The Pomp Letter

To investors,

The Sohn Conference, where investors pitch their best investment idea, was hosted on April 3rd. The next day, I wrote to this group and said that I would have pitched DeFi Technologies, Inc (NEO: DEFI) (GR: R9B) (OTC: DEFTF) if I had attended Sohn this year. You can re-read my analysis here.

Here is an excerpt on why I thought DeFi Technologies was highly undervalued:

“By my calculation, Valour’s average fee generation on their AUM is approximately 7.2%. That is a monster number for the asset management industry.

This understanding alone would make DeFi Technologies and Valour an interesting potential investment. But you have to remember that these ETPs they manage are holding crypto assets, with Solana being their largest ETP, so the asset values continue to grow rapidly during a bull market.

For example, here is an excerpt from the company’s recent earnings report:

“Assets Under Management ("AUM") grew 476% to approximately $508 million as of December 31, 2023, up from $106 million as of December 31, 2022. Valour Inc. and Valour Digital Securities Limited's ("Valour's") current AUM stands at C$880 million.”

That means Valour’s AUM has grown more than 800% from December 2022 till today. There are very few businesses in the world who can see this type of revenue acceleration without having to expend an insane amount of money on sales and marketing.

As of this morning, the current market cap of the DeFi Technologies is about $140 million USD. That may seem reasonable on the ~ $10 million they reported for 2023.

There are two points that may change the way to look at those numbers though. It appears that more than 75% of those revenues were created during the last 90 days of the year. Additionally, given the ~ $650 million USD in current AUM, that would imply an annualized revenue run rate of $46.8 million.”

It appears the market is starting to pay attention. The stock is already up more than 16% in the ~ 6 weeks since I wrote about my pick.

But I think the company is still undervalued.

DeFi Technologies released their Q1 earnings report yesterday and the numbers were incredibly impressive. Here are the highlights:

* Record Operating Revenues and Net Income: DeFi Technologies recorded its strongest quarter ever, achieving Operating Revenues of C$13.4 million and Operating Net Income of C$5.3 million for Q1 2024.

* Strategic Advancements and Product Launches: The quarter featured the launch of multiple Exchange Traded Products ("ETPs") by subsidiary Valour Inc, and Valour Digital Securities Limited (together, "Valour") alongside strategic acquisitions such as Reflexivity Research LLC, significantly enhancing the company's product offerings and market position.

* Substantial Growth in Assets Under Management (AUM): AUM grew by 78.7% to approximately C$908 million, driven by favorable market conditions, new product launches, and strategic corporate actions that enhanced trading volumes and overall financial performance.

* 2024 Outlook: Looking ahead, DeFi Technologies projects its annualized Operating Revenues to reach approximately C$119 million (US$87.45 million) for 2024, supported by ongoing AUM growth, upcoming ETP launches, and the integration of new acquisitions, which are poised to capitalize on the favorable conditions in the digital asset sector.

These numbers show a business that is on an annualized profit run rate of $15 million USD, yet the company is only trading at ~ $180 million market cap. What is interesting though is that DeFi Technologies gave 2024 guidance yesterday for about $87 million in revenue and more than $75 million in profit. If you take those numbers as reported, this means that DeFi is only trading at ~ 2.4x their projected 2024 profit.

Now you see why it appears to be an undervalued company.

But let’s say you don’t believe the company’s guidance. The business still reported approximately the same revenue in the first 90 days of the year that it did in all of 2023. A growth rate like that would suggest a much higher multiple for a company that has high capital efficiency.

There was one other thing buried in the earnings report that is worth paying attention to. The company said:

“In addition to the Company's existing business units, a new alpha-generating business ("DeFi Alpha") unit was formed in Q2 2024 in order to generate yield on the Company's excess liquidity. The focus is on arbitrage trading opportunities in the digital asset space with low risk in both centralized and decentralized markets (with minimal market or protocol exposure), thereby minimizing downside revenue volatility. DeFi Alpha has come off to a promising start, generating approximately US$40 million thus far in 2024.”

If I am reading this correctly, DeFi Technologies is saying that they have already booked $40 million of revenue in Q2 from a newly created business unit that didn’t previously exist. That would mean that the company has done 5x growth in revenue over their 2023 numbers in just the first 5 months of the year.

Regardless of how you cut the numbers, I still believe that DeFi Technologies is undervalued. Given this additional information in the latest earnings report, I believe DeFi Technologies has a good chance of being one of the best performers from any stock that was pitched at the Sohn Conference in April.

I am not merely sharing my opinion though. I am a shareholder of DeFi Technologies that will benefit if the market figures out the company is undervalued and I will be financial punished if the company ends up not performing how I believe it will. We also sold one of our companies, Reflexivity Research, to DeFi in a 100% all-stock deal earlier this year. True skin-in-the-game.

I’ll continue to monitor it and keep everyone updated. Hopefully my analysis is right, but you should do your own research. Nothing I have said here should be confused for investment advice. I am merely trying to highlight a company that shows how misunderstood crypto companies are by the public markets. Eventually the market will figure it out, but for now there still seems to be quite a bit of opportunity available to various public market investors who take the time to do the work.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Cyrus Shirazi is the Founder & CEO of Haven, a brand new company that is dedicated to focusing on exactly to solve all your accounting needs as a startup founder or business owner.

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To investors,

OpenAI announced GPT-4o yesterday. The demos were incredible, including real-time language translation, a clean verbal interface where users can speak to the model, the model’s use of photo and video inputs, and the ability for AI bots to speak with each other to accomplish tasks.

The most impressive part to me was the voice interface.

If humans are able to transition from typing on their computer to simply speaking to the machine, it will have profound implications to productivity. Given that the model can now process voice instructions with a high degree of accuracy, the bots are able to talk with one another.

For example, watch this demo of two bots talking to each other in a customer service scenario. Companies are going to save enormous amounts of money. Customers are going to save even more time and headache in the future.

So the bots can now talk to each other. The use cases people invent in the coming years is going to be incredible to watch.

But there is one area of artificial intelligence that most people seem to have a blind spot — how will the bots interact with money?

Let me explain.

These AI bots are now reaching a point where you can instruct them to do things on your behalf. You can tell them to talk to a customer service representative at a company you purchased something from. You can tell them to call a store and get information on a product or service. You could ask the bot to make a reservation for you.

You can even tell the bot to go shopping for you.

In many of these scenarios, the bot may have to make a purchase on your behalf. Let’s say that you ask the bot to find an item on the internet and purchase it for you. If the bot locates the desired item on Amazon, it can simply use your stored credit card information to complete the purchase. Painless and fast. There is a reason that Bezos and team invented the one-click check out.

But what if the bot finds the item located at a different online store?

There is still a chance that the bot can utilize your credit card information, either because you explicitly gave the bot the information to save or perhaps the bot has access to your Apple Pay or equivalent digital wallet.

Again, not a big deal for a bot to purchase a product or service from a retailer that is set-up to process payments.

That is not inclusive of all potential money transactions though. How will these bots handle paying each other when appropriate?

This is where things get really interesting in my opinion. When bots are acting on behalf of humans or corporations, they can leverage the same financial infrastructure that the human or company owns. But when a bot is acting on behalf of itself, there is no bank account or payment processing infrastructure available in the legacy financial world.

I believe this is where stablecoins and digital wallets will come into play. You can easily spin up a digital wallet without having to hand over any personal information. As long as you have the seed phrase, you own the wallet and have access forever. If a bot wants to send or receive money with another bot, then using these digital wallets will empower them to do so.

They don’t need the traditional bank account.

Given that the digital wallet will now serve as the financial infrastructure, this means that the bots will use digital currency for the actual payments as well. You may think that bitcoin will be their currency of choice. It is the largest market cap cryptocurrency and has the best brand awareness.

It also has a degree of volatility to it as well.

So I don’t think bitcoin will be the bot’s choice currency. Instead, the bots are more likely to use stablecoins. The stablecoins are…”stable.” That stability comes from the fact that products and services are priced in the underlying currency. When a bot requests a specific amount of money, they will likely do it in dollars. Hence, the appearance of stability becomes obvious.

So one way the bots could change their preference to bitcoin rather than stablecoins is to have products, services, and bot money requests denominated in bitcoin. Maybe that will happen. But it doesn’t happen nearly as frequently as dollar denomination today.

Bitcoin is a great store of value. Dollars are great for medium of exchange. I don’t see either of those two facts changing any time soon. The bots are not inventing a new use case, but rather trying to emulate what humans already do.

There will be a ton of open questions, including how taxes will apply to bots, what occurs in legal disagreements between bots or bot owners, and many more we haven’t even thought of.

Too many market participants believe that artificial intelligence and cryptocurrencies are separate industries. They are actually two technologies that fall under the automated future that we are headed towards. Make sure you are paying attention to all of this. It will impact your life, your business, and your investment portfolio.

Congratulations to the team at OpenAI. Yesterday’s demos were very impressive. I can’t wait to see what developers and entrepreneurs do with this new technology.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Anthony Pompliano went on Julian Dorey's Podcast to talk playing football in college, being deployed in the middle of the season to Iraq, America today, making Facebook millions of dollars, discovering bitcoin, bitcoin adoption, and a theory between the Mafia and the fall of America.

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Anthony Pompliano on Julian Dorey’s Podcast discussing Bitcoin & Iraq Deployment

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

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Today’s letter is brought to you by Consensus 2024!

Consensus 2024 is happening May 29-31 in Austin, Texas. This year marks the tenth annual Consensus, making it the largest and longest-running event dedicated to all sides of crypto, blockchain and Web3. 

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To investors,

The bitcoin and crypto industry has finally become big enough to enter the political arena. In the last week, we saw President Biden and his administration continue their war path against the growing industry. Within days, President Trump held an event where he not only came out in strong support of crypto, but featured a number of crypto speakers as well.

The politicians are picking sides.

It appears that the left sees their abrasive stance against bitcoin and crypto as something that will have no negative repercussions. The right appears to believe that embracing the new technology could help them gain voters in November.

Regardless of what side you are on, this is a fascinating development.

I thought it may be helpful to share the commentary from a few folks related to these political decisions. First, here is Castle Island’s Nic Carter:

“I’d love to live in the fantasy blank slate world many of your dwell in where new technologies have no partisan mapping and politicians just choose positions tabula rasa but that’s not our world.

Crypto is inherently political and has always been; to the extent leftism relies on the politicization of finance, crypto will be a rightist technology, definitionally. It is delusional to meekly intone that crypto is nonpartisan and hope for the best. This will not be persuasive to leftists whose agenda is threatened by open finance.

It is suicidal not to align yourself with the faction that actively supports your cause”

Balaji Srinivasan followed Nic’s comments with the following statement:

“Crypto is for American conservatives and Chinese liberals. It’s for small countries and dispossessed minorities. Because it gives power to those without state power. Democrats and Communists control powerful states, so they don’t benefit from crypto. But everyone else does.

So I agree with Nic’s point but with one major qualifier: crypto is to the right of American Democrats and to the left of Chinese Communists. In other words, it’s in the global center.”

Unchained’s Laura Shin shared this:

“Gensler and Warren are trying to politicize crypto. If the industry falls into the trap and takes the bait and does the same, then, game over — they win.

If crypto becomes politicized, then automatically 40+% of Americans will be against it without ever really learning about it.

IMO, if the industry focuses on education and explaining what crypto is and why it isn’t and shouldn’t be a political issue, then as the tech becomes more developed and used, there will gradually be more acceptance and adoption without having to overcome the hurdle of it having been politicized.

Take it, leave it, this is just my perspective”

These comments came after massive blowback for an op-ed that was written in Blockworks by Molly Jane Zuckerman titled “Only a fool would vote on crypto alone.”

In the piece, Molly writes:

“What I see is a small number of wealthy individuals, who made that wealth from cryptocurrency, looking for the government to let them continue growing that wealth unfettered.

Among diehard crypto evangelists right now, “voting for crypto” means voting Republican for president. According to this side of the debate, any other decision will virtually assure the death of the American crypto industry. 

This fear (true or not) has led some major personalities in Web3 to push crypto supporters into becoming single-issue voters. Their message is clear: Choose your 2024 candidates based solely on their cryptocurrency stance, or else.

In other words, Americans should prioritize their own selfish financial interests over broader societal and ethical concerns. When you promote the idea of voting for America’s crypto industry above all else, you’re deciding to ignore all of the other issues that are really at stake this election season — healthcare access, Social Security, gun legislation, women’s rights, LGBT issues, immigration, to name a few.  

I want to be clear — I do not care if you vote Republican, Democrat, or third-party, as long as you care about the issues at stake, and truly believe that the candidate in question is representative of your views. But voting for a candidate you would not otherwise support, simply because they favor the deregulation of a sector in which you hold a profit motive, is a compromise that you should not make.”

Obviously politics has been a controversial subject at any point in history. Add in the tribalism of crypto and you have a cocktail for chaos on the internet.

There seemed to be one thing missing in the conversation all weekend long though…people have been voting for their wallets for decades.

This is not new.

The current president has the lowest approval rating in American history. A big part of that is because majority of Americans are living paycheck-to-paycheck and inflation is more than 50% higher than the central bank’s target of 2% annually.

There are many topics and positions to consider when voting for a candidate, but if you can’t afford to live a relatively normal lifestyle in America then people are going to seek out ways to change leadership.

Bitcoin and crypto are presented as new things. They are from a technology standpoint. But the idea that people are suddenly going to use different criteria to vote doesn’t make any sense to me.

Citizens vote for who will put them in a better economic position. This is why you see incumbent presidents trying to implement various changes during election years, regardless of how bad of an idea the changes are.

Many of you know that I believe the free market is the single greatest referee in the world. This is true in economics, but also true in politics.

Just as the economy and market should be allowed to operate without intervention, the political process should be left untouched. Screaming at people because you don’t like their voting inclination is about as helpful as screaming at a wall.

Everyone’s time is better spent on more productive things. Hopefully this will be the last time I will have to write about crypto and politics before the November election.

Have a great start to your week. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Jihan Bowes-Little is the Co-Founder & Managing Partner at Bracket Capital, an investment firm focused on special situation opportunities in growth / late-stage private companies.

In this conversation, we talk about the similarities and differences investing in Coinbase, SpaceX, Stripe, landscape of private markets, financialization of venture capital, investing trends & sectors, cross-over investment example, market liquidity, bitcoin, and more. ⁠

Listen on iTunes: Click here

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Bracket Capital’s Jihan Bowes-Little on Coinbase, SpaceX, Stripe, Bitcoin, and more

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

There was more than a 70% chance of a recession occurring in 2023, according to Kalshi prediction markets in July 2023. Not only did the recession never come, but nearly one year later the same Kalshi market is predicting an 8% chance of a recession throughout the rest of 2024.

People are obviously feeling good about where the economy is at the moment. Another way to gauge the positive sentiment is to see how low the odds are of inflation running higher.

For example, most people don’t see a world where inflation will be higher than 3.5% year-over-year based on April’s report.

If you are one of the people who believe inflation will come in higher than the predicted 3.5%, you can wager $100,000 to win more than $800,000 in profits.

This is fascinating because the Bureau of Labor Statistics reported a 0.4% increase in CPI month-over-month in March. Inflation has been accelerating for months, yet people continue to believe that the year-over-year number will remain at 3.5% or lower.

Some of this disconnect between the data and people’s perspective could be a psychological scarring from the last few years. We saw inflation eventually peak at over 9%, which will leave a lasting impact on the way people think and how they behave.

While all of this has been going on, the US dollar has lost purchasing power. Truflation estimates that the aggregated inflation since 2020 is more than 25%.

At the same time, bitcoin has done a fantastic job of protecting and increasing citizen’s purchasing power. The asset is up more than 200% over the last year.

So people feel positive about the economy. Inflation remains elevated and appears to be accelerating month-over-month. The US dollar is being devalued. Citizens are losing purchasing power. And bitcoin continues to be one of the best ways to provide economic protection to your hard-earned wealth.

Unfortunately, it looks like the bitcoin community is more right with each passing day. I say “unfortunately” because the vast majority of citizens around the world don’t hold bitcoin yet, so they are on the losing end of this situation.

Hopefully that will change in the coming years. Have a great end to your week. I’ll talk to everyone on Monday.

-Anthony Pompliano

Jihan Bowes-Little is the Co-Founder & Managing Partner at Bracket Capital, an investment firm focused on special situation opportunities in growth / late-stage private companies.

In this conversation, we talk about the similarities and differences investing in Coinbase, SpaceX, Stripe, landscape of private markets, financialization of venture capital, investing trends & sectors, cross-over investment example, market liquidity, bitcoin, and more. ⁠

Listen on iTunes: Click here

Listen on Spotify: Click here

Bracket Capital’s Jihan Bowes-Little on Coinbase, SpaceX, Stripe, Bitcoin, and more

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

The President of Argentina, Javier Milei, is running one of the largest economic experiments in history. He assumed power with the country experiencing 300%+ inflation and a population that was quickly losing hope that the future could see improvement.

Milei won the Presidency by promising radical reform that would unleash free market capitalism and bring economic prosperity back to the country. While many people liked his ideas (enough to elect him!), very few thought he could have such a large impact in a short-period of time.

Argentina has seen inflation fall to 11% monthly, the Argentinian peso was the best performing currency in Q1, and the country ran a budget surplus in the first 90 days of the year for the first time since 2008. These are major milestones for a country and economy that was previously run by top-down bureaucrats who wanted to paternalistically oversee every aspect of the economy.

Matthew Lynn has a great piece in The Telegraph titled “Milei is already proving the Left-wing economic establishment wrong.” In the article, Lynn explains why Milei is having so much success already:

“First, even without a majority in parliament, he has been ruthless. Whole government departments have been closed down overnight, regardless of the immediate consequences. The Ministry of Culture was axed, so was the anti-discrimination agency, and the state-owned news service. Only last month, he unveiled plans to fire another 70,000 state employees. 

Milei hasn’t attempted to cut gradually, to control budgets, or to ease people out with early retirement, or hiring freezes. Instead, he has, as promised, taken a ‘chainsaw’ to the machinery of the state, yielding huge savings in the process. 

Next, he has been bold. The president massively devalued the peso on day one, taking the financial hit upfront, and then tore up rent controls, price restrictions and state subsidies. He pared back workers’ rights, reducing maternity leave and severance compensation, and allowed companies to fire workers who went on strike. 

He ripped away fuel subsidies, even though it meant a temporary spike in inflation. Sure, there has been some short-term pain, but the results are now becoming evident. 

Rents, for example, are falling by 20pc a year as landlords, freed from controls, put more supply on the market, instead of withdrawing it as they do in countries where the price is set by the government. 

Finally, Milei has never stopped making the argument. He promotes freedom, liberalisation and a smaller state with a messianic zeal. 

Many of the measures he has taken might be rough, but the president has never attempted to dismiss that, instead explaining patiently and persistently why the reforms are justified, and how they will create greater prosperity for everyone in the long run.”

This type of bold, ruthless approach to changing the economic situation in a country is commendable. It is not only difficult to implement, but it guarantees you won’t make many friends.

Americans have historically viewed Argentina as a country that lost control of their economy. We couldn’t imagine a scenario where the leader of the West followed in Argentina’s footsteps. That may be true today, but we are cooking with a number of the same ingredients that our South American counterpart was previously.

America has out of control spending. The national debt is ballooning. Our government has become a bloated bureaucratic machine that continues to hire needlessly. The central bank has created an inflation fire and is now struggling to put it back out. The average family is losing hope that they can ever achieve financial security. And the American Dream is at risk as we watch the middle class disappear.

We need bold leadership to get us back on track. We need to significantly cut spending. The entitlement programs will need to be changed. We’ll have to reduce the number of employees employed by the government. Free markets will have to reign. Politicians and regulators will need to understand their important role in encouraging innovation. And GDP will have to accelerate.

None of this is easy. The odds are stacked against us. But we are facing a fork-in-the-road. Continue on our path and risk becoming the Argentina from the last decade. Or return to our roots of capitalism and free markets so we can beat Argentina to the punch and continue to be the greatest economic machine ever created.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Jihan Bowes-Little is the Co-Founder & Managing Partner at Bracket Capital, an investment firm focused on special situation opportunities in growth / late-stage private companies.

In this conversation, we talk about the similarities and differences investing in Coinbase, SpaceX, Stripe, landscape of private markets, financialization of venture capital, investing trends & sectors, cross-over investment example, market liquidity, bitcoin, and more. ⁠

Listen on iTunes: Click here

Listen on Spotify: Click here

Bracket Capital’s Jihan Bowes-Little on Coinbase, SpaceX, Stripe, Bitcoin, and more

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Consensus 2024!

Consensus 2024 is happening May 29-31 in Austin, Texas. This year marks the tenth annual Consensus, making it the largest and longest-running event dedicated to all sides of crypto, blockchain and Web3. 

Don’t miss Bitcoin: We Are So Back, where Anthony Pompliano will discuss what the next bull market will look like, how it will differ from previous run-ups and the broad macro investment thesis for bitcoin and crypto more broadly.

Consensus has tailored programming for Bitcoin maxis and multi-chain mavericks alike, covering everything from post-halving strategies to mining and more. 

Plus, you absolutely won’t want to miss the epic BTC (Nic Carter) vs ETH (David Hoffman) battle at Karate Combat.

That’s just a taste of what's to come at crypto’s only big-tent event. Join Consensus in Austin alongside 15,000+ investors, founders, brands and more to take in all that blockchain has to offer. Get your pass today and use code POMP to save 20%.

To investors,

Mainstream media headlines this morning read “FTX Has Billions More Than Needed to Pay Bankruptcy Victims” and “FTX says most customers of the bankrupt crypto exchange will get all their money back.”

This is inaccurate.

Let me explain. FTX’s advisors filed a disclosure statement yesterday that revealed a plan to end the Chapter 11 bankruptcy. In the document, the advisors claim they have between $14 billion to $16 billion to pay out to creditors in the coming months. These are big numbers considering that FTX only owes approximately $11 billion to various people and entities.

So how did FTX get so much money?

First, they had cash on their balance sheet before they went bankrupt. Second, they were able to sell a number of investments they had, such as an investment in hot AI startup Anthropic, to generate more cash. And lastly, the various crypto assets FTX held have appreciated hundreds of percent over the last year.

So if the company has more money than what they owe, everyone should get paid back 100%, right? Not quite — it is not that easy. There is some funny math going on here.

FTX users who had crypto on the platform are owed money based on crypto prices back in November 2022. So if you had 1 bitcoin on the platform, you would be owed approximately $18,000. Although FTX is claiming they will pay you 100% of the $18,000, this means that you are actually only getting ~ 0.28 bitcoin back from the exchange. That is only 28%.

If you price the claim in dollars at the time of the bankruptcy, then FTX can take a victory lap and claim they are paying everyone back 100% of their funds. But if you denominate the claims in the native asset that a user put on the platform, then FTX is not even paying back 30% of the users’ funds.

Unfortunately, this is how bankruptcy works. The courts need to pick a date to use for the value of claims. The court also historically has used a single currency, US dollars, to denominate all claims. The same phenomenon at play in the FTX case is also present in other crypto bankruptcy cases (Celsius, Blockfi, etc).

The fact that crypto assets are involved here has thrown a curveball to the courts. They have never seen financial assets appreciate hundreds of percent in a year, which drastically changes the calculation of the true value of a creditors’ claim.

I don’t know what the right answer is for future bankruptcy cases. That is for people much smarter than me to figure out. But I do know that the headlines boasting that FTX users are going to be paid back 100% of their money are misleading.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Marko Papic is a macro strategist who incorporates geopolitics into his investment analysis. He is also the author of "Geopolitical Alpha: An Investment Framework for Predicting the Future."

In this conversation, we talk about geopolitical alpha, how to apply it to your investment process, China, Ukraine, Russia, Isreal, El Salvador, United States, rest of the world, commodity prices, public media narrative, inflation, proxy wars, bitcoin, and more.

Listen on iTunes: Click here

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Geopolitical Investor Marko Papic Breaks Down The Global Situation

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* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* ResiClub - Your data-driven gateway to the US housing market.

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

The bitcoin network launched on January 3, 2009. In just over 15 years, the network has become the strongest computer network in the world. There are hundreds of millions of people who have exposure to bitcoin across the spot market, ETFs, and mining. And the bitcoin brand is recognized around the world.

But those are just the high-level accomplishments so far.

Marty Bent points out that the bitcoin network achieved a major milestone last night — it has processed 1,000,000,000 total transactions since the network launched. A billion transactions is no joke.

As I was digging into this milestone, I came across another interesting data point — if you hold at least one full bitcoin, then you are in the top 2% of all bitcoin holders according to DanielGotHits on Twitter/X.

Bitcoin is not the only asset that is seeing enthusiasm right now either. The total market cap of stablecoins has hit a new all-time high.

One way to view this is that tons of dry powder is sitting on the sidelines ready to be deployed into bitcoin and other crypto assets. Another argument is that the stablecoin market cap is rising because people were selling their crypto assets in the last two weeks and going to cash in the form of stablecoins on various crypto platforms.

My guess is that both of these arguments have a hint of truth in them.

The good news, as Thomas Fahrer points out, is that bitcoin’s 200 day moving average just hit a new all-time high.

This is on top of the fact that GBTC’s 78-day streak of outflows since the ETF approvals ended on Friday. For the first time in almost 3 months, the world’s largest Bitcoin fund saw inflows of $63 million.

It is easy to get distracted by the day-to-day price action of bitcoin. Don’t let that happen to you. The digital currency has shown that those who have the longest time horizon tend to do best.

Hope you all have a great start to your week. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Hannah Maruyama is the Founder of Degree Free.

In this conversation, we talk about the data as to why college may not be as lucrative as people think, examples that include an 18-year-old bitcoin developer, why proof-of-work is so important, role of the parents, and a brand new launch program working one-on-one with teenagers.

Listen on iTunes: Click here

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Bitcoin 200 Day Moving Average Hits All-Time High

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Consensus 2024!

Consensus 2024 is happening May 29-31 in Austin, Texas. This year marks the tenth annual Consensus, making it the largest and longest-running event dedicated to all sides of crypto, blockchain and Web3. 

Don’t miss Bitcoin: We Are So Back, where Anthony Pompliano will discuss what the next bull market will look like, how it will differ from previous run-ups and the broad macro investment thesis for bitcoin and crypto more broadly.

Consensus has tailored programming for Bitcoin maxis and multi-chain mavericks alike, covering everything from post-halving strategies to mining and more. 

Plus, you absolutely won’t want to miss the epic BTC (Nic Carter) vs ETH (David Hoffman) battle at Karate Combat.

That’s just a taste of what's to come at crypto’s only big-tent event. Join Consensus in Austin alongside 15,000+ investors, founders, brands and more to take in all that blockchain has to offer. Get your pass today and use code POMP to save 20%.

To investors,

The market continues to work overtime trying to figure out the Federal Reserve’s plan to cut interest rates. Optimism ruled the day as we entered 2024, including a belief that we would have majority of the Fed’s interest rate decisions lead to rate cuts before the year ended. Today the sentiment is very different.

Rather than opine on the qualitative feelings of the market, we can look to the Kalshi prediction market for a quantitative read on how people are thinking about what should unfold related to interest rates.

According to these prediction markets, we were set for 5 interest rate cuts in January, but that number has now fallen to under 2.

Quite a fall in expectations in just 5 months. You can see that the most popular prediction now is a single rate cut in 2024.

At the start of the year, the market predicted an interest rate cut by July was more than 90% likely. Today that percentage has fallen to 27%.

These same markets think there is a 92% chance of no change to interest rates in the next meeting, but an 8% chance to cut at least 25 basis points and a 2% chance of a cut larger than 25 basis points.

What about the crowd that thinks there is going to be another increase in the interest rate, rather than cuts on the horizon? Those people are in the minority according to prediction markets. If you wager $100,000 on an interest rate hike happening before the end of 2024, you stand to make ~$566,000 if you are correct.

Finally, the prediction markets believe there is a 37% chance that we will see an interest rate below 5.25% this year, while there is a 33% chance below 5% interest rate and an 11% chance we see lower than 4.75%.

Most people don’t think in terms of probabilities. However, it can be one of the best ways to navigate complex, unknown scenarios. These prediction markets are not crystal balls, but rather can show you a quantifiable measurement on how sentiment and market expectations is changing in real-time.

I will keep seeking information on my journey to learn. Hopefully you find this valuable. Have a great weekend and I’ll talk to everyone on Monday.

-Anthony Pompliano

Hannah Maruyama is the Founder of Degree Free.

In this conversation, we talk about the data as to why college may not be as lucrative as people think, examples that include an 18-year-old bitcoin developer, why proof-of-work is so important, role of the parents, and a brand new launch program working one-on-one with teenagers.

Listen on iTunes: Click here

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How The Idea of Proof-of-Work Is Changing College

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* BetOnline -  Use crypto to bet on sports, casino games, horse racing, poker and more with promo code POMP100.

* Espresso Displays - The world's thinnest touchscreen portable monitor. Expand your workspace and work from anywhere.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Bitcoin’s price has been falling in recent weeks. This may be surprising to market participants that expected the digital currency to rise aggressively after the halving, but those of you reading this letter daily probably had a different viewpoint.

As I wrote to you on April 19th, Bitwise research analyst Juan Leon pointed out that bitcoin’s price action in the month after the halving would not be impressive according to historical data:

“On average, the price of bitcoin has risen 19.03% in the month preceding the halving, versus 1.70% in the month following the halving. Zooming out, however, the reverse is true: On average, bitcoin has risen 3,224% in the year following the halving, versus 185% in the year preceding it.”

So we are seeing history repeat in the first month after the halving, but the big question is whether we will see the significant price increase in the first year after the halving. There are still 11.5 months left until we have that answer.

In the meantime, there are many people asking me why bitcoin’s price has dropped 10% in the last 5 days and 17% in the last month.

One argument is that the halving was a “sell the news” event, but that seems too easy and naive of an answer. Instead, it is more likely that bitcoin is acting as the global alarm system once again.

Jeroen Blokland explains one theory:

“Yikes! Bitcoin is down a whopping 12% from its peak yesterday. It's another confirmation investors are forced to abandon their goldilocks scenario of decent GDP growth, slowing inflation, and a series of central bank rate cuts on the horizon. The US GDP number, which was significantly lower than expected, combined with a significantly higher PCE core deflator, seems to have pushed investors over the 'hopium' edge. Equities, bonds, gold, oil, and Bitcoin are all selling off. Let's see if and how Powell takes recent developments into account.”

If Blokland is correct, which I tend to think that he is, then the drawdown we are seeing in bitcoin having nothing to do with the digital network or asset, but everything to do with the macro backdrop the asset is trading in.

The network looks very healthy. The number of on-chain wallet addresses with at least 0.1 bitcoin has not gone down.

Hash rate on the network remains strong and growing, signaling the blockchain is secure and resilient.

And the number of transactions continues to rise. Regardless of intra-month price movements, people around the world continue to find value in bitcoin’s peer-to-peer system.

I lay out this analysis because it is easy to lose emotional control when the price of an asset drops lower with such speed. But don’t forget, this is normal for a bitcoin bull market. You should expect multiple 30% drops along the way to hundreds of percent in price appreciation during the expansion periods.

Take a deep breath. Stay calm. The world isn’t ending. Bitcoin is not failing. Nothing has changed about the investment thesis. Our central bankers and politicians have just mismanaged the economy to the point that people are getting worried.

Bitcoiners have known this for years.

Hope you have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Nick Neuman is the Co-Founder & CEO of Casa, one of the preeminent custody providers in bitcoin and crypto industry.

In this conversation, we talk about what custody used to look like before the digital age, how Casa is solving problems around bitcoin custody, examples of why self-custody makes it more secure, brand new inheritance feature, risks, and future of self-custody.

Listen on iTunes: Click here

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Casa CEO Nick Neuman Explains How The Rich Protect Their Bitcoin

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* BetOnline -  Use crypto to bet on sports, casino games, horse racing, poker and more with promo code POMP100.

* Espresso Displays - The world's thinnest touchscreen portable monitor. Expand your workspace and work from anywhere.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

There were six new crypto ETFs that started trading in Hong Kong on Tuesday. These were the first spot bitcoin and spot ether ETFs to launch in the region, but the trading volumes were quite lackluster.

Total trading volume for the Hong Kong ETFs was slightly over $100 million. In comparison, the US debut for the bitcoin ETFs saw more than $4.5 billion in trading volume on day one earlier this year.

These new ETF launches are important to watch because Asia boasts a much larger crypto user base than any other region in the world. As Willy Woo pointed out, Asia’s user base is larger than the US and Europe combined.

On one hand, you can argue that the overall interest in crypto is higher in Asia, so there should be many more investors interested in these spot ETFs. On the other hand, you could argue that the higher amount of Asian users means that people in the region have already allocated to the native assets, therefore leading to less interest in the publicly traded funds.

When you look at it on a percentage basis, rather than an aggregate analysis, I would go with the former argument when talking about retail investors. But the United States capital markets is still the dominant playing field for institutions around the world and these institutional allocators have much more money than retail.

It is hard to see a world where the Hong Kong ETFs become larger than the US-traded funds.

Another thing to keep in mind is that crypto is still outlawed in mainland China. Unless that legal position is reversed, there are close to 1.4 billion people in Asia who will not be allowed to allocate capital to these funds. Obviously incorporating such a large number of people into the addressable market would be a tailwind for these new ETFs.

Additionally, it is important to keep in mind that there are very real currency issues in some of these Asian countries. Let’s use the Japanese yen as an example. Jesse Colombo highlights that gold is up approximately 165% in the last 5 years when priced in yen.

This is compared to gold only being up about 85% in the same timeframe when priced in US dollars. That is 2x the performance, which is really just a statement on how poorly the yen has performed.

So it is not hard to formulate an argument that Asian investors could seek exposure to bitcoin as relief from their devalued local currencies. The open questions are:

* How much pain are local Asian investors actually experiencing from these currency issues?

* How much capital are they willing to allocate to bitcoin and crypto?

* Will these choose to buy the ETFs or seek out the underlying assets directly?

* Will investors pick US-traded funds over Hong Kong-traded funds?

We won’t know these answers for awhile, but with each incremental positive response there should be a stronger tailwind for bitcoin through this bull market.

It is obvious that the idea of a decentralized currency has become a global phenomenon. People are watching their currencies get debased at an accelerated rate, so they are seeking a long-term store-of-wealth. Bitcoin appears to be one of the solutions that has become an accepted answer.

Now we must wait and see how that popularity translates to capital flows over the next 12-18 months.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Bill Barhydt is the Co-Founder & CEO of Abra, a global platform for digital asset prime services and wealth management, leveraging trusted DeFi expertise to connect the on-chain and off-chain ecosystems for private clients and institutions.

In this conversation, we talk about the brand new regulatory approval as a registered investment advisor, what that means for Abra, how they can service both credited & uncredited investors now, why allowing basic financial services has been so difficult, and where the industry is going.

Listen on iTunes: Click here

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Abra CEO Says $50 Trillion Is Coming To Bitcoin & Crypto

Podcast Sponsors

* Core Scientific is one of the largest public Bitcoin miners and hosting solutions providers for Bitcoin mining in North America.

* iTrustCapital allows you to buy and sell cryptocurrency in a tax-advantaged crypto IRA.

* Supra - Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains.

* Propy - Now, anyone can start their on-chain journey by minting home addresses via PropyKeys and staking them for profit until they are ready to sell their home. 

* BetOnline -  Use crypto to bet on sports, casino games, horse racing, poker and more with promo code POMP100.

* Espresso Displays - The world's thinnest touchscreen portable monitor. Expand your workspace and work from anywhere.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe