Mad Hedge Bitcoin Letter
May 31, 2022
Fiat Lux
Featured Trade:
(FOSSIL FUEL FIRMS TO THE RESCUE)
(BTC), (XOM), (MRO)
Posts
The next real long-term inflection point in the development of Bitcoin is the question about energy or bitcoin infrastructure.
I can’t help but notice the elongating list of crypto mining companies and energy producers collaborating and the knock-on effects will follow through.
This is highly likely a long-term benefit for the price and stability of bitcoin.
Like many things in corporate America, everything gets professionalized, specialized, corporatized, and if they are lucky, financialized as a product and resold to investors.
The usual result is a higher-priced last-mile product and in this case, it would be the price of one Bitcoin.
In 2021, ExxonMobil reported annual revenue of more than $285 billion with global daily production and is also working with a bitcoin mining company in North Dakota to turn otherwise wasted gas into energy for mining operations.
In August 2021, Exxon was already selling some gas to miners.
ConocoPhillips is also supplying gas to bitcoin miners.
Marathon Oil, a multi-billion-dollar oil company based in Houston, also powers co-located bitcoin mining operations with its gas.
American companies aren’t the only ones making headlines for their bitcoin-and-oil deals though.
Russian oil giant Gazprom has been planning and building its own bitcoin mining venture on its oil drilling sites since late 2020.
Bitcoin mining as an industry gains mainstream legitimacy as more traditional energy companies work with bitcoin miners.
Historically, bitcoin mining hasn’t been developed with institutional money and is mainly mom and pop outfits.
That also means it’s less efficient and less dynamic but has room to grow.
Just a few years ago, the concept of heavyweight names inking contracts with mining companies would be impossible.
Bitcoin mining is an energy infrastructure.
A future where every major oil producer is also a bitcoin miner — or at least operates a bitcoin mining arm — is an idea that has longevity and could become reality soon.
Particularly for the oil and gas industry, bitcoin miners continue to make inroads with more reported deals between these two industries.
The achievements that these partnerships represent would jump-start the crypto winter that has engulfed the crypto industry with many altcoins getting flipped into the dumpster.
The top fossil fuel producers, even if it seems like they are ridiculed by the climate change brigade every second, are incredibly powerful companies and if energy and bitcoin energy infrastructure are inextricably linked, it means bitcoin has staying power.
As many have noticed, fossil fuel companies are masters at milking an industry as they initiate buybacks and dividends in the face of “Putin’s” hyperinflation.
If Bitcoin energy infrastructure is embedded into the industry of the likes of Exxon and company, I believe the price of Bitcoin will be an outsized winner even if the price of oil goes to $200 first.
The overspill of profits could finally find its way into a new business of developing more efficient mining systems and embedding itself as the bulwark of crypto coin creation.
That will mean that fossil fuel companies will be able to throw more capital at developing Bitcoin’s infrastructure as a new standalone business as oil, at some point, retraces from its highs.
Mad Hedge Bitcoin Letter
May 26, 2022
Fiat Lux
Featured Trade:
(HOW TO IDENTIFY CRYPTO SCAMS)
(BTC), (ICO)
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, being 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 to 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.
Mad Hedge Bitcoin Letter
May 24, 2022
Fiat Lux
Featured Trade:
(EUROPE IS ANTI-CRYPTO)
(BTC), (ECB)
President of the European Central Bank Christine Lagarde will never allow crypto to flourish on her watch and will do everything in her power to make sure it fails inside Europe.
Lagarde is part of the global establishment of low rates and “transitory” inflation that turned out to be 100% wrong.
But like many of these global bureaucrats that often fail miserably, their reward is to continue the same job since the only person who can fire her is herself.
Lately, Largarde shut down any notion that her fellow colleagues at the ECB should get a raise tied to the 8.5% inflation running through the European economy.
She has zero compassion for the median European worker to say the least.
As bad as US Central Bank Governor Jerome Powell has performed, Lagarde outdoes him by quite a distance.
Europe still has 0% rates and has only just acknowledged that they might have to raise rates this summer.
So it’s no surprise this Davos trotting Bank President who wears a $10,000 scarf to her interviews takes every chance to criticize the existence of crypto.
Largarde’s view is crypto is “worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.”
She added that she’s worried about people speculating on cryptocurrencies with their life savings as they may not be aware of the risks.
This remark is ironic since Lagarde is doing her best to bankrupt the European middle class to the point where they have nothing either.
Her remarks come amid recent turmoil in crypto markets, which have shed over $1 trillion in value over the past six months.
In short, this crypto industry figures to be either an American-dominated industry in the future or nothing at all because the rest of the developed world isn’t in tune with the idea that crypto will be a big part of our lives in the future.
Granted, Lagarde bashing on crypto makes her look like an enforcer right at the moment when many have lost their life savings because of the poor performance of Bitcoin.
The EU elite and Largarde despise crypto because it threatens to undermine their money-printing scam - which they use to steal from savers in order to bankroll their ever-closer union agenda.
This is at the same time the ECB has printed the Euro to oblivion and actively debasing Largarde’s own currency.
Every fiat has gone to zero over time and Lagarde will be looked at in history as one of the accelerators of this concept.
Lagarde’s bashing of crypto is a distraction from her own European Ponzi scheme of all time is: the current fiat financial system. Debt is issued daily to pay off past debt. A cycle they can’t break and count on the general public being too financial-illiterate to catch on too.
Lagarde's financial view is highly negative crypto because crypto performs terribly in hyperinflationary environments and is awful when the people in power want to ban it.
The price of Bitcoin is going to$20,000.
Mad Hedge Bitcoin Letter
May 19, 2022
Fiat Lux
Featured Trade:
(EXCHANGES LOSE CONFIDENCE)
(BTC), (COIN), (TGT)
Where there’s smoke, there is fire.
That is how you need to approach the crypto industry right now as systemic risks creep in.
Withdraw your money from Coinbase (COIN) immediately and switch to trading crypto-based ETFs on the New York Stock Exchange.
Why?
In the event the crypto exchange goes bankrupt, Coinbase says, its users might lose all the cryptocurrency stored in their accounts too.
Coinbase told us “crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.”
Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.
CEO of Coinbase Brian Armstrong is trying to swindle investors out of their money by putting in place the infrastructure to not return funds if bankruptcy happens.
To even talk about this in public is stirring unease and sowing mistrust within the management team there.
If Armstrong wanted a crypto winter, he is doing everything in his power to trigger it by his behavior by killing crypto adoption rates.
Bank accounts in the U.S. are protected by deposit insurance offered by the Federal Deposit Insurance Corporation. In the event a bank fails, the FDIC steps in to protect deposits up to $250,000, preventing depositors from going broke along with the bank.
Crypto exchanges are unsecure and not insured so that’s where the risk is.
As customers had to pay Coinbase a fee for every crypto transaction, the fintech generated rip-roaring growth over the last two years - revenue surged from less than $200 million in the first quarter of 2020 to $2.5 billion in the fourth quarter of 2021. Similarly, net profit increased more than 26-fold from $32 million to $840 million.
Bitcoin dropping to under $30,000 from the high of $65,000 has been a catastrophic disaster for Coinbase.
They essentially rely on higher volume to build growth and when their customers are busy getting impoverished, it doesn’t set the stage for Coinbase to build higher trading volume.
Setting up management to secure a get out of jail-free card for utter failure is another issue I have as an investor.
At the bare minimum, the optics are terrible, and questions arise about fiduciary duty which could result in a tsunami of lawsuits against Armstrong and Coinbase.
Sadly, the price of Bitcoin, which was promoted as an inflation hedge has in fact proved to be the polar opposite.
In times of hyperinflation, people want physical stuff like food, medicine, gas, and housing. Not digital currency.
I do believe cryptocurrency is a great investment when people aren’t paying $6 per gallon of gasoline.
The sudden spike in energy costs was triggered by terrible foreign policy mistakes by the current administration.
Now everyone in the crypto industry is running around with their head cut off scared of potential liability to these digital coins and digital exchanges for which there is no historical precedent.
How does the court behave if a crypto exchange blows up?
Nobody has a clue.
This is where we are at this point in the crypto narrative and the bears are piling in like no other.
Target (TGT) reported dire earnings reporting severe margin contraction because of higher costs.
The net result is yet another ax to risk assets and crypto is one of the most speculative out there.
The rest of the year will be a tough slog for crypto and it won’t work itself out until inflation is back under control.
But as many people understand, the US Central Bank is not interested in taming inflation and is professional at downplaying any risk.
The result is that hyperinflation explodes, risk assets sell-off, and investors go to cash.
Brian Armstrong gleefully telling investors he will fleece us is just another strong signal and supportive data point of my overarching thesis.
Price of Bitcoin is on its way to $20,000 soon.
Mad Hedge Bitcoin Letter
May 17, 2022
Fiat Lux
Featured Trade:
(SAM DROPS A BOMB)
(BTC), (FTX)
One of the leading lights of the crypto industry CEO of crypto exchange FTX Sam Bankman-Fried dropped a bomb on the crypto industry and you are going to want to hear what he said.
Many crypto fanatics want to believe that crypto will one day replace the precious American dollar as the global reserve currency.
Walk down the street for a Starbucks latte and dish out some crypto.
Take an Uber to a friend’s house, and dish out some more crypto.
Bill, please!
Well, Bankman-Fried filled us in and out of any person in the world, he understands what’s going on.
Bitcoin will not be the future payment network.
That’s not its use case.
Bankman-Fried cited the inefficiency and high environmental costs as a prohibitive step to adopting crypto as the de facto payment network for the world.
He later says that crypto has scaling problems.
His opinion is highly incongruous with the hopes and dreams of what crypto set out to be and even though it doesn’t change anything in one day, it could adversely affect the incremental investors at a time when crypto prices and system risk have been going in reverse.
Countries such as El Salvador and the Central African Republic have adopted Bitcoin as a legal tender. But recent research by academics in the US found that Bitcoin has scarcely been used for daily payments in El Salvador, despite the rollout of bitcoin ATMs and other measures to encourage its use.
The 30-year-old billionaire, who has expanded FTX into one of the world’s largest virtual asset exchanges, said an alternative type of blockchain known as proof of stake, or other technological innovations, would be required to create a functional crypto payments network.
Ethereum has been working to move to a proof of stake system, which is intended to be less energy-intensive.
This is the only way it will work if the are billions of payments every millisecond and the network will need to digest this right through.
Crypto, in its current form, is woefully unprepared to operate at that capacity.
Other sharp criticisms of Bitcoin stem from the serious environmental concerns about the amount of energy needed to run proof of work cryptosystems.
Crypto regulators around Europe have been sniffing blood in a region that taxes everything to smithereens.
Mining bitcoin consumes more energy than many countries, including Norway and Sweden, according to Cambridge university’s Bitcoin Electricity Consumption Index.
If crypto networks attempted to scale up to these billions of transactions per millisecond, costs would be uncappable and it could crash the network in one day.
Even if Bankman-Fried gave many investors the sour juice we didn’t want to drink, it’s highly positive to be real about what we are dabbling in.
Crypto isn’t the panacea investors are looking for and for the diehards, it won’t replace the US dollar and it won’t have a glorious network of daily payments.
Bankman-Fried alluded to the hope that Bitcoin could represent a safe store of value, but even saying that, look at what’s going in with stable coins and their values dropping by 99%.
There is a lot to sort out in the crypto world and the first six months have doled out a few crushing uppercuts.
I am highly bearish in the short-term on crypt assets and the altcoins is something nobody should touch as the stable coin fiasco could spill its other marginal coins.
BILLIONAIRE CRYPTO ENTREPRENEUR SAM BANKMAN-FRIED
