Mad Hedge Bitcoin Letter
April 7, 2022
Fiat Lux
Featured Trade:
(JANET PUTS IN A GOOD SHOWING)
(BTC)
Tag Archive for: (BTC)
Digital assets climbed the wall of worry surpassing a market cap of $3 trillion only just last November and that is just a small taste of things to come.
It was only at $14 billion just five years before that and sure, it’s retraced somewhat back to around $2 trillion in market cap now, but the proof is in the pudding.
When conditions align yet again in a quantitative easing type of way, expect the price of Bitcoin to take off.
Imagine how well Bitcoin is doing in an aggressive tightening cycle, stubbornly staying over $40,000 per BTC, it has proved its worth as a store of value.
US Treasury Secretary Janet Yellen dived into the topic of cryptocurrency at a speech the other day and much of what she talked about was net positive for the asset.
This will go a long way to legitimizing the digital token because this level of power broker also has the clout and authority to shut down an industry like cryptocurrency.
Yellen referenced the onset of the Internet in the early 1990s as an analogy for crypto, Yellen said while digital assets may be relatively new, they are part of the larger trend of the digitization of finance that has been in the making for decades.
I wouldn’t quite lump in crypto with the rest of digital finance, it’s quite a different animal yet if that is what it takes for her to understand what it is, then more power to her.
Yellen believes the development of digital technology can help create a more efficient payment system with instantaneous transactions and lower costs.
She also mentioned sizing up the risks, not technologies, and I would argue that the risk of not greenlighting crypto at the Federal level means that a country like Russia could forge ahead in crypto development.
What I liked about Yellen was she began to normalize the currency in terms of describing it as the next piece of financial development in a long history of digital progress.
Almost nothing she said felt like she would suddenly make a u-turn and squash the whole process.
She again pulled out the “caution” card which is really a central feature of bureaucrats and ensured the public that there won’t be any snap decisions made any time soon.
I am still not sure if this will be a kick the can down the road type of phenomenon, but she has left that possibility open as well.
What she plans to do is to sit back and allow the technology and the risk levels to emerge then to prove to her whether its ready or not so taking a passive role in this matter also means that the government will treat this as a slow play type of deal.
The last issue she brought up is the systemic risk aspect of cryptocurrency and if this asset could withstand widespread stress.
The Federal government will need to develop certain processes and mechanisms to solve contagion in the markets.
If one firm fails, then surviving a fatal blow to the overarching system is paramount.
Unfortunately, I believe Yellen is not suitable for safeguarding and promoting cryptocurrency.
Although she didn’t do anything overt to shut down the progress of crypto, it seems like she is biding her time in office until someone younger can come in who actually knows a thing or 2 about crypto.
It’s painfully obvious when someone has a scant idea of how crypto functions and Yellen is one of these people.
She simple is a bureaucrat placed in the Federal government at this particular time when crypto is developing wildly and she must answer to it because her position requires her to do so.
Only the real crypto people know what is going on.
The bar has been set naturally low for her and she succeeded.
In the meantime, crypto will keep developing and the price of Bitcoin will grow parallel to the inertia in Washington.
Mad Hedge Bitcoin Letter
April 5, 2022
Fiat Lux
Featured Trade:
(ETHEREUM’S WILD RIDE)
(ETH), (BTC)
The price of Ethereum has doubled from $1,800 last July to $3,500 today.
Throughout this newsletter, I have been preaching to readers that price appreciation will be higher in Ether than it is in Bitcoin.
Ethereum simply has better technology and is a better bet in the long run and sadly for Bitcoin, they are further along in their maturation cycle therefore the explosive up moves are confined by the law of large numbers.
It was simply almost a given that Ethereum would go from $1,000 to $3,500 and it’s really only a matter of time until they break $5,000 and then $10,000.
This is the second most popular cryptocurrency and although not a great store of value yet like Bitcoin, its fan base is growing by the day.
Here are a few answers for Ether fanatics from typical Ether questions.
Crypto investors always need more fine-tuning and know-how about cryptocurrency.
ETH is a great buy-the-dip opportunity for crypto diehards, and I believe there is clear sailing until $10,000.
Frequently Asked Ethereum Questions
Where's the best place to buy ETH?
There are many centralized exchanges that support Ethereum. If you live in the US, the most frequented exchanges are Coinbase, Gemini, and Kraken. Coinbase users can use Coinbase Pro for lower fees.
When is Eth2 launching?
Eth2 is a marketing term used to represent a number of updates to Ethereum. The Eth2 proof-of-stake chain was first launched in December 2020. "The Merge", which is the event that will fully switch Ethereum's consensus to proof-of-stake, is estimated to be ready in early 2022, although there is no exact timeline. Other updates, such as data shards, will follow that update.
Do I need to do anything to update to Eth2? Will Eth2 create a new token?
No, ETH holders never need to take any action to keep holding ETH. Ethereum users will be unaffected by the Eth2 upgrade. And the Eth2 updates will not create any new tokens.
How can I stake my ETH?
There are two ways that you can stake your ETH: by either running your own validator or providing your ETH to a staking pool.
Running your own validator requires a modern computer and 32 ETH.
Staking pools accept any amount of ETH. I recommend Lido or StakeWise.
Why are Ethereum transaction fees so high?
Like most blockchains, Ethereum fees are determined by supply and demand. The large demand to use Ethereum has pushed transaction fees quite high (however, fees were just a few cents only 2 years ago). Fees are especially high during market volatility, and during NFT drops.
What is being done to lower Ethereum transaction fees?
Ethereum fees are reduced by using layer-2 rollups. Rollups are scaling solutions that allow for significantly cheaper transactions, while still maintaining Ethereum's security.
Additionally, Eth2's data shards will make rollups even cheaper.
While rollups are cutting-edge technology being actively developed, a number of them are already live on the Ethereum mainnet.
What's the best wallet for Ethereum?
The most popular tool for using decentralized applications is Metamask. However, for security reasons, I recommend using a hardware wallet such as a Trezor or Ledger.
Mad Hedge Bitcoin Letter
March 31, 2022
Fiat Lux
Featured Trade:
(EVEN CHARLIE WARMS TO BITCOIN)
(DOGE), (SHIB), (BTC)
One of the biggest promoters of the U.S. economy for the past 50 years has been vice chairman of Berkshire Hathaway Charlie Munger.
Lately, he has taken his privileged position to opine about almost everything under the sun.
At some stage, people like us like to infuse the generation behind us with the right tools to navigate the global economy, and sharpening these instruments goes a long way in determining who became the ultimate winners and losers.
Charlie came out with sharpened elbows today describing a world in which “it’s never been harder for young people to make and keep their money.”
He then begins to dive into the topic of inflation and the financial destruction beset on a young population who are not only asset scarce, but whose salaries are lower in real terms than the young person 40 years ago.
Essentially, Charlie is encouraging young people to avoid the traditional financial system that benefited him so much in order to look for greener pastures.
Sometimes it really is greener on the other side of the fence and the first generation of crypto Billionaires can attest to that.
Becoming a crypto whale usually entails getting in early before the rest pile in.
Munger also lamented the hardship of young people purchasing property in a “desirable neighborhood in a city like Los Angeles.”
Mortgages backed by the US dollar and Fanny Mae have been instrumental in helping millions of hardworking Americans realize the American dream of owning their own home.
Obviously, the US property market in many parts of the country these days is out of control and even though it’s not directly linked to cryptocurrency, it’s directly linked to the US dollar which Bitcoin is an absolute competitor.
Munger couldn’t be righter that young people will not be able to copy and paste what worked before and that the ones who don’t adapt will not be able to achieve a life in a desirable city.
In a roundabout way, Charlie is espousing the virtues of Bitcoin even though he doesn’t know it.
Part of the bias he presides over is in the way young people get rich and age doesn’t make you want to get rich all over again in crypto after getting rich through the US dollar and stocks.
Investing in alternative strategies has never been more attractive, but there is a smart way to do it and an irresponsible way to do it.
In the last few years, Bitcoin has proved itself to be a great store of value and it appears that no matter what you throw at it lately, it won’t go down that much.
But then there is the scarier side of crypto that isn’t Bitcoin and things get suspicious quickly like somebody following you down a narrow, shady alley.
Many have thrown their life savings in these coins that are fashionably new and low cap and obscure thinking that they can get rich quickly when all that will actually happen is they'll lose their money in these coins that either fail or get the rug pulled.
Seeing coins like SHIB, DOGE, which were altcoins that actually did build a substantial market cap in the past, has only encouraged these people in their thinking that they can make a lot of money off of these coins when the reality is that these were only 2 among thousands of coins that got lucky.
Investing should be done with a purpose, otherwise, it becomes pure gambling and you'll likely fail.
That purpose could be Bitcoin as a means of decentralization, as a means of inflation hedge, or just as a currency that's easy to transfer. As long as you know what you support in your coin, you have a purpose that you believe in which is what investing is about, not closing your eyes and picking a coin.
Not only that you won't get rich, but you'll also lose your money in these coins. The only people getting rich will be those controlling the coin with their bags that are ready to sell.
But of course, there still are those projects with a purpose that can change the market, but you'll need a lot of time on your hands to find those new ones.
Mad Hedge Bitcoin Letter
March 29, 2022
Fiat Lux
Featured Trade:
(ANOTHER WIN FOR BITCOIN)
(RUSSIA), (BTC)
Bitcoin is getting its time in the sun as chairman of the Russian State Duma Committee on Energy, Pavel Zavalny revealed that payment for oil in Bitcoin (BTC) would be greenlighted.
What a dropped bombshell this is for the digital gold.
It’s hard to wrap my mind around that statement because it was just a few years ago when Bitcoin was the global pariah and not the world’s gas station Russia.
Now Russia has become the global pariah and to maneuver around a tricky political landscape, they have decided to just move the goalposts completely.
This is important for the dollar and the euro which are competitors to Bitcoin.
Those were the currencies that Europeans and other foreigners were used to settle their oil purchases with the Russians in the past.
Not anymore.
US President Joe Biden freezing Russian reserves has had the reverse effect of the Saudis looking to do business in oil without the US dollar and Russia tapping digital gold as their new form of payment or the alternative option of demanding payment of oil in Russian Rubles.
Hindsight is 20/20 and effectively scaring away foreigners from using the US dollar is a giant and transformational victory for cryptocurrency itself.
Historians might look back at this moment in history as the day the dollar hit the high watermark because I highly doubt that China or Russia will ever go back to settling even half a barrel of oil in US dollars.
Throwing fuel on the fire are countries like Hungary whose leader Viktor Orban has refused to stop buying Russian energy doubling down against the West saying that the Hungarian people aren’t footing the bill for this conflict.
The net net of this all is that Russia has received a narrow form of a free pass in markets like that because of the certainty involved in sending equities soaring.
Bitcoin has benefited from the risk-on sentiment with Bitcoin back up to $48,000.
Diversifying into Bitcoin and other currencies will lessen the dependence on dollars and euros issued by “unfriendly states” like the U.S. and the EU—and in the process skirt the sanctions they placed on it.
So then one must deduce that the severity of the sanctions has been reduced and we have clearly seen that flow through the market with the Russian Ruble reversing by 40% to almost pre-conflict levels.
One of the knocks on Bitcoin is the lack of institutional capital that can trigger a war chest of capital.
Bitcoin is now on the receiving end of a dream development with the biggest energy-producing nation ready to conduct business in its currency.
If this isn’t legitimizing Bitcoin, then someone please help me to understand what is?
Simply switching to Bitcoin or Ether would not exempt actors obligated to observe existing EU sanctions, but what if nations convert fiat to Bitcoin only to never convert it back to fiat and just hold a Bitcoin balance continuously.
That wouldn’t rub up against sanctions.
The takeaway from this debacle is that there are so many holes in the western “alliance” that Russian and China are just picking and choosing how they want to pick it apart like dissecting a toad with tweezers.
What this does amount to is a giant tsunami of potential flows into the cryptocurrency system and this puts $100,000 Bitcoin fairly in play again after the interest rate rise killed bullish sentiment earlier this year.
Russia has already partitioned off countries into “friendly” and “unfriendly” which the latter will be required to pay in Bitcoin or rubles.
One must question, is the intelligence about Russia losing really that accurate or was this their plan all along?
Let’s look at the tailwinds behind Russia at the moment.
Europeans like Germans and Hungarians continue to fund the Russian military machine through energy purchases.
Russia is able to skirt financial and energy sanctions using crypto.
The exorbitant current price of oil means significantly higher revenue for Russia in 2022 resulting in a healthier fiscal position.
The Russian government has been able to nationalize factories and infrastructure left by foreign companies.
The Russian Ruble staging a breathtaking turnaround of 40% are all signs that it's business as usual for the Kremlin.
Either way, this paves the way for energy deals with the global gas station to be settled in Bitcoin which is a monumental victory for crypto diehards and could trigger another leg higher for Bitcoin.
Mad Hedge Bitcoin Letter
March 24, 2022
Fiat Lux
Featured Trade:
(KICK THE CRYPTO CAN DOWN THE ROAD)
(BTC), (FED)
Federal Reserve Chairman Jerome Powell on Wednesday said digital innovation in the financial sector is here to stay and with it, a raft of new regulations will need to be created.
It’s interesting that he delves into the matters of cryptocurrency so succinctly when one might really question if he has a grasp on the current fiat monetary policy in the United States.
Many have also gone on record saying that he has committed a vast policy error by allowing inflation to run too high for too long.
There are elements that are true to this and observing his overly cautious stance to raising interest rates makes me deduce that he most likely will bring the same type of attitude to Bitcoin and cryptocurrency.
I agree that new regulations need to be created and the lack of them is holding cryptocurrency back, but at least Powell didn’t take the hostile route which he easily could have with nobody batting an eye if he turned more conversative to the technology of money.
Powell described cryptocurrency as a “novel technology like distributed ledger and decentralized finance which has the potential to improve the efficiency of the payment system and encourage a more competitive financial landscape.”
When I hear Powell say the word “novel,” it basically means that nothing of substance will take place in the near-term future because he is too experienced to deal with an emerging asset class that could potentially ruin his legacy at the Federal Reserve.
He could have even said that cryptocurrency is “exotic” and still gotten away with it.
Every Central Bank governor wouldn’t mind a more “efficient” and “competitive” financial system and fortunately, the American financial system is still the gold standard of the world even if the gatekeepers of the Central Bank currently aren’t performing up to snuff.
Powell also divulged that the Fed will likely collaborate with other central banks on other areas of crypto and financial innovation, including stable coins.
A stable coin is a cryptocurrency pegged to a reserve asset like a fiat currency, commodity, or other cryptocurrencies. It is a tokenized version of the asset and can be introduced subtly into a blockchain ecosystem to facilitate seamless pass transactions, improved arbitrage, and value exchange.
It is sometimes referred to as a utility token because it allows you to quickly buy and sell on decentralized exchanges that do not accept fiat currencies.
Stable coins are also used in centralized exchanges. What makes them useful in an exchange of this kind is the fact that fiat currencies take a long time to process, but their tokenized counterparts are standard blockchain entities that move quickly.
Powell also dives into the need for crypto to close the “regulatory gaps” which for me means that he wants crypto to be centralized just like the US dollar wields an army of bureaucrats in the form of regulators safeguarding the American financial system.
That might rankle a few crypto diehards who are hellbent on crypto being a decentralized system and not to mention when crypto looks like a safer bet, all the Wall Street influence that will pile into the crypto ecosystem.
Ultimately, Powell’s speech was good and bad for crypto.
Acknowledging it effectively means he legitimizes it, yet he doesn’t want it to develop without parameters in which the government has zero influence.
It is yet to be seen if the federal government just kills assets like Ether and Bitcoin to create their own digital currency would be the digital version of the US dollar.
That’s a page right out of the Chinese communist party with their digital yuan.
If that happens, many investors will cry foul and would be left scrambling.
However, I don’t believe Powell has the intention to crush a whole trillion-dollar asset class that could trigger contagion throughout the whole market.
By keeping it at arms’ reach, Powell effectively gave a green light to develop parallel to the US financial system yet kicking the can down the road to whether this monster can be integrated seamlessly into the US financial system or not.
That’s the end game for the likes of Bitcoin and crypto, but that decision has been put off for the long-term giving more time to this emerging asset class to improve its foundations.
To live to breathe another day is not necessarily a bad thing in speculative markets.
THE MAN WITH GREAT POWER OVER THE FUTURE OF CRYPTO
