The Pomp Letter

READER NOTE: This Thursday I am hosting a free webinar for anyone who is trying to transition into a new job in the bitcoin and crypto industry. Previously, my team and I have helped more than 3,000 people find a new role, so I will break down the lessons learned and provide actionable advice on how to make the jump efficiently.

The event is completely free and I will also be joined by people from BTC Inc, Compass Mining, Rhino Bitcoin, and Serotonin who will share their experience in finding a new job.

To investors,

One of the big differences in the US economy post-pandemic is how much extra capital is sloshing around the financial system. You can see the impact everywhere.

First, the Fed’s balance sheet has nearly doubled since 2020 even though the central bank has been trying to aggressively drain liquidity from the system and sell assets.

Second, according to Axios, “the average household wealth for those under 40 in the U.S. is up 49% from its pre-pandemic level.”

Third, US corporations are sitting on all-time high amount of cash, which comes in today at $4.4 trillion.

Fourth, US home prices are up about 30% bringing the median sales price of homes sold in the US to over $400,000.

Fifth, all this extra money flowing through the system has a record amount of people planning to go on vacation to a foreign country in the next 6 months.

Most of this extra money is coming as a byproduct of government spending. According to Game of Trades, “US government spending (inflation-adjusted) since 2020 now exceeds the combined spending of: World War I, World War II, and the 1970 to 1990 time period.”

So it shouldn’t be surprising that inflation refuses to come down. The government is spending like drunk sailors. The US consumer has extra cash that they want to spend like it is a hot potato. And US corporations have never had more cash on-hand than they do right now.

This is a cocktail for higher inflation, regardless of what the Fed does with interest rates.

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

-Anthony Pompliano

Renato Moicano is a UFC Fighter who went viral after his most recent fight, talking about defending liberty, importance of private property rights, and suggest everyone read the 6 lessons of Ludwig Von Mises.

In this conversation, we talk about the lessons he has learned from Brazilian constitution vs American constitution, private property rights, why he suggested Ludwig Van Mises, principles of America, why he views bitcoin as a lifeboat, capitalism, national debt, taxation, upcoming elections, inflation, the responses he has received, and crypto in Brazil.

Listen on iTunes: Click here

Listen on Spotify: Click here

Interview with UFC Fighter Renato Moicano on Economics, Freedom, and 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

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To investors,

The national debt is now over $34.6 trillion. Despite that insane number, the US government continues to run a deficit that is estimated to be ~ $2 trillion annually.

Given the high interest rate environment, our interest payment on this debt has now crossed over $1 trillion annually.

As The Kobeissi Letter put it:

“The annual interest expense on US debt is literally moving in a straight line higher, now at $1.1 TRILLION. To put this in perspective, less than 3 years ago the annual interest expense on this debt was $450 billion. That's a 144% jump as total US debt has surged by over $11 TRILLION since 2020. Even in 2008, at the peak of the Financial Crisis, annual interest expense was just $450 billion. As interest rates surge and debt levels hit record highs, we are paying the prices for decades of deficit spending. The era of "free money" is over.”

So the government is broke and they need more money. One solution is to keep borrowing and driving the national debt higher. But another solution is to raise taxes on American citizens.

While unpopular, politicians may feel like they have no other choice. Yesterday, there were a number of tax proposals that went viral online and caused significant uproar.

The most egregious proposal was for the government to tax unrealized gains. Technically they want to focus on the wealthiest Americans, but that doesn’t matter here. The idea of taxing unrealized gains is probably one of the stupidest ideas ever created by the political class.

Under this proposal, an American would owe taxes each year based on the price appreciation of their home. So if you have a $500,000 home and it appreciates $100,000 in 2025, then you would owe $25,000 - $40,000 in unrealized capital gains taxes depending on your income bracket and the state you live in.

Obviously this would bankrupt a large portion of the population considering the average American doesn’t have $400 for an emergency payment.

Additionally, imagine a tech founder who starts a new company. If they raise capital at $5 million valuation, work hard throughout the year to build a solution to a real problem, and then raise capital again at a $10 million valuation, the founder would owe tens or hundreds of thousands of dollars in taxes.

The problem in both of these situations is that the individual holding the unrealized gain never had true profit from the asset, so there is no money to pay the taxes. Plus, we won’t get into the difficult questions like “what happens if the asset depreciates later?” or “who gets final say on what an asset is worth?”

As I tweeted last night, “If they want to collect unrealized gains, we’re going to need refunds on unrealized losses.” The latter will never happen, but thankfully neither will the former.

On a more realistic basis, another tax proposal put forward is that the Biden administration would like to reinstate the 39.6% income tax for high earners. President Trump had removed this tax bracket and made the highest income tax only 37%. My guess is that this proposal’s fate will be determined by whoever is elected in November.

So, in conclusion, the US government is broke and we only have two options ahead of us — borrow more money or tax our citizens more egregiously. Even if the politicians are able to force a tougher tax regime through the legislative process, I don’t see a path where tax revenue can cure the federal deficit we run annually.

The only viable path the US has in my opinion is to continue borrowing money. That means the national debt will grow to the sky. The US dollar will be debased. Hard assets will continue to appreciate in value. And the investors who understand investing, not saving, is the path to financial freedom will be rewarded handsomely.

It is a tale as old as time. We have reached the point of no return. Our government is allergic to a balanced budget. They have a money printer and they aren’t afraid to use it.

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.

Adam Sullivan is the CEO at Core Scientific, one of the largest bitcoin miners in North America.

In this conversation, we talk about building Core Scientific, public company impact, bitcoin halving, bitcoin ETFs, future of bitcoin miners, consolidation in the industry, metrics to evaluate a business, and future plans for Core Scientific.

Listen on iTunes: Click here

Listen on Spotify: Click here

Core Scientific CEO Adam Sullivan on Bitcoin Halving & ETFs

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,

New industries bring new problems. The market has been focused on the various ramifications of bitcoin and crypto adoption, but these conversations have historically revolved around geopolitics, nation state acceptance, and portfolio construction.

People find it easy to discuss the large, easy-to-identify ramifications. The devil is always in the details though.

One of the small problems that has become obvious over the last few years is a disconnect between legacy banks and the wealth generated in this new industry. Here is how the problem works — someone bought bitcoin early and has held the asset till today. On paper, they have “made” approximately $10 million in gains on that bitcoin position.

This same person currently has $150,000 in cash sitting in their bank account. They have no other investable assets other than their bitcoin. In this scenario, if the person wants to go to the bank and get a mortgage or a loan, the bank will measure the individual’s net worth at $150,000.

Yes, you read that right. The banks do not count bitcoin or cryptocurrency holdings towards an individual’s net worth calculation for the purposes of underwriting traditional financial products or services. This makes it difficult for people who have majority of their net worth in this new asset class to access these legacy products/services.

At the same time this is happening, an entire generation of investors are creating material wealth in the new asset class. So either the banks will have to capitulate and change their underwriting methodology, or new companies will be created to service the crypto wealth holders with various financial services.

One example of a newcomer is Meanwhile, a startup that has created the world’s first bitcoin life insurance company. They denominate everything, from their internal P&L to the policies they service, in bitcoin. Clients can contribute bitcoin and clients can get paid out from the policies in bitcoin. Not only is this a pretty good idea, but investors such as Sam Altman, Lachy Groom, Google’s Gradient Ventures, and Stillmark are all betting that the company will be very successful.

Here is a conversation that I did with Meanwhile CEO Zac Townsend recently:

I have no clue if this company will work. Startups are hard. Meanwhile appears to have momentum and I found the team to be impressive. The bigger story to me is that bitcoin-focused (and crypto-focused) financial service providers are coming to fill the gap left by the legacy banks.

If the incumbents are going to ignore the trillions of dollars in wealth that has been generated, the economic incentive is too strong for startups to stay on the sidelines. Someone is going to service these people. The question is whether the startups can quickly get big enough to compete with the large incumbents once they change their mind.

The folks at Trammel Venture Partners put out a report on bitcoin-focused venture capital trends recently. These two slides caught my attention to help quantify this development:

You can read the full report from TVP by clicking here.

New industries bring new problems. New problems bring new opportunities for new companies. This is going to be worth paying attention to as the startups and incumbents battle it out for billions of dollars in future value.

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

-Anthony Pompliano

Zac Townsend is the Co-Founder & CEO of Meanwhile, the world’s first bitcoin denominated life insurance company.

In this conversation, we talk about traditional life insurance, protection, tax advantages, opportunities, and what Zac is building at Meanwhile using bitcoin to eliminate risk.

Listen on iTunes: Click here

Listen on Spotify: Click here

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

The bitcoin halving is scheduled to happen later today. I asked Meta’s new AI model to explain what the halving was and here is the output:

“The Bitcoin Halving is a preprogrammed event that occurs roughly every four years and impacts the production of bitcoin. The halving reduces the reward for mining Bitcoin transactions by half, which reduces the rate at which new coins are created and thus lowers the available amount of new supply.”

Not a bad description. There are a few important things to unpack around this event, so I will do my best to address each of them.

First, investors want to know — has the halving been priced in? Bitcoin is up approximately 40% year-to-date. Theoretically, if everyone knows the halving is happening, especially if they all know when it is happening, then the market should price the event in advance.

The problem with that theory is that everyone doesn’t know about the halving though. You could take a poll of bitcoin holders and a non-zero percentage of them would be hearing about the bitcoin halving for the first time. On top of that, some portion of the investors could not accurately describe what the halving is, how it works, where the impact is seen on the supply side, nor when it is scheduled to occur.

This information gap is a clear sign that the halving can’t be priced in.

The second question is how impactful will the halving be on bitcoin’s price in the coming days, weeks, months, and years? Castle Island’s Nic Carter made a great point yesterday on Bloomberg when he said “the halving represents an issuance reduction on an annual basis of 83 basis points.” Nic and I disagree on the halving being priced in, but his point here about the relatively small change in issuance percentage for this halving is important.

The smaller the percentage, the less impact that the halving event should have on the price of the asset.

Bitwise analyst Juan Leon quantified the historical impact on bitcoin’s price when he wrote:

“Historical data tells us that on a short-term return basis, the halving is a “sell the news” event.

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.

Those numbers are skewed by the huge (8,839%) return in the year following the 2012 halving. But ignoring absolute numbers, returns have been higher post-halving than pre-halving in each of the three historical examples we have.”

Placeholder’s Chris Burniske looked at the past price movements and showed that strong hands have benefitted greatly within 18 months from holding bitcoin post-halving.

Galaxy Research’s Alex Thorn came to a similar conclusion when analyzing the post-halving bull run data.

So my big takeaway is that the actual halving is historically a sell the news event. The price of bitcoin does not immediately take off higher. Instead, it takes a few weeks or months to see the supply change impact the market. Over the coming months, we should see bitcoin’s price continue to rise aggressively as demand stays constant or potentially increases.

One thing to call out, which runs counter to the public narrative, is that we should not expect bitcoin to experience as large of a return to the upside as we have seen in past bull markets. The market size is much larger and net new capital into the market has a smaller percentage impact.

You can see in Thorn’s analysis above that the price appreciation in percentage terms has been decreasing in the last few bull markets. Bitcoin still remains one of the best performing assets in the world, but it is much less risky to buy the asset today so you should expect to capture a lower return than those who took higher risk years ago.

Speaking of risk, I am constantly asked what I perceive as the biggest risks to bitcoin. One of my answers is some version of “the software potentially not executing as designed.” I measure this risk to be near-zero probability, but it remains a small risk worth watching. Today is one of the days where we will get another data point that bitcoin continues to do what it was designed to do — the halving should come and go without a hitch. But we never have 100% certainty until it happens.

Here is to hoping that we have an uneventful day. Happy Halving Day to all of you.

I’ll talk to everyone on Monday.

-Anthony Pompliano

Sandy Kaul is the Senior Vice President at Franklin Templeton.

In this conversation, we talk about bitcoin, client demand, tokenization, real world assets, regulation, portfolio construction, future narratives, meme coins, and where Franklin Templeton sees value in the future.

Listen on iTunes: Click here

Listen on Spotify: Click here

Trillion Dollar Investor Is All-In On 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

To investors,

The finance industry is built on capital appreciation and yield. Investors scour the world to find assets that will go up in price or assets that will give them income. That is what it all boils down to when investing.

Each investor has a different view on which strategy to pursue. Warren Buffett is famous for avoiding assets that don’t produce cash-flow. Other investors seek capital appreciation over anything else.

But what if an asset could be highly asymmetric, while also producing an attractive yield? This would be the holy grail of financial assets.

Over the years, investors have tried to put bitcoin in this bucket. Various companies have come and gone that offered yield on your bitcoin. At times, the yield was very high and quite tempting.

Unfortunately, these yield-oriented bitcoin offerings required you to give up your private keys, which meant that you no longer had control of your assets. Someone else held your keys and you had to trust them to give the bitcoin back when you wanted. As we saw with different companies in 2022, this was a painful lesson for many people including myself.

But rehypothecation is how traditional finance works for yield-generation. It just goes against the point of bitcoin as an asset that was designed to be held via self-custody.

So how can the pursuit of yield be solved for bitcoin holders?

There is a new experiment called Core DAO that is taking parts of bitcoin and ethereum to create a new hybrid technology solution. I won’t bore you with the technical details, but you can read those here if you would like.

What you need to know is that the Core team has created a way for individual bitcoin holders to generate yield on their bitcoin without surrendering their private keys. The way this is done is via the timelock feature on the bitcoin blockchain. Most people don’t know this, but every bitcoin transaction has the option to create a timelock or not for the bitcoin that is being sent. Majority of people don’t use the functionality because they want immediate access to the bitcoin.

In the case of Core though, users are essentially using the timelock function to have the opportunity to generate yield. The minimum amount of time is one week and there is no maximum amount of time.

While bitcoin is being timelocked, Core is working with bitcoin miners to recycle hash from transactions to secure the new hybrid tech. As of this week, approximately 50% of bitcoin’s total hashrate is participating in Core’s system.

Now this system is quite technical and it can be hard to understand exactly how to participate. I am fairly well versed in these technologies, yet find using the more technical products difficult at times. So it would make sense for financial organizations to figure out ways to offer exposure to various strategies in a familiar interface that makes it easier for investors to allocate capital.

That is where DeFi Technologies and Valour Asset Management comes in. As I wrote previously, I am a shareholder and believe the company is drastically undervalued. Their strategy is to find unique assets or strategies that they can offer in an ETP format.

Yesterday, Valour announced the world’s first ETP that allows investors to earn yield on bitcoin. It is called the Yield Bearing BTC ETP. This is being accomplished via the Core technology. Valour/DeFi Technologies are going to contribute approximately $200 million to the fund and investors will be able to start buying the ETP shortly.

I find this development fascinating because it attempts to solve a very difficult problem — hold the private keys to an asymmetric asset, while simultaneously earning yield.

The problem is so hard that most people are not willing to experiment with potential solutions. But if the problem is solved, then there is billions of dollars that will be allocated to bitcoin from yield-seeking investors. Remember, the debt market is significantly larger than the equity market for a reason.

Before I let you go, I want to emphasize that I consider Core and the use case they are pursuing as an experiment. It appears to be an experiment that is working well, but it is important to exercise caution when doing anything with your bitcoin. Whenever I want to try something new, or participate in an experiment, I am only usually willing to do it with a very small percentage of my portfolio.

With that said, we need as much experimentation as we can get. We need to solve problems. We need to build new financial infrastructure. It appears we are making progress. But there is still plenty of work to do.

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

-Anthony Pompliano

Chris Dixon is the Founder & Managing Partner at a16z crypto, and the author of “Read Write Own: Building the Next Era of the Internet.”

In this conversation, we talk about the original promise of the internet, what went wrong, lack of control from companies in the digital world, how blockchains and crypto can change that, bitcoin, ethereum, how crypto will interest with artificial intelligence, regulation, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

World’s Best Investor Is All-In on Bitcoin and 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

To investors,

The current economic situation is confusing to most investors. Many data points are pointing to an incoming recession, while the metrics that the Fed uses to gauge economic strength continue to show a hot economy with no signs of slowing down.

Below are a few charts that highlight these differences.

Bloomberg’s Lisa Abramowicz shows “longer-term inflation expectations are rising again. The market's implied rate of inflation over the next five years has risen to the highest level in more than a year, at 2.6%, according to breakeven rates.”

Inflation expectations rising usually leads to behavior from market participants that causes inflation to rise. Not a great sign of things to come if this becomes reality.

Will this cause investors to panic? Maybe. Winfield Smart explains that the “Goldman Sachs Panic Index soars to highest level since March 2023.”

CNBC’s Carl Quintanilla points out an opposing viewpoint from JP Morgan, which stated the recent retail sales beat, “alongside upward revisions to previous months, suggests a strong 3.3% rise in 1Q real consumer spending and some upside risk to our 2.25% GDP forecast, as well as building momentum going into 2Q.”

The Kobeissi Letter shared a shocking statistic: “US CPI inflation is on track to hit 4.8% by the 2024 election, according to Bank of America. Over the last 3 months, CPI inflation has averaged 0.4% on a month-over-month basis. If this trend continues it puts year-over-year inflation on pace to hit 4.8% by November, its highest since April 2023. That would be more than DOUBLE the Fed’s 2% inflation target. Inflation has been above the Fed's 2% long-term target for 37 straight months. Inflation is far from over.”

Lastly, the full-time employment situation in America is getting bad very quickly. This should lead to a major drag on US home prices in the future if the historical trends hold.

So what happens from here? How do we reach a conclusion based on the conflicting data points? The short answer is that I don’t know. It is an impossible situation to figure out.

Rather than focus on the short-term price movements of assets, I am spending all of my time focused on what I believe to be true over the next 5-10 years. Those trend lines appear to be easier to identify than what will happen in the US economy over the next 1-2 years.

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

-Anthony Pompliano

Trevor Bacon is the Co-Founder & CEO of Parcl, a decentralized real estate trading platform.

In this conversation, we talk about where they are getting real estate data from, how they want to help you trade on real estate prices, the impact of real time real estate data, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

Parcl Will Let You Trade Real Estate Prices Without Owning Real Estate

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,

Iran launched a barrage of missiles and drones at Israel over the weekend. This escalation of force did not come as a surprise to the United States and our allies.

Days in advance, Iranian leadership told various countries that they planned to retaliate after Israel reportedly destroyed Iran’s embassy in Damascus, Syria. Thanks to this heads up, almost 100% of the 300 missiles launched by Iran were intercepted and/or thwarted during the attack.

There was even an exoatmospheric interception of a ballistic missile, which may be the first time it was captured on video for social media.

This all happened less than 48 hours after I wrote a letter to this group on Friday titled Is Gold Warning Us About An Incoming Geopolitical Event? It appears that gold was sounding the alarm bell.

I tweeted on Saturday shortly after the attacks:

Potential gold all-time high theory — Gold’s recent price increase could have been Iran buying large amounts of gold. They were doing this because they anticipate swift and severe financial sanctions from the US after the drone attack launched today. I am not arguing that this is true, but it is an interesting theory that would line-up with the current timeline of events. The world is becoming more dynamic. The intersection of finance and geopolitics is only going to become more complex in the coming years.

We don’t know if this theory is true, but we will probably find out in the coming weeks. Gold wasn’t the only story in finance related to the recent attacks. We also got more data from the bitcoin market.

This data begs the question — if Iran had given everyone a heads up that they were going to attack, and the barrage of missiles and drones was successfully defended against, why would the price of bitcoin drop more than 10% in an hour and remain suppressed throughout the weekend?

CNBC’s Andrew Ross Sorkin asked on X:

“Trying to understand Bitcoin's price movements this weekend...If it is, as Bitcoin bulls believe, a store of value, during a war, wouldn't it be a considered safe haven? And if it is a hedge against inflation, wouldn't buyers rush to it out of fear that countries will spend more on conflict? What explains its fall? I'm genuinely curious to hear various perspectives...”

These are great questions. Bitcoin has been put on a pedestal as many different things to different people. Here is my best attempt to answer Andrew’s questions, while also explaining why bitcoin and other assets act erratically during times of global instability.

If you remember during COVID, all assets sold off as it became apparent the pandemic was going to be a big, negative situation. Investors were in panic.

I wrote a letter to this group on March 12, 2020 titled The Liquidity Crisis Will Drive Monetary Stimulus, Which Will Force The Adoption Of Sound Money Properties. Here is an excerpt from the letter:

“Unfortunately, we are watching a liquidity crisis play out in real-time. These liquidity issues are well understood structurally, but feel much worse than expected when they occur in reality. A liquidity crisis means that investors all rush to the exit doors at the same time, but there are so many more sellers than buyers that investors actually have a hard time offloading their assets for cash. Quite literally, investors begin aggressively lowering the price they are willing to accept for each asset in exchange for the cash which they are desperately seeking right now.

This is why you are seeing any asset with a liquid market tanking so hard right now.”

I went on to explain that the properties of an asset don’t change just because investors enter a moment of panic. Here is an excerpt from the same letter describing gold’s performance during the Global Financial Crisis:

“During the 2008 global financial crisis, gold dropped in price by more than 30% leading into the depths of the real pain. This isn’t because gold is a bad store of value or that it had lost safe haven status after 5,000 years. It is because gold has a liquid market and investors needed liquidity over anything else.”

This shows that all assets, regardless of why investors are holding them, will sell off during desperate moments of uncertainty and chaos. The correlations between asset classes moves towards 1. The investment community only wants US dollars in these moments over the last 15-20 years.

A similar dynamic played out over the weekend. It just so happens that the stock market and other tradable markets were closed during Iran’s attack. Bitcoin/crypto was the only market open on Saturday, so we shouldn’t be surprised that the assets sold off aggressively within minutes of the attack being launched.

Additionally, the attacks were not occurring within a silo. Bitcoin’s sell-off in the last 3 days coincided with the last 3 days before American citizens have to make tax payments today. Historically, we have seen bitcoin drop in the 2-3 days before tax day as holders sell the asset to raise cash to pay their taxes.

This means there were multiple factors responsible for driving bitcoin’s price down this weekend. My expectation is that the stock market will open and fall this morning, but we will have to wait to see what happens.

The good news is that I anticipate bitcoin will likely be one of the assets that leads the price recovery across markets, whenever that happens. Bitcoin seems to be the first mover in both directions, so it led on the way down and it should lead on the way back up too.

As I tweeted on Saturday shortly after the attacks were publicly known, “Financial assets almost always overreact to geopolitical rumors, threats, or attacks. It is in those moments that the true emotional control and clear thinking of investors is tested.”

Remember…fear is measured in days, but hedges/insurance are measured in weeks, months, and years.

Don’t get distracted by the noise. Stay focused on the long-term. Hope you all 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.

Chris Kuiper is the Director of Research for Fidelity Digital Assets. Yassine Elmandjra is the Director of Digital Assets at Ark Invest. Matthew Siegel is the Head of Digital Assets Research for Vaneck. Will Clemente is the Co-Founder of Reflexivity Research.

This conversation was recorded at Bitcoin Investor Day in New York. In this conversation, they discuss bitcoin evaluation process, bitcoin ETFs, client demand, regulation, crypto industry, and future outlook.

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Fidelity, ARK, VanEck Reveal How They Evaluate Bitcoin

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To investors,

Gold hit $2,400 over the last 24 hours, which is a new all-time high price for the precious metal. Most of you would not expect me to cover gold given my interest in bitcoin, but I think there are a few things worth calling out related to the recent rise in gold.

First, when the price of gold rises most people will point to existing geopolitical turmoil as the main driver. In a Reuters article this morning, Ashitha Shivaprasad writes:

“Safe-haven gold prices hit an all-time high on Friday on track for a fourth straight weekly gain as geopolitical risks in the Middle East and economic concerns about China spurred robust demand….There is potential for more upside in prices amid central bank purchases and as demand for safe-haven assets rise with growing anxiety among investors about geopolitical conflicts escalating, said Ricardo Evangelista, senior analyst at ActivTrades.”

It is not crazy to think that existing geopolitical events could be driving some of the price movement, but the question is whether the entire price movement could be explained by these issues which have been going on for months now.

That seems unlikely.

Joseph Wang, who runs FedGuy.com, has a different hypothesis: “Gold still surging - kinda concerning. Maybe someone is preparing for a big geopolitical move as they know they'll lose their dollars and euros after the fact.”

That is eye-opening because the seizure of your central bank assets are now a going concern for all foreign nations who step on the toes of the United States. Castle Island’s Nic Carter explained it well by responding to Wang with the following commentary: “Interesting thesis. For sure there’s no going back after 2022. Anyone that offends the US knows their FX reserves are getting frozen. New era.”

A new era is a great description.

But the seizure of central bank assets may not fully explain the price appreciation either. Meb Faber, the founder of Cambria Funds, pointed out recently that gold’s performance in a portfolio will be quite shocking for most people:

“Here's a crazy stat that no one will believe. The universal investment benchmark is the 60/40 portfolio of stocks and bonds. What if you replaced the bonds entirely with gold....crazy right? Turns out it makes no real difference.”

If you widen the timeline to the last 100 years, the results are similar.

I love narrative violations. This one won’t sit well with the traditional financial advisor crowd that preaches a classic 60/40 portfolio, but data is data. The best counter-argument to putting gold/stocks instead of bonds/stocks is that the bonds will pay yield along the way, while gold does not.

Before you all think I’ve gone all-in on gold, which I own exactly $0 of, I will remind you that digital gold (aka bitcoin) has been a much better investment over the last 15 years. For example, Bitcoin Archive on Twitter pointed out that $1 invested in bitcoin in 2009 is now worth $91 million, but $1 invested in gold in 2009 is now worth $2.

Just as bitcoin’s increase in price during January/February of this year probably was an early warning sign of incoming hot inflation, the current rise in gold may be telling us more about the future than the current geopolitical situation. This will be an interesting development to watch.

Hope you all have a great end to your week. I’ll talk to everyone on Monday.

-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.

Chris Kuiper is the Director of Research for Fidelity Digital Assets. Yassine Elmandjra is the Director of Digital Assets at Ark Invest. Matthew Siegel is the Head of Digital Assets Research for Vaneck. Will Clemente is the Co-Founder of Reflexivity Research.

This conversation was recorded at Bitcoin Investor Day in New York. In this conversation, they discuss bitcoin evaluation process, bitcoin ETFs, client demand, regulation, crypto industry, and future outlook.

Listen on iTunes: Click here

Listen on Spotify: Click here

Fidelity, ARK, VanEck Reveal How They Evaluate Bitcoin

Podcast Sponsors

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* 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.

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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 inflation report this morning shows that the economic measurement is headed in the wrong direction. Year-over-year CPI came in at 3.5% and the month-over-month growth in inflation was 0.4%.

This means that inflation is going up, not down, which is a major problem for the Federal Reserve.

The central bank has been talking about cutting interest rates. The market has been expecting those interest rate cuts. But this economic report is going to make it nearly impossible for the Fed to follow through on it’s promise.

The inflation report is actually signaling that the Fed should be RAISING interest rates, rather than cutting them.

That is a big narrative violation.

But maybe we shouldn’t be surprised by the hot inflation reading. In the letter I wrote on February 27th to this group, which was titled “Bitcoin Is Sounding The Alarm On Inflation,” I highlighted that bitcoin could be acting as an alarm system for incoming hot inflation:

“Why are so many people buying bitcoin right now?

The easy answer would be some version of “the institutions want to make money and now that they can buy the best performing asset of the last 15 years, they are going to buy as much as they can.” There is some truth in that statement, but I don’t think it is the full story.

In fact, there is a hidden detail that most people are missing, which may scare the hell out of you.

What if people are buying bitcoin because we are going to see a resurgence of inflation and investors are preparing for the inflation shock to their portfolio?”

Later in the letter I stated:

“First, let’s go back to 2020. The pandemic had a chokehold on the economy. Government officials and central bankers stepped in with unprecedented monetary and fiscal stimulus. Trillions of dollars in liquidity was sloshing around the economy.

The state talking point was to not worry about inflation, which was later followed by “inflation is transitory.” Sophisticated investors were not fooled though. Paul Tudor Jones and Stanley Druckenmiller went on CNBC to say “inflation is coming!” They each said they were buying bitcoin because the belief was that inflation would be the fastest horse in the inflation-hedge category.

That was a correct prediction.

Bitcoin’s price was around $8,000 during the summer of 2020 and inflation was under 2%. By March 2021, less than 1 year later, bitcoin was trading at $64,000. That 8x increase in price was attributable to a few things, but a major reason was that markets are forward-looking.

Investors saw that inflation was coming, so they began buying bitcoin hand-over-fist. They wanted to be protected when the inflation arrived. Remember, investors don’t wait for inflation to come before buying inflation-hedge assets. They buy them in anticipation.

And there is a strong argument that investors are doing it again now.”

It turns out that this phenomenon of bitcoin as an alarm system was correct once again. The risk now is what I called out in our March 13th letter titled “Will We Repeat The Great Inflation?”

“The truth is that the Fed shouldn’t be worried about their reputation at this point — they have a much bigger problem on their hands with the potential resurgence of inflation.

Unfortunately, we have a historical example of what could happen. The Great Inflation of 1965 - 1982 had an initial surge of inflation, followed by what seemed to be inflation falling to manageable levels, before inflation resurged to even higher levels of pain and destruction.”

A true resurgence in inflation would be catastrophic to the US economy. The Federal Reserve has done so much work, including raising interest rates at the fastest pace in history, that it is unclear whether they have the commitment to continue raising interest rates from here.

I don’t envy their position. It feels like there is a lose-lose scenario in front of them. If they keep raising rates to fight inflation, they will most likely push the US economy into a painful recession. If they don’t raise interest rates, then inflation is going to come back with a vengeance.

Regardless of what happens in the coming months, American citizens are the ones who lose. We are living in an economy with 3.5% inflation, an accelerated pace of currency debasement, a national debt that is growing to the sky, over $1 trillion of credit card debt, a housing situation that makes it cheaper to rent than buy in the 50 major metros, and tens of millions of Americans who feel like there is no path forward for them financially.

Insane.

But the hot inflation reading is now reality. Bitcoin sounded the alarm bell. Hopefully more people will pay attention to this economic signal in the future.

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.

Darius Dale is the Founder & CEO of 42Macro.

In this conversation, we talk about the probability of different economic outcomes, why "no landing" might happen, what that means, inflation, optimism index, small business survey, and outlook on asset prices.

Listen on iTunes: Click here

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Darius Dale Breaks Down What He Expects On Inflation

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* 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

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To investors,

The market thinks that meme coins are a new idea, but as always, we can learn quite a bit from studying history.

1RT’s Dan Tapiero recently recommended a history book to me that helped me do the necessary homework — A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States.

In the book, author Stephen Mihm explains the problem with counterfeited currencies during the late 1700s and early 1800s. The federal government had not yet consolidated power, so states still had significant say over things like monetary policy.

These states gave out charters to banks within their geographies that would allow the banks to create their own currencies. Banks loved this idea. They each began to create their own currency. The promise was that paper currencies would have the equivalent gold or precious metals available for redemption at the bank.

Unfortunately, no one could actually verify if the banks had the necessary metals.

This was the first form of counterfeiting that took place — some of the paper was not actually backed by gold reserves. But humans are not stupid and they can spot an opportunity when they see one.

A number of enterprising individuals (aka nefarious actors) realized that anyone could create a currency and put their own paper notes into circulation.

Because there were so many banks approved to create currencies, the market would not know which currencies were real and which were not, so individuals began to use all available paper currencies for trade. Although the individuals who were creating currencies had figured out how to legitimize counterfeited currency, these non-approved “bank notes” were still fake.

Throughout the book, Mihm refers to “alchemy” when discussing the magic tricks of these infamous individuals.

Eventually the US government had enough of the madness though. It wasn’t possible to operate a country that had hundreds of different currencies. The laws were enforced, the counterfeit currencies were reigned in, banks were held accountable for holding the appropriate amount of metals, and the US dollar eventually emerged victorious.

But the parallels from that time period to today are many.

First, in the same way that anyone could spin up their own currency a few hundred years ago, anyone can spin up their own crypto asset / meme coin today. Neither the fake currency or the meme coin have any value tethered to “reality,” but both assets carry the legitimacy bestowed upon them by the groups of people that opt-in to holding, trading, or using them.

Second, central banks are still playing the same games, although their goal is to make the situation appear differently in the modern world. Let’s use Zimbabwe as an example.

Bloomberg’s Ray Ndlovu writes:

“In yet another attempt to devise a credible national currency, Zimbabwe has replaced its dollar with the ZiG, short for Zimbabwe Gold. The new unit is backed by bullion and foreign currency reserves held at the central bank. All told, the ZiG is the country’s sixth attempt at establishing its own currency since 2008, when inflation crossed 500 billion percent, according to International Monetary Fund estimates. Not only did that render it worthless, it turned the unit into a global punchline: US Treasury secretaries would sometimes carry the notes around in their wallets as a reminder of the evils of hyper-inflation.”

This is insane. Zimbabwe is on their 6th national currency in the last 15 years or so. There is very little reliability that (a) the government has the assets backing the currency that they claim and (b) the government won’t make changes to the assets backing the currency in the future.

You can see the parallels to the old counterfeiting world of currencies.

It doesn’t matter who is supposed to have the “right” to create currencies if both the government and the people continue to create bad currencies. A bad currency may even be worse than a fake currency that everyone believes in.

And if your government failed the first 5 times at creating a currency that can be trusted by the people, it is nearly impossible to get citizens to trust you on the sixth attempt.

But maybe I am wrong. Maybe the current crop of meme coins will all be around in 10 years. Maybe the Zimbabwe Gold currency will become the next global reserve currency. And maybe the lessons from history are not worth paying attention to.

I just wouldn’t hold my breath while waiting for any of that to occur.

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

-Anthony Pompliano

Robert Mitchnick is the Head of Digital Assets at BlackRock. This conversation was recorded at Bitcoin Investor Day in New York.

In this conversation, we talk about process of BlackRock launching bitcoin ETF, client demand, regulation, future outlook for bitcoin, crypto industry, and more.

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BlackRock Head of Digital Assets Explains What They Are Doing

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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