“Creativity is just connecting things.” – Said Co-Founder of Apple Steve Jobs
Mad Hedge Bitcoin Letter
October 4, 2022
Fiat Lux
Featured Trade:
(ANOTHER SLIP-UP)
(FSOC), (MAX), (BTC), (ETH)
It’s coming - rules and more than a mountain of them.
They won’t stop until they get their cut.
Blame the industry for attracting the ire of the all-mighty rule makers.
This means that growth in this growth industry won’t be as gangbusters moving forward if ever.
It’s a net negative for crypto because they rely on that extra supercharger growth to attract the incremental investors and all in one poof, gone, like the wind.
What exactly happened?
The Financial Stability Oversight Council (FSOC), a U.S. regulatory panel comprising top financial regulators recommended that Congress pass legislation addressing risks digital assets pose to the financial system, including bills to bolster oversight of crypto spot markets and stablecoins.
Anything that Congress touches usually turns to higher costs and more red tape.
FSOC's report follows a slate of others that were released last month in connection with the White House's executive order. In September, the Biden administration published a series of reports recommending that U.S. government agencies double down on digital asset sector enforcement and identify holes in regulation.
It remains unclear when Congress might pass crypto-related legislation, although several bills have been introduced to address stablecoins and digital commodities regulation.
The FSOC report also suggested Congress pass a bill to provide rulemaking authority to federal financial regulators over the spot market for cryptocurrencies that are not securities, in order to address conflicts of interest and abusive trading practices.
It’s not a joke that regulation is racing to the front and center of the crypto narrative as the biggest risk to the industry.
It’s been quite relentless at this point.
As soon as we think the worst has passed, we are dropped with another trust-toppling scandal that will most likely induce further regulation after the debilitating Congress ruling.
This time it’s mediocre reality TV star and influencer – Kim Kardashian.
She’s the Hollywood socialite that pushed Ethereum Max which is a digital coin that aptly borrowed its name from the second biggest crypto Ethereum.
What have been the results?
Ethereum max is down a stunning 98% prompting investors to sue Kardashian who never disclaimed that her marketing was being paid by the company that owns the token.
Kardashian has filed motions to dismiss the suit, with her lawyers arguing that there's insufficient evidence their endorsements led to the plaintiffs buying EMAX.
She paid a fine of $1.25 million.
EMAX's value is based on the greater fools theory because it has no utility whatsoever.
As investors and promoters like Kardashian talked up this coin, more people invest and the price goes up allowing the investors at the beginning to cash out.
Kardashian was paid $250,000 by Ethereum Max for her marketing efforts.
Altcoins like EMAX lack the stability of older types of cryptocurrencies, like bitcoin and ether.
And EMAX has never reached meteoric highs like bitcoin so the greater fools theory in this coin only reaches so high for the previous investors to cash out.
EMAX is vastly riskier because investing in it can quickly turn into pouring money down a black hole with the asset depreciating rapidly.
While it's unclear how many people invested based off the celebrity endorsements, data found Kardashian's advertisement reached about one in five US adults and roughly 30% of crypto owners.
This is yet another public relations disaster for the crypto industry.
It’s bad enough the industry has impoverished most of its participants, but now it’s really involving the lowest level of brain activity on the human planet.
One might conclude that this Kardashian fiasco might be the bottom because how lower and pitiful can crypto get?
The one silver lining in the reason for crypto not crashing is because the big holders haven’t sold out yet which bodes well for crypto when capital markets start to loosen up.
That appears to be the last leg crypto is standing on which could be either scary or a sanctuary depending how you look at it.
Lastly, steer away from anything other than Bitcoin if you are going to invest.
“I believe this artificial intelligence is going to be our partner. If we misuse it, it will be a risk. If we use it right, it can be our partner.” – Said CEO of Softbank Masayoshi Son
Mad Hedge Bitcoin Letter
September 29, 2022
Fiat Lux
Featured Trade:
(WHERE DOES THE UTILITY COME FROM?)
(FOMO), (BTC)
Crypto insider Mike Novogratz had a lot to say at the TOKEN2049 conference in Singapore and he struck an upbeat tone as crypto has been one of the worst performing assets in the past 365 days.
His words were mostly silver linings and an optimistic view of the future.
His argument for another spike up in bitcoin was mostly centered around how the next Bitcoin’s (BTC) bull run will have to be much different from historical cryptocurrency rallies in terms of story and utility.
Compared to previous bull runs, the next Bitcoin rally will be more focused on utility and less on the story.
An asset can only go so far based on fear-of-miss-out (FOMO) hype.
The issue now is the lack of buyers and it’s no surprise.
Every little bump up is a great exit point for holders to dump more coins.
In almost every crypto newsletter I’ve written, I chronicle how recent events make it less attractive for the incremental investors to bite at crypto.
The data backs me up as new buyers have quit this speculative industry and need something that pays an annuity-like premium.
According to Novogratz, the 2017 bull run was mostly about the story of people not trusting the government and wanting more privacy and decentralization.
The blockchain narrative hasn’t really budged at all as well as few institutions have integrated the technology into daily tasks.
I don’t see where the “utility” comes from.
Some speculative investors began buying digital real estate in the metaverse in hopes of accruing rental digital revenue is beggars’ belief.
I don’t see the utility there as well.
It’s all good to use buzz words like “scalable” and “user friendly” – yet I see no actual development.
I don’t believe crypto is the inherent successor to fiat either, and I do believe that at best, it could be a nice compliment and that’s if miracle after miracle happens from here on out.
If governments regulate the heck out of it, its value diminishes greatly.
Novogratz needs to stop pushing the “inevitable” theme like a real estate agent advising buyers to buy the most expensive mansion at the top of the market.
Hilariously enough, one of the knocks on crypto was the elevated volatility which has reversed the past few months.
Why?
The lack of volatility stems from the lack of new buyers and sellers. There are still owners who haven’t sold and are holding until infinity, so the price doesn’t get pushed down further, but investors are so turned off by the charlatans and dangers in the industry that they rather put their money in something more real.
Crypto executives need to stop pushing the crypto to $1 million theme as every headwind imaginable is crushing the price of crypto.
Even worse, crypto executives are also facing billions of dollars in lawsuits and I believe it is more responsible to talk about the current existential crisis that Bitcoin faces.
If Bitcoin goes to zero, then crypto is finished so it’ll be interesting to see what the last big holders do with their coin.
Do they sell out the rest and crash the market? Or wait for the next bull run?
My bet is that the price of Bitcoin stays in a range for the next 15 months.
CRYPTO SALESMAN WANTS TO PUMP UP THE COIN
“We've arranged a civilization in which most crucial elements profoundly depend on science and technology.” – Said American astronomer and cosmologist Carl Sagan
Mad Hedge Bitcoin Letter
September 27, 2022
Fiat Lux
Featured Trade:
(AN INDUSTRY ON THE ROPES)
(LUNA), (BTC), (DAI)
Crypto’s and Terraform Labs co-founder Do Kwon is on the run.
Yes, that’s right – he’s a fugitive.
He was added to Interpol’s red list yesterday that alerts 195 countries to his status as a wanted fugitive. Today, we also found out that Kwon transferred 33,131 Bitcoins to himself right after he was added to the red list.
Kwon was the golden boy for stable coin for quite some time as the native South Korean’s brash attitude led him to billions in wealth.
His “fake it ‘til you make it” attitude has gotten him into deep water as quickly escalating investigations have been initiated against Kwon and Terraform Labs.
Why?
His brainchild Terra’s UST stablecoin lost its parity to the dollar in May in a $70 billion collapse and today shows a 99.93% loss.
Kwon and Terraform Labs fled South Korea for Singapore ahead of Terra’s meltdown, but Singapore police said on September 17 that he’d fled Singapore.
South Korean authorities want to question Kwon about alleged violations of capital markets law that has resulted in a slew of local suicides to investors who have lost everything.
Investigators also want to interview him to see if his company misled investors in labeling UST as a stablecoin.
They have said his stablecoin could achieve the definition of a Ponzi scheme.
It was only just earlier last year when Terraform Labs successfully rallied an audience of fans that called themselves the “Lunatics,” praising Kwon as the project’s outspoken hero as the price of its LUNA token rallied.
Kwon’s unique case has now set off US regulators with the intent of regulating stable coins more rigidly with even the possibility of an outright ban altogether.
The South Korean has sullied the stablecoin industry and the manhunt continues as Kwon claims he “is not hiding.”
U.S. lawmakers put forward a bill last week that would introduce a ban on UST-like algorithmic stablecoins, potentially threatening other decentralized dollar alternatives like MakerDAO’s DAI.
Cryptocurrencies have been littered with non-stop streaming of negative headlines in the past 12 months.
Bitcoin reaching $65,000 wasn’t in fact a celebration, but the calm before the storm before a myriad of structural problems was revealed as the price of Bitcoin collapsed.
Kwon's fleeing has not stopped his attempt at fixing LUNA, yet the price levels are barely a fraction of what they were before the collapse.
The international police case has heaped more fuel on the fire for incremental investors signaling them to stay away from cryptocurrencies and rightly so.
Kwon is highly likely to receive jail time in his native homeland of South Korea and legal experts can envision a prison time of over 10 years.
Financial fraud and running a Ponzi scheme are serious stuff in South Korea which is infamous as a place where Korean oligarchs regularly flout the law.
Delaying the inevitable is stirring up even more unrest for crypto as one of its big-time CEOs evades Korean law.
The longer he hides internationally, the longer the damage to the reputation of crypto.
The problem I have is that since crypto has no cash flow dispensing from it, the existence of these products enters a gray area of whether it is a Ponzi scheme or not.
Even more worrisome, stablecoins could become banned because of Kwon wiping out yet another set of crypto assets and crypto infrastructure.
It could cause yet more manhunts for crypto CEOs and the bankruptcy of the masses.
These events are highly bearish for the cryptocurrency industry, and I advise readers to head for higher water.
“Don't be afraid to give up the good to go for the great.” — Said American Industrialist and Oil Tycoon John D. Rockefeller
