“Bitcoin is one of the most viral concepts I've ever encountered.” – Said CEO of Digital Currency Group Barry Silbert
Mad Hedge Bitcoin Letter
March 1, 2022
Fiat Lux
Featured Trade:
(WAR IS THE MAIN CATALYST)
(BTC), (TINA)
Crypto has been going wild the last few days as There Is No Alternative (TINA) takes effect.
Russia’s financial system has been crippled and shut off to the outside world.
Bitcoin has shot up to the number one means of storing wealth.
Russians are buying bitcoin in droves as bank runs and systemic risk inundate the financial system.
The Russian Ruble has been crushed the past few days and Russian citizens have been trying to get rid of any rubles they have.
In this scenario, Bitcoin absolutely makes perfect sense.
The Russian Ruble now stands at 116 Rubles for $1 and the US dollar and Swiss Franc have benefited from this flight to safety.
Over the weekend, the U.S. and its allies stepped up draconian measures against Russia, intending to stop its banks from accessing SWIFT, the messaging network underpinning global financial transactions.
The European Union banned all transactions with the Russian central bank in a bid to prevent it from selling overseas assets to support its banks.
Without the source of funds, Russia is unable to properly finance its military for the long haul and it could mean that this war could drag out to a long-term event.
That event is extremely positive for the US dollar and for assets that are shut out from the traditional global financial system.
Debate has been raging over whether bitcoin, which is not owned or issued by a single authority like a central bank, could be used by Russia to evade sanctions.
There is a high probability that the Russian government will also turn to Bitcoin to maneuver around the sanctions.
However, it’s debatable whether the crypto networks can handle that type of volume.
The liquidity simply isn’t sufficient.
The new measures will also target the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation.
A secret Chinese research paper circulating around comes to a conclusion that this war could fracture the global financial system making the US dollar less attractive in the long haul and concluding the US economy will be a big economic loser with the expenses adding up.
The Bank of Russia, the nation’s central bank, stepped in to stanch the ruble’s swoon by more than doubling the country’s benchmark interest rate to 20% from 9.5%.
The hike in rates is designed to tempt savers to keep cash in Russian banks since the West and its allies have moved to isolate Moscow’s biggest lenders from international markets.
Even the Russian stock market has been closed because of these events.
As the Russian military drives a convoy to the edge of Kiev, this is really looking ugly, and sadly, on a human level, it is tragic, but this event is bullish for Bitcoin.
The inflationary effects were thought of being a tailwind for Bitcoin, but it appears as if the world has had to dive deep into a massive kinetic war to kindle that Bitcoin pixie dust once again.
I am bullish Bitcoin if the fighting continues.
“I think anybody who is interested in keeping their money safe from the criminal banking system would want gold, silver, and Bitcoin.” – Said American Filmmaker Max Keiser
Mad Hedge Bitcoin Letter
February 24, 2022
Fiat Lux
Featured Trade:
(MILITARY CONFLICT TANKS BITCOIN)
(BTC)
Readers should hold off on any new Bitcoin purchases.
Many investors were left wrongfooted as Russian leader Vladimir Putin pushed into Ukrainian territory from three directions sending missiles deep into the heart of Ukraine.
The Russian Ruble exploded with weakness to 87 to $1 USD signifying widespread panic stoking the forex markets.
In a climate with military tensions boiling at a generational high, it is a terrible time to buy the Bitcoin dip as Bitcoin has proved to be dumped by investors who are seeking a safer safe haven.
To answer how long Bitcoin will see this weakness means we need to answer the question of how long is Russia’s “peacekeeping mission”?
The markets didn’t have a full-scale takeover priced into the markets and if this kinetic war is dragged out, this could truly mean we are in for a sub-$30,000 for Bitcoin.
The only certainty right now is that the Ukrainian and Russian standard of living is about to fall off a cliff.
Fiat currency is still too dominant for these desperate citizens to pile into Bitcoin and every one of these people is looking to get their hands on the US dollar.
This proves that in times of desperation, military conflict, and geopolitical turmoil, investors are still not comfortable with migrating into Bitcoin.
This should be a wake-up call for Bitcoin engineers to improve the asset class in terms of safety, transactional process, and ease of use.
Another important variable into how Bitcoin prices will how will it react if Russia turns this into a genocide.
Do they wipe out every city-destroying infrastructure causing inflation to rip higher?
Bitcoin has already proven that hyperinflation in the short-term adversely affects Bitcoin prices as investors flee the digital gold and in turn purchase rental homes and buy commodities that are seen as a better short-term inflation hedge.
Hyperinflation is a vicious cycle that encourages hoarding which triggers more hoarding as the scarcity mindset sets in.
It will be fascinating to see how this conflict in Eastern Europe influences domestic dynamics in the American economy.
White House Press Secretary Jen Psaki reiterated that the US government is comfortable absorbing the cost by saying to the media, “defending freedom will have costs for us as well and here at home.”
The government plans to pass the cost to the American taxpayer in an already tight economic backdrop.
With the US government pushed into a corner, tensions are running high, and that climate is a poor one for crypto.
Investors are rating Bitcoin more as something they need to avoid for now and are being more pragmatic in searching for inflation hedges.
We are barreling towards yet another supply shock because of a more wide-ranging Russian agenda.
A possible supply shock sets up poorly for Bitcoin price action and with Putin holding all the cards, I would avoid Bitcoin until we get some sort of resolution on this which as it currently appears, might be a while.
Putin has behaved aggressively at every inflection point betting that he will meet minimal resistance and so far, he has been absolutely correct.
Time will tell if this emboldens him to overshoot more than initially planned or not.
Any relief rally in Bitcoin should be sold for the foreseeable future.
“Bitcoin is one of the most viral concepts I've ever encountered.” Said Founder and CEO of Digital Currency Group Barry Silbert
Mad Hedge Bitcoin Letter
February 22, 2022
Fiat Lux
Featured Trade:
(BTC FAILS THE ACID TEST)
(BTC), (ETH)
Sell Bitcoin (BTC) when it rallies.
The goalposts have narrowed lately for the digital gold and investors need to trade the market we have, not the market we want.
Even for long term, the crypto bull case is alive and kicking. In the short term, the flight to safety trade has shown that bitcoin is yet the safety asset believers want you to think it is.
Cash or treasuries are better options even with inflation running a hot 7.5%.
An ominous sign of late was when the co-founder of the Ethereum (ETH) blockchain Vitalik Buterin told us the digital-asset universe may actually benefit from a selloff in coin prices.
That’s bad news for prices if he says that.
“The people who are deep into crypto, and especially building things, a lot of them welcome a bear market,” Buterin said during an interview with Bloomberg.
“They welcome the bear market because when there are these long periods of prices moving up by huge amounts like it does — it does obviously make a lot of people happy — but it does also tend to invite a lot of very short-term speculative attention.”
I don’t agree with his statement and it’s an engineer talking about something important but at a technical level.
Investors don’t care what happens at that technical level in the short term.
Although there will always be speculators in every asset class, there is room for all sorts of investors long and short.
The speculators add liquidity to the market in an asset class where many coin creators are begging for more adoption.
For Buterin, to make this selloff about speculators is somewhat arrogant.
The truth is that he should be cheerleading anyone and everyone to get into crypto no matter where the funds come from.
On a micro level, Buterin should be more worried about competing against Bitcoin which is a tough ask.
Unfortunately, crypto has performed poorly against the flight to safety bid when a cornerstone premise had it that bitcoin and crypto were supposed to be part of that safety trade.
The currency is not mature enough and the weakness in prices tell the whole story.
Some highly publicized crypto hacks haven’t helped the case of the normal guy putting money into crypto either.
It continues to be a selective niche industry where it’s a hassle to go from fiat to crypto exchange and many can’t figure out the tax reporting rules.
Buterin has shifted his focus to scaling Ethereum in recent years. The popular blockchain has long suffered criticism because transactions on Ethereum can be slow and expensive.
Buterin should just worry about his own digital currency lasting the test of time instead of thinking he can pick and choose what type of investors goes into crypto.
Investors dumped Bitcoin after Russian President Vladimir Putin ordered troops into Ukraine.
Therefore, expect any geopolitical flareups to include huge bitcoin selloffs and a flight to the US dollar.
Any kinetic war means another leg down in bitcoin.
Volatility will play a huge role in the next move in bitcoin.
If there is a moderate solution to the Eastern European military hostility, then expect Bitcoin to jump back into the $40,000 area while an acceleration of aggressiveness will be met with a selloff down to $30,000.
So yes, guys like Buterin aren’t building the quality that needs to be built.
Clearly, they have been penalized and boxed up as if digital crypto is of inferior value to a normal equity stock.
The trust in the asset is not broad-based and it lends to the theory that readers shouldn’t double down in any crypto-related asset, but inch in and go from there.
Crypto has also performed poorly with rapidly advancing interest yields which is also worrying for readers looking for asset appreciation.
If bitcoin bounces back to over $40,000, I will sell that rally.
“Whenever technological advancement is made it can always be used both for good or for bad.” – Said Internet Entrepreneur Pavel Durov
