Mad Hedge Bitcoin Letter
August 2, 2022
Fiat Lux
Featured Trade:
(POWELL BOOSTS CRYPTO)
(BTC), (ETH)
After Bitcoin’s nosedive from $31,000 to $19,000, the digital gold has transitioned into a phase of low volatility.
This lull has helped out stabilize the asset class.
At one point, $12,000 was on the table but now, as recessionary fears have started to creep back into the market psyche, an expectation of loosening the liquidity regime appears to be in the cards.
Or so that is what the market is pricing in and when we look at the Fed Funds rate, it shows a forecast of interest rate cuts starting after March 2023.
Interest rate cuts are highly bullish for cryptocurrency because lower interest rates mean easier access to borrowing money to pour into alternative assets like crypto.
The tighter the money policy, the more conservative investors become preferring to invest in real estate and energy assets.
This year certainly hasn’t been the year of Bitcoin, yet we roll into the last half of the year hoping that 2023 will deliver rate cuts to crypto traders.
Positive signs have been filtering through following the Federal Reserve's announcement to raise interest rates by 75 basis points, bitcoin climbed over $24,000.
Ethereum has more than doubled bitcoin’s gains over the same period, jumping as much as 57%.
The future expectation of rate cuts has been boosted because of US Central Bank Governor Jerome Powell’s weak testimony.
Signaling the bringing forward of rate cuts because a recession could come is bullish Bitcoin.
However, the current problem we have is 9.1% inflation devouring the 2.5% Fed Funds rate.
The probable result is when the Fed finally does pivot to a more dovish stance, it will do so while admitting defeat to inflation.
In the most recent Cleveland Fed inflation expectations, July is estimated to be 8.8%.
To be sure, the total market capitalization for all crypto assets is still down roughly 60% from its peak reached in November 2021. But cryptocurrency prices have rebounded over the first half of July with fresh buying having sent the sector's total market cap back above $1 trillion.
The 200-day moving average (DMA), which traders use as a technical gauge for whether an asset's trend is broadly higher or lower, still sits far above current levels and is declining for both bitcoin and ether.
As far as crypto fundamentals go, Ethereum's merger is a potential positive for markets through the summer. Core developers of the Ethereum blockchain have slated its software upgrade from proof-of-work to proof-of-stake, the so-called "Merge," for as early as the week of September 19.
People like hearing hard dates and we are still waiting for one from Ethereum.
Ultimately, what is abundantly clear is that the lack of appetite to raise rates is good news for all risk assets as we move forward into 2023.
This means we won’t see a repeat of a disastrous sell-off that occurred the past year in crypto.
Since the middle of June, the bitcoin dip has been bought and I can easily see a scenario where crypto continues to inch up if inflation comes down to a 5-7% range which is entirely possible.
Crypto, the industry itself, has a lot of work to do, but the macro picture is what is powering the price right now.
“The function of leadership is to produce more leaders, not more followers.” – Said American Political Activist Ralph Nader
Mad Hedge Bitcoin Letter
July 28, 2022
Fiat Lux
Featured Trade:
(ANOTHER 130 MILLION)
(BTC), (AMZN), (MSFT), (GOOGL)
No private foreign capital or investment will penetrate Ukraine for the foreseeable future.
Every Ukrainian under 40 years old is now making a mad dash for higher ground to put their money in safer places.
The Ukrainian hryvnia has lost 25% of its value while artificially suppressed and this is just the beginning.
It could trigger a vicious cycle all the way to zero where like a hot potato, Ukrainian citizens try to rid themselves of local currency as fast as possible.
Like I said, there are others out there with similarly non-influential currencies, pretty much every ex-Soviet republic not in the European Union in the likes of Georgia, Kazakhstan, Moldova, Azerbaijan, and Armenia of the South Caucasus.
When you add up the population in the likes of Uzbekistan and such, then that totals roughly 130 million people.
These 130 million people, like El Salvadoreans, need to target securing alternative currencies.
For people who haven’t traveled to these esoteric places, US dollars are in high demand and hard to find and families hold on to them for dear life like a newborn child.
So, if the choices are Bitcoin or worthless paper, then between these two, the decision is rather straightforward.
Ukrainians are slowly coming to the realization that these are their options.
Recently, the Government of Ukraine has passed a law that legalizes Bitcoin and other cryptocurrencies.
The law grants legal status to virtual assets. The law not only grants users the right to operate cryptocurrencies but also defines the clear rights and duties of all market participants.
Ukraine’s government also approved the law regarding cloud services as a whole.
The bill’s goal is to create conditions for the processing and protection of data when using cloud computing technology, as well as providing cloud services and determine the specifics of public authorities’ use of cloud services, as well as more efficient use of public resources through the introduction of new technologies.
The new law will expedite the entry into Ukraine of the world’s top cloud service providers – Microsoft (MSFT), Amazon Web Services (AMZN), and Google (GOOGL) Cloud – and encourage the construction of data centers.
The Ministry of Digital Development has previously said that it planned to expand the market for “virtual assets.”
Virtual assets are divided into two categories in the draught law: secured and unsecured virtual assets.
A secured VA is an asset that verifies property or non-property rights, such as the right of claim on other objects like stablecoins, and is secured by fiat currency, securities, or any sort of offline asset.
All other sorts of cryptocurrencies and crypto-based assets, such as non-stable coins like Bitcoin, non-fungible tokens, and so on, are classified as unsecured VAs.
Therefore, it’s not surprising to find out in the latest data that the adoption of Bitcoin and other cryptos in Ukraine has skyrocketed.
Non-profit donors looking for donations are also being paid via Bitcoin.
The rapid legislation of course would not have occurred if not for the Russian situation, but either way, adoption is adoption and add another 50 million or so Ukrainians to Bitcoin’s growth story.
Eventually, Africa and South America will join the adoption phase as they also preside over rapidly depreciating fiat currency.
I’m shocked that Argentina hasn’t ventured this way yet, put them down for the next country in the crypto queue.
Even if Bitcoin is suffering a bout of weakness due to exogenous shocks, the long-term price trajectory should find a floor because of the demand for these 3rd world countries.
“Our basic thesis for bitcoin is that it is better than gold.” – Said American Investor Tyler Winklevoss
Mad Hedge Bitcoin Letter
July 26, 2022
Fiat Lux
Featured Trade:
(THE ART OF BITCOIN MINING)
(BTC), (ASIC), (GPU)
What Is Bitcoin Mining?
Bitcoin mining is the way in which new coins are added to the existing supply of the cryptocurrency known as Bitcoin (BTC).
These transactions are confirmed by the network and represent a critical component of the maintenance and development of the blockchain ledger.
Cryptocurrency mining is attractive to many investors interested in cryptocurrency and the most profitable are able to do it on a large scale incorporating an industrial mindset.
Granted, the units of economics of crypto mining have suffered in the short term because of spiraling energy costs.
But Crypto always ebbs and flows from crypto winters to crypto summers.
How Do I Mine Bitcoin?
Mining Bitcoin is not for the faint of heart.
Your computer must solve complicated math problems that verify transactions in the currency.
When a bitcoin is successfully mined — the miner receives a bitcoin.
One can use a normal computer that has a CPU, motherboard, RAM, and storage to mine bitcoin.
The only difference and the most important requirement here is the graphics processing unit (GPU) or the video card.
A high-performance GPU is a must if a person wants to mine Bitcoin.
Bitcoin mining is done using hardware called ASICs that is short for Application-Specific Integrated Circuits.
Another obligatory requirement is electricity for mining machines.
The largest bitcoin miners are usually found in countries with low-cost electricity.
Miners need robust infrastructure to mine mainly energy and equipment.
How do I do it at home?
A company called Compass Mining is betting that individuals will want to partake in bitcoin mining.
There’s a lucrative payout — if you’re lucky enough to mine a coin.
But the hassle of operating a mining rig can certainly cut into profits.
Compass’ new retail program will allow the purchase of a single application-specific integrated circuit (ASIC) mining rig that they can set up at home.
Mining corporations usually buy in bulk — this finally gives the little guy a chance.
Brands include top-of-the-line ASICs WhatsMiner series from MicroBT and the Antminer series from Bitmain, offering 78 to 95 Tera hashes per second and ranging in price from $8,100 to $10,400.
Profitability calculators can help you estimate your potential ROI.
Rigs are noisy and hot so it’s not for everyone.
Potential miners really need to do their due diligence if they want that sort of environment in their house.
About the size of a desktop computer tower, they can emit between 50 and 75 decibels of noise, which is roughly the same level as a vacuum cleaner or a hairdryer.
Just like the work-from-home paradigm was borne out of the pandemic, many who want to mine bitcoin, wish to do it from the confines of their couch and man cave.
The demand for mining hosting sites in North America has been outstripping supply. Encouraging bitcoin enthusiasts to set up their own operations at home is one way to relieve the pressure on existing hosting infrastructures.
China has shown us their cards by initiating a blanket ban on cryptocurrencies opening up opportunities for alternative miners.
The crackdown nearly halved the mining difficulty for the entire Bitcoin network. Miners outside China have been able to mine more bitcoin given the record low mining difficulty, raking in high revenue.
Corporate self-mining companies, such as Marathon and Riot, as well as third-party hosting sites, are facing a shortage in infrastructure to support more mining operations.
Once crypto comes back, we will all laugh at how 2022 was an aberration for the crypto world.
“Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.” — Said Author Nassim Nicholas Taleb
Mad Hedge Bitcoin Letter
July 21, 2022
Fiat Lux
Featured Trade:
(HOW TO SET UP A CRYPTO TRADING ACCOUNT)
(BTC), (COIN)