Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.
The month of February has been absolutely insane in the crypto world. So much so that we've taken until 1st of March to finally send you the February report. Bitcoin and the Alts have hit another level. Bitcoin passed $50,000 USD and recorded $58,354.10 (Bitstamp) only a week ago. Since then we've had a 25% correction, the first one for a month and a half. Is this a BUY THE DIP opportunity? Read on to find out.
There is so much going on that proper coverage of the month would be a book instead of a newsletter. We will condense everything into a short newsletter but if you have questions, we are always available to our clients for a chat and deeper explanation. Feel free to forward to your friends, they can also sign up themselves here.
In brief:
The march of big names and companies jumping on the Bitcoin (Future of Money) train continued with the biggest name of all, world's richest man buying $1.5 Billion worth of Bitcoin (BTC) on the Tesla Balance Sheet. How does that change the intrinsic value of Bitcoin? It doesn't. But, the importance of it cannot be understated, because it's further evidence of the constant increase of Bitcoin demand vs a maximum supply of just 21 Million Bitcoins. But with Elon it's much more than that. He is a leader, and has shown that he has a massive influence on his followers. I might also mention that if Tesla, Amazon and Apple start holding descent proportions of their Cash in Bitcoin there may not be enough Bitcoin available at under $100,000 USD. Tesla made more from Bitcoin's price appreciation in the days after its purchase than the Car company had made in its life so far.
As we tell all our new clients Bitcoin is a volatile investment. As Antonopoulos explains in our video of the month, Bitcoin can be likened to a lifeboat and lifeboats bob up and down in the sea because they are quite small. But, when the ship is sinking you better have a lifeboat because it will save your life. Bitcoin can rise and fall 20% in a day and that may scare some investors but there are 2 important points to understand.
1. Bitcoin's volatility is reducing over time (Possibly correlated with the size of Bitcoin's Market Capitalisation)
2. I'm happy to have volatility if that's the only way of growing 100-200% per annum.
This week Bitcoin has fallen 20% and that has indeed scared some. People are asking why has Bitcoin fallen and what does the future hold?
Why?
1. According to Willy Woo the selloff may have been triggered by a false report of a Bitcoin Whale (Large holding) sending their coins to an exchange to sell.
2. Overextended retail investors get smashed. The greed-Fear index was flashing green a week ago and small investors were starting to leverage into Bitcoin. What started as regular fluctuations ended up being made worse by retail investors getting "Closed Out" - essentially being forced to sell their positions when their trading margins became negative.
Do I BUY?
In the crypto space BTFD (Buy the F Dip) is a call cry to buy when prices are low but in fact this works for any market. So, is this a time to Buy the Dip? We don't give advice, but we can tell you what the smart money is doing.
Michael Saylor at US listed Business Intelligence firm Microstrategy is topping up by borrowing over $1Billion in USD and buying Bitcoin. That's not just smart money, that is the best trade I have ever seen. The company issued $1.05Billion at 0% interest maturing 2027. Yes, the above is not a mistake. They borrowed a Billion dollars at 0% interest to buy Bitcoin. How can they do that? Well, as we've said on many occasions the financial system is broken and Cantillionares at the top have so much free money that they don't know where to park it. Saylor then put together a massive conference of Business leaders and explained why and how they should be keeping Bitcoin on the Balance Sheet and how to sell this to their Boards and investors. There were over 1500 Companies at this conference. This is why I'm calling this Bull Run the Institutional Bull-Run.
Let's get into the report:
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This month's VideoThis month we had to include Andreas Antonopoulos's latest video which is sure to be recognised as a masterpiece. |
Markets
Bitcoin has topped $58,000 USD as we already mentioned and currently trading around $45,000. Cardano (ADA) and Binance Coin (BNB) have had stellar runs over the last month both taking #3 spot on by Market Cap. Cardano is now worth over $40 Billion USD. Cardano is a major ETH competitor and with ETH Gas prices increasing Cardano is positioning to steal ETH's mantle as the #1 Smart Contract Platform. Meanwhile, ETH has underperformed during the correction. losing a third of its value at one point after hitting its all time high earlier in the month.
* Top 8 Coins by Market Cap thanks to Coin Gecko
In the NEWS
1. Old Monetary System facing Issues.
“When things like this happen it undermines public confidence,” said Andrew Levin, a Dartmouth College economics professor who served at the Fed from 1992 to 2012.
The Fed had a significant outage for several hours meaning that interbank settlements were unavailable. Many conspiracy theories exist about "what really happened" - but we won't go into that. Either way, it's not great for confidence at a time when the M1 (Money Supply) is growing exponentially and the Chairman is being asked questions about the impact of Quantitative Easing. Here is what money supply (money printing) looks like:
A few points:
1. The data series is being discontinued. That is a big concern. As sophisticated investors in Equities know, a company that is constantly changing its accounting practices or the way it reports financials is not to be trusted. Why would a long running data series be discontinued? Hiding Something?
2. There has been no recession since 2008 (Australia didn't even have that). There is good reason for why? It's the same graph. The Fed is printing their way out of recession. But at what cost. Are we in the Weimer republic of the 1930's?
3. I hope you've seen the video of the month and can relate it to what you are seeing above. Are we on a sinking ship and is Bitcoin a lifeboat?
2. India bans Cryptocurrencies and announces they are working on a digital Indian Rupee.
Countries don't make all their money from taxing its citizens. They want to maintain their monopoly over money printing. Bitcoin is most definitely a threat to that. So what do you do? Ban Bitcoin and start your own Cryptocurrency off-course. What the Old guard don't realise is no one wants a digital Indian currency. The reason people in India are piling into Bitcoin is not because its digital, its because its decentralised money that their government can't get their hands on.
PS. Bitcoin passed the total Market value of the Indian Rupee and now doubles it. Always back the Decentralised, Provably Scarce, Borderless Store of Value.
3. Yield Curve Rises
Yield on Bonds and Interest rates generally have been falling for many years now and many are predicting deep negative interest rates. However, things have begun turning around. Yields are rising and equity valuations are being impacted. How long will things go on until another Quantitative Easing package is announced? Or maybe just some good old fashioned printing.
Just when we're about to send this newsletter, the RBA doubled its daily bond buying from $2B to $4B in a massive move to control the Aussie treasury yield. They do this to suppress interest rates and keep money flowing but how long can they keep printing money to maintain this?
4. Game Stop almost breaks Wall St
If you are a fan of Robin Hood standing up to the Rich then this was the story for you. A group of amateur traders unified online to buy up shares in a struggling listed company to squeeze the institutional shorts that were building. Alone those traders are just fodder but together they managed to send the company 100X up and get to a stage where markets stopped buying in GameStop while allowing selling. Unheard of market manipulation. The courts will now decide who did what. Either way what an incredible run it was. The attention now turns to crypto. What will they pump next after Doge coin?
Crypto Exchanges - Banks of the Future
Binance Coin went to $300 USD per unit this month and temporarily became the #3 coin by Market Cap.
So this month we take a look at Exchange tokens and what their future holds.
Specifically, I want to look at Centralised Exchanges. We will leave Uniswap, SushiSwap and Dodo to another time.
Centralised Exchange Tokens: Binance (BNB), FTT (FTX), Huobi (HT), OK Exchange (OKB), Bitfinnex (LEO)
Here is a list of the main Exchanges by Market Cap. Binance dominates but Decentralised exchanges have significantly come up also.
Centralised Exchanges are the ASX of the crypto world. While there are hundreds of them, there are some that dominate the space offering cheap fees and many interesting markets. Some have their own tokens such as BNB and FTT which give users of the exchanges fee savings in turn bringing actual real value to holders.
Many of these burn tokens for fees collected meaning the supply reduces and value increases. It is a roundabout way of winning from the success of the exchange but its not the same as holding equity. Exchanges like FTX offer a range of markets and derivatives. They even offer tokens based on equities.
Becoming Banks: Exchanges often adhere to strict protocols on KYC and AML and have a heavy regulatory presence. They are moving to include a wide variety of products and services in the DeFi space. For example, they are starting to offer Staking of various tokens directly on their site, Lending tokens, Margin Lending and Borrowing etc. This is pushing significantly into the space Banks traditionally play in. In years to come I see Exchanges pushing further into Bank territory and having the benefit of being much more global than banks are today.
So, investing in a token of an exchange you like the model of and even better - use, is a real trading strategy if you can hold long term. Risks include exchange hacks and poor management as well as a very competitive landscape and regulation.
Ask your broker if you would like to BUY or SELL exchange tokens. Free Brokerage on all exchange tokens until the 10th of March.
Bitcoin Dashboard
This month we again focus on just one part of the Dashboard.
Gold & Corporate Treasuries
This section of the dashboard compares the Gold and Bitcoin Market Cap. This helps us decide whether its too late to invest in Bitcoin. At present Gold Market Cap still significantly outweighs Bitcoins. BTC MC is only 7% of Gold's. In fact we don't really know exactly how much Gold is out there unlike Bitcoin Gold is not on a public ledger. If Bitcoin gets to Gold's market cap as predicted the price will be over $600,000 USD.
The Corporate Treasuries section tracks the amount of Bitcoin held in public companies. As we've discussed, companies the likes of Tesla and Microstrategy have moved part of their funds to BTC. This growing segment that didn't exist only a few years ago now accounts for over 7% of Bitcoin holdings and is growing rapidly. 60 Billion USD is nothing compared to the amount possible. Apple alone has almost $200 Billion in cash and cash like holdings. What would happen to the price if they convert 50% to Bitcoin?
Stock to Flow Valuation:
Current Long-Term Stock to Flow (STF) Price: $34,575 USD vs Current Price - $46,000 USD. Market price is now higher than the historical trend suggesting that Bitcoin is overvalued today. However, the STF model also shows an increasing price every day for the next year to $103,000 USD. According to the efficient markets hypothesis, a rational investor would buy today and wait for the $103,000 USD price to materialise if you trusted the model. That’s why we rate Bitcoin as a BUY
Plan B has stated that this year will make or break his model and it is incredible to see it materialise!
Monthly Memes
Which of you have refused to buy a dip because you thought it would go lower only for it to turn back up. Don't be this guy, buy low and sell high (or not at all).
Until next month, Happy Investing!
Stormrake Team
custody@stormrake.com
General Advice Warning
The information provided in this newsletter is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information contained here you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Therefore, before you decide to buy any product or keep or cancel a similar product that you already hold, it is important that you read and consider the relevant Product Disclosure Statement (PDS) of the product provider to make sure that the product is appropriate for you. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice. You can get a copy of relevant PDSs from Stormrake by email custody@stormrake.com. Disclaimer
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