“The politicians say 'we' can't afford a tax cut. Maybe we can't afford the politicians.” – Said CEO of Forbes Media LLC Steve Forbes
Mad Hedge Bitcoin Letter
August 25, 2022
Fiat Lux
Featured Trade:
(A THORN IN THE SIDE OF CRYPTO)
(BTC)
Many emerging countries have suffered asymmetric depreciation relative to stronger western currencies.
It’s a tough act for these guys and in some cases, they have been penalized by the larger nations for external risks out of their control.
India is said to be the new China and that’s not something to downplay.
They boast a young and highly educated demographic that is hellbent on improving their standard of life.
However, lately, the lust for crypto in India has been met with an iron fist by the Indian government which presented an exorbitant tax move as an opportunity to “professionalize” the asset class.
It also made crypto trading prohibitively expensive.
The decision comes amid an onslaught of criticism of the industry by government officials and regulators.
Some of the most brutal attacks have come from India’s central bank as it prepares to launch a national digital currency.
In short, since April 1, any gains on the transfer of crypto assets are taxed at 30%, a higher rate than many other jurisdictions including the US and the UK.
Trading losses can’t be offset against income as well.
Trading on three exchanges ZebPay, WazirX, and CoinDCX crashed between 60% and 87% after the tax took effect.
Under the banner of protecting against terrorist financing, fraud, and other illicit activities, the Indian government has tried to reign in the crypto industry and put it under its control.
Some of this is about avoiding conservative Indians that might throw their savings down the drain into a highly volatile and uncertain asset.
Central Banks tend to be risk-averse and most bank members have never had a real job in their life and come from academia.
There is still a stigma that crypto is high risk and might crash.
Indians have now been forced to migrate to foreign trading platforms or physically immigrate abroad to countries more favorable to crypto operations.
A huge revenue gap will take effect moving forward as in the past, investments in crypto in India grew from about $923 million in April 2020 to nearly $6.6 billion in May 2021.
The country’s population of 1.4 billion people trends young, with a growing, well-educated middle class.
After Vietnam, India achieved the second highest rate of crypto adoption.
While China has banned crypto transactions entirely because of many of the same reasons, India is yet to introduce a bill defining digital assets and decide how to regulate them.
Indian Finance Minister Nirmala Sitharaman has said any legislation can be effective only with international cooperation to prevent so-called regulatory arbitrage, whereby companies shop for the most lenient jurisdiction to do business.
The uncertainty is sending a chill through the clusters of Indian startups developing products based on blockchains, from decentralized finance applications to nonfungible tokens.
Reading the tea leaves, crypto’s assent clashes with India’s central bank and the central bank rather introduce a central bank digital currency than allow crypto to operate like a wild western.
It’s not surprising that those poorer countries lust for financialized centralization and crypto is the scapegoat.
Scarily, other countries like China have been developing these central bank digital currencies for years like the digital yuan and there is a low risk they could wipe out the existing crypto out there.
This is why many banana republics can never innovate, develop, or thrive. They simply won’t open up enough let alone open up to foreigners. Money and technology are both met with suspicion.
I would go even so far as to say that the future of crypto will either exist in the United States or not at all.
When bureaucrats are only willing to frame any financial conversation by the amount of control they can secure, then developing an alternative financial system like crypto is a non-starter.
America is the best country to nurture emerging technology because leaders understand its power and trajectory of it and even better, do not turn a blind eye to its potency.
This is what happened with inventions like the internet, personal computer, and the smartphone.
It will most likely happen with crypto as well.
Mad Hedge Bitcoin Letter
August 23, 2022
Fiat Lux
Featured Trade:
(CRYPTO INFRASTRUCTURE TAKES ANOTHER HIT)
(FTX), (FDIC)
The scandals keep on rolling in for the crypto establishment and right on cue, the possibly most public figure in the crypto world is now facing the music.
FTX CEO Sam Bankman-Fried is in hot water as a prominent U.S. bank regulator Federal Deposit Insurance Corporation (FDIC) demanded crypto exchange FTX to halt what it called "false and misleading" claims the exchange had made about whether or not funds at the company are insured by the government.
Let’s be clear about this, crypto is not regulated and thus not insured as an asset.
The money an investor loses on a crypto exchange because of an exchange bankruptcy usually means the investors won’t get their funds back.
This is a serious risk that an investor must grapple with when pouring money into the digital gold.
This is also part of the reason why the asset class is so maligned, volatile, untrusted, and unpredictable.
The asset class also attracts scam artists who promise 1,000% returns in 7 days.
The lack of backstop in this industry deters many conservative investors and thus many crypto investors are fresh-faced with nothing to lose.
Trading with fearless abandon isn’t a great idea and is almost like hoping to win the lottery.
I have never recommended betting the family ranch on crypto and I have always advocated putting a small portion of one’s portfolio, perhaps 1-3%, into crypto.
And since November 2021, we have seen a precipitous decline in the digital asset as well as many exchanges disappearing.
There are so many concurrent federal investigations happening that I can’t keep track of them.
This is the reality of an emerging and unproven asset class.
Here’s just what happened.
The FDIC issued a cease and desist letter to FTX US that those statements implied that FDIC insurance was available for cryptocurrency and stock holdings and that the agency does not insure brokerage accounts.
In a tweet, FTX CEO Sam Bankman-Fried emphasized FTX is not FDIC-insured, and apologized if anyone misinterpreted previous comments.
The letter was not only sent to FTX as 4 others got the same letter, so this is a widespread problem in the crypto industry.
The bank regulator issued a similar cease and desist letter to bankrupt crypto firm Voyager Digital, arguing that the company had misled customers by claiming their funds with Voyager would be covered by the FDIC.
Later, the FDIC issued an advisory urging banks dealing with crypto companies to ensure that customers are aware of what types of assets are government-insured, particularly in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products.
Stocks are insured and to imply by word association that crypto is also insured shows that these exchanges are playing a dirty game.
I don’t want to paint the whole industry with one brush, but the crypto establishment isn’t doing itself any favors and their business practices smack of desperation.
No doubt that in 2022, sales have fallen off a cliff, and just look at FTX which did over $1 billion in sales last year and 2022 will end up just a fraction of that.
They are hoping to cling on to any revenue foothold even if it means misleading customers.
Crypto has a mountain to climb and this is yet another setback.
“I have not failed. I’ve just found 10,000 ways that won’t work.” – Said American Inventor Thomas Edison
Mad Hedge Bitcoin Letter
August 18, 2022
Fiat Lux
Featured Trade:
(READY FOR LAUNCH)
(ETH)
Grab your cowboy hats and enjoy the event.
It’s here.
Ethereum (ETH), the second most important and largest crypto, just ran its final tests before the launch which could turn out to be the most important upgrade in crypto history.
The price of Ether could experience a “buy the rumor and sell the news” reaction, but traders wanting to get into ETH should wait for the dip to buy.
Since its inception, ETH has been mined via a proof-of-work model.
It involves complex math equations that massive numbers of computers race to solve, and it requires plenty of expensive electricity.
Now Ethereum will change to a new model for securing the network called proof of stake.
The method requires users to leverage their existing cache of ether as a means to verify transactions and mint tokens. It uses far less expensive electricity and is expected to translate into faster transactions.
The climate change brigade must be in heaven!
It couldn’t be a better time to change over as electricity bills have soared over 500% in places like London, England, and tripled in places like Munich, Germany.
Ethereum’s transition has been repeatedly stalled for the last several years and testing hasn’t been smooth.
Developers know within seconds whether a test was successful. But they’ll still be looking out for many potential technical issues in the hours and days ahead before the launch.
Another key issue relates to transactions. Ethereum processes transactions in groups known as blocks. One clear indicator that the test went well will be if the blocks have actual transactions in them, and aren’t empty.
The last major check is whether the network is finalizing, meaning that more than two-thirds of validators are online and agree to the same view of the chain history. It takes 15 minutes in normal network conditions.
Since December 2020, programmers have been testing out the proof-of-stake workflow on a chain called beacon, which runs alongside the existing proof-of-work chain. Beacon has solved some key problems.
The upgrade certainly is good news set against a backdrop of an awful last 10 months for the price of ETH.
The price of ETH has also rebounded by 80% recently as the US Central Bank has signaled rate cuts next year.
The transition to a proof-of-stake model means that this will be highly attractive to the incremental ETH miner moving forward.
When ETH miners are in a healthier position, the entire ETH infrastructure benefits and is fortified.
For those playing the long game, as we inch closer to next year’s rate cuts, one must believe that every dip in ETH is a buying opportunity.
We have received strong positive signal lately with meme stocks roaring back to action going to the moon which means liquidity is plentiful and loose.
Liquidity needs to be generous if cryptos are to skyrocket.
Fed Chair Jerome Powell who stated that 2.5% is “neutral” effectively means he is ready to subsidize meme stocks, crypto, and other speculative assets and as the headwinds turn to tailwinds next year, it could prove to be a banner 2023.
“The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence.” – Said German-American Writer Charles Bukowski
Mad Hedge Bitcoin Letter
August 16, 2022
Fiat Lux
Featured Trade:
(ADOPTION IN ARGENTINA)
($BTCUSD), (WMT)
