New Money: Issue #22
NEW MONEY is a discussion of trends, news, and macro events related to Bitcoin, Money, and Digital Assets, published by Adam Pokornicky of DAIM Advisors, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear
For investment inquiries, connect with me or my partner Bryan Courchesne at firstname.lastname@example.org
Here we are, a quarter way through 2021 and 7 months into a raging bull market for Bitcoin and Digital Assets dating back to early October of last year. Up 31% for March, 103% YTD, and a whopping 446% since the end of September. The price of Bitcoin can barely keep up with the positive news flow, the blistering pace of new dollars being created out of thin air by the Federal Reserve, and debt-based stimulus being injected into the economy every few months.
The positive news flow about Bitcoin and Digital Assets over the past month was almost dizzying and hard to keep up with:
$4tn AUM Morgan Stanley Private Wealth Management to Offer NYDIG and Galaxy BTC Funds to Clients
NYDIG Raises $200mm From Morgan Stanley, New York Life, MassMutual, Soros
Visa to Enable Bitcoin Purchases at 70mm Merchants
Crypto Custodian, Fireblocks Raises $133mm Series C from Coatue, Ribbit, BNY Mellon
MicroStrategy purchases more Bitcoin, upping its total to approximately 91,000 Bitcoin on its balance sheet.
Hong Kong-listed Software Company Meitu Purchases $50mm ETH and $39mm BTC on Balance Sheet
Norwegian Oil Billionaire Kjell Rokke Buys $58mm BTC, Launches Bitcoin Business called Seetee (highly recommend reading their shareholder letter)
FTX Purchases Naming Rights to Miami Heat Stadium for $135mm
Visa Launches Pilot to Settle USDC(USD Stablecoin) on Visa Network
Beeple Sells NFT for $69mm, Third Highest Sale from Living Artist Ever
BlockFi Raises $350mm Series D at $3bn Valuation
Goldman Restarts Crypto Desk, To Offer New Crypto Product
Fidelity, Goldman, SkyBridge, NYDIG, VanEck, Valkyrie, WisdomTree, and Bitwise All Have Current Bitcoin ETF Applications Pending
First Bitcoin ETF approved in Latin America
eToro to go public through $10.4bn merger
Coinbase set to reverse listing under COIN, report earnings 04/06
PayPal Acquires Crypto Custodian Curve, Launches “Checkout with Crypto”
Crypto Tax Company TaxBit Raises $100mm Series A from Paradigm and Tiger Global
E-commerce giant, Rakuten begins to accept crypto
Dapper Labs Raises $305mm Led by Coatue
Binance Adds Former US Senator and Ambassador to China Max Baucus as Advisor
Jerome Powell Says Bitcoin Is More Like Gold Than the Dollar
Howard Marks Changes His Mind About Bitcoin
On top of the positive news flow, on-chain data related to Bitcoin suggests this bull market, believe it or not, is just getting started.
Not only are on-chain analytics bursting with bullish data points, but we are on the precipice of the Wealth Management industry getting access to Bitcoin for client portfolios. A year ago, the narrative about Bitcoin was “DON’T RISK MORE THAN YOU CAN AFFORD TO LOSE”, a year later the narrative is “WHAT IS THE PROPER ALLOCATION FOR BITCOIN IN THE MODERN PORTFOLIO”. That’s over $100 Trillion worth of capital with basically ZERO exposure to Bitcoin looking to GET OFF ZERO and make a permanent allocation. Not a bet, an ALLOCATION. The magnitude of that amount of money looking to make even a 1% allocation to Bitcoin is not even remotely supportable at these prices. Bitcoin would have to 5-10x from here just to absorb a 1% allocation. You guys are smart people, you can do the math on potential price targets for the end of this cycle….
Ignore the Bitcoin is a Bubble People
I often hear “Bitcoin is a Bubble” like a broken record from friends, armchair economists, the peanut gallery on TV that parrot the narrative of the status quo, and those who have yet to do a lick of work understanding the difference between sound money vs fiat currency, and as a result why Bitcoin matters. If you come across this in your life, stop listening to these people, they are fools. They know nothing, haven’t done the work, and shamelessly continue to be wrong and mislead people about Bitcoin over and over again.
As a long term HODLer, I’ve often been laughed at, dismissed, and/or mocked about my interest and investment in Bitcoin by many intelligent people I’ve crossed paths with in life through college, Wall Street, the Tech/Startup world, and Ivy League MBA classmates of my ex who I spent a lot of time with in Philly. Collectively, their resistance to Bitcoin has long been a fascination of mine and at this point is both frustrating and baffling given they still have ZERO exposure to Bitcoin, are openly hostile and/or dismissive towards it without the least bit of interest in understanding it, and why it will likely be the most important innovation of our lifetime. Nothing sums up this complex resistance seen from them then the following article: “Why the Yuppie Elite Dismiss Bitcoin”.
And I want to make something clear, this weeks post is not meant to dunk on anyone, but we’ve gotten to the point where the reckless monetary and fiscal policy responses are getting more frequent and larger in size, leading to an inevitable endgame for our existing system that no one really knows how will play out. If you ever studied macroeconomics or are a student of history there are plenty of examples of empires and poorly run sovereign nations following a similar path we find ourselves on. While it never ends well, innovation has gifted us a tool for individual sovereignty and wealth preservation.
For all ignorance, the ignorance of the educated and yuppy elite is absolutely the most dangerous. Not only are educated people likely to have more influence given their status and access to platforms in the age of influence, but they are the last people to suspect that they don't know what they’re talking about when they go outside their narrow fields. Even worse they parrot information that is cycled through their echo chambers and opine as if they are experts on everything because at the core, the educated and yuppie elite believe they are the people in the know and that Bitcoin is for people not in the know.
And that may well be one of Bitcoin's biggest problems. Because if you know, you know, and most people who think they know are definitely not in the know. As the great Nic Carter articulated in a recent debate with Bitcoin skeptic and Professor of Applied Economics at Johns Hopkins University Steve Hanke, Bitcoin suffers from a definition problem:
So the thing about bitcoin is that we have a bit of a definitional problem because the word bitcoin actually refers to a number of different things, and that causes confusion. So on the one hand, it’s a protocol.
It’s a set of rules that people opt into to send value through a communications medium in a final way so you get final settlement. And on the other hand, it’s also a financial asset, so bitcoin is the name of the monetary unit that circulates within the bitcoin protocol.
That doesn’t make a lot of sense to a lot of people, but the bitcoin network is such that, really, there’s only one native currency that is changing hands on the bitcoin network, and we call that bitcoin.
And as of today, all of the bitcoins are worth about a trillion dollars. So that’s our problem, is that we use the same word to refer to the network itself and to the actual medium of payment on the network. - Nic Carter
“The first step to understanding Bitcoin is admitting you don’t understand Bitcoin.” @lopp
As the article above points out, the difference between Bitcoiners and the educated/yuppy elite boils down to one thing: Trust in the system.
“To succeed in the educated, professional class, you have to be smart. But it’s also crucial that you know how to fit in, be a good team player, navigate industry politics, be polite and likeable, and above all be a good foot soldier willing to sacrifice for your employer. The requisite core belief to be able to be all of these things is trust in the system - trust that if you are a good employee and play nice with others, that you will be rewarded via promotions and social standing” - Croesus BTC
A good rule of thumb to manage this is to understand the Circle of Competence.
“If you want to improve your odds of success in life and business, then define the perimeter.. and operate inside. Over time, work to expand that circle but never fool yourself about where it stands today." - Farnam Street
For the past decade+ we’ve had an explosion of debt and money printed out of thin air to prop up a zombie economy that for 40 years has eroded the wages of workers and transferred their share of profit and productivity to owners of capital that get access to near-zero interest debt and are bailed out any time the market and/or economy sneezes.
The idea that anyone can point to Bitcoin at $1 Trillion dollars in value and declare it “the bubble” when the government and central banks have increased debt and Money supply by $21 Trillion and $11 Trillion respectively since Bitcoin’s genesis is either ignorance or lacking critical thinking and objectivity.
Bitcoin is NOT a bubble people. It’s the pin.
Since the beginning of 2020, total U.S. Government Debt outstanding has increased by over 38%, while the Federal Reserve has created 40% of all dollars ever created in the history of this country. This is not over a decade, it’s over a SINGLE YEAR!
Meanwhile, the total federal debt as a percentage of GDP(see below) is the highest on record and that’s without taking into account the 1.9tn USD fiscal package that Congress passed this month or the infrastructure bill being planned next.
US Federal Government debt over the years.
1990: $3.2 trillion
1995: $4.9 trillion
2000: $5.6 trillion
2005: $7.9 trillion
2010: $13.5 trillion
2015: $18.1 trillion
2021: $28.1 trillion
2025: $50 Trillion (projected)
On the other side, Federal Reserve monetary policy has been debasing our dollars at an average of 24% a year since 2009 by printing money to buy assets on their balance sheet, misallocating capital to prop up the economy while pushing investors out the risk curve, punishing savers and transferring wealth from the poor to the rich.
So what happens when Central banks print money? They buy assets on their own balance sheet making other asset prices go up. This is primarily reflected in the prices of assets that are only accessible and desirable to the wealthy with the wealthiest 1% of Americans owning 52% of all equities and the wealthiest 10% owning over 87%. As I’ve written before countless times about the Cantillon Effect and its devastating effects of wealth inequality leading to Debt-Serfdom and Financial Feudalism, those closest to the money benefit, those furthest away from the money suffer.
So for the average American, if you aren’t at the very least questioning, learning, and consuming everything you can about money, how it works, and what the government and central banks and how it affects your hard-earned money and wealth through time theft and inflation, then what are you even doing?
There is a reason why Bitcoin has been the best performing asset over the past decade and why its adoption as an emerging store of value and innovative technology has captured the attention of humans around the world.
As an Investment Advisor and Manager, it would be a mistake to look at return and risk separately, rather it should always be combined. So not only is Bitcoin the best performing asset over the past decade, it offered the best risk-adjusted return over the past 10 years than any other asset and it’s not even close.
All of this suggests that not only is Bitcoin the way, but it very well may be a better investment today at $60k than it was a year ago at $6k. Bitcoin is here to stay and it’s here in a major way… For those still on Zero, GET OFF now…the fun is just getting started.
In the Next Newsletter I will be covering:
Why the 60-40 Modern Portfolio is Dead and how using Bitcoin, Digital Assets and Traditional Assets together will change portfolios forever
Decentralized Finance(DeFi) assets as an equity alternative
Fixed Income and Bond replacements using Stablecoin Lending