Mad Hedge Technology Alerts!
We are closing in on $27,000 and that’s quite the performance for the digital gold Bitcoin (BTC).
It just was last year when Bitcoin was down in the dumps.
I am not here flogging crypto but tech investors should take heed of what is happening in the riskier parts of the asset markets.
Yes, tech growth is quite volatile, but bitcoin even more so.
The price of Bitcoin is already up 72% this year and that will beat most tech growth stocks including the Teledocs and DocuSigns of the world.
This last strong surge is correlated with global banking contagion with even very liberal-based CNBC stating that Switzerland has become a financial “banana republic.”
Bitcoin is often advertised as the alternative asset class to fiat banking precisely because fiat banking has a history of going to zero.
The blowups at Silicon Valley Bank, First Republic, and Credit Suisse offer credible evidence that the strength of the fiat money banking system is trending down rather than up.
Hence the monster rally and this will just make banking more expensive for the unbanked and give the big banks more power and more “too big to fail” status.
Narratives are more powerful in crypto in generating real price movements than any other asset class and no matter what your thoughts on how powerful that narrative is, people actually believe this.
Cryptocurrency initially attracted interest from a niche group of investors following bank failures and government rescues.
While its popularity has grown among speculative investors in the roughly decade-and-a-half since, it has retained a status among some as being an asset more removed from the banking system than stocks and government bonds.
If the Fed decides to slow down the pace of interest rate hikes this is highly bullish for the crypto and tech growth sector.
Crypto investors have been particularly sensitive to regulatory and interest-rate developments.
They tend to pull money from long-bitcoin funds while adding to short-bitcoin products after the Federal Reserve announces interest-rate increases and regulators take action against crypto companies.
Since regulators started to crack down on some of the biggest crypto players, investors have pulled about $424 million from global exchange-traded products.
It’s been a terrible year to short bitcoin as that trade was last year’s rich uncle.
An important part of investing is to avoid searching for that boat that has left the dock.
Investors betting against crypto exchange, Coinbase (COIN), and bitcoin-buying software intelligence firm, MicroStrategy (MSTR), were down 76% and 62%, respectively, this year.
Some investors remain cautiously optimistic about the trajectory of bitcoin’s price, especially as it has surged against the backdrop of a banking crisis.
Although there could be a vicious pullback from the epic surge so far this year, Bitcoin will likely do well along with tech growth stocks in a paused or lower rate interest environment.
Throw in the bank contagion as a supercharger and 2023 is shaping up to be a great year to buy bitcoin and growth tech on the dips.
Mad Hedge Technology Letter
March 20, 2023
Fiat Lux
Featured Trade:
(AIRBNB POISED FOR A GREAT FOLLOW-UP YEAR)
(ABNB)
One tech firm that should get the benefit of the doubt from investors and traders moving forward is travel-sharing firm Airbnb (ABNB).
I’m not only recommending them because I use their product, but I do believe in their business model moving into the summer months of 2023.
Many travel agencies were waiting for a major pullback in travel for 2023 after revenge travel 2022 meant that consumers aggressively spent in 2022 after waiting in draconian lockdowns for the past 2 years.
Well, the cliff drop in travel revenue following 2022 will not come to pass as consumers are materially aware of higher inflation, but still not willing to sacrifice travel.
One of the epiphanies that many people had during the government lockdowns was that it is essential to get a change of scenery once in a while to refresh.
It’s one of the few new non-negotiable items on people’s lists now.
What are people doing to combat inflation?
Looking at more budget-friendly options and downgrading on accommodation, transport, entertainment, and even going to more affordable destinations.
Instead of Monaco, people are going to Marseille, instead of London, people are heading to Birmingham, and so on.
Its 2022 fourth-quarter revenue of $1.9 billion and earnings per share (EPS) of $0.48 were up 24% and 500%, respectively, on a year-over-year basis.
The full-year numbers were fantastic, too. 2022 was the first time that Airbnb was profitable for an entire fiscal year.
The strong financial performance was bolstered by some key trends highlighted by the management team. Nights and experiences booked increased 20% year over year in Q4. Cross-border, urban, and long-term stays also showed outstanding growth.
Airbnb's platform continues to add headcount as it now has 16% more active listings (or 900,000 more) than a year ago.
A near-term catalyst for Airbnb is the ongoing recovery of the Asia-Pacific region, which saw nights and experiences booked increase by 40% versus bookings in Q4 2021.
Chinese tourists are heading to Thailand and Malaysia in droves, packing the jumbo jets with rice crackers on the way there.
With its heavy reliance on cross-border travel, Asia-Pacific was decimated because of the health crisis. The easing of travel restrictions and the reopening of China will help provide a boost.
Airbnb's rapid rise to prominence has resulted in its name being used as a verb, which all but solidifies its place in consumers' minds. This is a powerful position to be in, especially in an economy that favors major internet-based brands. This situation bodes well for Airbnb's long-term relevance.
This year’s projections appear rosy with forecasts of year-over-year revenue and EPS growth of 14.3% and 22%, respectively, in 2023.
Although 2022 was quite the travel season, the follow-up year is shaping up to not be too shabby.
Definitely don’t expect a flop like a Spanish soccer player.
Shares in the first few months of the year got ahead itself and now after a deep pullback from February highs, I do believe this stock is a great "buy the dip" for the rest of 2023.
Rinse and repeat for the rest of 2023.
