Mad Hedge Bitcoin Letter
December 7, 2021
Fiat Lux
Featured Trade:
(THE BITCOIN BULL STORY IS IN-TACT)
(BTC), (ADA), (ETH)
No, the Bitcoin bull market is not over, but we won’t get our Santa Claus rally this year.
The short-term reversal in prices has been encouraging, but I do expect further bouts of volatility to occur most likely in early January.
We received some great signaling that capital isn’t bolting out the back of the stable with Bitcoin returning to over $50,000 overnight inspired by one of the largest wallets to buy the equivalent of $137 million more Bitcoin.
This Bitcoin whale is loading up again here, even though so many people and fake bitcoin keyboard warriors are saying that we are now in a bear market.
I don't see any confirmation of the bear market yet as no key support has been lost.
This wallet holder upped the ante overnight with a single purchase of 2,700 BTC — taking their total to 118,017 BTC.
The buy crushes previous recent transactions and increases the holder’s balance to breathtaking record levels.
This is officially the highest number of BTC ever held in this wallet: 118,017 BTC, in total this big spender has poured $2.5B USD to buy BTC with an average cost basis of $21,160 per BTC.
Interest and demand in Bitcoin rose a lot in 2021 despite the volatility. More than half of current investors got in over the last 12 months, adding another positive data point to the Bitcoin narrative.
In a survey of 1,000 people, about a quarter said they already owned Bitcoin and of that 55% said they started investing this year.
The results highlight the explosive growth cryptocurrencies have seen this year as investors plowed money toward the volatile asset class amid growing mainstream adoption.
It is becoming increasingly difficult for investors to ignore Bitcoin as its price continues to rise.
Major altcoins have also reversed course with this relief rally.
Ether (ETH) rallied 11.4% Tuesday, outpacing BTC in a pattern mimicked by several other large-cap tokens.
Other altcoins like Cardano (ADA) and Litecoin are up over 9% validating my thesis of altcoins outgaining Bitcoin for the catch-up trade.
I don’t believe that this weekend's crash can partially be blamed on the US congress' upcoming questioning of top crypto executives. Nobody knows yet how badly this investigation will impact the market, but I wouldn’t say anything meaningful will happen.
In fact, much of the volatility has been caused by poor communication from the US Central Bank that peaked with US Fed Chair Jerome Powell signaling the Fed will move faster than expected to tame inflation.
The algorithms had a field day dumping positions in volume.
Consensus had it that interest rate expectations would largely be left alone this December, but the Fed signaling that they plan to move earlier to break off the inflation genie caused all risk assets into a short-term tailspin.
That being said, I don’t believe the Fed will do more damage the rest of this month, and we should experience a relief rally into the yearend.
I would double down and say the Fed could have waited until January, because everyone understands how bad inflation is running its course, and it was largely baked into the market.
To get ahead of the next CPI inflation number is definitely a knee-jerk reaction and if the Fed has more of these fast pivots in 2022, we will experience a 10-15% correction in Bitcoin each time.
Long term, the US financial system will not be able to stave off highly inflationary policies, it’s like a drug addiction that can’t be shaken off.
Triggering inflationary-backed economic growth is the only way to make a dent in the federal debt hole, it just means that home price and wages will be a lot higher in nominal terms every year.
I merely see this short-term swoon as one step backward before we push forward again with the wild inflation.
People in the know have acknowledged that many corporations are building up reserves for 30% increases for 2022 salary and that is not a typo.
“I wished it had never been invented” – Said Billionaire Investors Charlie Munger when asked about Bitcoin
Mad Hedge Bitcoin Letter
December 2, 2021
Fiat Lux
Featured Trade:
(THE SKINNY ON IDENTIFYING CRYPTO SCAMS)
(BTC)
Awareness of safety is definitely a must with crypto — that’s not a shocker with it being a brand-new asset that many have a hard time contemplating.
It’s true that it’s a lot to wrap your head around.
Cryptocurrencies are speculative by nature. They lack traditional fundamentals, and a certain leap of faith is needed to invest in it.
It’s not easy for investors to analyze and assign a value to, and that’s where I come in to try to make sense of it.
Crypto markets are also less regulated in general, so it's easier to get ripped off.
Market manipulation is the intentional effort to artificially influence or interfere with asset prices.
Typically, scammers manipulate markets to tip the scales in order to accrue an unfair advantage.
Let’s go through the list of tricks that could be played on you.
Spoofing is done by placing fake buy or sell orders, which are canceled before they're filled.
Scammers use fake accounts and bots to place large trades, giving other investors the impression that demand is either increasing or decreasing.
Front-running is transacting based on knowledge of future transactions.
For instance, miners or node operators can have insight into pending trades. They could then leverage their inside access to make profitable trades ahead of major price swings.
It’s critical that investors migrate to voluminous, reputable, and transparent crypto exchanges and not try to get fancy with the middleman.
This makes a massive difference.
Another scheme is the pump and dump where fraudsters convince people to buy in, crypto schemers spread misleading information about minimally traded coins through social media.
They signal that a 10-fold increase in shares is imminent triggering hot new money then comes the dump.
As momentum builds, other investors cash in and drive the price up, while the schemers cash out and make a run for the exit.
Another deviant scheme is when crypto developers abandon a project but keep the funds raised from investors.
Bad actors can list a new token on a decentralized exchange, pair it with a legitimate cryptocurrency, and drum up interest on social media to lure in investors.
They often pay for known celebrities to pass it off as a legitimate asset.
The whitewashing of the asset fools a bunch.
Traditional hacking and theft targeting crypto wallets can be a digital or physical device.
These wallets have keys — both public and private. The former is a public address that allows crypto to be deposited into the wallet, similar to how routing and bank account numbers enable direct deposits.
The latter is like the password to an online banking platform. Whoever has access to that password can control the funds within the account.
Just as you wouldn't share your credit card number with a stranger, keep your private keys somewhere safe. Scammers can hack accounts and withdraw funds — and they'll employ various methods to get investors to reveal their private information.
Lastly, scammed via initial coin offering (ICO) is happening less and less as many cryptocurrencies do a better job establishing their credibility.
This is the crypto equivalent of an initial public offering (IPO) for a stock.
Through an ICO, companies can raise money to fund a crypto development, such as a token, app, or relevant service. In exchange for pledging funds, the investor receives an issuance of newly minted coins.
Similar to rug pull, ICO scams collect the funds of early investors only to abandon the project shortly after.
An easy way to recognize an ICO scam is to review the company's whitepaper. This document details the specifications behind the project, including strategy, goals, and market analysis.
If the company doesn't provide a whitepaper, that's a red flag.
Decentralized assets are not all unicorns and parabolic trading.
There is an ugly side of it devoid of standardized oversight and investors must stay on the lookout for these easily avoidable pitfalls.
Always double-check the broker, asset, and environment in which trading occurs. Never take anything for granted and err on the side of caution.
“[Bitcoin] is a remarkable cryptographic achievement… The ability to create something which is not duplicable in the digital world has enormous value…Lot’s of people will build businesses on top of that.”— Said Former CEO of Google Eric Schmidt
Mad Hedge Bitcoin Letter
November 30, 2021
Fiat Lux
Featured Trade:
(WE GO HIGHER IN THE SHORT TERM)
(BTC)
I am convinced that Congress will fail to act swiftly to head off the debt ceiling crisis that every trader should circle on their calendar.
December 15 is the day and that gives us only half a month for Congress to raise the federal debt limit, and Senate Majority Leader Charles Schumer and Minority Leader Mitch McConnell are miles apart.
Much of the trading these days is fueled by algorithms that decide on buying and selling based on the market data and this software is about to get bombarded with the U.S. possibly defaulting on their debt obligations.
The scare of a default or the perceived threat of a default, even if nobody thinks it will happen, will lend credibility for alternative assets namely Bitcoin and crypto-assets.
It’s hard for me to see Bitcoin not going up in the next 2 weeks and I believe traders should play from the $58,000 level which is the line of technical support.
Another flashing green indicator is the exploits of CEO of MicroStrategy (MSTR) Michael Saylor who has piled into the digital gold as his predominant strategy.
MSTR spent $414 million in buying 7,002 bitcoins yesterday.
MicroStrategy bought the coins at an average of $59,187 per Bitcoin. He added that following this latest acquisition, MicroStrategy now holds 121,044 bitcoins, and it used $3.57 billion to acquire them.
MicroStrategy is already profitable regarding its cryptocurrency investment. Its 121,044 bitcoins are worth $6.81 billion, a profit level of nearly 100%. There is not a bigger bull out there than Saylor who has staked his existence on the digital gold going higher.
Another positive indicator is the growing margin leverage ratio which shows more borrowed funds that will be bet on the price of bitcoin going up.
Less leverage in the system means less capital flowing to buy crypto.
What’s marinating in Washington?
Democrats insist that Schumer will not waste a week of Senate floor time to use the budget reconciliation process to raise the debt limit with only Democratic votes.
Both leaders hope to circumvent another brutal fight, but McConnell and Republicans are poised to really play hardball for this one.
McConnell was criticized for laying an egg during the last debt ceiling crisis and giving up negotiating leverage.
If McConnell doesn’t extract something on spending out of Democrats, especially when we’re looking at the Build Back Better bill possibly passing the Senate in some form, it’s an abject failure.
The conundrum is fueling predictions within the Senate that Treasury Secretary Janet Yellen will push the deadline for increasing the nation’s borrowing authority until January or February which is a positive event for the price of Bitcoin.
Yellen could find a couple of extra quarters in the cushions and push it to January or February, but it’s not a 2-foot putt.
Also, Democrats are nixing the Republican argument that Yellen has the flexibility to extend the deadline into January or February.
Yellen also warned leaders this month that the passage of the $1 Trillion Infrastructure Investment and Jobs Act gave her less room to maneuver because it requires a $118 billion transfer to the Highway Trust Fund by Dec. 15.
Bitcoin’s function as a rock-solid market hedge has never been more applicable as Congress is behaving almost as if money is unlimited and as if there are no consequences to that assumption.
What we are going to slowly see is that in terms of attractiveness, crypto will be that shiny wrapper compared to stocks and gold.
Even if the odds of a real default are almost zero, there could be some sort of technical default, Bitcoin will be that safe haven if the unthinkable comes to pass.
More and more people are coming to a realization they need a Plan B.
Back on the battlefield, it’s almost impossible in any plausible way that the inflationary genie with be bottled up any time soon unless it’s a nominal Fed speak victory.
The U.S. government is just too far past the point of possible return and whether it is labeled as the omicron variant, supply chain constraints, energy shortages, tight labor market, or however you want to fill in the blank, these events are almost all entered through the narrow prism of politics intersected with politics and the output is inflation.
Inflationary in the sense they add costs to either the national debt or the cost of existing as a human in the modern world and sooner than later, everyone will conclude the only way to counteract these forces are alternative assets or cryptocurrencies
“Virtual Currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” — Said Ben Bernanke, former Chairman of the Federal Reserve
Mad Hedge Bitcoin Letter
November 23, 2021
Fiat Lux
Featured Trade:
(THE STRONG BREADTH OF CRYPTO)
(BTC), (ETH), (ADA), (SOL), (UUP)
