NEW MONEY is a recap of the week in ₿itcoin. Everything you need to know, right to the point. New Money, is published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for ₿itcoin and Digital Assets. Twitter: @callmethebear
First some housekeeping:
Welcome to the first issue of NEW MONEY. You've been invited to New Money as a former subscriber of 'Crypto Bits’, the weekly ₿itcoin newsletter I published in 2017 or as a current/prospective client of DAiM Digital. If you feel like you’ve been added in error, please consider sticking around for a couple weeks before unsubscribing.
I’ve decided to start writing again because things are changing and the role of ₿itcoin moving forward has never been more important and apparent given the extremeness of recent economic and global events. While ₿itcoin was born in the last financial crisis, I strongly believe when the dust settles, it will likely cement its place and value as ‘New Money’ during this one.
Despite it being the best performing asset over the past decade, the majority of the world still thinks of ₿itcoin as magic internet money and does not understand what ₿itcoin is, how it works or why it’s qualities as a non-sovereign, fixed-supply, immutable, decentralized, emerging store-of-value are so important in a world where governments and central banks are doing everything they can to f*ck up money. I hope the New Money newsletter will serve as an informative and entertaining resource that helps you overcome the challenging and intimidating aspects of learning about and understanding ₿itcoin.
As readers, I hope you’ll keep an open mind and that over time, I can articulate the power and value of ₿itcoin and help you Get Off Zero. With New Money you can expect a simple, easy-to-read digest of news, commentary, data and price analysis related to ₿itcoin without the noise, complexity, and time that goes along with trying to keep up with it all by yourself. For now, expect to receive an email once a week on Sundays. If you believe any of your friends, family or colleagues would benefit or enjoy this weekly recap, please forward it to them or Subscribe them below. Thanks and I hope you enjoy!!!
Now that is out of the way, let’s jump into things!
**the first issue is going to be a slightly modified and longer version of the planned weekly bit sized format. In this issue I’d like to set a baseline of current events and the role of ₿itcoin for us to expand on and discuss weekly from here.
A brief history lesson: ₿itcoin was born on Jan. 3, 2009. Satoshi Nakamoto, the mysterious inventor of ₿itcoin, referenced the infamous Times of London headline Chancellor on brink of second bailout for banks into the code of the genesis block. Banks were being bailed out around the world and ₿itcoin was born.
The Everything Bubble Has Popped
Flash forward a little over a 11 years later, an invisible pathogen is wreaking havoc on the world both physically and economically, the everything bubble is popping and bailouts are being discussed around the world. 50 years of industrial globalization, decades of low volatility manufactured by central planners, and the destruction of capital accumulation by the majority have left the system more fragile than ever.
The stock market is down over 30% and a global health crisis has turned into an economic crisis, bringing the global economy crashing to an immediate halt. Trade has stopped, entire industries are shut down and countries have closed their borders. In order to stop the spread of COVid-19, we’ve been collectively asked to practice social distancing, with most companies telling employees to work from home, schools from K to college have been cancelled, professional sports leagues have suspended play, restaurants, bars and gyms are closed to the public and many parts of the country are under strict quarantine.
We have created the perfect storm: a never imagined global financial, economic and potential humanitarian crisis that will take everything we've got to stop it. With supply and demand coming to an immediate halt, everything is at risk of collapse.
As we head into Monday, stock futures are limit down and the world is on the verge of bailouts and money printing that will make the financial crisis look like a warmup. If it all plays out in a way that Central Banks do the only trick they know, then you can expect a massive expansion of the monetary base, debt base fiscal stimulus, bailouts and helicopter money all being thrown at the problem. They will do anything they can to keep the music going.
As of now, the Federal Reserve has cut the Fed Funds rate by 150bps in the past two weeks down to ZERO. The largest emergency reduction in the Fed’s more than 100-year history. Its extended over $2 Trillion dollar in emergency short term lending facilities in the repo and commercial paper market to the most distrusted institutions in America (Wall Street Banks, over levered hedge funds(ex: Millennium, Citadel and Point 72) and horribly managed multi-national corporations(ex: Airlines, Boeing) without any congressional oversight.
To make matters worse, Treasury Secretary, Steve Mnuchin is recruiting executives from Goldman Sachs and other Wall St. banks to administer billions in loans to airlines, hotels and other industries.
On the table for Bailouts is the following:
Fed is considering stepping in by printing money to buy up to $4.5 Trillion in mortgage and short term corporate related debt. I wouldn’t be surprised if they extend it to equities at some point.
The US government is looking at a bailout package between $1-5 Trillion with a $500 billion secret slush fund for the Treasury Secretary at his discretion.
the legislation would provide checks of $1,200 per adult for many families (aka Helicopter Money)
$300 billion in federally guaranteed loan to small businesses
$200 billion for loans to Airlines, Casinos, Cruise Ships, Oil & Gas, Restaurants and other distressed industries
Airlines the ire of most Americans, are seeking a lifeline of $50B+ from the federal government. Why does this matter?
that’s more than 3x what the industry received after 9/11
the biggest US airlines spent 96% of their free cash flow over the past 10 years on stock buybacks, making shareholders and executives stupidly rich instead of paying down debt
At first bailouts sound like a good idea, but then it sounds like a $10-$15 trillion dollar problem when its all said and done. With lobbyists piling on to get wins for clients in whatever Coronavirus stimulus package that is passed, everyone wants a piece of the that bailout money. Where do you draw the line?
So How Are We Gonna Pay for It?
Look no further than this suggestion from Rashida Tlaib to mint 2 - trillion dollar platinum coins and order the Federal Reserve to give the Treasury a trillion dollars each by printing money out of thin air.
I mean seriously. Hats off to @RashidaTlaib for thinking outside the box and in terms of getting money into people's hands and not listening to the "but how will we pay for it crowd.. What is money anymore when we can just print endless amounts of it?!?!?
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” – Satoshi Nakamoto
We need to fix the money. That is why we ₿itcoin.
₿itcoin Is Built For This. Time for Plan ₿
This brings in to focus alternative currency regimes like gold and ₿itcoin. When perceived as a store of value, like gold, its value is not guaranteed by a linked cash value. ₿itcoin’s worth is based on supply and demand. One of the most unique and important characteristics of ₿itcoin is its hard capped supply of 21mm units. It’s this fixed supply that gives it potential as a store of value one day and opens up a world of opportunity when governments and central banks are printing money, monetizing debt and exploring massive debt based to bailouts and stimulus to prevent the economy from collapse. The downside however, the more risk that central banks take on their balance sheet the more we have to worry about and question the integrity of the fiat systems they back.
To illustrate how few ₿itcoins actually exist, consider that there are approximately 60 million millionaires around the world. If we divided the maximum supply of ₿itcoin, each millionaire would only be able to have 0.35 ₿itcoin.
“What the f*ck happened to ₿itcoin??”
I’m glad you asked. Over the past few weeks, ₿itcoin is down almost 33% including over 50% in a single night. Is it a safe haven or not a safe haven” has been a lot of the talk over the past couple of weeks. In my opinion, the truth is somewhere in the middle. Bitcoin is both a speculative risk asset AND an emerging speculative store of value.
₿itcoin is not a hedge to pandemics. It’s a hedge to fiat regimes. A sudden, negative demand shock in the global economy as we recently experienced will create a liquidity crisis affecting every asset, including ₿itcoin, Gold and Treasuries. When there is a run on liquidity, market participants sell anything that is not nailed down to raise cash.
Despite the price of ₿itcoin taking a massive hit over the past few weeks, it survived and it survived with:
No Government intervention
No Quantitative Easing
No Helicopter Money
No Circuit Breakers
No Economic Stimulus
And that’s the beauty of ₿itcoin. When ₿itcoin has problems, the market clears itself out. Anyone who’s been around ₿itcoin knows it’s volatile but unadulterated and thrives in chaos. When fiat money has problems, it gets printed and debased. In the short term, the latter is more expedient, in the long term, the former will inevitably win. If you think that the end of all of this, somewhere lies a non-sovereign, decentralized, fixed supply, digital, immutable future, then as painful as the volatility is in the short term... soon will be the time to Get Off Zero.
Equities — The S&P 500 and Dow Jones Industrial Average are both down approximately 30% in the last month.
Oil — The price of oil is currently down about 60%, which includes a recent 25% rally that brought a barrel of oil from around $20 to just over $25.
Gold — The price of gold is currently down about 12% from a local high of approximately $1,700.
₿itcoin — The price of ₿itcoin is down approximately 40% from around $10,000 to approximately $6,000 currently
Best Podcasts of the Week:
How America has been very wasteful with resources for the last five decades
The problems with top-down decision making
Why centralized economies "on the bike" don't work in the long-run
The morality of Fed policy
Parallels between modern day America and the Weimar Repulic
How bond markets will react to the wave of stimulus
The challenge of global coordination for a new Bretton Woods
Why in the wake of stimulus some governments might turn to ₿itcoin
The three factors that lead to currency failure
What I am Reading:
Creeping Authoritarianism: the state is looking to rapidly expand power
The EARN IT bill, by which senators are attempting to destroy widespread public use of encryption, i.e. private communications. (EFF)
The White House and the CDC are asking Facebook, Google and other tech giants to give them greater access to Americans’ smartphone location data. (CNBC)
The Justice Department has quietly asked Congress for the ability to ask chief judges to detain people indefinitely without trial during emergencies. (Politico)
Tim Mak @timkmakALERT: "The Justice Department has quietly asked Congress for the ability to ask chief judges to detain people indefinitely without trial during emergencies — part of a push for new powers that comes as the coronavirus spreads through the United States." https://t.co/LDhEIJtbH1
The Strengthening of the US Dollar and Why it’s Bad
Short term(1-2 months):
₿itcoin neutral/lower (along with all risk assets with COVid-19 shutting down world)
Medium term (6 months):
Long term (12 months):
₿itcoin higher higher 🚀
Next Week in New Money:
I’ll teach you how to stack sats and earn ₿itcoin for Free
Bitcoin technical analysis
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