“We have to stop optimizing for programmers and start optimizing for users.” – Said American Programmer Jeff Atwood
Mad Hedge Bitcoin Letter
January 25, 2022
Fiat Lux
Featured Trade:
(SELL THE SHORT TERM RALLIES)
(BTC), (ETH), (SHIB), (DOGE), (ADA)
Bitcoin must be treated as a sell-the-rally asset at this point.
I am not giving up on crypto, but I must acknowledge what is happening in the markets.
Suffering from a broad-based risk aversion move with investors dumping literally everything is something that happens when investors need to meet margin calls.
It’s not about Bitcoin at this point, it’s just caught up in the wash, as asset prices around the world readjust to the new Central Bank policies.
The market is looking through the tailwinds crypto possesses from store of value, inflation hedge, limited supply, and an alternative asset to the US dollar.
It doesn’t matter in the heat of the battle and when everything sells off.
Bitcoin hitting the very lower limit of $30,000 means that investors aren’t ready to ditch the dollar for this high-flying digital currency.
In fact, the US dollar has held up quite strongly in the face of trillions of debt issuance.
Look around the globe and the US dollar has absorbed the Fed’s action in stride reflecting little depreciation stemming from the decision to pump massive amounts of liquidity into the system.
The dollars’ strength means that the transition into digital currencies will take longer than first estimated.
Bitcoin won’t take over in one day, but it will experience a gradual adoption phase with the bruises to show for it.
With Russia's move to ban crypto assets lighting the fuse of the latest plunge, Bitcoin's price moves have become closely linked to technology shares, which have slumped on rate hike fears.
The culmination of Netflix warnings of sagging growth triggered another wave of risk aversion in the markets hitting crypto again to knock it down deep into the lower $30,000 range.
In the short term, traders need to play Bitcoin from the $40,000 level and sell rallies until conditions change.
Ethereum, one of the hottest digital coin trades that have soared in popularity thanks to the non-fungible token (NFT) boom, has halved down to the mid-$2,000 level.
Bitcoin, even with its massive underperformance, is still outperforming the minnows of cryptocurrency.
On the horizon, sadly, plans of 4 rates hikes is generally going to cause more pain for risk-on assets, and especially crypto as investors have been conditioned to sell crypto at the first sight of trouble.
On the derivatives side, about 200,000 positions were liquidated in the last 24 hours, totaling more than $800 million in losses and growing according to Coinglass.
Forced liquidations enhanced the selloff and there have been few dip buyers who are waiting out for healthier macro signaling.
For the past two weeks, most of the funding rates in crypto futures have leaned to the short-seller side according to data from The Block Research.
Many retail traders that got into Bitcoin at the peak are now rushing to sell everything and even institutional money are looking at raising cash through the sale of Bitcoin.
I do believe that Bitcoin is still in the midst of a secular bull market, but sentiment and conditions must settle before we reignite the bull case.
Inflation is still a secular tailwind for Bitcoin and other crypto’s, but not in an environment of a panicking Fed who has made a policy misstep.
The altcoin picture is gloomy with Ethereum sidechain Polygon’s (MATIC) token down 36% and Cardano’s (ADA) token is down 61% since their all-time highs in September, when the latter project announced the launch of their smart contracts.
Altcoins suffered drawdowns as steep as 90-99% during the 2017-2018 crypto cycle and the same could happen as investors rush to safer assets.
Naturally, the biggest category of altcoin losers is meme coins.
Dogecoin (DOGE) is now nearly 80% down from its all-time high last May, despite a recent tweet from Tesla CEO Elon Musk that temporarily sent DOGE up as much as 33%.
Shiba Inu (SHIB), another dog-themed coin that gained 1,607% last year, is down 71% from its all-time high.
Sell the rallies at $40,000.
“Once a new technology rolls over you, if you're not part of the steamroller, you're part of the road.” – Said American Writer Stewart Brand
Mad Hedge Bitcoin Letter
January 20, 2022
Fiat Lux
Featured Trade:
(PAY FOR YOUR HOUSE IN BITCOIN)
(BTC), (MILO)
Crypto continues to benefit from higher adoption rates and although it doesn’t filter down to the price of Bitcoin (BTC) immediately, it bodes well for the long term.
I am even surprised myself with how Bitcoin has transformed from a speculative asset into something more sustainable.
There have been several events that have also hastened the adoption of crypto and one of the transformational events was the advent of Bitcoin ETFs that are accessible for the average investor.
This was never the case before as people were highly confused about how to participate.
The next monumental shift on the verge of sweeping up another avalanche of new capital is the integration of crypto into the American property market.
Most Americans’ net wealth is tied to their home and, United Wholesale Mortgage – the second-largest US mortgage lender – announced a move to crypto payments last August.
However, despite widespread popular sentiment for the initiative from potential customers, the company gave up on the idea shortly afterward.
The regulatory uncertainty alongside market volatility was cited as the two main headwinds.
Nonetheless, the trend is moving in favor again as the first bitcoin mortgage offering was announced on Tuesday: confirming that while the regulators lack drafting a framework.
A real estate fintech company Milo announced the launch of the world’s first crypto mortgage: enabling borrowers to leverage their bitcoin holdings to buy real estate in the United States.
CEO of Milo Josip Rupera said that customers could obtain bitcoin-backed loans by using their bitcoin holdings as collateral for purchasing a property.
Customarily, first, customers needed to sell their crypto balance for a down payment by converting it into fiat currency.
However, Milo now allows US citizens and foreigners to qualify for a US-based mortgage based on their BTC holdings.
This is another indicator of BTC being massively valued as a form of alternative payment.
Milo offers crypto loans and has promised to expand their debt offerings to BTC holders.
Milo’s clients will be able to pledge their bitcoin to purchase property and finally qualify for a low-interest rate 30-year crypto mortgage.”
The company clarified earlier that ‘no dollar down payments’ would be required to finance the mortgage: making the procedure faster and more efficient. However, an obvious question pops up again: what about the sharp movements in the price of bitcoin acting as collateral?
Similar to other crypto loans, the crypto-mortgage would be launched with a margin-call component.
Milo would then underwrite the customer, evaluate the property, validate other aspects of creditworthiness, and ultimately facilitate a successful transaction.
If, however, the crypto drops in value, the borrower would be subject to the deficit amount if the assets are underwater.
Milo would allow the borrower to pay in fiat currency or pledge more crypto to adjust the margin account to its minimum maintenance margin.
Attaching itself to the coattails of the most stable asset in America could act as the panacea of crypto’s evils.
Expert bang on saying crypto is a poor store of value, well, if it's used to underpin an American house, then that argument goes out the window.
Making a path from Bitcoin to real estate debt is genius.
Milo has been planning this business since last year. The goal was to allow crypto holders to bypass the complex hassle with traditional banks and lenders, which barely consider crypto as an asset class. Instead, the company aimed to offer an alternative route to buy real estate.
Milo estimates that the crypto mortgage market could be worth tens of billions of dollars soon.
The marriage of mortgage lending and crypto would be the elixir to finally kill that volatility that many don’t like about this asset.
There’s nothing more stable about a physical home and the U.S. property market underpinning crypto is essentially the holy grail of the crypto industry into how this asset can really mainstream into every part of the U.S. economy.
Until then, accepting heightened volatility is part and parcel of crypto, and crypto settling in the $40,000 range shows that crazy fluctuations aren’t as common as they used to be.
To check out more about a crypto-backed mortgage or if you are thinking about taking out a crypto-backed mortgage, go to Milo’s homepage by clicking here.
“Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.” – Said CEO of MicroStrategy Michael J. Saylor
Mad Hedge Bitcoin Letter
January 18, 2022
Fiat Lux
Featured Trade:
(SELL THE RALLIES)
(BTC)
The interest rate hangover continues to hammer the leveraged crypto markets as the price of bitcoin (BTC) is stuck in neutral.
The silver lining around this whole situation is that Bitcoin hasn’t crashed and is clinging onto that $40,000 level which appears to be the proverbial line in the sand.
I can’t say the same for tech stocks who have been shown no respect whatsoever in this sell-off and will continue to get shut down until investors feel an interest rate bottom can be formed.
Short-term bearish signals are running riot with retail investor sentiment on social media turning negative since late last year with the recent downward price momentum providing a self-fulfilling prophecy.
Taking a barometer of the social media forums shows us what’s bubbling under the trading surface because bitcoin traders coalesce around these forums to offer us insight into the real mentality of traders.
Bitcoin’s market capitalization has tracked the growth of the global money supply since late 2013.
The annual change in money supply hit a high-water mark in February 2021, while bitcoin’s annual growth rate reached a peak a month later in March and these two are very much correlated.
In the long run, cryptocurrency’s usage as a payment exchange of value is what will give us higher prices.
The problem I have right now is with how the market is starting to view crypto assets in the short term as a speculative type of technology asset even though that’s not entirely true.
To get down to the nuts and bolts, crypto and its nascent industry haven’t matured enough to shake that speculative label and now they are getting penalized for it with higher interest rates.
Truthfully, crypto still needs the perfect storm of variables to go its way to supercharge the price of crypto, and recently many of these variables have reversed.
The result is the incremental Bitcoin trader fleeing the asset like rats fleeing a sinking ship.
Recent data showed that bitcoin’s correlation with the M1 money supply has risen to 0.77, suggesting a strong statistical relationship between the two.
But with the Build Back Better legislation halted, where does the incremental free money come from?
There are still many long-term positive signals coming from the crypto industry like rampant hiring.
Crypto jobs pay well and offer high salaries — even more importantly, they are highly appealing to Generation Z which has a good 50 years of work in them ahead.
The positive trend in crypto careers will mean more innovation leading to a better product.
Crypto hiring outstripped price action in 2021, as crypto job searches soared by 395% in the United States alone, according to LinkedIn.
Critically, the crypto industry outpaced the wider tech industry, which also saw overwhelming hiring success, almost doubling its number of job listings. However, at 98% growth, the tech industry pales in comparison to crypto jobs, which gained a whopping 395%.
Also, I’d like to point out that tech jobs are starting to bleed over into crypto jobs as the early iterations of the metaverse are being hammered out.
This is occurring through the gaming industry which has been earmarked as the launching pad for the future internet 3.0 or metaverse.
Eventually, these two sectors will fuse together which is highly bullish for the price of crypto.
Some type of crypto offspring will be needed as a payment vehicle inside the metaverse.
Sure, we aren’t there yet but it’s coming soon.
The lions’ share of job postings was in software and finance, other industries are also seeing a rise in demand for crypto talent.
These include professional services like accounting and consulting, as well as the staffing and computer hardware sectors.
Platforms with the most generous crypto hiring - Coinbase has over 250 openings, Kraken over 300, and the world’s most active exchange, Binance, lists more than 600 job posts.
There are healthy signs under the surface but hiring will be killed if Bitcoin is cut in half.
At this level of $40,000ish, the price still justifies another wave of hiring which is why holding these levels is utmost critical to the short-term direction of Bitcoin.
From a trading point of view, I would sell any substantial rally short-term in Bitcoin until we get more visibility about monetary policy.
“We must ensure that technology is accessible, affordable, and adds value.” – Said Indian politician serving as the 14th and current prime minister of India Narendra Damodardas Modi
