Decentralization, DeFi, Disruption.....Power is Shifting, Think Differently, Embrace Change

New Money: Issue #21

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 [email protected]


Greetings my fellow Bitcoiners, Precoiners and internet Friends…..As I write our Feb letter, the price of Bitcoin is once again flirting with $40k. The Last time I wrote New Money, back in late December 2020, the price of Bitcoin was $23,000. Ironically, we discussed Bitcoin’s price in, “Is the Price of Bitcoin Too Damn High? and I focused on contextualizing the price of Bitcoin and how cheap and misunderstood it was versus stocks and other asset classes it’s competing against.

Here we are, six weeks later on the cusp of Bitcoin breaking out of three-week 25-30% bull market retracement after hitting all-time highs and tapping $42,000 in mid-January. We’ve seen Bitcoin, Ethereum and several De-Fi tokens post extraordinary gains in January and early February. Meanwhile, Bitcoin has consolidated around $35k, prepping itself for the next leg of its long journey towards 6 figures and global adoption as a store of value and eventually money.

For myself and my partner Bryan, the past four months have been rewarding and validating. Our efforts to build a gold standard regulated and compliant Investment Advisor and Asset Management firm dedicated to an industry and asset class that most people have either overlooked or considered too risky/too crazy for the past decade have begun paying off. Our mission at DAiM is to help individuals “Get Off Zero” and help them accumulate more Bitcoin through wealth management strategies and tax efficiency. Our measurement of success at DAIM will always be valued in Bitcoin. How much Bitcoin did you start with vs how much Bitcoin do you have now?!?! There is no more important measurement for any individual investing in Bitcoin than to accumulate more of the most scarce monetary asset ever created through proper wealth management and wealth preservation strategies. Our performance speaks for itself.

On a personal note, this is the ideal opportunity to express our sincerest gratitude to our clients for working with us, entrusting us with your money, and recommending friends, family, and colleagues to us. Much of our growth is organic and a function of client recommendations, who we are able to generously reward through a share of our fees through our Partner Program. Our high touch service, personalized client interactions and platform features, including our model portfolio and the ability to earn yield in brokerage and retirement accounts, are unmatched. Our 3 foundational services are seeing unprecedented demand:

  1. Individual and Institutional Asset Management

  2. TPAM/SubAdvisory for Wealth Managers and Financial Advisors

  3. ERISA Compliant 401k Plans with Bitcoin

As an organization, we couldn’t be better positioned to capture adoption and provide wealth management services to individuals, endowments, family offices, corporations, 401k plans, and other Financial Advisors and Wealth Managers. While the past few years have been challenging both personally and professionally to grow a business in a misunderstood asset class in the middle of a bear market where progress and growth are not accurately reflected in AUM and demand, I couldn’t be more excited and proud of what we’ve built and the opportunities ahead. Six months ago, individual demand was steady, but it was a struggle to get institutions and wealth managers/financial advisors to pick up a call or engage. Now, opportunity is abundant, as they’re barrelling down our door looking for a regulated, compliant, and transparent way to get exposure, access, and expertise managing Bitcoin.

For me, this is the most exciting time of being involved in Bitcoin since I started investing back in late 2012. While, I’ve experienced multiple bull and bear markets, exchange hacks, setbacks, and hype cycles, I’ve never experienced retail and institutional demand like this coming from so many directions and use cases. The world is waking up to the sound money properties of Bitcoin in a world awash in fiat currency that is being debased and while central bankers intentionally create inflation and make the value of your hard-earned money worthless. The hard work of convincing people to take Bitcoin seriously is over. The past 6 months have unequivocally shown us that Bitcoin has crossed the chasm from fringe to mainstream finance and that it is here to stay. What was once mocked and shunned is now being widely considered as an acceptable 1-5% portfolio allocation and will likely be viewed going forward as a Permanent Balance Sheet Allocation. If you are still doubting the merits of Bitcoin in your portfolio, please have a read of my work: Modern Portfolio- The Investment Case for Bitcoin.


As I prepare to give you an inside look into my thoughts about Bitcoin, Digital Assets, and Asset management, in general, going into 2021, I think it’s best that I offer some context about myself and how my mindset has evolved since late 2012 and why I am so bullish on the ability to help individuals use both Bitcoin and Digital Assets to navigate their portfolios moving forward.

I’ve made a lot of mistakes since buying my first Bitcoin back in December 2012. Mt Gox, Sim swaps, taxes, etc…, It’s probably what makes me one of the most seasoned, experienced and OPSEC obsessed Bitcoiners you could ever interact with. For Asset Management and Financial Advisory, I honestly don’t think there’s a licensed Financial Professional that has the Investment Management experience and understanding of Bitcoin, Digital and Traditional Assets as I do and truly enjoys helping as many people as possible get off zero.

My love affair with Bitcoin started in late 2012 and into early 2013 when I understood how Wikileaks was able to take donations throug Bitcoin after being cutoff by banks and payment processors. This lead to reading the whitepaper and realizing how unique its scarcity and fixed supply was relative to Gold and Silver, which were being created in unlimited quantities by Wall Street through paper derivatives, Futures, rehypothecation and price-fixing.

I give a lot of credit to two of my most valuable friends and resources, Michael Krieger(former Alliance Bernstein Energy Strategist: highly recommend following him on Twitter) and my former colleague at Scottwood Capital where I worked from 2002 to late 2012 who I will keep anonymous. We’ve been in a chatroom together for over a decade, have helped each other navigate the past 13 years since the beginning of the financial crisis, and discovered and invested in Bitcoin together. Being invested and passionate about Bitcoin has always felt like walking around with a secret that no one else knows and feeling crazy trying to explain it to everyone else. I owe much of my early adoption and understanding of Bitcoin to having open-minded, thought-provoking, and free-thinking humans as resources to expand my mind, challenge me to question everything, and explore things outside of my comfort zones. Bitcoin is and always will be an evolving learning experience about money, economics, governance, property rights, free speech, game theory, and perhaps a little religion. You don’t need to understand all of it today, you just need to have a little skin in the game and be on the right side of history. This is why I write, this is why I work with individuals and this is why I care so much about exposure, education, and empowerment.

So why am I telling you all this?!?!?! Well, because 2021 is going to be a banner year for Bitcoin and Digital Assets, but more importantly for society to push back against traditional systems, hierarchies, and power. The explosive growth we’ve seen to date will be dwarfed by the value expansion and global interest in Bitcoin, with simply not enough supply to satisfy demand. Structurally, the macro environment is doing much of the heavy lifting that is making the case for Bitcoin and Digital Assets in general, creating tailwinds that make Bitcoin a safer investment now then ever before in its 12 year history.

Bitcoin is and will be the biggest beneficiary of societal and economic divides we’ve been dealing with for decades because it is governed by rules not rulers. As more people recognize that politicians, tech oligarchs, unelected bankers, and Wall Street can manipulate the money, silence dissent, deplatform free speech and change the rules to benefit themselves whenever they want, individuals will continue to push back, opt-out and stop playing the game. Our government is not going to save us. Four-year election cycles will do nothing to help us and you can't beat Wall Street using Wall Street. Switch to Bitcoin and watch the powerful become powerless.

The Era of Decentralization Begins

The Age of Aquarius started December 25th when Jupiter and Saturn joined forces at 0° Aquarius. The age of Aquarius will be defined by “we versus I” mentality of visionary, rebellious, innovative, and eccentric Aquarians. It focuses on pursuits of valuing each person’s individuality, holding and taking care of each other as a unit, and a disruption of the system and major shift in power dynamics. For as long as most of us can remember, power has rested in traditional, oppressive hierarchical structures, and their beliefs and systems have dictated our reality. In the Age of Aquarius, power is turning over to the individual and giving us the freedom to choose our own reality based on what aligns with our soul. It’s important to realize these developments are really reflections of an inner shift taking place, one that relates to an awakening of mind throughout our culture as the times ahead will likely usher in major advances in humanity's intellectual growth, though probably at widely varying levels of sophistication. 

So how does this all tie into Bitcoin, Money and the future?

It’s been a little over 5 weeks since the dawn of Aquarius and people are realizing the immense power that is held by a handful of corporations, that has led to a sudden rebellion or ‘wait a minute, that’s not right’ reaction. Things are already happening fast as a cultural and economic revolution are upon us.

Over the past month, many people have left the big Social Media networks and/or are migrating to other communication channels. Tens of millions of people ditched WhatsApp for Signal upon learning about its privacy terms. Many conservatives left Twitter as their speech was silenced were deplatformed. Wall Street Bets and Robinhood showed that Hedge Funds and Wall Street can change the rules and play a different game whenever they feel like it.

In short, the battle lines are being drawn around private companies – which were once seen as democratizing forces but have trended towards “illiberalism” – versus open-source platforms that anyone can use, indisputably and in perpetuity.

Connecting the dots to the crypto industry, noted technologist Balaji Srinivasan said,

“Crypto and WallStreetBets have the same spirit: a vision of truly free markets where everyone plays by the same rules.” A disparate group of traders, banned together by social networks like Reddit and Discord, now, conceivably, can have as much influence on markets as Wall Street, Srinivasan argued.

So what happened? People have suddenly woken up to the fact that these so-called ‘free social networks’ and apps are not really that ‘free’: they hold an unhealthy amount of power, sell our data, and influence our behavior. People no longer want to be at the mercy of companies that can read our private messages, sell our data, shut down our accounts any time, and have such sway over our lives.

If it’s not clear yet, it will be soon that decentralization in the way communication is distributed and consumed will be the most prominent theme moving forward. Bitcoin, as free speech money and a decentralized form of money and value transfer, will be the biggest beneficiary of the decentralization theme moving forward. Furthermore, companies and institutions focused on innovation, value creation and the fair distribution and democratization of value, will be the big winners moving forward.

So what will this look like?

  • People start to become dubious about the centralized power held by just a few corporations and institutions that can dictate pretty much everything and impact our lives without us having any say.

  • People rebel against this unjust balance/distribution of power and take coordinated, bottom-up action to change the rules of the game.

  • New rules that better reflect a fair and balanced distribution of information and resources.

Themes to expect ahead:

  • People taking coordinated action

  • Democratization of information

  • Decentralization of power, with groups of people fighting for freedom and sovereignty

  • Power to the people

  • People coming together in look-alike groups to change the rules of the game

I bring all of this up because I believe the era/revolution that is upon us that will eventually democratize our society - will be lead by Bitcoin. An ark, a lifeboat and monetary vessel which can never be inflated into oblivion, accumulating energy and influence over time. The decentralized nature of Bitcoin and the digital systems, exchanges, and platforms being built in this new decentralized financial paradigm are providing us with the resources, vision, and the determination to build healthy new structures that are a better fit for our current society. While I have a strong opinion of where Bitcoin is going, the road ahead to dismantle power structures won't necessarily be smooth. However, if we want change, we have to shake things up first. Our society will be healthier and stronger because of it.

2021 Outlook from DAiM

  • Bitcoin as a Permanent Balance Sheet Allocation

  • Decentralized Finance(DeFi) Opportunities

  • Portfolio Allocation || Redefining the Modern Portfolio

  • Fixed income Portfolios vs Digital Asset Lending

Our thought process on Bitcoin is evolving.

  1. Bitcoin should be a Permanent Balance Sheet Allocation of at least 5% and up to 15%. I’ve backtested enough portfolios and reviewed enough data that demonstrate that Bitcoin is not only an asset that deserves a place in your portfolio but its attributes as a Store of Value, Growth/Tech Innovation, and ability to earn yields of up to 6% make it more than appropriate allocation away from stocks, bonds, and real estate. Once you invest in Bitcoin, your mindset should be that this is a permanent allocation.

  2. DeFi: The innovation and advances occurring in DeFi are extremely exciting and this is the future of finance. Over the next month, I will be taking a deep dive into DeFi opportunities that I believe will be the horses to ride moving forward. What I really like about several DeFi services and platforms is they look like traditional investments that I can model on revenue and cash flow. They look more like equities and bonds to me and the ability to value them this way gives me strong confidence as to how to think about them fundamentally and allocate to them as part of a portfolio. Names like UNI, SUSH, YFI, AAVE, BAL, and NXM are all on my radar and will likely be something we recommend in the future as an allocation away from equities and fixed income(more on this below).

  3. Portfolio Allocation: I believe there is merit to investing in ETH and many of the DeFi names above as long as you are willing to allocate away from equities/traditional assets rather than Bitcoin. This is a change in my thought process and the distinction is important. I am prepared to make the argument that Bitcoin needs to be its own bucket or allocation that should not be touched and that there is room for other investments as long as you are willing to allocate away from some other asset classes. Modern 60/40 and even 70/30 portfolios are dead and we need a new framework for building portfolios that represent the environment we are experiencing.

    Bailouts and an explosion of the supply of the monetary base at a rate of over 22% a year, has cattle prodded investors out the risk curve and forced them to over-allocate to risk assets like stocks, bonds, and real estate, offering poor risk-adjusted returns. We are in an environment where central bankers are intentionally trying to create inflation through the debasement of our currency and politicians are trying to stimulate the economy through debt-funded stimulus to create growth. The overall increased risk exposure to stocks and chasing yield creates a systemic form of risk that also puts one’s savings and investments at risk and has lulled into treating this as the norm. Historically speaking, portfolios built primarily around stocks and bonds struggle in periods where interest rates are close to zero (1930s U.S., post 1990 Japan, Europe today) as well as when inflation is rapidly rising (the U.S. in the 1970s). In these scenarios, bonds can become correlated to risk assets like stocks and real estate causing them to all decline at the same time.

    Any meaningful uptick in inflation and growth will result in a backup in Treasury yields that will have a knock-on effect on all risk assets. Defensive assets like volatility, gold, and now Bitcoin must be considered to diversify portfolios, smooth out returns and provide dry powder in periods of volatility.

    For these reasons, we are thinking about portfolio management in a totally different way and will be utilizing every tool in the toolbox, to provide investors with a more modern approach to preserving and growing their wealth. We believe we are uniquely positioned given our overlap in both traditional and digital assets and welcome the advancement of this conversation with clients and potential investors to re-evaluate the way they are thinking about their entire portfolio.

  4. Yield and Lending: we are seeing incredible opportunities to earn income/yield on Bitcoin, Digital Asset and cash that doesn’t exist in traditional markets. The ability to earn yields of 4-6% on Bitcoin and Ethereum(7-10% on TEY in tax-advantaged accounts) and 9-11% interest on cash in overcollateralized lending is one of the strongest opportunities available to augment low yielding and poorly performing fixed-income allocations that have significant duration and convexity risk from any back up in yields from here.

    So why does this opportunity exist? Inefficiency and imperfect information. The digital asset space is a newer asset class and both counterparty risk management and collateral are misunderstood by the market. Collateral posted is typically highly liquid and demand for digital assets is currently very high producing outsized yield profiles for lending and borrowing. As the market matures, we expect greater market intelligence and credit evaluation insight to normalize rates over time. But for now, this remains one of the best opportunities for investors to replace cash and fixed income with secured lending facilities that have collateral coverage that dwarfs anything available in traditional markets.

Conclusion:

2021 is likely to be the biggest year yet for Bitcoin and Digital Assets and now is the time to think about how are you are currently positioned and how you can take advantage of so many different opportunities to augment not just your Bitcoin and Digital Asset exposure but utilizing all the tools and resources available to rethink your overall portfolio. We welcome the opportunity to advance these conversations with you and if you want to learn more or schedule a consult with DAiM, please reach out to us below:

CONTACT DAiM

Alright thats it! I hope you enjoyed the latest issue of New Money.. until next time!


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Is the Price of Bitcoin Too Damn High?

New Money: Issue #20

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 [email protected]

Back when I lived in New York and was the Head Trader at a 1bn+ Global Credit Fund, there was a political activist by the name of Jimmy McMillian, who ran for the mayor of New York City and Governor of New York under a single platform, “The Rent is Too Damn High”. While his candidacy never seemed to resonate, his unique look and broken record rants about how the rent was too damn high certainly did. If you lived in New York, you most certainly remember Jimmy McMillan, if not by name then by his single issue mantra that was played like a broken record on NY1 and plastered all over the NY Post and Daily News.

So what does Jimmy McMillan and “The Rent is Too Damn High” have to do with Bitcoin?!? Actually alot really. I wrote in “A Peaceful Protest: Opt-Out, Vote With Your Money and Buy Bitcoin about how Central Bank monetary policy and printing money has transformed this country from an industrial empire to a financial one, where asset inflation, rent-seeking, and debt-serfdom subjugate Americans in their own country through a gross form of Financial Feudalism. I discussed in one of my earliest newsletters, how the Cantillon Effect has contributed to wealth inequality, harming most Americans, because wage growth is woefully struggling to keep up with the soaring costs of fundamental things such as shelter(rent), healthcare, food, and higher education, a symptom of the parasitic system we have where you’re always on a hamster wheel without enough dollars to keep up with the increased standard of living without debt.

So when I think of Jimmy McMillan and his “the rent is too damn high” campaign, I can’t help but channel his spirit and go on my own monetary activist campaign and rant about how "The Price of Bitcoin is NOT too Damn HIGH! Perhaps I’m repurposing a mantra turned meme for my own personal enjoyment, because it seems relevant now more then ever with Bitcoin above $20,000 and the #1 question new buyers seem to be asking as they consider Bitcoin, “is the price of Bitcoin too high?

The Price of Bitcoin is NOT Too Damn High

This week’s issue of New Money will be entirely dedicated to the price of Bitcoin, its value, how other things would be priced in Bitcoin supply terms, and why it’s potential addressable markets and future value suggest that the Price of Bitcoin is NOT too Damn High but that the price of Bitcoin may very well be too damn low.

I’ve been wanting to write about this topic for a while but it never felt like the right time. I’ve been invested in Bitcoin for over 8 years now and I’m both floored and feel validated by the progress we’ve made and the future ahead. Almost every step of the way, I’ve heard complaints about the price of Bitcoin being too high even when it was under $1,000, when it hovered around $10,000 for most of the past two years and especially now that we’ve broken all-time highs and are firmly above $20,000. The price of Bitcoin, even at these levels, should not be a barrier to a personal or institutional allocation so it seems rather appropriate to tackle it. As a quick note for any subscribers new to Bitcoin, while the current price of $23,000 may be more than you are looking to allocate, you do not need to own a full Bitcoin to get exposure and participate. Bitcoin is divisible into 100mm micro units called Satoshis or “Sats” and you can accumulate Bitcoin or “Stack Sats” in any dollar denomination that works for you. The most important thing to do is allocate and GET OFF ZERO.

Now that I have teed everything up, get ready for a doozy from your favorite Bitcoin Investment Advisor. Enjoy the early drop, because like most of my work, I’m certain this will get repurposed and plagiarized in months to come. Let’s jump in.


When individuals invest in the stock market, they often mistake the price for value. When they perceive the observable price/share to be high, it’s expensive, when the observable price/share is low, it’s cheap. Rarely is the price as a function of value relative to fundamental operating metrics considered. Many companies understand the behavioral preference of investors to prefer low dollar-priced stocks they can afford and manipulate the supply of shares outstanding to price their stock to appear affordable for that very reason.

For example, back in July, the price of Tesla hit an all-time high of $2,230. The price which for the past few years, spent most of its time near $200 was becoming expensive at $2,230 for younger investors and loyal followers to purchase a single share. What fun of course is it to invest in something if you can only own 1 or 2 shares, right? The company, recognizing that incremental buyers of Tesla would be more excited if they could purchase multiple shares, decided to announce a 5:1 stock split, a cheap trick public companies do, to increase the # of shares outstanding to lower the perceived price of its stock and barrier to investing. For Tesla, the result brought it’s previously sky-high share price of $2,230 down to a more accessible $446 on Aug. 31. With a little financial engineering and the clickity-clack of a keyboard, the price of Tesla was suddenly affordable again.

The problem: the price we observe has only a fraction to do with its value and what you are actually paying for. The value is a combination of its observed stock price * the # of shares outstanding which usually represents a multiple of earnings. In Tesla’s case, it’s $645 stock price today seems much more affordable today than it was 3 months ago when it was $2,230, but the reality is the value of Tesla has increased by over 50% from its July ATH of $400bn($2,230/share) to $620bn with the Tesla pre-stock split-adjusted price of a cool $3,225.

The price, which the naked human eye often assigns an arbitrary price determination of being too high/expensive or too low/cheap often misrepresents value due to lack of valuation and context. Tesla, to the Robinhood traders and TikTok stock experts, appears cheap and affordable at $645 especially when you remember the stock was trading at $2,230 only a few months ago. But just like Tesla trading at 1300x earnings, eventually the value of what you are buying/investing matters, especially when you need to compare the opportunity cost of investing in something else.

Thankfully, we can use a little basic math to give us an apples-to-apples way to compare prices of things using their value. Because this blog is about Bitcoin, this is where start ranting about how The price of Bitcoin is NOT too Damn High!

Let’s start with Tesla and price it as if it had the same outstanding supply as Bitcoin.

Tesla:

  • current price is $645

  • 947mm shares outstanding

  • current market value of $612billion.

Bitcoin:

  • current price is $23,000

  • 18.57mm units outstanding,

  • current market value of $427bn.

So how do we compare Tesla’s $645 price vs Bitcoin’s $23,000 price? To the casual observer looking at simply price alone and nothing else, I of course can buy 35x as many Tesla shares for the cost of just one Bitcoin. This makes the price of Bitcoin appear too damn high compared to Tesla but is it?

Again, if we are looking at simply price alone, we need a way to compare their prices using a common supply count. For this exercise, we’ll do that by converting the price of Tesla into a Bitcoin adjusted price by using Tesla’s current market value and dividing it by the number of units of Bitcoin outstanding.

$612bn / 18.57mm = $32,870

Tesla = $32,870 in Bitcoin adjusted terms

All of a sudden the price of Tesla is 51x more expensive when replacing Tesla’s 947mm shares outstanding with Bitcoin’s limited supply of 18.57mm units.

But wait, what would the price of Bitcoin be if it were priced in terms of number of Tesla shares outstanding?!?! Using the same exercise in reverse we get:

$427bn / 947mm = $450

Bitcoin = $450 in Tesla adjusted terms

So when I increase the supply of Bitcoin to equal the number of shares of Tesla outstanding, the price of Bitcoin is suddenly much cheaper than the price of Tesla. The overall market value of Bitcoin hasn’t changed, it’s the price however for the purpose of this exercise that has been adjusted to account for the abundant amount of supply of Tesla outstanding. So when I view Bitcoin in Tesla terms, I can buy a greater share of Bitcoin than Tesla, all else equal? How can that be?

Well, the price of Bitcoin or anything really, comes down to its overall perceived market overall value as a function of price * supply. The amount you own is simply a percentage of the total amount outstanding.

1 unit of Bitcoin = 0.000005% of total supply

1 share of Tesla = 0.00000011% of total supply

Each unit of Bitcoin represents a greater share of the overall supply of Bitcoin than a single share of Tesla represents. In fact, each unit of Bitcoin represents 50x more ownership of the total value of Bitcoin than a single share of Tesla represents to the total value of Tesla. A unique property of Bitcoin is its immutability. With the supply of Bitcoin fixed, your 1 bitcoin will always equal 1 bitcoin and never be diluted. The same can not be said for a share of Tesla or any other asset really. Even Gold, one of the great Store-of-Values throughout humanity, can see it’s supply increased and diluted through perpetual mining and pulling it out of the earth’s crust (or off an asteroid or the moon).

This is a perfect example of how one of Bitcoin’s other greatest properties, it’s scarcity, becomes so powerful and attractive. It’s fixed supply and immutability make Bitcoin the most scarce monetary asset that is digitally verifiable every created.

Now that you understand all the above, let’s play a game:

You are given $100,000 to invest and you can invest in either Tesla or Bitcoin for the next 5 years. Would you buy a share of Tesla at $32,870 in Bitcoin adjusted terms (51 shares in today’s prices) or a single unit of Bitcoin at $23,000? One is an electric automaker, valued at $1.7mm per vehicle produced annually, the other is potentially a store-of-value and non-sovereign fixed supply form of money that may become the global reserve currency of the world in 10-15 years. Which horse are you backing?

Let’s see how other investments stack up when priced in Bitcoin terms:

What if we applied Bitcoin's scarcity and limited supply to other investments:

  • AAPL: $119,700 in BTC ( vs. $130 current price)

  • GOOG: $30,700 in BTC ( vs. $1,732 current price)

  • FB: $41,900 in BTC ( vs. $260 current price)

  • AMZN: $84,050 in BTC ( vs. $3,116 current price)

  • MSFT: $89,970 in BTC ( vs. $221 current price)

  • Visa: $18,766 in BTC ( vs. $205 current price)

  • Gold: $612,256 in BTC ( vs. $1900/oz current price)

Wait a second….. 🤔🤔🤔🤔….. all of the sudden, The Price of Bitcoin is NOT too Damn High, but surprisingly low when priced in the relative supply issuance of other common stocks and assets we buy, sell, and invest in daily without giving much thought or pushback to their price.


Bitcoin’s Future Value

The above exercise only focuses on the price of Bitcoin in relative terms to other things we invest in….But how does Bitcoin’s current price and market value stack up to its potential future value and addressable markets that it’s competing for?

Bitcoin’s long-term potential is to compete as a Global Store-of-Value and eventually as Global Money. To capture addressable markets such as Store of Value (Gold ~$11.7 Trillion), Broad Money (~$100 Trillion), Negative yielding debt ($18 Trillion), and global debt ($277 Trillion). Bitcoin has a risk/reward profile that is inherently skewed to the upside given how small a percentage it is of each. If you were to look at the graphic below, you can see that if Bitcoin were to capture 50% of Gold’s share of its role as a Global Store-of-Value, Bitcoin would tip the scales at over $300,000. This basic calculation assumes Gold has zero increase in value along the way. Now, let’s consider broad money. If Bitcoin were to continue in its emergence of money and capture 50% of Broad Money, we are talking $2,650,000/Bitcoin. Wishful thinking? Sure. Realistic? Absolutely.

Lastly, let’s look at Bitcoin’s current price as a percentage of monetary, debt, and safe haven markets it’s competing for. This allows you to observe Bitcoin’s price and its value, and compare just how expensive or cheap Bitcoin is as a % of market share:

  • Gold ($11.7tn): 3.76%

  • Broad Money($80tn): 0.53%

  • Negative Yielding debt($18tn): 2.37%

  • Global Debt ($277tn): 0.16%

As you can see above, Bitcoin’s current value is only a fraction of the markets it’s competing for in a world that is craving for sound money and safe-haven assets. So when you observe the price of Bitcoin or hear someone say “I don’t like Bitcoin here” or “the price is too high”, take a step back and look at the big picture of where Bitcoin is today and the global markets it’s competing to capture over the next 5-10 years. This is not a trade, this is a permanent balance sheet allocation to a non-sovereign, hard-capped fixed supply, decentralized, immutable new type of money that has a realistic likelihood of becoming a global standard and reserve currency of the world.

In the words of Paul Tudor Jones from his infamous investor letter back in May:

“So that was the flavor behind some of the discussions that were had when scoring the suitability of each asset as a store of value. What was surprising to me was not that Bitcoin came in last, but that it scored as high as it did. Bitcoin had an overall score nearly 60% of that of financial assets but has a market cap that is 1/1200th of that. It scores 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value. Something appears wrong here and my guess is it's the price of Bitcoin.

At the end of the day, the best profit-maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping in the performance dust because you thought you were smarter than the market. If I am forced to forecast, my bet is it will be Bitcoin.”

So as we close out this issue of New Money, join me in channeling Jimmy McMillan and repeating the mantra:

The PRICE of Bitcoin is NOT too damn high.

If you enjoyed this post, please do me a solid and share it on Facebook, Twitter, LinkedIn and with friends, your personal text chatrooms, and anywhere else where it could be useful for anyone trying to understand the price of Bitcoin. Enjoy the holidays and I’ll be back after the new year to recap 2020.

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And a friendly reminder:

If you’re interested in investing in Bitcoin and Digital Assets through a taxable brokerage or tax-advantaged retirement account, please reach out and contact us to schedule a consult. If you are a Financial Advisor or Wealth Manager and want to partner so you can offer Bitcoin to your clients, email us at [email protected] If you want to inquire about an employer-sponsored 401k plan for you or your employer, please reach out here. If you need help and want to talk, hit that contact link below. Between our low-cost fees, yield accounts, retirement vehicles, and client referral fee-sharing program, we’re delivering an A++ experience that is unrivaled in our industry.

CONTACT US

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If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

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November Recap, The Herd is Coming, Bitcoin Supply Shock and Hodl Mentality

New Money: Issue #19

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear

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For the month of November, Bitcoin was up 42.4%, continuing the ferocious rally from October and tapping all-time highs from December 2017. Bitcoin is up a whopping 79.9% over the past two months, making a new all-time high in terms of total market cap of $367bn in the process(there’s more Bitcoin today then there was 3 years ago). As it stands, Bitcoin is consolidating around $19k. The longer Bitcoin spends hovering below $20k, the more energy is coiling beneath it, making the inevitable move beyond $20k that much more explosive. If it wasn’t obvious to the casual observer, Bitcoin is no longer a fringe investment asset. It has crossed the chasm into mainstream adoption.

I wrote about Paul Tudor Jones earlier this year in “The Bitcoin Tipping Point”, describing his investment in Bitcoin as the tipping point for adoption by institutional investors. Paul Tudor Jones is an investing legend, his decision and rationale for investing in Bitcoin legitimized the asset class, removing the career risk and clearing the way for other large macro investors and Fund managers to invest in Bitcoin. Since then, a who’s who of legendary investors and wall street institutions have lined up, praising their love for Bitcoin while trying to one-up each other with their bullish targets. PTJ was recently interviewed and said the following:

I'm not an expert on Bitcoin by any stretch. It's just with a market cap of $500 billion. It's the wrong market cap in a world where you've got $90 trillion worth of equity market cap and God knows how many trillions of fiat currency, etc.

Bitcoin has thrived as government and central banks continue to act recklessly and individuals wake up to this reality. There’s a supply shortage of Bitcoin which I will address later in this letter. No one wants to sell. In fact, investors are tripping over themselves to get Bitcoin exposure with supply shortages making it difficult.

The great news for us is that the narrative is actually coming together. That’s why they’re all here. Bitcoin is not a fad. Bitcoin is the way.

The irony of Bitcoin at all-time highs and supporting a market cap of $367bn, is that its total market cap has surpassed that of JP Morgan at $356bn, which only 3 short years ago was called a fraud by the CEO of JP Morgan, Jamie Dimon. He later said he regretted calling bitcoin a fraud and even recently noted in a speech at the New York Times’ DealBook Conference that “very smart people” are buying into the cryptocurrency in the belief that it will outperform gold, the U.S. dollar, and U.S. Treasury bonds.

“Let them do that,” he said. “It’s just not my cup of tea.”

Well, I hate to break it to you Mr. Dimon, investors seem to love this cup of tea. Bitcoin and companies that have levered themselves and their busineesses to Bitcoin like Square, MicroStrategy and Silvergate Bank seem to be on to something and investors have noticed. All up well over 100% this year while JPM lags, down over 12%. It might make sense just to get some in case it catches on.

Despite the CEO’s thoughts on BTC, a team of analysts at J.P. Morgan’s Global Markets Strategy group, sent a note to investors last month pointing out the “potential long-term upside for Bitcoin is considerable”, touting Bitcoin’s emergence as an alternative to gold among millennials, suggesting a “doubling or tripling” in the price of the cryptocurrency if current trends continue

“The older cohorts prefer gold, while the younger cohorts prefer Bitcoin as an ‘alternative’ currency,” says the research note.

The analysts go on to observe that, if this trend continues, there could be a challenge to gold in the long term—with important price implications for Bitcoin. (Editor Note: if the market value of Bitcoin were to equal the market value of Gold, a single Bitcoin would be worth over $500k)


DAiM Launched the First ERISA Compliant Employer-sponsored 401k Plans w/ Bitcoin

In a bit of exciting news for Bryan and myself, we’ve launched the first ERISA compliant Employer-sponsored 401k plans with Bitcoin. This is a product that we’ve seen incredible demand and one that I’ve worked super hard to bring to market. American workers deserve to have the options to have Bitcoin in their retirement accounts and we’re finally going to be able to work with small, medium and large companies across the country and provide workers with a regulated and compliant way to buy Bitcoin directly in their 401k.

You can read the full press release here.

If you’re interested in learning more about our plans or know anyone that might be interested please fill out our application form here: DAiM Bitcoin 401k Plans

If you’re interested individually in investing in Bitcoin with DAiM through a taxable or tax-advantage IRA please contact us here. We’re experiencing record client growth and want to help you in an any way we can. If you just want to evaluate your options, we’d be happy to make time to chat.


November Highlights (Nov was a big month 🤓)

If you are keeping score, that brings us to the following Financial institutions and trading legends that recognize Bitcoin is Gold 2.0:

  • Fidelity

  • JP Morgan

  • Bloomberg

  • Deutsche Bank

  • Citibank

  • Jeffries

  • Blackrock

  • Susquehanna

  • BTIG

  • NYDIG/Stone Ridge

  • Guggenheim

  • Alliance Bernstein

  • Jump Trading

  • Paul Tudor Jones

  • Stanley Druckenmiller

  • Bill Miller

  • Paypal

My former partner at Ikigai Fund, Travis Kling, perfectly summates what is happening in the institutional world with this tweet and graphic below.

Bitcoin Supply Shock

Over the month of November, Greyscale, the Asset Management company behind the Greyscale Bitcoin Trust(OTC equity ticker GBTC) saw record inflows of over 60,000 Bitcoin into their trust. Since September 21st, Grayscale has shoved 103,129 Bitcoin into the GBTC. That supply total is 1.6x the entire mining supply over that time. For those not familiar, GBTC is a proxy for owning Bitcoin and trades at a 30% premium to NAV. Institutional investors love it, because it’s an easy way to get exposure to but mainly because shares are issued to them at NAV, and if they hold them for 6 months, assuming the premium remains 30% they can sell GBTC and pocket the 30% “for free”. This has been dubbed the “GBTC NAV trade” and is at the expense of unsuspecting retail investors.

Advisor Note: For any individual who owns Bitcoin through GBTC, buyer beware. At the current price of $19,000, buying GBTC is like paying $25,000 for Bitcoin. In addition to the 30% premium you are paying, you’re also spending 4% in expense fees. It’s highly recommended that you give consideration to swapping that GBTC for investing in Bitcoin directly. Unless of course, you enjoy paying 30% more for things you don’t need to, you’ll end up owning 1.3x more Bitcoin in the process.

HODL Waves & UTXO’s

HODL Waves tell the story of Bitcoin’s accounting structure called UTXO’s or Unspent Transaction Outputs. Since all bitcoin in existence are contained in some UTXO, this means that all bitcoins have an agenot the age/time when that bitcoin was first mined, but when it was last used in a transaction. (if you want to learn some data science, read this)

If you look at the chart below, you can see that only 29% of all Bitcoin in existence has moved in the last six months(sum UTXO’s from 0-6 months). Long term investors are sitting tight on their Bitcoin not interested in moving their Bitcoin at any cost. This paints a picture of just how few Bitcoins are actually available to satisfy incremental demand.

With miners only able to create 900 BTC in a day, supply is drying up. Between coins being gobbled up by exchanges, institutions and individuals alike, both PayPal and Cash App recently disclosing that they have been buying every single freshly mined BTC on a daily basis along with Greyscale adding over 64k Bitcoin over the month of November, we’re in the early stages of a supply-side liquidity crisis. Meanwhile, liquidity on exchanges is vanishing, the opposite behavior from the prior bull run.

Whereas much of the 2017 bull run was a function of speculative FOMO, it appears the upcoming 2021 bull run will be a function of HODL FOMO. Bitcoin has matured and been significantly derisked in the past few years with widespread trust in Bitcoin emerging. The adoption of bitcoin as a Store-of-Value and Gold 2.0, has led to an intentional decision by individuals and most recently corporations, to view it as a reserve asset and hold it for the long term, aka HODL. The speculative capital chasing gains in USD fiat of 2017, has been replaced by HODLers attempting to prevent long term fiat loss through monetary debasement. This is an entirely different type of investor base that is owning it as a reserve asset for the long term.

HODL Mentality

With the bull market starting, I wanted to share some advice to subscribers to prepare for the upcoming run. It is imperative that your investment in Bitcoin be both low time preference with a high time frame horizon. Meaning you don’t have a need for the money today and you can sit in this investment for years to come.

The HODL attitude requires psychological & emotional work. During this bull market, price will go up a lot and pull back just as violently… 100% gains followed by 25-35% pullbacks. You are an investor, not a trader. Do not be urged to take money off the table early, do not get seduced by claims of the next Bitcoin, do not get tricked into parting ways with your precious coins for any reason. You are in this for the long run and the best thing you’ll be able to do for yourself is sit tight.

Money Printing, Inflation and Time theft

This brings me to my final thoughts on money printing, inflation and time theft. I wrote a lot about money and central banks in March, April and May and I think it’s important that I reiterate the core message about why money printing, inflation and debt are so important.

21% of total US Dollars ever created have been printed in 2020, or $4.5 Trillion. This is more than the amount of money created in the previous 5 years, yet only 5% of it is new cash in circulation.

The Federal Reserve is killing capitalism by printing money, suppressing volatility, masking market signals, and creating noise to bail out Wall Street and mega-corporations. They’ll keep printing more and more money, looting the American people, and stealing from our future as much as we let them. Every major central bank and government official globally is going to ride the money printing train as long as they can and we’re gonna get stuck with the mess. This is what makes Bitcoin so important in this moment.

When it comes to our government and politicians, both sides are addicted and committed to money printing and debt. Up until the financial crisis, Republicans used to care about debt and deficits but are just as gung-ho about adding trillions of dollars in debt as long as it benefits their side of the argument. The Democratic Party makes a lot more sense if you imagine its agenda as that of a corporate HR compliance department. It doesn’t matter who’s in office and who has control, they ain’t working for you or me.

Speaking of corporations, because the Fed is holding rates near zero and monetizing debt on their balance sheet, corporate bonds now yield less than inflation expectation for the first time in history. Think about that, the yields on corporate bonds are paying you less than the governments fake measusr of inflation. This means you’re getting a negative real rate of return.

This forces investors desperate for yield out of the risk curve. As we get closer to 0% yield, the structural mechanism of capitalism disintegrates & morphs into pure speculation. Just look at the stock market. The current S&P 500 PE Ratio is 37.44 vs historical average of 15.86. You are paying an average of 37x every dollar of earnings. With 90% of Americans own less than 12% of the stock market, the average US worker must now work a record 141 hours to buy 1 share of the S&P 500. In the 1980s, it took less than 20 hours. You know what’s not expensive for the average American? Bitcoin. While it’s sticker price seems high, the value it represents is actually very low, which makes Bitcoin an attractive asset from a risk/reward scenario.

Yes, I know what you are gonna say. If millennials would just have invested in the S&P 500 in the 80s instead of dumping in their diapers they'd have nothing to complain about now. Alas, individuals are literally having time and money stolen from them through monetary and asset price inflation. Fiat currency has become nothing more than a political tool, facilitating the “institutionalized system of time-theft through an agenda of expansionary monetary policy which is perpetrated by central banks globally. Inflation, a consequence of these policies, is intrapersonal time theft — a legally enforced injustice.” (h/t Robert Breedlove)

If you want to go down a rabbit hole of understanding the linkage between money, inflation, and time theft, I highly recommend reading the four posts below by Robert Breedlove who dives deeper on the point above. They’re super long reads but well worth the knowledge drop.

Bitcoin is the Way.

The Want to get a sense of just how sociopathic the ruling class of this country is. Click in and read the following tweet thread(and the rebuttal below by one of my favorite Bitcoiners Robert Breedlove). Her below take is one of the most idiotic and dishonest explanations to support the government narrative and propaganda that MMT (Modern Monetary Theory), where debt, deficits, and money printing are good for us.

News flash, it’s not. She’s paid to create a narrative that prioritizes the state and the elites that control this country over the individual. Any time you come across anyone pushing MMT and money printing propaganda, ignore and reject them at all costs.

Sound money is required to repair wealth and income inequality. It’s time for regular folks to vote with their money and stand their ground. Bitcoin is your way out.

What you should Listen to

We Study Billionaires: The Investor’s Podcast Network, Ep BTC001: Bitcoin Common Misconceptions w/ Robert Breedlove (Bitcoin Podcast) - Nov 24, 2020

  • In this podcast, Robert Breedlove talks with Preston Pysh about all the common misconceptions that new investors to Bitcoin face. It’s a great discussion for anyone skeptical of Bitcoin to listen to and you’ll learn more in 2 hours listening to this than 4 years of higher learning.

  • This should be REQUIRED listening for all of humanity and is one of the best Bitcoin podcasts you’ll ever listen to.

Allright that it! I hope you enjoyed the latest issue of New Money.. until next time!


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If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

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DAiM October 2020 Recap, Mid-November Update, Paypal Launches Bitcoin, Bull Bull Bull

New Money: Issue #18

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


For the month of October Bitcoin was up 27.6%, briefly pulling back to start the month before going on an absolute tear to the $14k before consolidating at high time frame resistance at $13,780 to close the month. If there was a single word to describe Bitcoin price action throughout the month of October it would be “breathtaking”. Bitcoin has now spent a record 100 consecutive days above the $10,000 level. The monthly close of $13,800 is equal to the highest monthly close dating back to December 2017. As we write this October letter almost midway through November, we’ve not only punched through this high time frame resistance but we’ve smashed all the way to $16k, a level Bitcoin’s price has closed above for only 15 days in its entire history.

To put it simply, we are in unchartered territory. We’re in the early days of the next bull market cycle that Bitcoiners have been waiting for the past 2.5 years. The train is leaving the station and the next 12 months are going to be an incredible ride for Bitcoiners and absolutely unbearable for anyone who hasn’t gotten off zero.


DAiM Performance


Bitcoin Goes Mainstream

The biggest story for Bitcoin in October was the announcement by PayPal that it would begin supporting Bitcoin and Digital Assets. PayPal announced that it would launch support from Bitcoin this year, allowing its 200+ million U.S. users to buy and sell bitcoin. Sure enough, as I wrap up this October letter, Paypal has launched active buying and selling on their platform.

Notes on Paypal is such a big a deal

  • In its Q3 conference call, PayPal CEO Dan Schulman said that the initial demand for crypto services was 2-3X larger than the company’s expectations.

  • PayPal said it would also enable 26 million merchants to accept crypto for payments in 2021. Merchant acceptance is a major hurdle for the widespread use of crypto for day-to-day payments.

  • Paypal is one of the largest financial institutions in the world, with a market capitalization of $250 billion. Jumping into Bitcoin and Digital Assets and taking a vested interest in its regulatory treatment—is a major de-risking move that will without a doubt force other institutions into interacting with Bitcoin

Billionaire’s Investors Go Bitcoin


Billionaire U.S. investor Stanley Druckenmiller is now a Bitcoiner. In an appearance on CNBC, Druckenmiller disclosed a bitcoin position significantly smaller than his gold horde. However, he predicts bitcoin will outperform gold in the long run – largely due to millennial and Silicon Valley attraction to the crypto scene.

"Frankly, if the gold bet works the bitcoin bet will probably work better because it's thinner, more illiquid and has a lot more beta to it,” he said. 

"It has a lot of attraction as a store of value to both millennials and the new West Coast money and, as you know, they have a lot of it."

Paul Tudor Jones, who we wrote about exclusively back in May in, The Bitcoin Tipping Point, shared in an interview on CNBC last month that he was more bullish on bitcoin than ever, noting the Bitcoin Rally Was Only in ‘First Inning’ and lauding the Bitcoin community at large.

“The intellectual capital” behind bitcoin deserves highlighting, as I haven’t heard it mentioned nearly enough. Few understand that bitcoin is more than an alternative asset – it is also an idea that draws from philosophy, economics, sociology, technology and history, pulling in the curious and the innovative who are asking the right questions and feeling their way towards answers that reflect some of the deepest conflicts known to man. The crypto industry is where the smartest minds of today are actively thinking about and building for tomorrow. 

Bitcoin Data Points

Bitcoin’s Role as an Alternative Asset- Fidelity Digital Assets, the crypto-focused blockchain division of Fidelity Investments, focuses on the narrative that bitcoin is an uncorrelated asset that can serve a similar role as an alternative investment in improving a portfolio’s risk-adjusted returns. The report also looks at investors’ rationale for including alternative investments in a portfolio, the growth in appetite for alternative investments, and the characteristics of bitcoin that may make it a sustainable portfolio diversifier.

The report pulls many key data points and theses almost verbatim from DAiM’s The Modern Portfolio - The Case for Allocating to Bitcoin”, that we originally began circulating this time last year and have been pounding the table on as the basis for our 1-6% allocation to Bitcoin. We’re happy to see other institutions adopt this framework and put their own spin on it, as we believe an allocation to Bitcoin in the Modern Portfolio will be a matter of how much, not if moving forward.

Fidelity Bitcoin


JP Morgan in a note to clients published by its Global Quantitative and Derivatives Strategy team posits that bitcoin has proven itself to be a risk asset, not a safe have, with “considerable” potential upside. TAKEAWAY: The term “safe haven” has to be one of the most widely misconstrued in all of finance (along with “uncorrelated” and “fair value”). Short term, of course bitcoin is not “safe” – just look at the volatility. It is a hedge against fiat debasement, however, much like gold. The term “hedge” is often erroneously conflated with “safe haven” – gold is often referred to as a safe haven, for example, but at times it is more volatile than the S&P 500. And longer-term, hedges can become safe-havens. Meanwhile, positioning bitcoin as an either/or thesis does it a disservice. It can occupy many portfolio roles simultaneously. That aside, the note correctly focuses on the millennial generation’s looming influence on the global financial system, and their growing interest in bitcoin.

Meanwhile, Grayscale acquired an additional 15,114 Bitcoins this past week for the GBTC trust. Their total now sits at over 506K BTC as weak hands keep selling and they just keep scooping up cheap Bitcoin. That is the equivalent of 16.8 days of bitcoin production in one week. Supply. Demand.

Comparatively, Square’s Cash App Bitcoin volumes are up 11x yoy with over $1.6 billion in bitcoin purchases and sales in Q3 up from $875 million in Q2 2020 and $148 million in Q3 2019. Even more impressive, Square announced that it was holding $50 million in Bitcoin on its balance sheet in its shareholder letter as well.

Bitcoin balance on exchanges continues to decrease. This is noticeable as traders move Bitcoin to exchanges to sell and pull them from exchanges when they plan on HODLing/holding for a while. As of November 2020, over 62% of the Bitcoin supply hasn’t moved in over one year (all-time-high). Together, these are extremely bullish indicators that should not be overlooked as this behavior pushes the price higher as demand is exploding while supply is decreasing.

So who is buying ?

  • Retail wants in on Bitcoin

  • Institutional investors want in on Bitcoin.

  • Multi-billion dollar public companies want in on Bitcoin.

  • Banks want in on Bitcoin.

  • Governments want in on Bitcoin.

Demand is coming from everywhere and this time it’s real. When I first started buying Bitcoin in late 2012, mainstream adoption like this was something I could only dream of back then. Now I’m like pinch me, it’s hard to believe it’s a reality.

While the previous bull run in 2017 was driven mainly by retail investors, the “smart money” has been accumulating Bitcoin. Microstrategy, Square, and NYDig adding it their balance sheet, Paypal offering it to its users or Paul Tudor Jones and Stanley Drunkemiller clearing the roads for Hedge Funds and Asset Managers, most institutions sat on the sidelines due to a lack of institutional-grade onramps and custodians. Comparatively, retail interest has only increased slightly. Historically, retail floods into Bitcoin after breaking the previous all-time-highs as the media picks up the narrative and FOMOs investors into the party.

All I can say is buckle up folks, there is simply not enough supply to meet the insatiable demand for Bitcoin. If you are a proud owner of Bitcoin, just sit back and relax. Your Bitcoin is worth way more than five figures.

Bitcoin vs Macro Assets MTD & YTD

In October, Bitcoin had a strong month in terms of returns compared to the modest losses of gold, stocks, and bonds, which were down 0.3%, 2.8% and 3.5% respectively,

YTD, Bitcoin continues to blow gold, stocks, and bonds away. As of writing, it’s not even really a fair fight.

  • Bitcoin: 123.96%

  • Gold: 23.84%

  • S&P 500: 10.97%

  • Bonds: 16.74%

If you follow DAiM’s recommendation of a 6% allocation to Bitcoin, Bitcoin alone would be netting you an additional return equal to the 70% allocation to equities. Given Bitcoin’s similar volatility characteristics to equities and superior risk-adjusted returns, reducing equity exposure by 6% would double the return of your portfolio. Not only do we believe we are in the early stages of the next Bull market, but we see this performance divergence expanding dramatically, which suggests, an asset allocation adjustment should be considered immediately if you haven’t already.


That’s it for this week. I’m keeping it short. I’ll be back next weekend and every week after that moving forward, trying to keep up with the breathtaking speed at which Bitcoin and Digital Assets emerge into our collective conscience and mainstream adoption.

I’m leaving you with this hilariously precious Bitcoin Bull Bull Bull rap video made in honor of Michael Saylor, who’s purchase of 38k Bitcoin on the balance sheet of MicroStrategy has made him the unofficial new Bull of Bitcoin 🚀🚀🚀🚀(if you want to learn more about why he added $700mm of Bitcoin to their balance sheet)


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DAiM September 2020 Recap, BitMex, Bitcoin New Wallet Addresses, China & MicroStrategy

New Money: Issue #17

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


For the month of September, Bitcoin was down (7.53%) tapping $12,000 to begin the month before rejecting strongly and ending the month at $10,787. Bitcoin briefly traded under $10,000 for a 4hr candle before quickly getting bought back above the vaunted $10,000 level, hovering for most of the month around $10,600. Bitcoin has now spent a record 70 consecutive days above the $10,000 level. While the beginning of the month offered a healthy retracement after almost 5 months of gains, sentiment measures have once again begun to turn bullish as the price continues to be supported despite negative news flow that in prior years would have adversely impacted Bitcoin’s price. However, it would be a mistake to get comfortable about where asset prices head from here, with so much uncertainty ahead of us with fiscal stimulus and a potentially ugly election driving much of the macro picture through early November.

Performance

Last month we briefly talked about our model portfolio allocation to Ethereum and humble bragged about its outperformance relative to Bitcoin and the explosion of DeFi(Decentralized Finance) and the double and triple-digit returns different tokens/projects were experiencing. Between food named tokens like Yams, Hotdogs, Sushi, and Uni, the DeFi space had reached full-blown mania as the greed around DeFi had reached a fever pitch by the end of August.

However, September was a very different story. As the market always does with parabolic returns and rampant greed when it comes to Bitcoin and Digital Assets, what goes up, must come down. One of the projects, “SUSHI” had the rug pulled, creating a catalyst for wiping out the investors and profit-taking in other projects that were both healthy and necessary. The DeFi Index was down (-36%), with other prominent DeFi projects like YFI (-33%), COMP (-45%), and SUSHI (-80%) all seeing significant double-digit losses, leading ETH to finish the month down (-17%) underperforming BTC by around 9%.

That being said, we believe the correction was of course necessary and healthy. Total Value Locked(TVL) in DeFi continued to accelerate and make new ATHs in September, despite the strong price correction. This is impressive and we believe when the dust settles there will be opportunities for us to recommend for clients in the months ahead.

The two major news items of the month were both net positives for Bitcoin. The crackdown of BitMex and arrest of one of its founders for violating money laundering and the Bank Secrecy Act and the continued investment of Bitcoin on the balance sheet of MicroStrategy by its CEO Micheal Saylor which I will touch on later. In terms of BitMex, a derivatives exchange that is nothing more than a casino for degenerate gamblers using 100x leverage was a welcoming sign. If we are to legitimize and clean up the crypto markets for more traditional players to enter, removing renegade firms like BitMex is a very good first step. A few key points worth noting:

  1. The charges brought against it by the CFTC were for violating US anti-money laundering regulations and had tie-ins to the Bank Secrecy Act. There's a lot of US-based exchanges that have done business with Bitmex. There's DeFi projects that are potentially subject to similar money-laundering accusations due to the lack of KYC/AML. These DeFi projects need to get there house in order and truly become decentralized. US long hand of the law is going to flex and take their pound of flesh, undoubtedly so our criminal US banks which launder tons of money can get in the game. I reckon this won't be the end of this story

  2. BitMex being taken out of the market is actually good for a Bitcoin ETF. Remove the leverage and manipulation and the markets become more orderly. 

  3. Have to wonder if they went this hard at Bitmex, then a full-throttle attack on Tether ain't fair behind.  We’ve talked ad nauseum about Tether in the past and it appears the war on Bitcoin and how money gets in the system is on. Regulators and centralized powers want to map wallets and know who is doing what at all times.

With respect to BitMex, while I don’t love their operation because it’s a degen casino, I thought this tweet was super relevant about how our legal system works.

News:

  • Donald Trump was diagnosed with CoronaVirus

  • Asian Crypto Exchange KuCoin Hacked for $150mm in Crypto

  • MicroStrategy Buys $175mm More Bitcoin, Brings Total to $425mm 

  • Bermuda Stock Exchange Approves Listing of World’s First Bitcoin ETF

  • US State Bank Regulators Agree to Blanket Set of Rules for Money Transmitter Licenses

  • Kraken Wins SPDI Bank Charter in Wyoming, First-Ever for Crypto Company

  • OCC Allows Federally Chartered Banks to Custody Stablecoin Reserve Accounts

  • DEX trading volumes hit $23billion

MicroStrategy Does It Again

One of the most bullish fundamental drivers for Bitcoin continues to be the conversion of cash reserves on the balance sheet of MicroStrategy (NASDAQ:MSTR) into Bitcoin. I spoke about MicroStrategy in great detail back in my newsletter back in August And So It Begins..... A Public Company Buys Bitcoin on Their Balance Sheet” about why this was such an important “FIRST” and event for Bitcoin. To my great surprise, MSTR’s initial purchase of 21,454 Bitcoin would be followed up by an additional purchase of 16,796 Bitcoin bringing them to a total of 38,250 Bitcoin.

After completing the purchases, CEO Michael Saylor was open to talking about how they came to buying Bitcoin, saying “We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting,” Saylor said.

“I want something that I could put $425 million into for 100 years,” Saylor told CoinDesk.

“I went down the rabbit hole” during COVID-19, Saylor said, admitting he “was wrong” to have doubted bitcoin back in the $600 range. I wish I knew then what I know now,” he said.

“I started to cheerfully assign homework” to MicroStrategy’s executives and directors, Saylor said. He staged “a series of learning exercises to bring everyone up to speed.” If MicroStrategy was really going to move millions into bitcoin, then everyone had to be on board. MicroStrategy has settled on bitcoin as the treasury alternative.”

“This is not a speculation, nor is it a hedge,” said Saylor. “This was a deliberate corporate strategy to adopt a bitcoin standard.”

To listen more about Michael Saylor and how MSTR became the first public company to own Bitcoin as a cash reserve on its balance sheet I highly recommend listening to the following podcasts. They are simply fascinating beyond your wildest imaginations and he even hints that he is currently advising other companies who want to follow his lead.

Pomp Podcast #385: Michael Saylor On Buying Bitcoin With His Balance Sheet

  • In this conversation, we discuss how Michael built MicroStrategy, how he sold a domain for $30mm, what his $500 million dilemma earlier this year was, and why he choose to put more than $400 million into Bitcoin with the company's balance sheet.

Steven Livera Podcast: SLP213 Michael Saylor - Bitcoin Dematerializes Money

  • Why did MicroStrategy buy $425 million of Bitcoin and adopt it as primary treasury reserve asset? How did the team learn about Bitcoin? What is driving people to learn about Bitcoin in this high inflation environment? Michael Saylor, CEO of MicroStrategy joins me to discuss. 

What We Are Watching

New Bitcoin wallet addresses went parabolic in the last week of September/beginning of October. It’s unclear at the moment if this is a one-week anomaly as a result of trader exodus from Bitmex or an intriguing bullish backstory that could mark a new bull market catalyst. What we do know is that this is something we should be keeping an eye on. (h/t @ColeGarnerBTC )

Image
data | @glassnode

Here’s why: Volume precedes price and Bitcoin active address counts are a reliable on-chain leading indicator of volume. A spike in activity by new participants entering into BTC not yet reflected in price does not occur often. When price action is down or flat and volume is up, this is what traders call a divergence. In this case, it’s a bullish divergence.

Historically speaking, Bitcoin tends to see about 5-10k new Bitcoin addresses/day. That figure grew it its highest level in over two years last week, peaking above 22k/day.

Image
data | @glassnode

The important question is, where are these addresses coming from? While the exodus from Bitmex after it being charged by the CFTC for violating the Bank Secrecy Act would make the most sense, the on-chain data shows this is not the case.

After getting charged by the CFTC and one of the founders being arrested, a massive spike of 4,500 in withdrawals began Oct 1. Withdrawals have since returned to normal.

Image
data | @glassnode

If BitMex were responsible for the address growth we’d naturally expect to see new addresses spiking prior to the batched BitMex withdrawals. Once the withdrawals are processed, the addresses should revert to the norm in lockstep with BitMex transfer data. Except, the data shows the opposite.

  • No particular spike in address growth before the withdrawals.

  • Growth gets stronger after withdrawals have fully returned to normal.

  • ~100,000 new $BTC addresses since Oct 1. But only 4,500 BitMex withdrawals.

Image
data | @glassnode

So where the hell might all these new addresses be coming from? It’s impossible to know for sure but On-Chain analyst, @ColeGarnerBTC offered a plausible explanation from a story that made its rounds the last week of September that mostly passed under the radar — despite being one of the most bullish backdrops for the market.

It’s particularly odd to see the Chinese government pushing out propaganda supporting crypto assets, which is contrary to its ever-increasing tightening control over fx exchange at the retail level. However, the source and validity of the newspaper is the Reference News, the #1 circulated newspaper in China. News and information does NOT get published here without a greenlight from the CCP.

So what could be the intent? Well, as we’ve discussed in prior issues of New Money, the People’s Republic of China is rolling out their DCEP, more publicly known as the Digital Yuan, an updated and more innovative currency and payments infrastructure poised to take over trade and remittances in emerging markets and challenge American influence on the global stage.

If you want to learn more about China’s initiative to integrate adoption of the DCEP and blockchain technology using the BSN(Blockchain Services Network) across government, big business, and emerging markets, I highly recommend reading, “China’s Checkmate: The Technology Weapon You Didn’t See Comingby Tatianna Koffman where she discusses “how the BSN will be the backbone infrastructure of interconnectivity through mainland China, city governments, private businesses, and individuals, in both China and abroad. This network will form a new Digital Silk Road to create a link to China and its trading partners globally.”

The about-face from China is extremely fascinating and almost totally on-brand. While China has been one of the harshest and negative forces over the years, often suppressing Bitcoin momentum(perhaps intentionally to keep the price down as they accumulated and positioned themselves over the past 10 years), it’s also strongly supported Bitcoin miner activity in a major way, dominating miner hash rate and controlling a large amount of newly minted Bitcoin supply, holding more Bitcoin than any other country by a large margin. While the United States prints money in infinite terms to satisfy its insatiable appetite to bail out rich people, corporations and keep the Ponzi scheme going for its outrageous debt load that is impossible to ever pay back without creating rampant inflation, Bitcoin has quietly become China’s national treasure.

Sooner or later, maximizing Bitcoin’s potential becomes an unavoidable economic incentive and it appears with the rollout of the DCEP, the Chinese government seems to want to ignite the bull market.

Overall:

While I see reasons to be cautious over the next few weeks heading into the election with all the f*ckery expected from Trump in playing games with Democrats, holding back stimulus, manipulating the stock market, his issues with Covid-19, suggesting he may not accept a peaceful transition of power if election results run against him and a Supreme Court nomination process that could stir up the deepest angst of America’s culture wars coming at an unimaginably difficult moment, I am extremely bullish about the direction of Bitcoin over the next 3 months and into 2021.

While it’s very likely we see volatility, sideways actions, and lower prices to shake out weak hands over the next few weeks/months, fundamentally speaking, we see this period as an excellent and dare I say the last great buying opportunity to build a multi-year long-term position and/or deploy new capital if you're thinking to increase BTC exposure around $10k before the bull run takes off. It’s my belief that Bitcoin holders will be very happy by Christmas 🎄🎅🏻and that 2021 will be a lot of fun for HOLDers. (I know 2020 has been 💩 💩 but I mean in Bitcoin terms).

Company // Employer-Sponsored 401k Plans w/ Bitcoin

As mentioned last month, we are launching the first-of-its-kind ERISA compliant employer-sponsored 401k plans with Bitcoin. We’d love to help you or your company enroll in this plan. If you would like to learn more about how DAiM can help your business or your employer offer an employer-sponsored 401k plan with Bitcoin, please fill out the following form and we’ll get in touch with you immediately!

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Odds & Ends

Bitcoin. “A bet against the ruling class.” I’m personally developing a crush on Chamath Palihapitiya and believe we need to protect him at all costs.

If you fancy watching the entire interview (I recommended there’s lots of free jewelry), you can do so here as Laura Shin and Chamath talk about a wide range of issues, including Bitcoin, COVID, civil unrest, wiping out hedge funds and corporations and broad economic trends and forecasts. 

Invest with DAiM

If you are interested in investing in Bitcoin and digital assets while earning positive cash flow (and potentially tax-deferred or tax-free returns) while waiting for the massive call option on Bitcoin becoming a recognized form of global money to play out, you can contact us below to schedule a consultation to evaluate your options:

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Or if you a ready to go and want to get moving quickly you can start an account by filling out our new client profile:

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Spread the Word 🗣

If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

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