Mad Hedge Bitcoin Letter
October 5, 2021
Fiat Lux
Featured Trade:
(ARE ALTCOINS RELEVANT?)
(BTC), (ETH)
Posts
As some of you may have figured out — there are other cryptocurrencies out there besides Bitcoin (BTC).
In fact, there are thousands of different cryptocurrencies out there.
Generated, in part, by the transformational narrative of BTC, many have tried to replicate the success of Bitcoin in terms of percentage gain of the underlying asset.
These other peer-to-peer digital currencies have emerged over the last couple of years and are all chasing BTC.
First, let me get it out of the way by saying that BTC has extraordinarily benefited from its first-mover advantage and the subsequent snowballing network effect.
Altcoins, not even one, have experienced these super boosters.
These digital currencies, better known as altcoins (alternative coins), are mainly designed to overcome the structural and technical limitations of BTC while supporting a diverse set of real-world use cases.
Why should investors keep tabs on altcoins?
Per the date of this writing, BTC has a market cap of around a trillion dollars, and altcoins also represent another trillion.
Commanding half of the market cap in cryptocurrencies is enough to warrant attention.
Since altcoins are such a big part of the market, every crypto investor should understand how they work.
In fact, the way you might profit off of crypto is not in BTC itself, but the diverse set of other assets in the space.
It’s true many missed the BTC boat — make sure you don’t miss the next boat.
Owing to the growth of the decentralized finance (DeFi) ecosystem, the increased use of smart contracts, and the introduction of environmentally-friendly consensus mechanisms, altcoins have expanded their market capitalization manifold, especially between 2020 and 2021.
Altcoin’s popularity signals the growing breadth of high quality crypto assets invading the industry.
Many blockchain companies and projects issue their own cryptocurrency tokens, making them the primary utility token for users to interact with their network.
Since there are hundreds of projects and DeFi opportunities available, such as staking and yield farming, together with an open market to choose from, it can be a bit challenging to determine the most promising projects.
One major variable that must be baked into the pie is that altcoins tend to offer a higher risk and higher reward as a cryptocurrency investment.
Although Bitcoin is volatile, it's the market leader and has already gained substantial value and name recognition — so investors looking for extra juice will gravitate to lower-priced, nascent coins with more upside.
Altcoins have more room to grow, but they also represent higher systemic risk therefore I can’t advise readers to pour their entire net worth into altcoins just yet.
A wonky altcoin could literally go poof in one second and there’s no way to get your fiat back with it.
Readers looking for altcoin success should only allocate a small portion of their portfolio into this space, and I would recommend a trusted broker like Robinhood or Coinbase as reputable crypto brokerages.
Altcoins are more advanced. Since they came out after Bitcoin, they've improved on its technology. In terms of transaction speeds and costs, many altcoins are far superior technically to Bitcoin.
Should you consider investing in altcoins?
The proverbial low-hanging fruit has been harvested in BTC.
Another serious challenge of altcoins is how to pick the right one in a crowded setup which is where we come in.
We will be navigating through altcoins and giving readers the best chance to succeed.
Like real estate, many of these altcoins are getting priced to the relative price proposition it holds when compared to a $50,000 BTC, which is essentially seen as the best house in the best neighborhood thus priced the highest.
The altcoin that will perform best in the short run will be the worst house in the best neighborhood and the most potential for returns will come from the best house in a rapidly gentrifying neighborhood.
Altcoins and their underlying prices are behaving in a similar fashion to real estate prices, which is why Ethereum and some others are looking super cheap and primed to gain on BTC.
In short, the “rising tide lifting all boats” truly applies to the digital gold as well, and I am supremely confident that BTC will hold this $40,000 support level through the end of 2021 giving the existence of crypto a massive victory to us crypto junkies.
Mad Hedge Bitcoin Letter
September 30, 2021
Fiat Lux
Featured Trade:
(THE APPEAL OF ETHEREUM)
(BTC), (ETH)
I’ll take you on a short journey on the next best thing after Bitcoin in crypto land.
Ethereum (ETH).
It’s most likely the best profitable opportunity from the “established” crypto-assets today.
ETH is the 2nd largest cryptocurrency by valuation coming it at over $350 billion.
I know many of the readers out there have a hard time wrapping their heads around Bitcoin, and I will vouch that ETH could be the real “catch up trade” if the ride to $60,000 was missed in Bitcoin.
Let’s take a look at what's driving Ethereum's recent price action.
Why is Ethereum on the rise?
ETH was launched in 2015, and it's famous for being the first cryptocurrency with a programmable blockchain.
While other cryptocurrencies were using blockchain technology to record transactions, ETH offered a blockchain that developers could use.
Through ETH, developers can create decentralized apps (dApps).
These dApps are a fundamental part of some of the biggest current trends in cryptocurrency. They're used for decentralized finance (DeFi), which are platforms that provide financial services without a middleman, such as a bank. They're also used with non-fungible tokens (NFTs) — digital assets that people buy and sell as collectibles.
Offering a robust platform to build other apps on it is one of the biggest differences between bitcoin and ETH and also why ETH could have more upside to the price in the long term.
As of last count, about 80% of dApps are built on ETH.
Fortunately, ETH benefits from the first-mover advantage in this respect and will attract higher quality developers to work on dApps.
The development on dApps could create an ecosystem that supersedes anything bitcoin can produce.
Another critical reason for the higher prices in ETH is the asset is currently going through a series of structural upgrades.
The Ethereum network’s long-planned upgrade to a scalable, proof-of-stake consensus model grows closer.
This should take place sometime at the end of October and Ethereum’s price could see some major movement around that time.
It’s plausible that we get a “buy the rumor, sell the news” type of price action meaning the lead up to upgrade could see some big up days with a modest sell-off when the upgrade comes through.
These upgrades will make ETH more scalable with faster transaction processing. It will also make ETH more secure and more environmentally friendly.
More specifically, Ethereum’s upgrade is better known as ETH 2.0 and aims to fulfill its original vision of the network to become an efficient, global-scale, and general-purpose transaction platform while retaining crypto-economic security and decentralization.
Should you buy Ethereum right now?
I believe ETH will be higher than Bitcoin in the future.
Why?
Its co-originator, Vitalik Buterin, is an Elon Musk type of figure in the crypto community — ready to move mountains and pull off miracles one after the other.
He was the guy that made ETH from scratch.
Second, it's the cryptocurrency of choice for creating dApps.
Ethereum 2.0 should be a big improvement that allows it to handle far greater numbers of transactions with much less energy usage.
It’s relevant in terms of volume and market cap meaning there is a minimal chance this will be a fly-by-night type of phenomenon.
After Bitcoin, ETH has been the most popular asset for institutions to pour their capital into because of the reasons I just said.
Access to ETH is also top-notch — available for purchase at most cryptocurrency exchanges. It's not hard to buy, unlike many irrelevant coins.
ETH prices continue to fight through the negative China news, but SEC Chairman Gary Gensler has reiterated his support for its regulation of crypto instead of the demise of it.
It has been rangebound from $1,750 to $4,000 highlighting the volatile nature of the asset.
It has settled around $3,000 today and I do believe it is setting up for a strong finish to 2021.
Ultimately, I do see ETH prices trending back to the $4,000 mark by the end of 2021 and next year should be ripe for a move past $5,000.
Mad Hedge Bitcoin Letter
September 28, 2021
Fiat Lux
Featured Trade:
(THE ART OF BITCOIN MINING)
(BTC), (ASIC), (GPU)
Mad Hedge Bitcoin Letter
September 23, 2021
Fiat Lux
Featured Trade:
(DIFFERENT WAYS TO PLAY CRYPTO)
(BTC), (GBTC), (GLD), (AAPL)
One might postulate that the price of bitcoin and Chinese housing has no relevant correlation with each other.
Think again!
Granted, Chinese citizens aren’t denominating their mortgages in bitcoin to snap their ritzy Shanghai townhouses overlooking the Bund.
I don’t mean that.
But Bitcoin is an asset just like stocks, bonds, and commodities and is exposed to one-off events that shake out the financial system.
What’s brewing in the Middle Kingdom?
Chinese biggest property builder Evergrande teeters on the brink of financial devastation.
Add it up, Chinese bank deposits are $35 Trillion, more than 2x the US.
Would any Chinese financial crisis lead to an epic flight to fiat alternatives?
Does nobody recognize that this is a planned liquidity drain of the property market in China by the CCP?
All escape "exits" have already been shut. You can't even buy paper gold in China either - forget Bitcoin!
So I don’t believe that the potential disorderly selling of Chinese flats or the bust of a major property developer would end up boosting the price of Bitcoin because the Chinese government has made it abundantly clear that bitcoin is a red line for its citizens.
If there is a 20% dip in Chinese property prices — Chinese would believe that’s a once-in-a-century buy the dip type of event.
That doesn’t mean that some won’t try to sell on the down low and get their money out of China through hell or high water.
Some certainly will — China made it clear they didn’t want their citizens investing in overseas assets — I know of the odd millionaire spinning out a random credit card to put a down payment on a house in Vancouver.
What this does scream is policy error big time — an overtightening that could result in a hard landing that is ruinous for global growth.
That would be the worst-case scenario and I would put that at 10%.
Why is this company systemically important?
Evergrande was once China’s darling real estate developer. Now, it is gagging on debt.
It was founded in 1997 by Xu Jiayin. It has completed around 1,300 commercials, residential and infrastructure projects and supposedly employs upwards of 200,000 people.
The company’s success came because it was aligned perfectly for the parabolic boom in real estate that has been driven by the last two decades of staggering Chinese growth, growth for a country that is unparalleled in all of modern human history.
The tragedy in all this is that 1.5 million Chinese have put deposits down on homes that haven’t been built and this is more often than not their entire life savings.
Most likely, it is them who will hold the bag and lose their deposit.
Better them than me.
For a soft landing to happen, the Chinese government must pull out all the bells and whistles.
Even though I categorize this as a quasi-gray swan, opposed to a solid black swan, it is highly likely that it won’t spill over into the broader market, and if we do get a large bitcoin dip, bitcoin buyers finally are gifted a cheaper price to enter bitcoin.
These opportunities are few and far between recently, at least in 2021, and I can guarantee that MicroStrategy CEO Michael Saylor is already ginning up his next bitcoin purchase usually done with his own company's corporate paper.
Limiting the fallout will be easily done if the Chinese government flood the right channels with liquidity, plugging the holes before they become unpluggable kinda like our own debt ceiling mess.
The larger issue is to ponder — is this the tip of the iceberg?
The silence and a lack of major actions from policymakers is making everyone nervous, but most likely they are sorting it out behind the scenes.
The response so far has been largely limited to the People’s Bank of China, which injected a net 90 billion yuan into the banking system. It added another 100 billion yuan on Saturday.
Evergrande has been mired in $300 billion worth of liabilities, more than any other property developer in the world. It’s a beast in China’s high-yield dollar bond market, accounting for about 16% of outstanding notes.
A lackluster response to an already expensive market could be costly, with real estate accounting for 40% of household assets in China. Data last week showed home sales by value slumped 20% in August from a year earlier, the biggest drop since the onset of the coronavirus early last year.
Isolating Evergrande is almost a point of emphasis for the Chinese Communist Party and the mission is to harangue them as a scapegoat for sky-high property prices.
They are the fall guy.
This is more of a political show than anything else — a show of power — letting the world know that this economic pain is nothing to even bat an eyelid about.
Bitcoin, perceived as a riskier asset along the risk curve, is not immune from a sell-off and a flight to safety has taken prices down around 10%.
I have full faith in the Chinese government and its authority to nip this in the bud, and around the $40,000 level, the price of Bitcoin should offer resistance.
If Bitcoin holds $40,000 and a resolution to this is announced, expect a 10% surge in Bitcoin prices.
This should not be treated as anything more than a standard 5% equity drop that is equivalent to a 10% crypto drop in prices.
Book some of those gaudy profits you made in the first half of the year to drop your cost basis while deploying capital at lower levels.
THE AFTERMATH OF GOLD MINING IS DEVASTATING
Mad Hedge Bitcoin Letter
September 21, 2021
Fiat Lux
Featured Trade:
(UNDERSTANDING THE FOG OF WAR)
(BTC), (MSTR)
One might postulate that the price of bitcoin and Chinese housing has no relevant correlation with each other.
Think again!
Granted, Chinese citizens aren’t denominating their mortgages in bitcoin to snap their ritzy Shanghai townhouses overlooking the Bund.
I don’t mean that.
But Bitcoin is an asset just like stocks, bonds, and commodities and is exposed to one-off events that shake out the financial system.
What’s brewing in the Middle Kingdom?
Chinese biggest property builder Evergrande teeters on the brink of financial devastation.
Add it up, Chinese bank deposits are $35 Trillion, more than 2x the US.
Would any Chinese financial crisis lead to an epic flight to fiat alternatives?
Does nobody recognize that this is a planned liquidity drain of the property market in China by the CCP?
All escape "exits" have already been shut. You can't even buy paper gold in China either - forget Bitcoin!
So I don’t believe that the potential disorderly selling of Chinese flats or the bust of a major property developer would end up boosting the price of Bitcoin because the Chinese government has made it abundantly clear that bitcoin is a red line for its citizens.
If there is a 20% dip in Chinese property prices — Chinese would believe that’s a once-in-a-century buy the dip type of event.
That doesn’t mean that some won’t try to sell on the down low and get their money out of China through hell or high water.
Some certainly will — China made it clear they didn’t want their citizens investing in overseas assets — I know of the odd millionaire spinning out a random credit card to put a down payment on a house in Vancouver.
What this does scream is policy error big time — an overtightening that could result in a hard landing that is ruinous for global growth.
That would be the worst-case scenario and I would put that at 10%.
Why is this company systemically important?
Evergrande was once China’s darling real estate developer. Now, it is gagging on debt.
It was founded in 1997 by Xu Jiayin. It has completed around 1,300 commercial, residential and infrastructure projects and supposedly employs upwards of 200,000 people.
The company’s success came because it was aligned perfectly for the parabolic boom in real estate that has been driven by the last two decades of staggering Chinese growth, a growth for a country that is unparalleled in all of modern human history.
The tragedy in all this is that 1.5 million Chinese have put deposits down on homes that haven’t been built and this is more often than not their entire life savings.
Most likely, it is them who will hold the bag and lose their deposit.
Better them than me.
For a soft landing to happen, the Chinese government must pull out all the bells and whistles.
Even though I categorize this as a quasi-gray swan, opposed to a solid black swan, it is highly likely that it won’t spill over into the broader market, and if we do get a large bitcoin dip, bitcoin buyers finally are gifted a cheaper price to enter bitcoin.
These opportunities are few and far between recently, at least in 2021, and I can guarantee that MicroStrategy CEO Michael Saylor is already ginning up his next bitcoin purchase usually done with his own companies’ corporate paper.
Limiting the fallout will be easily done if the Chinese government flood the right channels with liquidity, plugging the holes before they become unpluggable kinda like our own debt ceiling mess.
The larger issue is to ponder — is this the tip of the iceberg?
The silence and a lack of major actions from policymakers is making everyone nervous, but most likely they are sorting it out behind the scenes.
The response so far has been largely limited to the People’s Bank of China, which injected a net 90 billion yuan into the banking system. It added another 100 billion yuan on Saturday.
Evergrande has been mired in $300 billion worth of liabilities, more than any other property developer in the world. It’s a beast in China’s high-yield dollar bond market, accounting for about 16% of outstanding notes.
A lackluster response to an already expensive market could be costly, with real estate accounting for 40% of household assets in China. Data last week showed home sales by value slumped 20% in August from a year earlier, the biggest drop since the onset of the coronavirus early last year.
Isolating Evergrande is almost a point of emphasis for the Chinese Communist Party and the mission is to harangue them as a scapegoat for sky-high property prices.
They are the fall guy.
This is more of a political show than anything else — a show of power — letting the world know that this economic pain is nothing to even bat an eyelid about.
Bitcoin, perceived as a riskier asset along the risk curve, is not immune from a sell-off and a flight to safety has taken prices down around 10%.
I have full faith in the Chinese government and its authority to nip this in the bud, and around the $40,000 level, the price of Bitcoin should offer resistance.
If Bitcoin holds $40,000 and a resolution to this is announced, expect a 10% surge in Bitcoin prices.
This should not be treated as anything more than a standard 5% equity drop that is equivalent to a 10% crypto drop in prices.
Book some of those gaudy profits you made in the first half of the year to drop your cost basis while deploying capital at lower levels.
THE DEBT IS DUE!
Mad Hedge Bitcoin Letter
September 16, 2021
Fiat Lux
Featured Trade:
(ONE OF AMERICA’S DIRTY LITTLE SECRETS)
(BTC)
