Chairman of the SEC Gary Gensler is not hiring 87,000 new SEC agents who will form the backbone of the SEC and “carry a firearm and be willing to use deadly force, if necessary.”
No, that’s the Internal Revenue Service (IRS) but the SEC is starting to trend in that direction in regard to how it views the crypto industry.
We aren’t at the point of the SEC raiding crypto exchanges. That stuff only happens in places like Palm Beach, Florida.
Gensler’s recent message to crypto has essentially been to get with the program or face a tortuous existence.
His defiant message appears to be falling on deaf ears as the crypto industry has felt they should be entitled to a new set of lenient rules than conventional assets.
I can tell you this has worked out quite poorly for crypto companies who have willfully placed a bullseye squarely on their forehead.
In a recent speech, Gensler criticized the crypto industry, telling an audience of lawyers that the “vast majority” of the nearly 10,000 existing crypto tokens are securities, being issued to the public in violation of federal laws.
He argued that through statements and dozens of enforcement actions, the SEC has made clear how existing law applies to the industry and that no such rules are forthcoming.
Gensler said investors deserve disclosure to help them sort between investments that they think will either flourish or flounder.
The SEC has been adding to its enforcement staff dedicated to protecting investors in the crypto market, announcing in May that it was adding 20 new positions in the newly named Crypto Assets and Cyber Unit, nearly doubling its size.
Crypto infrastructure companies have knowingly avoided the law and SEC as securities exchanges and broker-dealers by failing to properly register while continuing business as usual.
They also believe the products sold aren’t “securities” in the way that the SEC believes they are.
In their world, tokens are like gaming chips or collector’s cards.
We have a word for what they are doing in the English language – illegal.
Coinbase Global Inc. (COIN), the largest publicly traded crypto exchange, said in its most recent quarterly report that the company is under investigation by the SEC, and has received a list of questions about how it chooses which digital assets to list and how it classifies them.
The SEC brought charges in July against a former Coinbase product manager for insider trading, identifying nine tokens it alleges are securities, which were listed on the exchange. Coinbase has said that it disagrees with the SEC’s classification.
In February, the crypto lending platform BlockFI agreed to pay a $100 million for failing to register with the agency.
Gensler said that the SEC will have to come up with new procedures for registering crypto exchanges because they also offer custodial and broker-dealer services, unlike typical stock market exchanges.
I understand that some of these crypto exchanges are a little different from what some of the retail stock exchange platforms are selling, but skirting the law now just means the penalties will be even harsher down the road.
This is not the era of Facebook when the internet police had no idea what was going on with them.
It took decades for sentiment to shift against big tech.
However, from inception, crypto has been unable to shake the stereotype of being a fly-by-night operation and large swaths of it sure appear to be sketchy and they are policed as such.
The brand damage is immense causing the incremental investor to abstain from crypto and the regulators to clamp down even further on crypto companies and products.
We are seeing this in real-time.
The regulation is a footnote on a bull run on the way up, but now crypto has shot itself in the foot and is having a hard time convincing new investors into the asset class precisely because of a loss of trust.
https://www.madhedgefundtrader.com/wp-content/uploads/2022/09/bitcoin.png6811430Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-09-15 15:02:152022-09-15 16:46:09Picking A Fight With Gary
I get many inquiries asking me how to set up an account to buy Bitcoin (BTC) and so it’s gotten to the point where I will walk new readers through the process of setting up a cryptocurrency account at Coinbase (COIN).
The signup process is actually highly straightforward and only takes minutes.
Why sign up for Coinbase?
This is an exchange that is highly popular and already has a large customer base.
Investors who can’t stomach the higher risk of exposing capital to an unregulated exchange should just dabble in bitcoin-connected ETFs which is completely reasonable.
Due to a spate of recent crypto exchange bankruptcies, some might be hesitant to get their capital tied up in bankruptcy hearings, but it’s my job to let readers know this option is out there.
COIN is still a major part of the crypto infrastructure.
Readers just only invest as much as they are willing to lose in crypto due to its higher than median volatility and underperformance the past 10 months.
Let’s get this party started.
1)
As many might assume, one must open their browser and head to www.coinbase.com to kick off the process. Once there — you’ll be greeted by an interface where the right choice is to click “sign up” in the upper right corner.
2)
A screen box pops up requiring personal information which is basically a full name, email address, password, and state. I am also assuming the user is from the United States. After clicking the agreement that the user is 18 years or older and consenting to the user agreement, click “Create account.”
3)
Technically, an account has now been created and a screen pops up offering $5 of Bitcoin if one verifies a photo ID which is completely optional. The screen let me know that it was a “limited time offer” so this offer might be gone when others sign up or it might still be there. Either way, click “Continue.”
4)
After the creation of the account, the next step is to click the verification link in the email that was provided. Simply go into the email inbox given, open the email, and click “Verify your email address.”
5)
The next step is to provide a phone number for a two-step verification. This added level of security, makes it so it’s difficult to use your account without your phone number. Select the country, enter the phone number, then click “Send code.”
6)
Enter correct authentication code sent to the phone number provided then click “Submit.”
7)
Select citizenship of the account holder then click “Submit.”
8)
Verify identity by filling in personal information including full name, date of birth, street address, city, last 4 digits of social security’s number, and zip code. Then answer a few more questions about what you will use Coinbase for, source of funds, and employment status then you’re good to go.
9)
The last step of verifying your info are two questions asking the user “How much do you expect to trade per year?” and “What industry do you work in?”
After you answer these two, then click “Submit.”
10)
That was the last of the personal questions and after clicking submit, the new user is directed to the trading interface showing a portfolio balance of $0.00. The next step is to click “Add payment method” in order to divert some fiat currency into the Coinbase account.
11)
There are different options available, and I personally chose “Bank Account” for its ease of use and free fees.
12)
A box pops up asking me to agree to the Plaid End User Privacy Policy. This is software that links Coinbase to your bank account.
For anyone who doesn’t want that linked, I would advise using one of the other three options.
Click “Continue” to proceed.
13)
Select your bank — provide your bank information.
14)
Bank Account is now linked — immediately buy any cryptocurrency available on Coinbase. Pat yourself on the back for a job well done!
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/bitcoin15.png506882Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-07-21 15:00:422022-07-21 16:11:34How To Set Up a Crypto Trading Account
Get your digital coins off Coinbase (COIN) asap. That’s the big takeaway of another crypto platform freezing.
I told you this could happen again, and it did.
This is yet more unwanted optics for the digital gold and its pitiful infrastructure whose bellwether coin crashing down to $19,500 has kicked up an avalanche of system risk.
This asset class simply will not have a future if crypto exchanges, lenders, middlemen, stablecoins, and the broad network just freezes after customers want their money back.
We need to put this under the category of not good enough.
Delivering back funds upon a requested withdrawal is the cornerstone of trust for any industry.
Crypto is failing miserably at basic safeguarding of funds and they have nobody to blame but themselves as crypto lender Vauld on Monday paused all withdrawals, trading, and deposits on its platform and is exploring potential restructuring options.
The shake-out is clearly not over and it’s really who’s guess to which crypto company is next.
Vauld CEO Darshan Bathija said on Independence Day that the company is facing “financial challenges” due to “volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate” which has led to customers withdrawing more than $197.7 million from the platform since June 12.
Many future investors won’t invest in any crypto risk assets if the CEO says one day everything is perfect and a few days later the platform is down.
It’s flat out misleading.
This is certainly a black eye for the “decentralized” thesis that has morphed into a money confiscation operation which will damage long-term trust and accountability of the asset class.
In the next bull market, if there is another one, many investors will remember when multiple lenders and exchanges froze funds when Bitcoin went down in price.
So apparently these platforms only work for the customer if crypto is going up.
The ridiculousness then leads to investors to question at what percentage sell-off is their crypto broker going to pull the rug and screw them over.
This is why many conservative investors gravitate towards regulated market with cash flow which crypto certainly is not.
Also, insurance is another massive failure precisely because it’s unregulated.
This will ostensibly turn into a big negative feedback loop with systemic risk attracting government regulators causing Bitcoin to drop further and then inviting another wave of regulators on top of the first round of regulators.
Who wants to be a part of that circus?
Pushing the false narrative that regulation is akin to communism and that centralized money is the worst thing out there has really come back to bite the crypto community.
The industry was clearly overhyped when it didn’t need to be.
Crypto clearly needs a reset after many of the companies that surround the ecosystem are in panic mode because of insolvency issues.
It’s almost as if the only thing working is Bitcoin itself and nothing else.
Just like the health and military crises which really exposed the thoughts and values of individual people, the rise in interest rates has exposed crypto as not as good as first advertised.
https://www.madhedgefundtrader.com/wp-content/uploads/2022/07/vauld.png6901490Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-07-05 12:02:472022-07-05 15:28:10Crypto Infrastructure Hanging By A Thread
The crypto exchange Coinbase (COIN) which is one of the biggest in the market offers us a glimpse into the crypto world by default because of the earnings reports they deliver via the public markets.
Its stock price is down 75% since it came public mirroring the plight of its bellwether coin Bitcoin (BTC).
Many people I talk to get peeved at how stocks usually perform once they go public.
Going public for COIN has meant going ex-growth and a nasty drop in valuation for investors.
To say COIN has underperformed the market is an understatement.
They went public around the euphoria of the Bitcoin rise to $65,000 and the aftermath has been brutal.
COIN continues to be hit with rafts of analyst downgrades even after being down 75% and that’s how bad the analyst community views the stock.
No dead cat bounce or no reversion to the mean for COIN!
Not only are crypto prices down across every coin that is relevant, but crypto traders have thrown in the towel.
COIN doesn’t charge trading fees, but they do sell the customer order flow to high-frequency trading firms that profits from retail orders.
The spiral downwards is like a self-fulfilling prophecy with orders drying up resulting in staff layoffs and rescinding already agreed upon new hires resulting in low morale grappling with negative revenue growth.
Cost will need to come down fast because the market won’t be favorable to the guidance of next quarters’ earnings report.
COIN quickly became the equities market poster child for the boom in digital currency prices last year with the largest US cryptocurrency exchange seeing its value surge above $75 billion as Bitcoin hit a record high, but I do believe upcoming regulation will force their business model down the drain.
Also, when a company’s customers become impoverished by losing boatloads of money in the very market the company makes a market for, the future doesn’t sound too appealing to investors.
The once $75 billion company is most likely worth $5 billion today and if customer order flow is made illegal, which the SEC is trying to achieve, then the company is worth $100 million at best maybe not even that.
Heightened competition from other firms has also undermined the stock.
Earlier this month, Binance revealed that it would be offering zero-fee trading for Bitcoin and said it had plans to also eliminate fees on other tokens in the future.
COIN still has an expense outlay of $1.7 billion to shave down.
As Bitcoin hangs on for dear life at $20,000, it could be a death blow once Bitcoin sells off to $12,000.
Much of the synergies that triggered its meteoric rise are gone and the dip buyers have vanished.
I do believe that selling rallies is most likely the best strategy right now in Bitcoin.
The public reports from the exchanges couldn’t be worse and then one must question will COIN also institute a withdrawal freeze like others have if capital bleeds uncontrollably?
A withdrawal freeze is the antithesis of decentralized money and I do believe there are a lot of alienated folks out there who believe in crypto but were highly disappointed by the first 6 months in 2022.
$12,000 appears as the natural reversion point as $20,000 has gone from support to resistance on a technical level.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-06-28 15:02:282022-06-28 17:09:30Coinbase Licks Its Wounds
Below please find subscribers’ Q&A for the June 1 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.
Q: What are the 3 best stocks to own for the end of the year?
A: Apple (AAPL), Alphabet Inc. (GOOGL), and Microsoft (MSFT). Those you want to buy on meltdown days, kind of like today. Make sure you scale into these—so maybe buy 20% on every down-500-point Dow day. Eventually, you’ll end up with a pretty decent position at a market low in a stock that will double in 3-5 years.
Q: Why these three stocks?
A: Lots of reasons: They’re huge, they’re safe, two out of three pay dividends, Alphabet is about to split, and they have huge moats so nobody can get into their sectors. They have near monopolies in what they do, and they have immense cash on the balance sheet. These are the kind of stocks that portfolio managers dream about. And watch what rallied the hardest in the last dead cat bounce we had—it was these three names. That tells you that they will lead any long-term bull market in the future. These are the stocks that people want to own.
Q: What will bring your predicted second half-bull market in the stock market?
A: Inflation drops from 8% to 4%. That will happen for a couple of reasons. The year-on-year comparisons become highly favorable starting from next month when inflation started to take off a year ago. Inflation numbers are going to be climbing the wall of worry from here on out. That could get us down to 4% by the end of the year. The second reason is the Ukraine War either ends or becomes a stalemate and is no longer a factor in the global markets, and we’ve had time to replace all the Russian oil and Ukrainian wheat.
Q: Are banks positioned to benefit from the coming rally?
A: Absolutely. I think big tech and banks will be the top-performing stock sectors for the next five years because inflation will go away, recession fears will go expire, and credit quality will improve, but interest rates will remain 300 basis points higher than they were during the pandemic. Buy (JPM), (BAC), and (C) on dips.
Q: What will be the worst performing sector?
A: Energy—anything energy-related will get absolutely slaughtered, which is why I don't want to touch it with a ten-foot pole right now. That includes oil companies, exploration companies, E&P companies, and master limited partnerships, as well as coal and other natural gas stocks. So, if you’re long these names don’t forget to sit down when the music stops playing. You could get your head handed to you at the end.
Q: Can we make lower lows?
A: Yes, that’s entirely possible. Market moves are basically random when you get down to these levels— down more than 20%. And on all future downturns, I would be spending your cash going back into the market expecting a second half rally.
Q: What about green energy?
A: Unfortunately, green energy is very tied to old energy because $120 oil makes green companies much more competitive from a cost point of view. So, I’m not going to go piling into green companies right here, especially if I think oil is topping out in the near future. Buying green energy companies here is the same as buying oil at $120 a barrel.
Q: What is the best way to play the declining US dollar?
A: Buy the iShares MSCI Emerging Markets ETF (EEM). Also, the Aussie dollar (FXA) and the Canadian Dollar (FXC), which benefit tremendously from commodity prices, which will rise for another decade in a global economic recovery.
Q: Why will energy be the worst sector?
A: If you end the war in the Ukraine or you replace Russian oil, either by finding new sources of oil, getting other producers to increase production which they can do (including the US), or by accelerating the move to alternatives, then you move oil back to pre-invasion prices which were about $70 a barrel or $50 lower than they are here.
Q: Best way to hedge a falling market?
A: Do what I'm doing: keep a balanced portfolio of longs and shorts, that way you always have something that’s going up. And if you do it through the options, you have time decay working for you on both sides of the equation. If you want to go outright, buy outright puts on individual stocks because they had double the moves of the indexes. And go to my short selling school which you can find by going to my website at https://www.madhedgefundtrader.com. There’s actually 12 different ways to benefit from falling markets.
Q: How deep in the money can we go on our call spreads?
A: Wait for the Volatility Index (VIX) to go over $30, and then go 15-20% in the money. And yes, you only make 10, 15, or 20% on those positions in a month but then you put together ten of them and that adds up to quite a lot of money. You want to find the position that has the greatest probability of happening—i.e. something that’s 20% in the money. Do that when the market has just dropped 20%, which it already has, and then you have a position that has a minuscule chance of losing money.
Q: How much longer do you see this current bear market bounce lasting?
A: Until yesterday.
Q: What's your favorite commodity ETF?
A: My favorite commodity stock is Freeport McMoRan (FCX), the world’s largest copper producer. Rather than pay the extra management fees for an ETF, I prefer just to go straight to the source and buy (FCX).
Q: When do you think the Fed will pivot to dovish or neutral?
A: This summer. It’s just a question of whether it’s the July or the September meeting.
Q: When you say “buy on dips”, what does that mean? 1%, 3%, 5%?
A: Well in this market, a dip would be a retest of the previous lows which is going to be down 10% or 15% on the major positions in your portfolio. If you’re day trading, a dip is only 1%, so it really depends on your timeframe and your risk tolerance. That’s why I always tell people to scale by doing everything in incremental pieces—20%, 25%, and so on. You never know what the market’s actually going to do on a short-term basis. Randomness can’t be predicted.
Q: If you plan to enter a LEAPS on Apple, what strikes would you do?
A: Well, first of all, I want to see if Apple drops all the way to $125, which is a lot of people’s downside target. If it did, then I would do the $125/$135 call spread two years out, and that will probably double. And if it starts a long term up trend, then I’ll keep rolling up the strike prices. If, say, Apple goes to $125, you put your LEAPS on. If the stock rises to 150, then take profits on the $125/$135 and roll into the $150/$160. That’s how you can get like 1,000% returns like we got on Tesla (TESLA) a few years ago. You just keep rolling up your strike prices on every weak day and maintain your leverage.
Q: When do we bet the farms on Editas Medicine Inc. (EDIT) and Crispr (CRSP) Therapeutics?
A: Never. These are small, highly speculative companies which will make money someday, but if the someday is in five years and you’re betting the farm with a LEAPS, you lose the farm. It's going to take a long time for these smaller biotech stocks to come back. If you want to play biotech, go with the big ones like Amgen. It takes a long time to convert cutting-edge technology into profits. The big companies already have a stable of reliable money-making drugs on hand.
Q: Salesforce Inc. (CRM) is up big on earnings—what should I do with the stock?
A: Buy the dips. It’s still way, way below its all-time highs, so use the weekdays to accumulate Salesforce for the long term. It’s one of the best cloud plays out there.
Q: What do you think about NVIDIA Corporation (NVDA)?
A: I absolutely love it. It rallied 20% off the bottom. Use any other additional weak days like today to increase your position. This stock someday is worth $1,000, up from today’s $195.
Q: Do you like SPACS?
A: No, I hate them and think they’re a rip-off. And a lot of them have become totally illiquid and untradable, so you have no choice but for them to shut down and return their money if they have any left. I’ve hated SPACS from day one and people are now getting their comeuppance on these.
Q: What do you think about the weakness in Coinbase Global Inc. (COIN) down here?
A: It’s just going down with all the other high-risk, speculative, meme stock type plays, which include all of the crypto plays like Bitcoin. I would avoid all of those. You want to buy quality at the discount now, and you want to buy the Cadillacs at Volkswagen prices and leave the speculative plays for the next generation, Gen Z, who are already highly interested in stocks.
Q: What is your favorite non-US country to invest in?
A: Australia, because you get a double play there on the currency, which should go up 30% from here, and they will benefit from a global commodity boom which continues for another ten years. They pretty much sell a lot of the major commodities like iron ore, wheat, sheep, and so on. It’s also a really nice country to visit. The only negative with Australia are the sharks.
Q: Biotech takeover targets?
A: Well (EDIT) and (CRSP) would be two of them. Things in the sector are so cheap that they are all potential takeover targets. M&A (Mergers and Acquisitions) will be a major play in the biotech sector for the foreseeable future.
Q: Should we sell short the defense industry here?
A: No, even if the war ends tomorrow, you might get some profit-taking, but the fact is that long term military spending is increasing permanently. The peace dividend now has to be paid back, and that is great for all the defense companies, so I would not be shorting them. If anything, I’d be buying on dips. Buy Lockheed Martin (LMT), Raytheon (RTX), who make the Javelin antitank missile for which there is now a two-year order backlog. You can also throw in General Dynamics (GD) for good measure which builds nuclear submarines and the Stryker armored vehicle.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Keep Those Defense Plays
https://www.madhedgefundtrader.com/wp-content/uploads/2021/05/john-thomas-gunslinger.png410404Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-06-03 10:02:102022-06-03 10:55:37June 1 Biweekly Strategy Webinar Q&A
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