the CSE in Canada, VYGVF OTC in the US), which was founded a couple years ago as a new cryptocurrency brokerage (the four founders include some accomplished tech and fintech folks as well as CEO Stephen Ehrlich, who was a bigwig at E*Trade and founded Lightspeed Financial, a trading-focused broker-dealer).

How do we match the clues? The assets under management for Voyager’s crypto brokerage did indeed double from November into December, as posted in this press release, they do offer a trading platform that includes a wide variety of cryptocurrencies and offers investors some yield on their crypto assets (it was 8.5%, sometimes 9.5% for larger investments — not all digital assets in their system bear interest, but close to half of them do). And, as it so happens, Jim Woods has also publicly talked about this as a favorite idea, including a mention over at Money Show in January (the stock is up about 200% since that byline, it’s been a wild year).

This is an incredible business growth story right now — I don’t know how the story ends, of course, but this part of it would be headlined “crazy growth”, they have gone from about $200 million in assets under management on their cryptocurrency platform at the end of December to