“What value does cryptocurrency add? No one’s been able to answer that question to me.” — Said US Investor Steve Eisman
Mad Hedge Bitcoin Letter
December 9, 2021
Fiat Lux
Featured Trade:
(CRYPTO REGULATION IS FAR AWAY)
(BTC),
Indecision.
That’s what you get when Washington tries to wrap their brains around crypto regulation.
Cryptocurrency industry executives appeared before Congress to debate whether crypto technologies hold a use case for the future.
A Republican even brought up whether politicians “know enough about this technology to have a serious debate.”
So we are talking about really low levels of crypto comprehension here.
It almost reminds me of the Senate discussions on Facebook years ago when government officials failed to understand what digital advertising was or how Facebook made money.
It was something of that sort, but of course, with a different asset class altogether.
At least Facebook dealt in terminology that was closer to what Congress could understand.
Some Democrats at the hearing couldn’t make a decision about whether crypto is an inherent good or bad.
I feel that this could be the biggest threat where Democrats pit crypto against the US dollar and see it as a necessary evil to take down.
No wonder Bitcoin had a slightly down day in the crypto market as the net net of the talks was consensus that this is going to take a long time to get any meaningful victories and Congress barely knows what this is.
There is nothing smash and grab about this.
Everyone wants their piece of it.
It’s no coincidence that California has the highest income tax regime out of any state and let’s hope Democratic politicians don’t take that type of attitude to crypto.
We are not talking about technical questions here.
This is a $3 trillion market and it’s no joke.
A few Republicans were highly laissez-faire in nature during talks and proposed having minimal regulation realizing not to kill the goose that lays the golden eggs.
The argument revolved around making sure America was the heart and center of the future crypto industry.
Readers should remember that China banned crypto and expelled their crypto miners who had to flee to Texas and Kazakhstan.
China has made its decision that it won’t partake in any upside to the crypto industry.
A widely accepted principle of modern politics is that the American right loathes regulation and that Republicans will do everything in their power to get rid of as much government as possible.
Ever since the Reagan Presidency, Republicans have built this anti-government narrative, claiming that government crushes personal freedom, outsources jobs, and sabotages economic growth.
If Republicans flip the house in 2022 during the mid-term elections, crypto regulation will most likely be put on the backburner for good.
I don’t see any deal breakers coming our way, but certainly, the indecision during this meeting caused a dark shadow over the direction of crypto even if for a split second.
It was a reminder that crypto isn’t the panacea for all evils.
Even if nothing gets decided now, but down the road something does, it would be something more than insanity for Congress to kill a $5 trillion or $10 trillion industry by the time they can get around to destroying it.
The silver lining in the short-term is that investors will keep pouring capital into crypto-based and blockchain investments and technology like the metaverse will still get built with crypto tokens being the heart and central to a metaverse payment system.
None of that will get shut down for years and like many other industries in America, this just might get too big to fail, maybe gift in a few or several bailouts along the way as well ala the banking sector.
Remember, this still is America!
Maybe I am being a little too cynical, but remember that Facebook and its blatant and brazen theft of data business model just need to pay lip service to Congress during Senate hearings once in a while and they are good to go.
Crypto does nothing nearly as terrible as Facebook.
And Facebook is still the leader in creating the Metaverse after all of that.
Congress still hasn’t done squat and I can easily see crypto following the same type of game script.
Get ready for the same old story, crypto executives and politicians sitting within a 4-wall room agreeing that something needs to be done but without creating deadlines or any call to action.
Long term this is great for crypto and there will be no meaningful regulation for years.
Crypto CEO’s to Congress: Regulate us, but don't ‘shoehorn’old rules on new assets
Mad Hedge Bitcoin Letter
December 7, 2021
Fiat Lux
Featured Trade:
(THE BITCOIN BULL STORY IS IN-TACT)
(BTC), (ADA), (ETH)
No, the Bitcoin bull market is not over, but we won’t get our Santa Claus rally this year.
The short-term reversal in prices has been encouraging, but I do expect further bouts of volatility to occur most likely in early January.
We received some great signaling that capital isn’t bolting out the back of the stable with Bitcoin returning to over $50,000 overnight inspired by one of the largest wallets to buy the equivalent of $137 million more Bitcoin.
This Bitcoin whale is loading up again here, even though so many people and fake bitcoin keyboard warriors are saying that we are now in a bear market.
I don't see any confirmation of the bear market yet as no key support has been lost.
This wallet holder upped the ante overnight with a single purchase of 2,700 BTC — taking their total to 118,017 BTC.
The buy crushes previous recent transactions and increases the holder’s balance to breathtaking record levels.
This is officially the highest number of BTC ever held in this wallet: 118,017 BTC, in total this big spender has poured $2.5B USD to buy BTC with an average cost basis of $21,160 per BTC.
Interest and demand in Bitcoin rose a lot in 2021 despite the volatility. More than half of current investors got in over the last 12 months, adding another positive data point to the Bitcoin narrative.
In a survey of 1,000 people, about a quarter said they already owned Bitcoin and of that 55% said they started investing this year.
The results highlight the explosive growth cryptocurrencies have seen this year as investors plowed money toward the volatile asset class amid growing mainstream adoption.
It is becoming increasingly difficult for investors to ignore Bitcoin as its price continues to rise.
Major altcoins have also reversed course with this relief rally.
Ether (ETH) rallied 11.4% Tuesday, outpacing BTC in a pattern mimicked by several other large-cap tokens.
Other altcoins like Cardano (ADA) and Litecoin are up over 9% validating my thesis of altcoins outgaining Bitcoin for the catch-up trade.
I don’t believe that this weekend's crash can partially be blamed on the US congress' upcoming questioning of top crypto executives. Nobody knows yet how badly this investigation will impact the market, but I wouldn’t say anything meaningful will happen.
In fact, much of the volatility has been caused by poor communication from the US Central Bank that peaked with US Fed Chair Jerome Powell signaling the Fed will move faster than expected to tame inflation.
The algorithms had a field day dumping positions in volume.
Consensus had it that interest rate expectations would largely be left alone this December, but the Fed signaling that they plan to move earlier to break off the inflation genie caused all risk assets into a short-term tailspin.
That being said, I don’t believe the Fed will do more damage the rest of this month, and we should experience a relief rally into the yearend.
I would double down and say the Fed could have waited until January, because everyone understands how bad inflation is running its course, and it was largely baked into the market.
To get ahead of the next CPI inflation number is definitely a knee-jerk reaction and if the Fed has more of these fast pivots in 2022, we will experience a 10-15% correction in Bitcoin each time.
Long term, the US financial system will not be able to stave off highly inflationary policies, it’s like a drug addiction that can’t be shaken off.
Triggering inflationary-backed economic growth is the only way to make a dent in the federal debt hole, it just means that home price and wages will be a lot higher in nominal terms every year.
I merely see this short-term swoon as one step backward before we push forward again with the wild inflation.
People in the know have acknowledged that many corporations are building up reserves for 30% increases for 2022 salary and that is not a typo.
“I wished it had never been invented” – Said Billionaire Investors Charlie Munger when asked about Bitcoin
Mad Hedge Bitcoin Letter
December 2, 2021
Fiat Lux
Featured Trade:
(THE SKINNY ON IDENTIFYING CRYPTO SCAMS)
(BTC)
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, 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 of 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.
“[Bitcoin] is a remarkable cryptographic achievement… The ability to create something which is not duplicable in the digital world has enormous value…Lot’s of people will build businesses on top of that.”— Said Former CEO of Google Eric Schmidt
