The Rake Review: December 2021 (Happy Holidays)
Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.
Summary:
If you are a busy investor that doesn't have time to read this whole newsletter here is a brief summary:
* December tends to be a strong month for financial markets but this December has brought fear and volatility. Although things seem to be settling.
* Inflation and talk about tax hikes on the rich is dominating political discourse
* Australia will bring in stricter requirements for the cryptocurrency industry
* Jack Dorsey is making waves having quit Twitter. He is currently attacking Web3 and VC firms.
(Watch our monthly video - it's only 5 minutes, entertaining, and pertinent)
or Read below for all the detail.
Happy Holidays
"If your postman, taxi driver or yoga teacher is giving you tips on the next coin to pump then it means crypto is definitely mainstream but it should also trigger an alarm that at least part of the market could be overheated." - The Rake Review Nov 2021
We've since seen a broad market pullback, partially due to a combination of margin calls of leveraged positions, US corporates holders booking-in profits before year-end, and Chinese Communist Party pressure for Chinese held crypto to be sold in the lead-up to their CBDC (Central Bank Digital Currency). These shorter term swings do little to waiver our belief in the longer trend and benefit that crypto, but in particular bitcoin, offers to humanity.
Looking back at this year, we've seen a big change in the maturity of the bitcoin market with larger interest and investment by institutional funds, corporates, family offices and even countries. The potential for Bitcoin to bring a dramatic improvement to humanity is profound. Globally, nearly 1 in every 3 adults are still unbanked and the traditional banking system is not motivated nor able to help these people. Many of these people have no form of identification to even be able to open a bank account yet many do own a mobile phone which is enough to be self banked on Bitcoin. The people of El Salvador have made the leap and are now banked through Bitcoin and we're excited to see their prosperity continue to rise.
Western nations are experiencing more challenging times as the painful experience of inflation is starting to take hold. Central banks will need to delicately manage the "taper" (reducing money printing to reduce inflationary pressure). Too much printing and inflation runs hot; too little and asset/equity prices will collapse along with confidence (recession/depression). We've also seen huge polarisation and political divides in society. While these may seem somber notes on our final 2021 newsletter do not despair! Bitcoin offers a beautiful, a-political solution to this. A Bitcoin future will not only solve inflation (through its fixed supply schedule), but it will also unlock a new level of productivity and prosperity through fairer reward for effort. How and why this will occur is brilliantly explained in "The Bitcoin Standard" by Saifedean Ammous and if you have some time to read a book this Christmas period then we'd highly recommend this book (or audiobook if you prefer). The sequel "The Fiat Standard" is also out so no doubt you will be busy reading during the holiday period. (Speak to us and we'll lone you a copy of either book)
It is with this knowledge that we look fondly on the opportunity of 2022 and will work hard to help as many people as possible understand and get on board the future of money.
New Year Charity
For those of you in the mood for giving here is a charity that has just made giving possible through crypto. The marketing team has told us of a boom in charitable donations driven by crypto, including significantly higher value per individual contribution of crypto vs fiat. Also it is brilliant that you can donate bitcoin as well as over 30 other cryptos. That's the future of payments - pay in whatever currency you chose. We hope to catch up with the team from this charity and post a video of it in the new year.
Yad Ezra V'Shulamit
Local charities that accept bitcoin
More Options
Interested more investment options?
Due to popular request, Stormrake has formed some relationships with a number of funds that offer various investment strategies within the crypto landscape. If you are looking at investing in direct funds, let us know and we can show you some interesting options including algorithmic trading funds, long crypto funds and DeFi driven funds. Some of these may be a more aggressive or tax effective investment approach that might complement a conservative "HODL" crypto portfolio (seek you own financial & tax advice).
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Video of the MonthDo you agree with this statement?"The government is best placed to look after my interests as they have the best information and can make the best decisions." Watch the video of the month as a Canadian politician by the name of Pierre Poilievre asks 10 government officials where the money is coming from for a raft of new spending that's being announced. Canada is perhaps the most similar country to Australia in terms of wealth, political system, size, structure and even history. Everything apart from the weather. |
Markets
Bitcoin is down almost $9,000 USD from the same time last month. All the other major cryptocurrencies are also down. BNB has fallen back under 100 Billion USD Market Cap. DOGE is down over 10% in the last week alone.
* Top 8 Coins by Market Cap thanks to Coin Gecko
In the NEWS
1. Frydenberg Announces Australian Crypto Regulation
The Treasurer, Josh Frydenberg, has announced the intention to regulate deposit taking institutions that deal with crypto. Consultations are due mid 2022 and there is no implementation date yet. There is also the complication of a new federal election by May. If the legislation does get through in its current form companies like ours will require an AFSL (Australian financial Services Licence). That's something we have expected to come for quite some time.
2. Buying the Dip
The opportunity to buy some more bitcoin during the panic of December has not passed everyone by. Michael Saylor of Microstrategy has topped up again bringing overall Microstrategy holdings to over $5 Billion USD (a staggering 0.5%+ of all bitcoin). The country of El Salvador also topped up 150 bitcoin including 21 Bitcoin on the 21st. Bulgaria or Ukraine might be the biggest holders of crypto assuming they didn't sell the funds captured from seizures in 2020-21.
3. Africa Fund
500 BTC have been allocated for African Bitcoin development. Jack Dorsey and Jay-Z himself, have created a fund for Africa run by a board entirely comprised of African directors. This sits well with our earlier comments about banking the unbanked in Africa.
Education: The Easy Money Trap
“I like to call this the easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased will destroy the wealth of those who used it as a store of value”
- Saifedean Ammous (The Bitcoin Standard)
This month's education session focuses on why supply is linked to value in money and why trust is key.
In his book Saif dives into historic examples of monetary systems and currencies and provides a huge array of examples where the same thing tends to happen over and over again.
When money becomes trusted and accepted people tend to store value in that money.
Once money is accepted as exchange for goods or becomes transferable across time and space people tend to build trust and be willing to hold the money - often as savings.
When enough value is stored in the money it becomes lucrative to make more of it.
Once a whole society stores savings in that money the value balloons overall and making more money becomes easier than taxing people or making successful enterprises.
When that becomes lucrative the authority holding the money printer can't help but to make more.
Governments have never had the ability to keep their hands off the money printers despite early promises to keep the currency clean (in the building confidence faze)
How does that relate to Bitcoin?
Then along comes Bitcoin and solves that age old problem for the first time in human history. Here is something that has a fixed supply schedule known to all (21Million coins over 150 years or so of mining). On top of that there is no authority to control anything. The currency is truly decentralised and no individual person, group or government can change it. The keys to the money printer don't exist.
Here is a currency that can never be inflated. That is really the invention inside Bitcoin.
I don't have to "trust" or have "faith" in the government and knowing history that faith is blind anyway.
Once we have established that trust is not required and the supply schedule is fixed its obvious that value can build up through adoption and eventually economic growth, without it ever being devalued. That's a powerful concept and one that must be learned in order to make an informed decision about where wealth should be stored.
Even Gold would be mined at a much faster rate if the price were to double. Bitcoin on the other hand can't be mined any faster even if its price rises 10 fold.
Stock to Flow Valuation:
The stock to flow shows we are still below trend this month. This is what I would call "oversold territory".
Monthly Memes
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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