“If a cop follows you for 500 miles, you’re going to get a ticket,” said Oracle of Omaha Warren Buffet, in reference to Bank of America’s many legal problems.
Mad Hedge Bitcoin Letter
October 27, 2022
Fiat Lux
Featured Trade:
(SILVER LININGS)
(BTC), (GOOGL), (GENZ)
With all the Dr. Dooms out there and you know there are many – it might seem like a broken record.
With the barrage of criticism thrown at crypto lately, it almost seems as if there is no future for it, but I would not agree with that.
The future path of crypto is surrounded by silver linings that investors cannot ignore and I believe that is what we need to take away from 2022.
I found it interesting that in Google’s earnings report yesterday, they singled out crypto as an important source of advertising revenue.
Google’s management acknowledged that the crypto “winter” has sullied digital ad revenue and was viewed before as a handsomely generating growth asset.
Google posted its worst revenue growth since 2013 and blaming it on the crypto underperformance is a sign that there could be a future place for crypto.
Financial firms advertise relentlessly on mainstream media channels and big media need those dollars.
Even more important than just the pure digital ad revenue that crypto generates is its audience base.
Let’s not upsell this thing, many got burnt and will never come back.
However, several surveys have highlighted Gen Z and Millennial fervent appetite for this exotic asset class.
Charles Schwab, an asset manager, published its latest survey, illustrating the preference for Bitcoin and Crypto investment by a substantial portion of Gen Z and Millennials.
According to the study, 46% of Gen Z and 45% of Millennials wish to invest in cryptocurrencies to aid their retirement plans.
Additionally, the survey found that 43% of Gen Z and 47% of Millennials have begun investing in crypto outside their 401K.
After the arbitrary lockdowns and hyperinflation over the past few years, younger people are beginning to question the traditional paths to retirement if not the whole US financial system.
Some are straight-up cynical about it as the stock market got clobbered in 2022.
Bonds haven’t done much better and this year could be one of the first years to experience a scenario in which bonds and stocks went down together.
So take the classic investment strategy of 60/40 allocation.
By holding 60% of your portfolio in stocks and 40% in bonds, the thinking goes, you get the best of both worlds: high growth potential from your riskier stocks and protection from your more conservative bonds.
In this new world with new rules, traditional nostrums are thrown out the window.
The same goes for cookie-cutter ETF index funds.
A reset is needed.
The truth is that building wealth is a lot harder in a world where stocks and bonds go down substantially because of the massive overprinting of dollars by the federal government.
There is no free lunch anymore and many upper middle class families thought they were in the free-and-clear on an easy gondola ride to retirement.
Yet, they have been dragged back into the rat race legs screaming as products and services are up anywhere from 8%-50% depending on where you live.
Yes, crypto is on life support, but don’t count it out as once the Fed pivots, Bitcoin will stage a relentless rally and I view the biggest enemy of crypto are the participants themselves.
Sadly, the percentage of American families needing to finance an evasive retirement life is inching up and the young and old shouldn’t write off crypto yet.
Mad Hedge Bitcoin Letter
October 25, 2022
Fiat Lux
Featured Trade:
(SAVING CRYPTO)
(BTC), (KPMG)
One can’t help but be appalled to see the former driver of global growth China turn radically inward, preferring a deeply authoritarian economic model.
What they had in the Hu Jin Tao years between 2002 to 2012 was legendary and might not ever happen again.
Friends of mine who have managed to flee China all mention how it was easier to leave before 2020.
Good luck now navigating Chinese lockdowns.
Authorities have made it impossible to leave and they track everything including a digital yuan now.
China and its backward economy have a lot of problems, and the more problems that add up nudge the people to a crypto solution.
I am not saying that every Chinese person will invest in crypto, but for the wealthy ones that usually immigrate to Singapore or Hong Kong, the data backs up my thesis.
KPMG accounting firm has indicated a colossal interest in the crypto market from the wealthy elite of Singapore and Hong Kong.
58% reported investments in crypto game while a further 34% intend to allocate funds to bitcoin, stablecoins, and ether, as well as decentralized finance (DeFi) opportunities.
KPMG only gathered responses from investors whose assets under management ranged between US$10 to $500 million. Of the 58% already invested in crypto:
100% held bitcoin,
87% disclosed ether,
60% bought NFTs and other metaverse tokens,
47% had DeFi tokens.
KPMG found interest in crypto has mainly been driven by prospects of high returns, portfolio diversification, and increased confidence in the market following institutional uptake.
It wasn’t all bullish, though, with respondents stating the industry needs more mature methodologies for valuing crypto, the lack of which has given some investors pause.
Wealthy investors are keen on crypto’s “store of wealth” proposition alongside decentralized finance.
Not to mention, most already invested only allocated 5% of their portfolio to the digital asset class, a figure dampened by uncertainty around regulations and accounting standards.
The good news is that there is a pathway that links rich Chinese to the future of crypto, but it’s largely contingent on if crypto can get its act together or not.
China is ramping up its control over money supply by implementing a digital yuan that they can delete and add to wallets any time they want.
This is really 1984 in its purest form.
As the crypto winter continues, there are indeed some silver linings.
However, crypto needs to be careful that it doesn’t turn into just another centralized version of what the Chinese are running away from.
Decentralization is hard to pull off in the long term as the government will want its cut.
Rome wasn’t built in one day.
“The biggest risk is not taking any risk.” – Said Co-Founder and CEO of Facebook Mark Zuckerberg
Mad Hedge Bitcoin Letter
October 20, 2022
Fiat Lux
Featured Trade:
(LOOKING TO MAKE A DIFFERENCE)
(BTC), (NFT)
A non-fungible token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership.
Like cryptocurrencies, they are also digital tokens.
But compared to cryptocurrencies, which are fungible, or interchangeable, NFTs are singular and unique. Like cryptocurrencies, they exist on the blockchain as cryptographic assets.
The price direction of NFTs is a good way to take a barometer of a speculative technology market underpinning crypto.
I can tell you that the NFT marketplace is dead as a doornail and like how the price of Bitcoin has been engulfed in a crypto winter, it’s even worse in the NFT world.
How bad?
Multimillion-dollar NFT purchases marked down to $100 kind of bad.
In times when the crypto industry is bullish, NFT prices benefit from being a second derivative industry.
One might say that it’s just a 3X ETF of Bitcoin and for speculators, this can be either good or bad.
If you don’t believe me about the state of NFTs, let's roll through some of the data points.
In sectors from art to gaming, trading volume and prices for NFTs across all sectors have plunged about 95% since this time last year.
Since the start of September, NFT trading volumes have averaged $35 million per week.
The NFT capitulation is solid proof that NFTs are not stores of wealth and definitely aren’t inflation hedges.
I can also say that Bitcoin has pretty much failed every test of legitimacy as well during this crypto winter.
NFTs and Bitcoin are speculative assets that only do well during a time of increasing liquidity. The reverse holds true as liquidity tightens.
Many of those art NFTs are being bought and sold on OpenSea, the most prominent peer-to-peer marketplace.
Trading volume on the platform has plummeted from around $3 billion in September 2021 to $350 million in September 2022, an 88% drop.
Personally, I don’t believe in NFTs long term, I don’t get how a digital certificate will hold weight.
I rather have a real physical certificate that shows I own something like a real estate deed.
For those who might think NFTs could hold more utility in the future, then I am another hater you must convince.
Preaching to me about how long-term prospects are positive and investors should buy the dip is laughable.
Any serious asset doesn’t go down 95% in one year without a crisis and in the short-term survival of NFTs isn’t guaranteed.
This was a fad that caught on and rode the hysteria of Bitcoin to relevance and now is being dumped faster than one can imagine.
As we approach a Fed-induced recession, it’s hard to believe what Americans would be interested in buying an NFT when they get fired from their job.
Only 50% of Americans have even heard about NFTs, but most understand that securing shelter and food during unemployment is more important than throwing money down the toilet.
Avoid the NFT asset class, period.
“We're running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere... can handle before there is an environmental catastrophe.” – Said Founder and CEO of Tesla Elon Musk
Mad Hedge Bitcoin Letter
October 18, 2022
Fiat Lux
Featured Trade:
(ANOTHER PATH GETS SHUT DOWN)
(BTC), (PORTUGAL)
