“Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.” – Said CEO of MicroStrategy Michael J. Saylor
Mad Hedge Bitcoin Letter
January 18, 2022
Fiat Lux
Featured Trade:
(SELL THE RALLIES)
(BTC)
The interest rate hangover continues to hammer the leveraged crypto markets as the price of bitcoin (BTC) is stuck in neutral.
The silver lining around this whole situation is that Bitcoin hasn’t crashed and is clinging onto that $40,000 level which appears to be the proverbial line in the sand.
I can’t say the same for tech stocks who have been shown no respect whatsoever in this sell-off and will continue to get shut down until investors feel an interest rate bottom can be formed.
Short-term bearish signals are running riot with retail investor sentiment on social media turning negative since late last year with the recent downward price momentum providing a self-fulfilling prophecy.
Taking a barometer of the social media forums shows us what’s bubbling under the trading surface because bitcoin traders coalesce around these forums to offer us insight into the real mentality of traders.
Bitcoin’s market capitalization has tracked the growth of the global money supply since late 2013.
The annual change in money supply hit a high-water mark in February 2021, while bitcoin’s annual growth rate reached a peak a month later in March and these two are very much correlated.
In the long run, cryptocurrency’s usage as a payment exchange of value is what will give us higher prices.
The problem I have right now is with how the market is starting to view crypto assets in the short term as a speculative type of technology asset even though that’s not entirely true.
To get down to the nuts and bolts, crypto and its nascent industry haven’t matured enough to shake that speculative label and now they are getting penalized for it with higher interest rates.
Truthfully, crypto still needs the perfect storm of variables to go its way to supercharge the price of crypto, and recently many of these variables have reversed.
The result is the incremental Bitcoin trader fleeing the asset like rats fleeing a sinking ship.
Recent data showed that bitcoin’s correlation with the M1 money supply has risen to 0.77, suggesting a strong statistical relationship between the two.
But with the Build Back Better legislation halted, where does the incremental free money come from?
There are still many long-term positive signals coming from the crypto industry like rampant hiring.
Crypto jobs pay well and offer high salaries — even more importantly, they are highly appealing to Generation Z which has a good 50 years of work in them ahead.
The positive trend in crypto careers will mean more innovation leading to a better product.
Crypto hiring outstripped price action in 2021, as crypto job searches soared by 395% in the United States alone, according to LinkedIn.
Critically, the crypto industry outpaced the wider tech industry, which also saw overwhelming hiring success, almost doubling its number of job listings. However, at 98% growth, the tech industry pales in comparison to crypto jobs, which gained a whopping 395%.
Also, I’d like to point out that tech jobs are starting to bleed over into crypto jobs as the early iterations of the metaverse are being hammered out.
This is occurring through the gaming industry which has been earmarked as the launching pad for the future internet 3.0 or metaverse.
Eventually, these two sectors will fuse together which is highly bullish for the price of crypto.
Some type of crypto offspring will be needed as a payment vehicle inside the metaverse.
Sure, we aren’t there yet but it’s coming soon.
The lions’ share of job postings was in software and finance, other industries are also seeing a rise in demand for crypto talent.
These include professional services like accounting and consulting, as well as the staffing and computer hardware sectors.
Platforms with the most generous crypto hiring - Coinbase has over 250 openings, Kraken over 300, and the world’s most active exchange, Binance, lists more than 600 job posts.
There are healthy signs under the surface but hiring will be killed if Bitcoin is cut in half.
At this level of $40,000ish, the price still justifies another wave of hiring which is why holding these levels is utmost critical to the short-term direction of Bitcoin.
From a trading point of view, I would sell any substantial rally short-term in Bitcoin until we get more visibility about monetary policy.
“We must ensure that technology is accessible, affordable, and adds value.” – Said Indian politician serving as the 14th and current prime minister of India Narendra Damodardas Modi
Mad Hedge Bitcoin Letter
January 13, 2022
Fiat Lux
Featured Trade:
(THE TURKISH LIRA AND THE DEATH CROSS COME INTO PLAY)
(BTC), (LIRA), (ETH), (USD)
The infamous Death Cross is just around the corner again staring us in the face as another potential liquidity event could drive us lower or higher.
Even if you don’t fancy dealing with this phenomenon, algorithms lap it up and these technical events signal short-term price momentum and the direction of it.
To get even more exact, the death cross is the situation in which an asset's average price over the last 50 days drops below that of its 200-day moving average, an indication that its momentum is toast.
And this event is even more scrutinized after Bitcoin’s disgusting start to the year that has left it languishing in the lower $40,000s.
Not exactly the start we wanted and lots of complaints about the dufus called Fed Chair Jerome Powell and his handling of monetary policy.
Now, we should zone in on the big whales — the ones that hold massive amounts of Bitcoin and by that, I don’t mean 1 BTC or 1.2333 BTC.
All eyes are on them, many have said they will hold until infinity, but that’s easier when you bought BTC 10 years ago and not at $60,000 per unit which is what many retail traders did last year.
As we inch towards the vaunted death cross, will this trigger a 10% escape hatch that deadens the asset?
So far in 2022, Bitcoin has outperformed for just a few days and has been under relentless selling pressure.
To make matters worse, Ethereum appears to be forming a death cross as well.
The macro turning putrid has had a meaningful effect on the drop of Bitcoin prices, and if BTC can get through this death cross quagmire by holding onto the $40,000 level, then that could signal greener pastures ahead in the mid-term.
Speculative investments like Bitcoin are being abandoned under such aggressive tightening. Reports show only 5% of the clients surveyed by JPMorgan Chase expect Bitcoin to reach $100,000 per piece by the end of 2022.
Although the "death cross" is a bearish indicator, Bitcoin's historical record surrounding the indicator remains unclear. When the metric appeared last June, Bitcoin’s performance was dismal. But when the metric appeared last March, Bitcoin’s performance was strong. The emergence of this indicator in November 2019 sent Bitcoin lower.
As the U.S. economy is grappling with rip-roaring inflationary prices searing through the consumer prices to home prices, emerging countries are doing so bad with inflation that some are already completely giving up their own fiat currency.
Sure, El Salvador sucked up all the headlines for nationalizing Bitcoin as the de-facto medium of exchange for their citizens, but Turkey and its massive population of 84 million straddling the European continent have comprehensively pivoted towards Bitcoin as hyperinflation wrecks the purchasing power of the Turkish Lira.
The situation in Turkey is what crypto fanatics want to happen in the United States and it also represents what could unfold if the US Federal Reserve neglect doing their job.
Luckily, we are nowhere near that yet.
The Turkish lira has become so unpredictable that bakeries are closing down by the thousands citing a local currency that has lost most of its value.
In Turkey, cryptocurrency trading volumes using the lira exploded to an average of $1.8 billion a day across three exchanges, according to blockchain analytics firm Chainalysis.
Turks favor stable coin tether, whose value is pegged to the dollar.
The rise of cryptocurrencies in recent years has presented a unique tool kit in which to store wealth, albeit far more volatile, and the shortage of US dollars circulating has forced the hand of the average Turk.
The Turkish lira has lost 40% of its value against the U.S. dollar in the past 5 months.
In the capital Istanbul, on the ground level, the local bazaars are accepting Bitcoin as standard currency over their own Turkish Lira.
This trend could mirror the future for some of these marginal economies that are run into the ground by renegade dictators.
Although the U.S. Federal Reserve has been irresponsible, the degree of policy mistake in Washington is nowhere near as atrocious as the events in Turkey.
There are numerous countries whose population could resort to crypto as a store of wealth including every ex-Soviet republic, big swaths of the Middle East, and major areas of Central and South America along with all of Africa.
My guess is that over time Bitcoin gets elevated as the de facto third currency behind the U.S. dollar and Euro. At this point, Bitcoin is too big to fail and too big to get rid of.
In a time of desperate need and no access to dollars and euros, Bitcoin is giving hope to large parts of the world as the pandemic and omicron inches closer to their shores.
Wait out this sideways correction then we march higher.
“We've arranged a civilization in which most crucial elements profoundly depend on science and technology.” — Said American Astronomer Carl Sagan
Mad Hedge Bitcoin Letter
January 11, 2022
Fiat Lux
Featured Trade:
(ANOTHER TECH COMPANY BETS THE RANCH ON BLOCKCHAIN)
(GME), (NFT)
GameStop Corp is getting into the nonfungible tokens industry and eyes the crypto industry to launch its new growth strategy.
What are Non-Fungible Tokens (NFT)?
NFTs are coded on the Ethereum blockchain. Ethereum is a cryptocurrency, but its blockchain also supports these NFTs. NFTs store extra information that programs a piece of code uniquely tying it to a specific item.
This unique and non-interchangeable unit of data is stored on a blockchain, a form of digital ledger. NFTs are usually associated with reproducible digital files such as photos, videos, and audio.
NFTs use a digital ledger to provide a public certificate of authenticity or proof of ownership, but do not restrict the sharing or copying of the underlying digital files.
GME intends to create a division in which a marketplace facilitates the buying, selling, and trading NFTs of virtual videogame goods such as avatar outfits and weapons.
They are also likely to sign partnerships with two crypto companies to share technology and co-invest in the development of games that use blockchain and NFT technology, as well as other NFT-related projects.
This could trigger another avalanche of capital into this new industry that has commanded hundreds of billions of new investments in just a few years.
Crypto is the predictable landing stop for GME as their retail gaming business has failed in the face of the pandemic and their stock was only saved by a Reddit Army bidding up the price of the stock in order to dissuade hedge fund managers to profit off its decline.
The truth is that GME’s business model has been crushed as the gaming industries have been uploaded to the cloud and consumers are opting to directly download titles they want straight from their Wi-Fi connection.
Waiting around malls for people to come and pay in-person is an outdated model and instead of joining the cloud and copying the rest of the industry, this drastic change signals they are ready for something vastly different.
They tried executing a few technical changes in order to stage a turnaround, but its loss widened compared with the same period a year earlier. The revenue growth came from sales of hardware and accessories, while revenue from game software slipped 2%.
GME is involving itself in blockchain and NFT technologies as a last-ditch effort to be relevant again.
Luckily for GME, blockchain and NFT is where all the action is and new venture capital is stacking its chips in the fledgling industry as well.
That doesn’t mean they are going to turn the ship around in one day but of course, you want to be where the pie is growing.
GME shares had plunged by more than 45% over the past six weeks signaling that internally, they are desperate for wholesale changes.
The meme mania has largely worn off and to rejuvenate the mediocre business model they are looking for the magic bullet.
It’s not just GME getting in early, a marketplace called OpenSea said it raised $300 million in venture capital and is now valued at $13.3 billion, greater than GMEs valuation of close to $10 billion.
The videogame industry is more than likely to be first mover in the adoption of cryptocurrency, NFTs, and blockchain technology.
Gamers are poised to be among the first to embrace the technologies because this environment feels like something they could make the next jump to conceptually.
In recent weeks, some of the industry’s biggest publicly traded videogame companies have launched or announced plans to sell NFTs, including Ubisoft Entertainment, Zynga, and Square Enix.
GME is among many that are hoping to front-run other investors before this industry explodes 10X which could easily happen.
They don’t want to miss the big thing and they clearly made errors by avoiding the cloud.
NFT is just one technology that has exploded from blockchain and there will be many iterations of useful software that will need to be decentralized in nature.
NFTs have caught on quite well with famous athletes, actors, and musicians who are looking to secure proof of ownership of a digital good representing their image and likeness.
The idea is genius, but some might question if a stash of code is really proof of ownership.
Naturally, there will be non-believers and believers, but if the stars of the world are convinced, which many have already sold items as NFTs, then I believe it will legitimize an industry moving forward and it will grow 100X in the next 10 years.
Or it could easily evolve into something more secure and complex with the next iteration of NFTs.
To grow a tech company, firms are starting to bet the ranch of decentralized apps and crypto.
This is only positive for the long-term sustainability of crypto as we inch towards the metaverse.
“It has become appallingly obvious that our technology has exceeded our humanity.” — Said Scientist Albert Einstein
