Mad Hedge Bitcoin Letter
October 11, 2022
Fiat Lux
Featured Trade:
(KOWTOWS TO THE INSTITUTIONS)
(BTC), (ETH), (COIN), (GOOGL)
“Don't be afraid to give up the good to go for the great.” — Said American Industrialist and Oil Tycoon John D. Rockefeller
Mad Hedge Bitcoin Letter
September 20, 2022
Fiat Lux
Featured Trade:
(THE SAVIOR)
(BTC), (FTX), (SKYBRIDGE)
The proof is in the pudding, and this is yet more evidence that it’s impossible to extinguish a forest fire with a bottle of water.
That’s the analogy I would like to trot out as another white-hot inflation number pierces the hearts of team transitory.
Inflation staying at 8.3% year over year is highly negative for the price of Bitcoin, cryptos, and risk assets in general.
Crypto was supposed to be the savior of inflation, but at the time of this writing, the price of Bitcoin (BTC) is down 6% this morning and underperforming the broader Nasdaq market by two times.
Everyone knew that inflation would still come in high, but the 8.3% is highly disappointing as the inflation naysayers had already started to spread the deflation narrative or that inflation has “peaked.”
We are currently stuck in a vicious feedback loop where elevated inflation cannot be contained with the current Central Bank policies.
A low Fed Funds rate of 2.5% cannot crack inflation over 8% and it’s killing the price of crypto and literally destroying the digital coin industry.
At these accommodative rates, the job market is holding up quite well which is what the Fed doesn’t want. Job seekers who lately have gotten cut from technology firms are reappearing with higher paying jobs and better benefits in different parts of the economy.
There is no hope for Bitcoin until the US Central Bank finally tames inflation.
The consumer price index (CPI) rose 8.3% in August from a year earlier, a mild slowdown from the 8.5% reported for July.
Gas prices came down, but other sectors offset those price decreases and caused overall inflation to remain elevated. Health insurance, for example, rose a blistering 24.3% year-over-year, the largest increase ever.
Food at home and rent prices were also one of the main drivers this month, up 13.5% and 15.8%, and services inflation rose above 6%.
The result of all this is that a Bitcoin reversal will be delayed as crypto investors wait for inflation to decrease.
I can’t imagine Bitcoin getting over the $25,000 per coin hump until there is more progress on the inflation front.
This is also negative for crypto infrastructure that is holding on for dear life until the next bull market comes.
Anything bullish in crypto has been effectively pushed back.
The inflation report means that US consumers will deal with a cost-of-living crisis longer than expected which will supersede any crisis in terms of what currency they want to store wealth in.
The larger risk is that the US Central Bank risks losing control of inflation completely as the negative feedback loop can accelerate to the downside which might force the Fed to raise rates to unprecedented levels.
It sure appears that this is morphing into a whack-a-mole phenomenon.
It’s clear that the Fed is being way too generous to equity holders by casually increasing rates at a pedestrian pace. If they lose control of inflation, Bitcoin could go to $10,000 per coin.
The fact is that the US Federal government is the biggest beneficiary of low-interest debt which is now about to touch $31 trillion.
The Fed is doing everything it can to not raise rates more than is needed because it makes servicing the debt and those interest payments too onerous.
The Fed will need to raise rates to keep the Federal government solvent if the risk of hyperinflation increases.
Ultimately, this new inflation report means that inflation will persist longer than expected which will cause the Fed to raise short-term rates faster and higher than expected.
Today was a sucker punch to Bitcoin – the digital is down and out for the time being.
Mad Hedge Bitcoin Letter
June 23, 2022
Fiat Lux
Featured Trade:
(EASIEST WAY TO SHORT BITCOIN)
(BTC), (BITI)
Mad Hedge Bitcoin Letter
June 21, 2022
Fiat Lux
Featured Trade:
(SYSTEMIC RISK ACCELERATES)
(BTC), (SOL)
Responsible Financial Innovation Act – that’s what they will call it.
Yeh, the Federal Government has seen enough of the sloppiness that masquerades as crypto infrastructure and they pulled the rug.
As many might know, there has been nothing responsible or innovative about fiscal matters at all lately with the Fed asleep at the wheel with hyperinflation.
Many of the talking heads like Transportation Secretary Pete Buttigieg continue to argue that more government spending doesn’t result in higher inflation.
So just imagine right now that crypto is about to go through the twilight zone of federal regulation where I am sure regulators will argue that layers upon layers of regulation are required to keep this asset safe and secure.
In short, this means higher costs and not just a few pennies.
Let’s get more into the weeds of the proposed crypto bill.
The bill is cornered by oversight from the Commodity Futures Trading Commission (CFTC).
The CFTC is overseen by The Division of Market Oversight (DMO) and I could easily see both of these regulators slapping two sets of their own unique fees for any crypto trade or account.
Next, it also gives “needed legal clarity” in how to handle customer holdings after the recent furor over customers’ tokens getting roped in with an exchange’s assets in the event the company goes bankrupt.
The administration has signaled it wants better custody arrangements in any crypto bills moving through Congress.
This won’t be free either.
Some sort of mechanism or escrow account will need to exist to make sure investors (in an uninsured asset class) doesn’t get dragged into a bankruptcy claim if an unregulated exchange goes under.
Also inserted, is language from a bill last year from Rep. Patrick Henry and others that sought to clarify the meaning of a crypto broker, especially hoping to protect wallet providers, software developers, and others from being snagged by certain tax reporting requirements.
This is the first step that will ultimately give regulatory access to the Financial Industry Regulatory Authority (FINRA) who forces all brokers to pass a series of tests to become licensed brokers.
It usually costs a few thousand dollars to go through these courses and these licenses must be issued by an official bank member and not some random LLC in the Cayman Islands.
There is specific language regarding oversight fees that would incur if the CFTC would monitor this asset class.
It’s anybody’s guess how exploitive these fees will be.
Lastly, comes the “innovation” part of the bill which to the Federal Government specifically means disclosure innovation.
Certain disclosures will be required to the SEC from companies raising funds through digital asset sales.
The approach also specifically gives SEC their chunk of change and a path to levy an SEC fee on the crypto industry.
As one might surmise, in totality, this will cost a lot and these proposals will need to meander through the congressional committees before it coagulates in its final form.
I will honestly say that the aggregation of debacles lately in crypto has shone a bright light on the gaps in the crypto industry.
They didn’t help themselves when they really needed to.
Crypto needs time the most, the time to develop itself as they see fit without 3rd party oversight. That chance has evaporated.
Just as disappointing, crypto has not participated in this latest bear market rally with high growth tech stocks and is down 5% this morning.
Disappointing all around for the crypto industry and this doesn’t help that we are staring at a crypto winter if crypto prices start to decouple with tech stocks.
There is a legitimate chance they might be left out of the recovery stage.
Mad Hedge Bitcoin Letter
May 19, 2022
Fiat Lux
Featured Trade:
(EXCHANGES LOSE CONFIDENCE)
(BTC), (COIN), (TGT)
Mad Hedge Bitcoin Letter
April 28, 2022
Fiat Lux
Featured Trade:
(AFRICA ADOPTS)
(BTC)
The Central African Republic has adopted bitcoin as legal tender which makes it the second country to absorb it as the official state currency after Central American country El Salvador.
Lawmakers unanimously adopted a bill that made bitcoin legal tender alongside the CFA franc and legalized the use of cryptocurrencies.
This makes The CAR the first African nation to use Bitcoin as their national currency.
Many Bitcoin deniers proclaimed insanity when El Salvador adopted Bitcoin as the national currency and to be frank, the experiment hasn’t gone as smoothly as it could have.
Many merchants still prefer hard US dollar bills to Bitcoin, but I would argue, that there are growing pains to go along with it.
There is honestly no playbook for this type of visionary legislation.
The landlocked state is one of the planet's poorest and most troubled nations, with an economy that is heavily dependent on mining.
The introduction was heavily criticized by the International Monetary Fund (IMF).
It warned of "large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection" and with issuing bitcoin-backed bonds.
CAR has made this drastic decision in an aggressive way to attract venture capitalists and hedge funds.
For all those investors who have the privilege of spending dollars and euros, not everyone is from a country where they trust their own currency.
Just look at the Turkish lira.
I have some friends who bought luxury seaside villas in Ankara, Turkey because they thought that it was a guaranteed asset appreciation tool along with the added benefit of being able to take vacations to a gorgeous seaside resort.
In hindsight, the investment has been an utter failure.
Since they bought the property, the local currency has depreciated by 400% meaning they could have waited today and used only 25% of what they paid a few years ago.
I don’t want to sound arrogant, but much of the world still measures their wealth in US dollars and if a country has no access to US dollars in real-time, then why not adopt Bitcoin as an alternative?
Bitcoin is a guaranteed better store of value than the Central African Republic Franc and it is not even close.
Some of the emerging currencies have depreciated by 500% or 600% like the Turkish Lira or the Kazakh Tenge.
Bitcoin will definitely outperform the bulk of these marginal fiat regimes.
In fact, most people have never even heard of these sub-Saharan African republics.
Many are landlocked and are limited economically.
So I would argue that from a risk reward basis, it’s a great bet to make considering their local currency is worth less than the money it is printed on.
Not only that, I would fully expect other poor African countries like Botswana, Eritrea, South Sudan, and Chad to ship on the Bitcoin wagon as well.
The Central African Republic, which has gold and diamond reserves, is one of the world’s poorest nations. Years of violent conflict and a political crisis in the lead-up to presidential elections in December 2020 have had a severe impact on the economy and damaged relations with its international partners, leading to delays in the distribution of aid and some partners suspending budget support.
For many of these countries wrenched by years of war and strife, one might argue that Bitcoin could represent a beacon of financial stability along with a massive incentive to join the internet which only 11% of CAR citizens can claim.
Why not hit 2 birds with one stone.
Like Chinese citizens jumped from cash, bypassed plastic credit cards, to deploy a digital payment system on their smartphone called Wepay.
Why not go from the CAR Franc and skip any sort of solid fiat currency and go straight to Bitcoin.
Many sovereign countries without access to strong fiat currencies are coming to the same conclusion that it’s foundational to go the Bitcoin route than presiding over a currency that nobody in the world has ever heard about and wouldn’t touch with a 10-foot pole.
Welcome CAR to the Bitcoin club.
In 10 years, there will be a paradigm shift in which the consolidation of currencies will most likely leave us with a handful of Western currencies, the Chinese yuan, Russian Ruble, and crypto.
