“When we launch a product, we're already working on the next one. And possibly even the next, next one.” – Said Current CEO of Apple Tim Cook
Mad Hedge Bitcoin Letter
May 3, 2022
Fiat Lux
Featured Trade:
(MINERS CHOKE ON HIGHER ENERGY COSTS)
(MARA), (RIOT), (CAN)
It represents strength that Bitcoin is holding the $38,000 level considering that energy costs have spiraled out of control.
I would consider this a relative victory for Bitcoin.
Like many other businesses, the cost of producing products is important and when the cost of oil is low, crypto miners laugh all the way to the bank.
That hasn’t been the case lately.
It was only just at the end of 2019 that the price of Brent crude was $20 and fast forward to 2022, the price touched $130 and has now settled around the $105 per barrel mark today.
It was no coincidence that Bitcoin’s most recent meteoric rise took place when the nominal cost of energy was half of what it is today.
The most glaring unintended consequence is the distressed nature of Bitcoin miners whom many have gone out of business because they simply aren’t profitable amid uncontrollable energy prices.
To dig deeper in the weeds, electricity comprises 90-95% of Bitcoin mining costs.
There was further news this week that a Russian Bitcoin miner had been included in the latest round of US sanctions. The Swiss-based Bitriver AG had moved its assets to Switzerland last year but found itself in the crosshairs, alongside 10 of its subsidiaries.
Bitriver claims to be the world's largest hosting provider for climate-friendly crypto mining (using renewable energy), and boasts a 100-megawatt data center in the Siberian city of Bratsk which it outsources to foreign miners from the United States and other Western nations.
HIVE (HIVE) is a Canadian miner which produced 278 BTC in March of 2022. The company also mines Ethereum with 2,549 produced, so that can diversify the company away from BTC. However, the company draws down on its ETH holdings to fund its strategic deal with Intel (INTC). The company sold 10,000 ETH to fund BTC rigs.
Ironically, the company has an ETH mining operation in Sweden which is the very nation leading the charge against Bitcoin operations in Europe.
Hive has access to 50MW of power and has an operating margin of 74% at present.
Marathon Digital (MARA) is focused on North American operations, which would shield it from European legislation. Marathon produced a Record 1,259 BTC in Q1 2022, up 556% Year-Over-Year and its total Bitcoin holdings increased to 9,374 BTC.
Like almost everything else that touches money in Europe, European regulation wants to tax and regulate galore which is what countries do when they are highly uncompetitive.
Europe has never produced an influential tech company from scratch and this is one of the biggest reasons why.
Sweden is in the process of regulating HIVEs ETH mining operations out of business in the name of climate change.
The obsession with climate change in Europe leading to the Stockholm syndrome attachment to green energy is just in its early innings.
It’s crystal clear to me that Europe will kick out all of its crypto miners and now there will be a sense of urgency since there is an energy crisis occurring within the European zone.
This all means that crypto miners will migrate to Russia and America with higher margins in Russia because the cost of energy is so low.
Although that is the long-term prognosis of the mining industry, in the short-term, cost challenges handcuff the best of them and the share prices of stocks like Marathon, Canaan (CAN), Riot, and Marathon are down in the dumps.
When the cost of oil retraces nearer to $70, I believe that will be the elixir for higher crypto mining share prices. Until then, rising interest rates and higher energy are something that miners must navigate or go bust.
“This is the perfect means of transportation, something that can take off and land everywhere.” – Said Co-Founder and CEO of Lilium Daniel Wiegand
Mad Hedge Bitcoin Letter
April 28, 2022
Fiat Lux
Featured Trade:
(AFRICA ADOPTS)
(BTC)
The Central African Republic has adopted bitcoin as legal tender which makes it the second country to absorb it as the official state currency after Central American country El Salvador.
Lawmakers unanimously adopted a bill that made bitcoin legal tender alongside the CFA franc and legalized the use of cryptocurrencies.
This makes The CAR the first African nation to use Bitcoin as their national currency.
Many Bitcoin deniers proclaimed insanity when El Salvador adopted Bitcoin as the national currency and to be frank, the experiment hasn’t gone as smoothly as it could have.
Many merchants still prefer hard US dollar bills to Bitcoin, but I would argue, that there are growing pains to go along with it.
There is honestly no playbook for this type of visionary legislation.
The landlocked state is one of the planet's poorest and most troubled nations, with an economy that is heavily dependent on mining.
The introduction was heavily criticized by the International Monetary Fund (IMF).
It warned of "large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection" and with issuing bitcoin-backed bonds.
CAR has made this drastic decision in an aggressive way to attract venture capitalists and hedge funds.
For all those investors who have the privilege of spending dollars and euros, not everyone is from a country where they trust their own currency.
Just look at the Turkish lira.
I have some friends who bought luxury seaside villas in Ankara, Turkey because they thought that it was a guaranteed asset appreciation tool along with the added benefit of being able to take vacations to a gorgeous seaside resort.
In hindsight, the investment has been an utter failure.
Since they bought the property, the local currency has depreciated by 400% meaning they could have waited today and used only 25% of what they paid a few years ago.
I don’t want to sound arrogant, but much of the world still measures their wealth in US dollars and if a country has no access to US dollars in real-time, then why not adopt Bitcoin as an alternative?
Bitcoin is a guaranteed better store of value than the Central African Republic Franc and it is not even close.
Some of the emerging currencies have depreciated by 500% or 600% like the Turkish Lira or the Kazakh Tenge.
Bitcoin will definitely outperform the bulk of these marginal fiat regimes.
In fact, most people have never even heard of these sub-Saharan African republics.
Many are landlocked and are limited economically.
So I would argue that from a risk reward basis, it’s a great bet to make considering their local currency is worth less than the money it is printed on.
Not only that, I would fully expect other poor African countries like Botswana, Eritrea, South Sudan, and Chad to ship on the Bitcoin wagon as well.
The Central African Republic, which has gold and diamond reserves, is one of the world’s poorest nations. Years of violent conflict and a political crisis in the lead-up to presidential elections in December 2020 have had a severe impact on the economy and damaged relations with its international partners, leading to delays in the distribution of aid and some partners suspending budget support.
For many of these countries wrenched by years of war and strife, one might argue that Bitcoin could represent a beacon of financial stability along with a massive incentive to join the internet which only 11% of CAR citizens can claim.
Why not hit 2 birds with one stone.
Like Chinese citizens jumped from cash, bypassed plastic credit cards, to deploy a digital payment system on their smartphone called Wepay.
Why not go from the CAR Franc and skip any sort of solid fiat currency and go straight to Bitcoin.
Many sovereign countries without access to strong fiat currencies are coming to the same conclusion that it’s foundational to go the Bitcoin route than presiding over a currency that nobody in the world has ever heard about and wouldn’t touch with a 10-foot pole.
Welcome CAR to the Bitcoin club.
In 10 years, there will be a paradigm shift in which the consolidation of currencies will most likely leave us with a handful of Western currencies, the Chinese yuan, Russian Ruble, and crypto.
"Brains are the new tonsils. Thanks to the Internet, you don't have to know
anything anymore," said comedian Paul Riser.
Mad Hedge Bitcoin Letter
April 26, 2022
Fiat Lux
Featured Trade:
(THE DOGE EFFECT)
(DOGE), (TWTR), (TSLA), (ETH), (BTC)
One of the more outsized second order effects occurring in the risk markets right now is the boost Dogecoin (DOGE) is receiving from the carnival atmosphere that is Elon Musk buying Twitter (TWTR).
DOGE is up 30% in the past week but down 500% from last May when DOGE experienced a euphoric ride up only to come crashing down.
It’s no surprise that Musk, through his EV company Tesla (TSLA), owns Bitcoin on its balance sheet and he’s on record lately admitting that Bitcoin is the only cryptocurrency that Tesla owns, and they haven’t sold any.
Personally, he owns Ethereum (ETH) and Dogecoin (DOGE) and he specifically mentions the reason for owning Dogecoin is because he likes dogs.
On the surface, it sounds ridiculous that Musk would speculate on an altcoin just because he likes dogs, but people also thought it was crazy he would buy Twitter for $44 billion.
Musk explained he arrived at the conclusion to buy DOGE through a well-known principle called Occam's razor.
That is a philosophical principle that states the simplest variant is usually the best choice.
He then goes on to explain that he subscribes to a variant of Occam’s razor where the most entertaining variant is usually the best choice.
He is entertained by Shiba Inu dogs so he buys Shiba Inu Alt Coins represented as DOGE coin.
Either way, his association with Dogecoin and Bitcoin has done wonders for its short-term price action with Bitcoin and other cryptocurrencies surging.
Perhaps this could be the reason for the short-term stabilization of crypto.
Other factors that could be lifting crypto are U.S. dollar holders looking for alternative assets during the highest inflation in decades; some buying after the American mid-April tax deadline passing; the war in Ukraine and the U.S.’s OFAC sanctioning of Russian bitcoin miners and the ongoing uncertainty about whether the Securities and Exchange Commission (SEC) might approve spot Bitcoin ETFs in the U.S.
Musk also said last month that he wouldn’t sell his dogecoin, and would also continue to hold bitcoin and ether.
Earlier this year, Tesla began accepting dogecoin for merchandise purchases on its website. DOGE holders could be hoping that Twitter under Musk’s leadership may see more of the same — a use case for the token. Late last year Twitter unveiled a tipping function allowing users to send creators bitcoin.
The way DOGE achieves higher price discovery is for the potential for dogecoin to be given more utility on one of the biggest social media networks once Elon has official control of the company.
Every incremental bit helps.
Imagine DOGE freely mingling in and out of Twitter accounts that highly entertain or Musk floating the idea that for $3, every account can get a blue checkmark which has traditionally signaled a large and influential account.
Paying this $3 using DOGE could be the way that Musk integrates DOGE is onboarded onto the Twitter ecosystem.
Other use cases could also find their way into the DOGE coin ecosystem such as a $5 vanilla Twitter registration fee and with a total addressable market like Twitter and the chance to monetize the platform in a different way, I wouldn’t put it past Musk that he has some sort of plan for DOGE, BTC, or ETH.
Musk has been a huge proponent of free speech and during a Ted Talk interview he said buying Twitter “had nothing to do with economics.”
That thought right there could lead to a one-way avalanche of crypto payments embedded all over his new social media company.
Don’t write off DOGE, the richest man in the world might keep pushing it to the public and we already know that every associated Tweet about it results in a higher price.
Mad Hedge Bitcoin Letter
April 21, 2022
Fiat Lux
Featured Trade:
(SHOPIFY BOOSTS DIGITAL GOLD)
(BTC), (SHOP), (MCD), (WMT)
