Mad Hedge Technology Alerts!
Cryptocurrency prices have been on a tear lately as bitcoin continues to rally on hopes a spot bitcoin exchange-traded fund will launch soon.
Last week Bitcoin had a 24-hour time period where it exploded 13% to the upside as the digital gold wakes up from its slumber.
Lately, it certainly is odd to see US treasury yield surpassing any type of volatility that crypto can offer proving that volatility is more about a time and place dynamic rather than a certain asset class.
The volatility meant that Bitcoin passed $35,000 for the first time since May 2022 even though it has pulled back a little today.
The rally could be fueled in part by investors who were betting against the crypto asset scrambling to cover short positions as well.
Bitcoin led cryptocurrency prices higher over the past two weeks after the SEC declined to challenge its court loss against Grayscale Investments (GBTC) and its effort to convert its Grayscale Bitcoin Trust into a spot bitcoin ETF on Oct. 13.
A U.S. appeals court ordered the SEC to review Grayscale's ETF application. The regulator could still reject the spot bitcoin application, but it would need a new justification to do so.
Institutional demand for a spot bitcoin ETF is stronger than ever before. For many institutions, it is a matter of when — not if — the SEC will approve a spot bitcoin ETF.
A spot bitcoin ETF would provide a regulated and accessible vehicle for bitcoin exposure, and also mark a major vote of institutional confidence.
MicroStrategy (MSTR) added 21% and the computer software company holds 158,245 bitcoin with an average purchase price of $29,582.
Sooner or later, unless regulation totally wipes out Bitcoin, crypto is likely to find itself finagling its way into 401K’s.
The longer it lingers around, institutional pockets, which are deep, will find a way to onboard it into its business model.
For many years, institutional money has stayed away from crypto primarily because it is built on nothing and most conservative investors want to see cash flow.
At least an asset like gold bullion, there is a physical nature of what one buys.
Yet, as the world becomes more digitized and globalized, institutional money is starting to take the bait.
To Bitcoin’s credit, the absolute collapse of volatility in the past few years has been an interesting talking point because too much volatility used to be the problem for this asset class.
There is a chance that as we begin to start a new economic cycle because of a Fed pivot, that $16,000 per Bitcoin at the end of December 2022 could register the low of the next cycle.
Bitcoin is more appealing as a risk-reward proposition now than it was exactly a year ago as the Fed embarked on an epic tightening cycle.
Throw into the mix that the quality of global government has cratered to a generational low and it makes sense for institutional backers from Blackrock to front-run the next bull market in crypto as capital looks to de-risk from fiat currencies.
This could finally end up being the run-up to $100,000 per bitcoin that everyone expected during the last bitcoin spike.
Readers can play this in the equity market by buying MSTR.
Mad Hedge Technology Letter
October 25, 2023
Fiat Lux
Featured Trade:
(AMERICA SHINES WHILE EUROPE SLUMBERS)
(TSLA), (NVDA), (AAPL), (ABNB), (UBER)
Europe’s fintech companies are exploding.
The weakness in stock prices is emblematic of the broader malaise in the Eurozone economy.
The positive here is that the US economy keeps chugging along and on a relative basis, is leaps and bounds stronger than its counterpart.
Why does that matter?
The less money invested into European tech can be diverted into the likes of Tesla (TSLA), Nvidia (NVDA), Apple (APPL), and the rest of the American tech companies.
I absolutely see this as a zero sum game in a world where all the low-hanging fruit has been plucked.
In a globalized world, investors can really just dabble in whatever national market they seek to profit from with ease.
It’s really just a few taps of the screen.
Silicon Valley is already heavily entrenched in Europe with sprawling workforces in many of the 27 countries in which they arbitrage lower wages to their benefit.
If one ever hoped a local rival would root out American variants, it’s a hard slog ahead.
France’s worldline shares plummeted a record 59%, erasing €3.8 billion ($4 billion) of market value, after the French payments company slashed future forecasts.
The stock’s plunge echoes August’s huge fall in peer Adyen NV and follows Tuesday’s 72% drop in fintech CAB Payments Plc. Shares in Adyen declined 7.5% on Wednesday, while another peer, Nexi SpA, slid 18%.
Since then, worries over lofty valuations and a broader slowdown in consumer spending have brought the high-flying stocks back to earth. Adyen, Nexi, and Worldline have lost more than $33 billion in market value combined in the year to date.
Worldline said it now sees full-year organic revenue growth of 6% to 7%, down from a previous forecast of 8% to 10%. The company’s third-quarter sales also missed estimates.
Small fintech companies growing in the single digits is one of the biggest fopaux an up-and-coming fintech company can commit.
Management also complained that European consumers are tapped out.
They don’t have the money to allocate to “non-discretionary” items.
Europeans are basically paying for shelter, energy, and food.
If there is anything else left over, it’s not much. That’s what happens when the cost of living rises between two and three times.
Management also emphasized an acute slowdown in German consumer spending which hurts since these consumers are some of Europe fintechs biggest customers.
I do believe that many investors aren’t going to stay invested in Europe’s fintech space and it is ripe for consolidation which ironically could come from America’s magnificent 7 who have the deep pockets.
It’s a fragmented sub-sector of tech with some operators pigeonholed into one microscopic area of Europe like Andorra or Slovenia.
Technology scales but Europe is hard in the sense it must cut through a vast language, sprawling bureaucracy, high tax regimes, and cultural barriers not to mention different laws. Throw into the mix that multinationals have stopped supporting work visas for non-EU citizens and it is easy to understand why Europe is not ideal for starting tech firms.
The narrow path is why a company like Worldline generates revenue of around $1.2 billion per quarter as opposed to an American PayPal (PYPL) which does $8 billion per quarter.
If we look at the big boys like Google, quarterly revenue goes up to $80 billion per quarter highlighting how far back Europe is from the real upper echelon of American tech.
If Europe is getting trounced by the likes of PayPal, then investors can’t get angry when they get labeled the bush leagues of global technology.
Look at Silicon Valley and especially the tier 2 firms like Uber (UBER) or AirBnb (ABNB) for the real growth instead of Europe’s suffocation of free market technology.
