Surging unemployment, Digital Dollars and HODLing

New Money - Issue #3

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

For the past couple of weeks I’ve been thinking about the job market and the looming unemployment crisis we are entering. By now many of us have either lost their job or have had friends/family/neighbors laid off. With over 10mm people filing unemployment claims in the past 2 weeks, and large companies like Disney, Macy’s and Gap announcing massive layoffs this past week, things are escalating quickly for people just trying to make ends meet.

This chart below(click if not interactive) puts the recent claims in historical context.

According to the St. Louis Fed projections, the coronavirus economic freeze could cost 47 million jobs and send the unemployment rate past 32%. The crux of the research showed 67 million workers in “occupations with high risk of layoff”, including sales, production, food preparation and services plus an additional 27.3 million people working in “high contact-intensive” jobs such as barbers and stylists, airline attendants, and food and beverage service. Adding the two together and giving a 50% job loss haircut, gets us back to that 47 million jobs and a 30% unemployment rate would that would top the Great Depression peak of 24.9%.

The Rent Domino

As we’ve quarantined our way into April, the 1st of the month suddenly became a major problem for everyone in the housing chain. With the economy shut down, non essential businesses closed and individuals getting furloughed or fired in large numbers, tenants/landlords/lenders are boxed into a Mexican standoff in which no strategy exists that allows any party to achieve victory without a bailout.

Tenants are paying for housing. Landlords are running a business. However, in the current moment, we’re embattled in a crisis that is the fault of neither and requires large scale intervention up and down the economic chain to avoid collapse for all parties.

This is exactly what happens in an over leveraged bubble economy, eventually everyone needs a bailout. If anything is obvious at this point, it’s that systemic risk is everywhere, especially in a bubble economy built on a foundation of debt where the incentives are consumption and growth at all costs. When people become incentivized to consume and go into debt rather than save, any slowdown or hiccup in economic activity causing one part of the chain to fail, has a domino effect that causes the other links to deteriorate quickly. This applies not just to housing but across all industries and markets.

Here we are in a post-2009 economy, suffocating in moral hazard and the implicit expectation of a bailout after the handout given to Wall Street & friends. It’s now 11 years later, and while banks, systemically important financial institutions(think hedge funds and asset managers) and corporations were back to the bread line getting collateral relief and liquidity/lending facilities available to no one else, dozen’s of industries like Airlines, Oil&Gas, Cruise Ships, Restaurants, etc. have been begging for and receiving their fair share of welfare and bailout money.

In the not so distant future, we’ll be seeing small business owners, retails shops, commercial real estate property owners, housing owners and banks holding mortgages looking for the next round of bailouts. Those $1,200 stimulus checks the government promised to cut in the most recent bailout legislation? If you rent, I hate to be the bearer of bad news but for most people, it’s nothing more than a dirty bandaid that heals nothing, serving as a backdoor bailout for landlords since there's no rent freeze even though income is frozen. Meanwhile, the government can’t even seem to figure out how to get that money out to you quickly enough(more on this below), with estimates that it will take up to 6 weeks because antiquated technology and staff reductions at the Internal Revenue Service have seriously hampered the agency’s ability to process checks.

Eventually, everyone is going to need a bailout but where do we draw the line? As this point, who the fck knows but you can be sure you’ll be last in line, as our corporate captured politicians continue to work for their donor base while the rest of us fight Hunger Games style for scraps to eat, pay bills and protect ourselves from this invisible pathogen wreaking havoc on our lives that we had nothing to do with.

Unlimited money printing and unchecked debt is a recipe for inevitable collapse of the entire system. The systemic contagion that has revealed itself in no less than 6 weeks removed from all time highs in stocks should be a red flag to anyone paying attention. We need better money so we can fix these problems.

Digital Dollars

🚨This is where everyone need to start paying attention 🚨

In the original COVID bailout bill, there was a provision in the legislation that referred to the creation of a “digital dollar” as a means of speeding up stimulus payments to businesses and individuals. The Act introduced a system of digital wallets maintained and operated by Federal Reserve system banks. Eventually it was scrapped, mostly because I believe they need more time to figure out how they build in all the inter workings of what this evil bill is really trying to accomplish while pretending incompetence and dysfunction in disbursing the $1,200 in the short term so they can push the Digital Dollar through later. The bill continues to be worked on behind the scenes and will be presented as legislation in months to come. You can find more of the draft here.

TLDR, We need to fight this.

They want to use the guise of creating a more efficient way to give $$ to consumers for economic relief in a time of crisis(delaying the checks for 4-6 weeks will be the excuse), but the digital dollars are a Trojan horse akin to the Bank Secrecy Act passing in 2001 after 9/11 under the guise of protection.

The proposal to create consumer digital dollar accounts is not about digitization or dollars (dollars are plenty digital), but about accounts and surveillance. The linking of your bank accounts directly with the Federal Reserve would give direct access to all of your financial transactions, completing the loop for the government and eliminating the need to go through intermediaries to get your data while removing banks as dollar dispensaries.

They want to ban cash and bring out “Fedcoin” so they can:

  • monitor (and prevent if they wish) all your transactions,

  • instantly freeze all your assets,

  • institute negative rates and other taxes at will,

  • do bank bail-ins, and sell your information to advertisers

  • print (give) $ at any time and burn (take) $ at any time.

I’ve been wanting to write about the Digital Dollar legislation for weeks because it reminded me of this scene in season 1 of Mr. Robot. It’s almost prophetic in the way it describes exactly what is happening now:

One of my colleagues, Meltem Demirors describes this perfectly in her tweet thread below. Click in to read her entire analysis:

Goodbye Fourth Amendment. No warrants. Easy seizure. This is unprecedented and should be fought with everything we got.


Learning Center

What does it mean to HODL?

The term “HODL” first appeared as a misspelled version of HOLD in a post, published on the Bitcointalk Forum on December 2013. The author of the aforementioned post titled ‘I AM HODLING’ had this to say:

BTC crashing WHY AM I HOLDING? I'LL TELL YOU WHY.  It's because I'm a bad trader and I KNOW I'M A BAD TRADER.  Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro.  Likewise the weak hands are like OH NO IT'S GOING DOWN I'M GONNA SELL he he he and then they're like OH GOD MY ASSHOLE when the SMART traders who KNOW WHAT THE FUCK THEY'RE DOING 

The term HODL or HODLing has become a very popular ₿itcoin meme and battlecry for ₿itcoiners to resist selling under any scenario. It’s now become part of the ₿itcoin/crypto lexicon as a buy-and-hold investment strategy in contrast to resisting the temptation of actively trading in emotional moments of FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt) which occur often to the volatility of cryptocurrency market

Because all ₿itcoin transaction are recorded on the blockchain, we can analyze unspent transaction outputs, UTXOs and model the last time they were moved by date. This allows us to understand when each ₿itcoin was last used in a transaction. The chart below shows the age distribution of each ₿itcoin and if you add up each ban 12months and over, you can see that over 60% of ₿itcoin has not moved in over a year!! This means that existing ₿itcoins are in strong hands of HODLers, despite all the market swings and volatility.

What I am Reading:

Must reads:

Best Podcasts of the Week:

Pomp Podcast: Chamath Palihapitiya on How To Invest Through This Crisis

  • where Chamath currently has capital invested

  • how he thinks we can solve the structural issues in health and economics,

  • why being a patient investor will pay off,

  • where he is looking for opportunity right now

  • how the world is going to change after the pandemic is over

Recode Kara Swisher: Chamath Palihapitiya: "The investing landscape is done,” taxes will go up, and a two-week lockdown is inevitable

  • how long it will take to recover from the Covid-19 crisis & its impact on startups

  • how the US government should and will react — including tracking individuals via their technology

  • why businesses should make sure they have at least 36 months worth of cash on hand to weather this recession and its slow recovery perio

  • corporate "shenanigans" that will make economic recovery harder says he's done investing for at least nine months

The Breakdown with NLW: ‘If You’re Not Radicalized, You’re Not Paying Attention’ Feat. Nic Carter’

  • Why corporations weren’t adequately prepared for economic trouble

  • Moral hazard How stock buybacks became a boogeyman

  • Why the crisis is actually 4 crises in one

  • How Covid-19 could accelerate the US’ withdrawal from the world

  • Why a ‘naive safe haven’ narrative was never correct for ₿itcoin

  • Why ₿itcoin was designed for exactly this type

Technical Analysis

₿itcoin closed the month of March around $6390, managing to bounce off its intra month lows of $3800 and climbing back above monthly support at 6380. For now ₿itcoin maintains a neutral/bullish bias and will likely trade in a range between $5800 - $7750.

While the range of $5,800-$7,700 in and of itself is not helpful, a clearer picture will emerge upon todays weekly close. Should ₿itcoin close above $6820, a bullish weekly bias would emerge and I would expect ₿itcoin to begin trading at the top end of its, range, testing above $7k and eventually pushing towards near term resistance at $7750.

From a trading standpoint, two clear strategies emerge, a clean break of $7,700 and hold on a weekly basis would signal a continued move back towards $10k. A move down back below monthly support that eventually pushes below $5800 and a close on a weekly basis would signal weakness and a move back to test $3100 lows last seen in March of 2019. For long term investors, this area continues to be ideal for selective accumulation. Should you be interested in making purchases here, an initial toe hold position would make sense, followed by a dollar cost averaging strategy that is adjusted based on a break of either upside or downside levels mentioned above.

Investment Help from a Licensed RIA

If you are interested in investing in ₿itcoin and would like the help of a licensed Investment Advisor to navigate your first purchase, store it safely and securely or would like to invest ₿itcoin directly in your 401k or IRA, please feel free to reach out to my partner and I here to schedule a call. We’d love to help.

Things That Make You Go Hmmm

I caught this right before sending out the newsletter and it totally fascinated me. Basically the gist is that the world is changing PCV(Post CoVid-19) and there is no normal to go back to. The amount of change the Corona crisis will bring to our every day lives, economy and way of life will have all kinds of second order effects. Second order effects are things that happen because something happened because something happened.

H/t to Nathaniel Whittemore for linking to this curation of second order effects from his friend Emerson Spartz and a set of collaborators that are likely to arise because of the Covid-19 crisis. You can jump into the report here

Next Week in New Money:

  • What is the Halving event next month?

  • What is Money?

  • Stock buybacks- what does this mean for stocks?

Recent Issues of New Money:

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.