(BTC) Archives

Understanding the Fog of War

One might postulate that the price of bitcoin and Chinese housing has no relevant correlation with each other.

Think again!

Granted, Chinese citizens aren’t denominating their mortgages in bitcoin to snap their ritzy Shanghai townhouses overlooking the Bund.

I don’t mean that.

But Bitcoin is an asset just like stocks, bonds, and commodities and is exposed to one-off events that shake out the financial system.

What’s brewing in the Middle Kingdom?

Chinese biggest property builder Evergrande teeters on the brink of financial devastation.

Add it up, Chinese bank deposits are $35 Trillion, more than 2x the US.

Would any Chinese financial crisis lead to an epic flight to fiat alternatives?

Does nobody recognize that this is a planned liquidity drain of the property market in China by the CCP?

All escape "exits" have already been shut. You can't even buy paper gold in China either - forget Bitcoin!

So I don’t believe that the potential disorderly selling of Chinese flats or the bust of a major property developer would end up boosting the price of Bitcoin because the Chinese government has made it abundantly clear that bitcoin is a red line for its citizens.

If there is a 20% dip in Chinese property prices — Chinese would believe that’s a once-in-a-century buy the dip type of event.

That doesn’t mean that some won’t try to sell on the down low and get their money out of China through hell or high water.

Some certainly will — China made it clear they didn’t want their citizens investing in overseas assets — I know of the odd millionaire spinning out a random credit card to put a down payment on a house in Vancouver.

What this does scream is policy error big time — an overtightening that could result in a hard landing that is ruinous for global growth.

That would be the worst-case scenario and I would put that at 10%.

Why is this company systemically important?

Evergrande was once China’s darling real estate developer. Now, it is gagging on debt.

It was founded in 1997 by Xu Jiayin. It has completed around 1,300 commercial, residential and infrastructure projects and supposedly employs upwards of 200,000 people.

The company’s success came because it was aligned perfectly for the parabolic boom in real estate that has been driven by the last two decades of staggering Chinese growth, a growth for a country that is unparalleled in all of modern human history.

The tragedy in all this is that 1.5 million Chinese have put deposits down on homes that haven’t been built and this is more often than not their entire life savings.

Most likely, it is them who will hold the bag and lose their deposit.

Better them than me.

For a soft landing to happen, the Chinese government must pull out all the bells and whistles.

Even though I categorize this as a quasi-gray swan, opposed to a solid black swan, it is highly likely that it won’t spill over into the broader market, and if we do get a large bitcoin dip, bitcoin buyers finally are gifted a cheaper price to enter bitcoin.

These opportunities are few and far between recently, at least in 2021, and I can guarantee that MicroStrategy CEO Michael Saylor is already ginning up his next bitcoin purchase usually done with his own companies’ corporate paper.

Limiting the fallout will be easily done if the Chinese government flood the right channels with liquidity, plugging the holes before they become unpluggable kinda like our own debt ceiling mess.

The larger issue is to ponder — is this the tip of the iceberg?

The silence and a lack of major actions from policymakers is making everyone nervous, but most likely they are sorting it out behind the scenes.

The response so far has been largely limited to the People’s Bank of China, which injected a net 90 billion yuan into the banking system. It added another 100 billion yuan on Saturday.

Evergrande has been mired in $300 billion worth of liabilities, more than any other property developer in the world. It’s a beast in China’s high-yield dollar bond market, accounting for about 16% of outstanding notes.

A lackluster response to an already expensive market could be costly, with real estate accounting for 40% of household assets in China. Data last week showed home sales by value slumped 20% in August from a year earlier, the biggest drop since the onset of the coronavirus early last year.

Isolating Evergrande is almost a point of emphasis for the Chinese Communist Party and the mission is to harangue them as a scapegoat for sky-high property prices.

They are the fall guy.

This is more of a political show than anything else — a show of power — letting the world know that this economic pain is nothing to even bat an eyelid about.

Bitcoin, perceived as a riskier asset along the risk curve, is not immune from a sell-off and a flight to safety has taken prices down around 10%.

I have full faith in the Chinese government and its authority to nip this in the bud, and around the $40,000 level, the price of Bitcoin should offer resistance.

If Bitcoin holds $40,000 and a resolution to this is announced, expect a 10% surge in Bitcoin prices.

This should not be treated as anything more than a standard 5% equity drop that is equivalent to a 10% crypto drop in prices.

Book some of those gaudy profits you made in the first half of the year to drop your cost basis while deploying capital at lower levels.

THE DEBT IS DUE!

September 16, 2021

Bitcoin Letter

Mad Hedge Bitcoin Letter
September 16, 2021
Fiat Lux

Featured Trade:

(ONE OF AMERICA’S DIRTY LITTLE SECRETS)
(BTC)

One of America's Dirty Little Secrets

Bitcoin Letter

Crypto is still controversial - still this bizarre, unruly, too-big-to-explain thing that half the population dismisses as nonsense and the other half swears will hit six figures “any day now.”

You’d think after all these years the debate would cool off, but if anything it’s turned into a running commentary on the world young people walked into.

Remember when Millennials and Gen Z were mocked for complaining?

“Well of course the economy is screwed. Nobody wants to pay a decent salary, and nobody wants to work.”

Funny how that line hits differently when inflation actually shows up, interest rates rocket higher, and the cost of living goes from “annoying” to “how is this even allowed?”

But here we are. And if you believed the economy was compromised, then naturally something else had to fill the ideological gap.

Crypto stepped in, not just as a speculative lottery ticket, but as a middle finger to a system that politely thanked young people for their degrees and then handed them a lifetime of rent payments.

The roots of this frustration aren’t mysterious. The US spent decades outsourcing manufacturing, suppressing wages, and printing money like a kid discovering the family label maker.

That era of zero-percent interest rates and endless quantitative easing felt like a cheat code until 2022–2023 ripped it away. Suddenly money wasn’t free. Inflation wasn’t theoretical. The bill had arrived.

And then remote work blew the doors off the old labor map. Wage arbitrage used to be something corporations did. Now individuals do it, too.

People work from Bali, Buenos Aires, or Boise while competing with candidates from everywhere. Geography melted. Job markets stretched. And wages…stayed stubbornly unimpressive.

Meanwhile, the cost of living decided to cosplay as a space rocket. Housing affordability didn’t just get worse - it went full dystopian. Real wages moved an inch while prices sprinted a mile.

Even well-paid professionals found themselves barely clearing the month. The “just get a good job” advice aged about as well as a bowl of shrimp in the sun.

Put all that together and it’s no wonder younger adults turned to crypto. Was it partly hope? Yes. Was it partly desperation? Also yes. Was it also a little bit of “screw it, the system isn’t giving me anything anyway”? Absolutely.

Crypto became the alternative ideology because the old one - work hard, buy a home, retire someday - stopped functioning as advertised.

But here’s the twist: by 2025 that original crypto narrative has mutated into something completely different.

After the spectacular blowups of 2022 (we all remember them), crypto didn’t die. It matured.

Bitcoin ETFs launched in 2024. The IRS finally drew up rulebooks instead of threats. Global regulators settled on actual frameworks. Big banks stopped pretending crypto didn’t exist and quietly rolled out services like it was no big deal.

We went from “crypto is too wild to regulate” to “crypto is now part of my retirement account.”

In other words, the industry that was supposedly “too big to fail” is now simply part of the same financial system it once tried to disrupt. Not exactly the revolution the early evangelists dreamed of, but certainly more stable than the critics predicted.

And yet, underneath all the regulation, all the institutional adoption, all the shiny ETF commercials on cable news, something deeper remains. Young people still want ownership. Of something. Anything. A stake in a world that constantly feels like it’s slipping further out of reach.

Crypto didn’t fix that existential ache. It just became one of the few places where the door didn’t slam shut on them.

But reality check: if crypto does end up creating massive new wealth (again), it will still go mostly to the people who had disposable income to invest.

The vast majority living paycheck to paycheck aren’t buying Bitcoin; they’re buying dinner. Volatility is not a luxury they can afford.

And now they’ve got a new anxiety: AI. Automation. Entire job categories looking shakier than a meme coin on a Sunday night. Younger workers aren’t throwing rocks at the system; they’re just trying to stay afloat while the rules change every five minutes.

This is why crypto still feels like a real option in 2025. Not because it’s a secret to getting rich (that’s over) but because it’s one of the few places where younger generations can participate without asking permission from gatekeepers.

But let’s be clear: crypto is not a golden ticket. It’s not a lottery. It’s not the road to Lambo-land. It’s simply an asset that survived hype cycles, regulatory crackdowns, spectacular failures, and global uncertainty - and came out the other side as part of the mainstream.

We don’t need to overhype it. We don’t need to bury it. We just need to acknowledge what it actually is now: a tool. A legitimate piece of the financial puzzle. A place where the rules are finally written down. A sector driven not by chaos but by clarity.

Crypto isn’t a passport to extravagant dreams anymore. It’s a viable strategy in a world where traditional routes to stability have eroded.

And maybe that’s the point. Maybe what younger generations wanted all along wasn’t a revolution but a chance to belong to the economy they were promised.

Crypto didn’t give them that. But it did tell the truth about the world that made them look for it.

September 14, 2021

Bitcoin Letter

Mad Hedge Bitcoin Letter
September 14, 2021
Fiat Lux

Featured Trade:

(CRYPTO IS LEGIT)
(HOOD), (BTC), (FINRA), (SEC), (CFTC)

Change of Chair, Not Change of Tune: SEC Edition

Bitcoin Letter

There was a fresh wave of optimism that swept across Washington when SEC Chair Paul Atkins spoke to Congress about making the United States a global hub for digital-asset innovation. Headlines painted him as the opposite of Gary Gensler - friendlier, more flexible, and eager to strike a “balanced” approach.

But anyone who has lived through a regulatory cycle knows better. The pendulum swings, but the incentives at the center never change.

Atkins now gestures to the Senate committee that overly harsh enforcement may have stifled innovation - and that perhaps it is time to bring crypto into a more cooperative regulatory framework. These developments suggest the industry has grown too large and systemically relevant to operate outside the official perimeter of federal oversight.

Don’t blame me for being cynical, but whether the rhetoric is friendly or hostile, boiling this down to money and power still cuts through many adjacent industries.

It’s just the way of life.

Crypto has become lucrative, and every administration - no matter how innovation-forward their branding - still wants a slice of this golden goose.

Why do I say that?

The SEC’s core revenue mechanics have not changed. Every movement on regulated exchanges, from buying to selling, generates the fees that fuel its operations. The language used to justify them may evolve, but the incentive remains untouched.

Investing with retail brokerages is marketed as commission-free, now and forever. They do not charge fees to open or maintain accounts. Yet the fee structure underneath always finds its way back to the same place.

Self-regulatory organizations (SROs) such as the Financial Industry Regulatory Authority (FINRA) impose small fees for sell orders. These fees apply across brokerages. Firms pass them to customers, who indirectly fund regulatory bodies. FINRA is required by law to forward certain fees to the Securities and Exchange Commission.

The numbers shift with time, but the mechanism stays the same: fees ultimately cover the government’s cost of supervising markets and securities professionals.

There are numerous layers of cost embedded into participating on exchanges regulated by the SEC. The result is a well-oiled system of fee collection and institutional reinforcement.

So when Atkins offers his stamp of legitimacy to the crypto sector, the underlying exchange is simple: innovation-friendly messaging in return for bringing digital assets into the fee-generating ecosystem.

For lack of a better word, these fees allow regulators like FINRA and the SEC to rake in the cash, and as we know in this business, money is power.

I only see it as a matter of time before the SEC, FINRA, and Commodity Futures Trading Commission (CFTC) expand their reach further into crypto infrastructure - not just through enforcement, but through officially sanctioned pathways that look friendly on paper yet consolidate control.

And I’m not blaming them. Everyone is in the business of adding to their nest eggs, and the SEC, FINRA, and CFTC are no different.

However, ultimately this is what it’s about: a cash grab dressed up in innovation-forward language. The legitimization of crypto is merely the collateral benefit - one any asset class would be ecstatic to receive.

Take sports as an example. Football leagues scramble for the NFL’s approval, but the NFL rarely offers its blessing. They don’t care if college football and startup leagues battle it out away from the confines of professional football. The cost of lacking an NFL stamp of approval has been devastating for newcomers.

If the SEC once again vouches for large elements of the crypto ecosystem - this time through cooperative rulemaking under Atkins - this will start a chain reaction. It offers an olive branch to wealthy investors who have waited for a friendlier regulator.

Consequently, they would come pouring in, guns blazing, with the heft of their capital and the strength of their financial connections.

Atkins announcing that cryptocurrency exchanges may receive a clearer path to registration, as opposed to the adversarial gridlock of the Gensler era, makes this one step closer to reality.

During his early remarks, Atkins stated that recent regulatory battles left both investors and innovators without adequate clarity. His angle appears the inverse of Gensler’s warnings, but the subtext is the same: the SEC cannot effectively shape a market from which it remains partially excluded.

I want to remind readers that any SEC chair has the choice to allow crypto to operate in a vacuum, but doing so risks letting it grow too big to regulate - and too large to fold into traditional fee structures. They all know that.

Atkins highlights crypto as an asset class with enormous potential, yet one that requires consistent regulatory engagement.

The moral high ground is still shaky.

The SEC continues to permit the listing of foreign firms under structures that allow significant opacity, yet remains eager to frame crypto as the primary risk vector in modern markets.

Atkins acknowledges that Congress must ultimately define jurisdiction, just as Gensler once did. He may sound more cooperative, but the underlying tension is the same.

Regulation would be a huge win for the crypto universe, but it invariably infringes on the decentralized ideals that first drew people to digital assets.

Regulators love to preach about safety, but they preside over a system that endlessly erodes the purchasing power of fiat currency through policy choices far outside the crypto world.

Thus, does anyone sitting in the SEC chair truly believe that preserving the dollar’s value - or crypto’s future - is something they can call safe?

September 9, 2021

Bitcoin Letter

Mad Hedge Bitcoin Letter
September 9, 2021
Fiat Lux

Featured Trade:

(BEST WAY TO EARN PASSIVE INCOME IN CRYPTO)
(CELSIUS NETWORK), (BTC), (ETH), (SNX), (CEL), (LINK), (UNI), (AAVE)

The Best Way to Earn Passive Income in Crypto

Bitcoin Letter

So global yields are in the toilet today?

Savings accounts don’t do what they used to do, do they?

How about we try out a certificate of deposit (CD) to harvest some cash?

Are there simply no other interest-bearing vehicles one can park capital in and gain a healthy return?

I would say you are right, but then I would be the fool here and I am certainly not in that line of work. But there is an elixir to the anathema.

Enter the world of crypto-based yield, the place you end up when you realize the banks stopped trying years ago. There are no logos to worship and no slick pitches to fall for, only the tools that actually make your money move.

This is a landscape of financial mechanisms built on collateralized lending, decentralized liquidity pools, and blockchain driven demand, designed to offer yields traditional banks would not dare whisper about.

A Look Back: The Early 2020s

Back in the early 2020s, centralized crypto lenders promised stable, high-yield returns by lending digital assets to traders and institutions.

The model was clear on paper: depositors supplied assets, borrowers posted collateral, and interest payments cycled back to the depositors.

The appeal was obvious, too. Floating rates far above bank offerings, over-collateralized loans that ostensibly reduced default risk, and automated liquidation engines that protected lenders from sharp drawdowns.

But those years also revealed something deeper: crypto yield wasn’t magic; it was mechanics. And mechanics depend entirely on transparency.

Several major lenders that once rode parabolic growth arcs ultimately shut down or restructured following liquidity stress and market drawdowns.

These events carved a permanent lesson into the industry: when yields come from undisclosed leverage, black-box rehypothecation, or concentrated risk, the music eventually stops.

How Crypto Yield Works (When Done Responsibly)

Today’s more mature landscape emphasizes mechanisms rather than miracles:

Over-collateralized lending: Borrowers post more collateral than the value of the loan.
On-chain liquidity pools: Smart contracts handle matching between liquidity providers and traders.
Staking and validator incentives: Networks reward participants for securing blockchains.
Real-yield models: Revenue from actual usage (trading fees, borrowing demand, network operations) flows directly to providers.

These systems function best when transparency is verifiable, incentives are aligned, and custody risks are minimized.

They fail when promised APYs float on wishful thinking, opaque balance sheets, or dependence on perpetual bull markets.

The Modern Reality Reveals A Maturing Ecosystem

For years, the traditional banking business has conditioned us naive folk to accept steep fees and no yield earnings on holdings as the status quo.

I will tell you right now that it’s a load of garbage and nobody should accept these pitiful offers from dinosaur banks.

There is so much more out there that we can access now because of crypto.

But as of 2025, the responsible path isn’t chasing a single platform but understanding the underlying engine.

Evaluating any crypto yield opportunity now requires asking questions like:

What is the source of the yield? (Fees? Borrowing demand? Emissions?)
How transparent is the collateralization and liquidation framework?
Is custody centralized or verifiably on-chain?
What are the failure modes in extreme market conditions?
How quickly can one withdraw funds?
Are audits and risk reports published and verifiable?

A Clearer Awakening

You’re not dreaming, crypto yield does exist. But in 2025, the real deal isn’t a single star player but in an entire ecosystem’s hard-earned maturity.

Wake up to a clearer understanding of how crypto yield works, easily convertible into better financial decisions.

Participate not by trusting a brand name, but by understanding the mechanics that make the entire machine run.

If the early 2020s were defined by explosive growth and painful lessons, the mid-2020s are defined by something far more sustainable: clarity.

These days, crypto yield is no longer a deal of a lifetime but a financial primitive. And like any powerful tool, it rewards those who learn how to use it responsibly.

August 16, 2021

Tech Letter

Mad Hedge Technology Letter
August 16, 2021
Fiat Lux

Featured Trade:

(HOW TO BE A TECH ANGEL INVESTOR)
(FB), (PINS), (LYFT), (TWTR), (BTC)

How To Be A Tech Angel Investor

Tech Letter

It’s not easy to be the genius who doled out early seed money to Facebook (FB), Foursquare, GitHub, Pinterest (PINS), Lyft (LYFT) and Twitter (TWTR), among others.

These investments turned out to be highly successful. If someone even miraculously hit on one of these, your grandchildren would know about it.

This person even acquired a majority stake in Skype for $2.75 billion which was considered highly risky at the time and offloaded it to Microsoft in 2011 for $8.5 billion.

Not everyone can do this like Silicon Valley tech investment maestro Marc Andreessen.

Behind the public markets is angel investing and the data says that these investments fail over 50% of the time for the best of breed like Andreesen.

There are simply too many variables that can derail these profit models which nobody can predict.

To lose over half the time and claim to be an outsized winner means relying on those 10 or 100-baggers or might I even say 1,000-baggers to drag up the portfolio performance.

These are the guys who were buying bitcoin (BTC) at 10 cents on the dollar.

Truthfully, investing in startup companies is not for everyone considering there is over a 50% chance a company will end at a 0 or pennies on the dollar.

However, it can be highly gratifying if and when the investments do pay off and investors get a front seat to the forefront of the tech innovation cycle, which you simply don’t get by trading Facebook and Google from your Fidelity account on your computer screen.

These investors can also get direct access to the chatter while creating a rich network of tech know-how; and I do believe that’s half the value in it too, since it can propel angel investors to the next super app or guy behind the next super app.

I mean who could have ever predicted a global health crisis that’s going into its 3rd year soon? And who will be able to nail the knock-on effects of climate change.

That is why risking losing one’s shirt is a real possibility if they bet the ranch on an unknown entity.

Everybody wants the next Tom Brady to quarterback their team, but who knows who the next Tom Brady is at 18 years old?

Even though Andreessen hits on less than 50% of his ideas, the industry median is around 17%, showing how superior his performance is.

He definitely has this thing figured out on relative terms.

Let’s define Angel Investor.

An angel investor is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.

The funds that angel investors offer could be one-off investments to help the business get off the ground or in drip injection form to support and carry the company through its difficult early stages, which means burning cash.

Most of these companies don’t make money for the first 10-years and that time is usually a referendum on the quality of the idea; very few stand the test of time.

The potential to make 100-baggers is out there with subsectors like fintech already worth half a trillion dollars in 2020 and with a predicted annual growth rate of 35%.

Angel investors typically require a 35-40% return on the money they invest in a company minus costs and inflation to call it a winner.

But Venture Capitalists may take even more, especially if the product is still in development. For example, an investor may want 50% of the business to compensate for the high risk it is taking by investing in a startup.

Angel investors do the jobs of banks.

Traditional banks would never lend to an entity based on a half-built product or even a genius idea.

Proof of income and debt to income ratios are realities at banks.

When net profits are negative, the balance sheet is too ugly for banks to even think about doing any business with these startups.

Therefore, there are limited pathways for entrepreneurs to find capital, and many turn to Angel investors to help startups take their first steps.

Who Can Be an Angel Investor?

Angel investors are normally individuals who have gained "accredited investor" status, but this isn’t a prerequisite. The Securities and Exchange Commission (SEC) defines an "accredited investor" as one with a net worth of $1M in assets.

Essentially these individuals both have the finances and chutzpah to provide funding for startups. This is welcomed by cash-hungry startups who find angel investors to be far more appealing than other, more predatory, forms of funding.

These private funds usually draw up opportunities for a defined exit strategy, acquisitions or initial public offerings (IPOs).

Liquidity events is what makes everyone happy at the end except for the investors who missed the boat.

It’s even possible that an angel investor only sees growth in the first 5 years and unloads the “idea” to another private investor for a profit.

Private market deals are common because of the excess of liquidity brought on by the U.S. Central Bank lowering interest rates for a prolonged amount of time.

What I do know is that America is the framework within which almost all unicorns prosper, and I do not envision any monumental shift to Europe or China, these other places simply have more problems than the U.S.

How does the normal Joe get it on the action?

Andreesen has said the only way he usually does business is with a “warm” introduction which can be hard to come by if one doesn’t rotate in the same social circles as these heavy hitters.

Scoring a warm introduction also means getting boots on the ground in California which is ebbing and flowing between its colossal wildfires and public health issues like many other places.

Honestly speaking, if might be difficult to get the best of the best angel opportunities even if the gunpowder is loaded.

It’s accurate to believe that probably guys like Andreesen get the best of the best ideas in front of them and if they pass on it, the likes of Sequoia, Benchmark, and Softbank have very smart people as well who get similar type of presentations and opportunities.

Like you correctly guessed, this private group of capital is quite incestuous and tight-knit. It’s a copycat league of the ages.

The one avenue that might be of interest is a platform that has democratized angel investing who on the last count had close to 1,000 companies looking for start-up capital.

This platform is called https://angel.co/angel-investing and some are even actively hiring on the same platform.

I won’t stand here saying this is the cream of the crop because it’s not, but I will say that sometimes companies are overlooked, or the industry consensus has shifted too far in one direction offering undiscovered dark horses a chance.

Lastly, this forum of angel companies on offer does give analysts insight into where money is funneled to and the current hot sub-sector of the tech industry.

This platform even offers an Angel index fund if a reader wants to take the aggregate performance of 150-200 companies with a $50,000 minimum.

If a reader wants access to facilitate angel investing by a deal-by-deal offer from the Angel list as a professional investor, then $500,000 is required.