The Pomp Letter

To investors,

The new capital flowing in the crypto industry from Wall Street and traditional investors will not behave like the capital that has been here for years.

Let me explain.

These new investors have different goals. They are not luddites. While the memes and narratives may be fun, these investors are more likely to manage their portfolio based on spreadsheets and academic theories.

One good example is portfolio rebalancing. If a financial advisor allocates 1% of their client’s assets to bitcoin, and then bitcoin triples in price, many times the advisor will sell some of the client’s bitcoin to bring the portfolio allocation back to 1%.

This activity would be blasphemous to hardcore bitcoin holders.

They believe you should never sell your bitcoin. It doesn’t matter how large of a percentage the bitcoin position becomes. Hold what you have and then buy more.

That is not how professional money managers operate though. Rebalancing is a core strategy that they use, regardless of whether you agree with it or not.

This is important to understand because the new segment of investors will introduce net new selling pressure to the market as bitcoin’s price rises. There will also be cyclical times of year where rebalancing is more popular than others.

Rebalancing is not the only behavioral difference either.

Many of the sophisticated investors who will begin allocating to bitcoin or cryptocurrencies will choose to use derivatives instead of spot bitcoin. This introduces a new avenue for capital to enter the market without actually purchasing real bitcoin on a dollar-for-dollar basis.

It also introduces new ways for large pools of capital to short the market as well.

Lastly, many of the investors from the traditional world have morphed into passive indexers. They want to make market selection decisions, not asset selection decisions. This rise of passive investing is highly debated, but the numbers show that it is becoming a dominant approach to capital allocation.

As those investors begin allocating to the new world, many of them will want a carbon copy of their traditional strategy. They want an index of the market, which will put some capital into bitcoin — just not all of it.

The arrival of Wall Street and traditional investors should be celebrated. Tens of billions of dollars will flow into the industry that was previously on the sidelines. Just don’t buy the story that 100% of that capital is going to plow into bitcoin, nor will it all be investors going long.

When the ground shifts beneath an industry, you have to pay attention. The more you understand the new players, the better you will be positioned to understand the future.

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

-Anthony Pompliano

Juan Meisel is the Founder & CEO of Grip Shipping.

In this conversation, we talk about how he took his business from 0 to 8 figures in revenue, attacking an incumbent industry using innovation & technology, hiring, processes, and how the world is changing.

Listen on iTunes: Click here

Listen on Spotify: Click here

My Appearance on Bloomberg Television Yesterday

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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

Today’s letter is brought to you by Espresso Displays!

I normally work on my desktop computer and am hyper productive. The second that I leave my desk, I lose my productivity on a laptop.

So I started to use a second screen and it seems to have fixed the issue.

It took awhile to evaluate many different screens — Espresso Displays was by far the best one.

I use it every day. I can’t imagine working from my laptop without it now. They are lightweight, thin, and look like Steve Jobs designed them himself.

Any reader of The Pomp Letter who orders one this week will get a great deal. Highly recommend!

To investors,

The price of bitcoin and digital assets have fallen more than 20% since the bitcoin spot ETFs were approved. Sentiment online has degraded and it seems we are living in a different world than just a few weeks ago.

But nothing has actually changed.

Price is a liar and can make a fool of anyone who can’t control their emotions. These two insights are important to remember whenever the volatility of this asset class shows itself. It remains true whether the assets are going up or down in price.

Since the ETF approval, the S&P 500 and Dow Jones Industrial Average have both hit new all-time high levels. Bitcoin’s hash rate has hit a new all-time high. And the market continues to think the Fed will cut interest rates in the first half of this year.

Bitcoin’s software is executing exactly as designed — producing block after block of transactions. The halving is less than 100 days away. And more people have access to buy bitcoin now than two weeks ago.

So all the fundamentals are signaling positive signs, and the macro market is preparing for an injection of significant liquidity, yet crypto prices are trying to distract investors from these facts.

Don’t be fooled.

As Benjamin Graham said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” The fundamentals eventually prevail over the fear and greed in a market.

So why is the price going down? People have been selling Grayscale’s GBTC shares.

According to Bloomberg’s Katie Greifeld, there has been more than $3.4 billion in outflows over the last week and a half.

The FTX estate is reported to have been approximately $1 billion of the $3.4 billion in outflows.

This selling is largely due to the fact that GBTC’s previous discount to NAV has essentially closed back to 0%. This means the fund is now trading at NAV, so anyone who was previously underwater has a chance to get out without the discount penalty.

Even with the heavy selling of GBTC, there has still been a net inflow of more than $1 billion to these spot bitcoin ETFs.

Some people will point to the fact that price is down and say this is catastrophic for the Wall Street investors who are losing money on their first introduction to bitcoin.

There may be some of that pain happening, although much of it is exaggerated because the asset was only trading at much higher levels for a short period of time, but another way to look at it is the hundreds of millions of dollars that are flowing into the ETFs at lower prices are getting a better entry level and will likely end up in a better position in the future.

Short-term pain, long-term gain.

Crypto investors have learned over the years to buy the dip when assets are in a bull market trend, which is what we are experiencing now. It has taken longer for Wall Street investors to learn this lesson in traditional markets — the dips experienced in the equities market are much less severe.

It is natural to see multiple 30% declines in crypto bull markets, so Wall Street will have to get used to this type of volatility. That volatility will dampen over time. We just aren’t there yet.

So investors have a choice to make this week — you can look at the fundamentals of these assets and markets, or you can panic because price is showing red.

I bought more this morning. You should do your own research and think about what is best for your portfolio. We’ll see how everything plays out in the coming weeks.

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

-Anthony Pompliano

Juan Meisel is the Founder & CEO of Grip Shipping.

In this conversation, we talk about how he took his business from 0 to 8 figures in revenue, attacking an incumbent industry using innovation & technology, hiring, processes, and how the world is changing.

Listen on iTunes: Click here

Listen on Spotify: Click here

Entrepreneur Built $100 Million Business In 1 Year

Podcast Sponsors

* Frec.com - Use tax-loss harvesting to save on your tax bill, while keeping the same investment exposure you already have.

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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,

There is strong debate in the market about the US economy. One side believes the Federal Reserve will pull off the impossible and guide us towards a soft landing. The other side thinks the economy is showing significant red flags and is destined for a recession.

The truth is that no one knows what is going to happen.

That won’t stop people from trying to figure it out though. There are trillions of dollars, and many reputations, on the line in this debate. Take Anne Walsh, the Chief Investment Officer for Guggenheim Partners Investment Management, who told Bloomberg last week “we still see a recession coming, although our base case is a mild recession, and as a result we still see rate cuts [coming]. We are actually predicting they start sooner rather than later.”

James Solloway, the Chief Market Strategist at asset management firm SEI, told Marketwatch last week that the big problem in the economy today is how many people are expecting these interest rate cuts. His view is that 3% inflation is not problematic as long as the market believes the Fed will keep interest rates at the current level or potentially raise them further.

These are just two anecdotal opinions though. What does the market believe?

Ann Saphir writes for Reuters:

“Futures contracts that settle to the Fed's policy rate fell, and now reflect about a 47% chance of a Fed rate cut by March, down from 55% earlier in the day.

Just a week ago the probability of an interest-rate cut in March from the current range of 5.25%-5.5% was seen at nearly 80%, reflecting faster-than-expected declines in inflation. Fed policymakers themselves had also signaled at their December meeting that their rate-hike campaign was likely at an end and that in 2024 they would probably start to reverse course.

In the last week, though, signs of the consumer's continued strength and indications that the inflation battle has not yet been won have eroded confidence in the likelihood that the Fed will pivot all that soon.

Central bankers, in this last week of public commentary before a self-imposed quiet period ahead of their late-January meeting, have also suggested a rate cut may not be imminent, even as they continue to call out progress on the inflation fight and hold the door open to a rate hike a little later in the year.”

That pesky inflation continues to rear it’s ugly head.

Another interesting point comes from Creative Planning’s Charlie Bilello who explains “the S&P 500 is now 11% higher than where it was when the Fed started hiking rates in March 2022.”

But there is one factor that most people are not considering at all — what if the Federal Reserve and the entire market is operating with bad data? What if inflation is already back to the 2% inflation target?

Truflation, the leading alternative inflation measurement, is showing the current inflation rate is 1.86%. That is nearly 50% lower than the Fed’s current reading of 3.4%.

This is noteworthy because almost no one is considering this possibility.

If the Fed has already accomplished their goal of getting inflation back to the 2% target, and there are meaningful signs of a potential recession, it would be prudent for the Fed to start cutting interest rates sooner than the market expects.

Some of you may ask me — what signs of a recession exist today?

Paul Davidson of USA Today points out the following:

* “A measure of small business hiring plans fell to the lowest level since June and marked the second lowest reading since the pandemic-induced recession in 2020, the National Federation of Independent Business said last week.”

* “Both manufacturers and service companies said they cut jobs in December, the first time that’s happened since October 2022, according to Ludtka and surveys by the Institute for Supply Management.”

* “Job growth was revised down in 11 of 12 months last year, Ludtka says. That often occurs when the economy is at an inflection point, or shifting from growth to contraction.”

* “In the third quarter, credit card debt hit a record high of $1.1 trillion and delinquencies were at their highest level since 2011, according to the Federal Reserve Bank of New York and Ludtka.”

* “Net profit margins for S&P 500 companies likely shrank to 10.9% in the fourth quarter, the lowest level since late 2020, FactSet, a financial data and software company, estimated Friday ahead of earnings season.”

* “The yield on the 3-year Treasury bond has been well above the 10-year Treasury for more than a year, notes Gus Faucher, chief economist of PNC Financial Services Group.” (known as inverted yield curve)

Each of these signs are worth paying attention to, but none of them guarantee a recession will happen. This is the beauty and difficulty of financial markets. Uncertainty rules the day.

Regardless of whether a recession comes or not, my best guess is that we will see looser monetary policy to end the year than we have today. How severe the loosening will be, along with the exact timing, is up for debate.

But economies around the world are addicted to cheap money and central banks are more than happy to deliver the drug of choice. We can fight the trend in the short-term, but the long-term trend may as well be written in stone.

Cheap money. Higher asset prices. And a lot of investors who will have to figure it out along the way.

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

-Anthony Pompliano

Darius Dale is the Founder & CEO of 42Macro.

In this conversation, we talk about global liquidity, Macro Weather Model, bitcoin & other risk assets, and impact of fiscal stimulus.

Listen on iTunes: Click here

Listen on Spotify: Click here

My Appearance on Fox Business Friday with Charles Payne

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* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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,

It has been one week since the bitcoin spot ETF began trading. The big surprise to many is that bitcoin’s price has traded down despite billions of dollars flowing into the various ETFs.

How could that have happened?

There are two main reasons in my opinion — first, investors across the market had built up anticipation of the ETF approvals. This led the asset to rise from around $27,000 in mid-October to ~$45,000 earlier this month.

Whenever you get this type of rapid appreciation, it is likely that the market will sell the news. That is exactly what happened here. Investors took profits after their speculation was confirmed.

“Buy the rumor, sell the news” has not been the only culprit though.

There have been billions of dollars flowing out of Grayscale’s GBTC also, which is putting significant sell pressure on the bitcoin price. Bloomberg’s Eric Balchunas shared this visual to highlight more than $2 billion leaving the world’s largest bitcoin fund.

This is happening because Grayscale’s management fee only dropped to 1.5% from the previous 2%. While the 25% drop may seem significant, the other ETFs are competing with sub-0.50% management fees. Simply, Grayscale is the most expensive fund based on fees.

Why would they leave their fee so high?

The asset management firm is betting that majority of the capital will not leave the fund. The current market cap is over $25 billion, so less than 10% of the capital has left in the first week, which probably signals that more than 50% of the fund will stay and continue to pay a 1.5% management fee. If that is the case, Grayscale will still pull in ~ $225 million annually without any increase in bitcoin’s price.

Not a bad business.

This nuance around Grayscale and the sell pressure in the market highlights an important development — the dynamics of the bitcoin market are changing because the holder base is changing.

For example, the hardcore bitcoin holders, who helped turn the digital currency into the best performing asset over the last 15 years, have created a culture and meme where it is looked down upon to sell your bitcoin. HODL is a rallying cry.

This meme created a highly illiquid asset, which led to asymmetry following material inflows of demand. But now the hardcore holder base is going to be diluted by the traditional financial players.

Blackrock’s IBIT already has more than $1 billion in the fund after the first four days. I would expect Blackrock to eventually have more bitcoin than Michael Saylor’s Microstrategy.

So why does this matter?

Traditional financial investors have different behavior. For example, they like to rebalance their portfolios, which means they will sell assets that have increased in value. This taking of profits will be a new source of sell pressure that was previously not present in bull markets.

Another example is the creation of derivatives. Many of the incoming capital flows will end up in these products, rather than buying spot bitcoin, which will reduce the actual positive impact on price. If the use of derivatives is used to heavily short the asset, it could even create a significant headwind for the asset.

One more point is that the increase in liquidity, from more capital and more products, will generally dampen volatility as well. The positive is that we shouldn’t see severe 80% drawdowns in the future, but we also shouldn’t expect 1,000% price increases in a single year.

Bitcoin is growing up. There is less risk investing in the asset today, so an investor should get paid a smaller return. That is how markets work. The true test of a great investor is whether you can continue to update your mental model and adapt to an ever-changing world.

Bitcoin is one of the most interesting financial assets. It will continue to do very well, especially since governments can’t help themselves from printing trillions of dollars annually. But don’t expect the past performance to be indicative of future performance.

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

-Anthony Pompliano

Darius Dale is the Founder & CEO of 42Macro.

In this conversation, we talk about global liquidity, Macro Weather Model, bitcoin & other risk assets, and impact of fiscal stimulus.

Listen on iTunes: Click here

Listen on Spotify: Click here

Darius Dale Highlights Global Liquidity Data Turning Bullish

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* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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 Espresso Displays!

I normally work on my desktop computer and am hyper productive. The second that I leave my desk, I lose my productivity on a laptop.

So I started to use a second screen and it seems to have fixed the issue.

It took awhile but I evaluated tons of different screens — Espresso Displays was by far the best one.

I use it every day. I can’t imagine working from my laptop without it now. They are lightweight, thin, and look like Steve Jobs designed them himself.

Any reader of The Pomp Letter who orders one this week will get a great deal. Highly recommend!

To investors,

World leaders had a field day yesterday sharing their opinions on a variety of topics. Rather than pick only one to write about, below is a compilation of the best hits.

First, we have President Donald Trump promising to ban central bank digital currencies if he gets back into the White House:

“Tonight, I am also making another promise to protect Americans from government tyranny. As your president, I will never allow the creation of a Central Bank Digital Currency. Such a currency would give the federal government absolute control over your money. This would be a dangerous threat to freedom – and I will stop it from coming to America. We are also going to put in place strong protections to stop banks and regulators from trying to DE-BANK you for your political beliefs. That will NEVER happen while I am your president.”

This was a pleasant surprise. Most politicians and central bankers are so enamored with blockchain technology that they can’t help themselves but to start thinking about the ridiculous, nefarious ways they could leverage this innovation. Social credit scores. Personalized monetary policy. Censorship. Seizure. The list goes on and on.

Second, speaking of Trump, JP Morgan’s Jamie Dimon told CNBC’s Squawk Box that Trump was right on NATO, immigration, growing the economy, tax reform, and China.

“I don't like how Trump said things, but he wasn't wrong about those critical issues. That's why they're voting for him. People should be more respectful of our fellow citizens...I think this negative talk about MAGA will hurt Biden's campaign.”

Regardless of your politics, this was very surprising to see from Jamie Dimon, but the ensuing conversation online shows that many people agree with his comments. There is a popular belief that the Overton Window has moved so far that certain things that would have been taboo, such as “Trump was right,” are now safe to say for the CEO of JP Morgan.

Third, Jamie Dimon also talked about bitcoin during the same interview. It was obvious that he felt uncomfortable being asked for the ten-millionth time about the digital currency.

“There are cryptocurrencies that do something, that might have value. And then there's one that does nothing, I call it pet rock. The Bitcoin, or something like that. It has some use cases. Everything else is people trading among themselves.”

This commentary was not surprising to me. Dimon is not a fan of bitcoin, so people should just stop asking him about it. It doesn’t matter if he is right or wrong, although it is hard to see a scenario where he will be right, because the free market is the referee. I did find it interesting that Dimon seems more excited or sympathetic to non-bitcoin cryptocurrencies though, including the idea of tokenization that BlackRock’s Larry Fink has been sharing in recent interviews.

Fourth, we have Goldman Sachs’ David Solomon sounding the alarm on the national debt situation.

"I'm very concerned about the growing debt. That's not something I think is going to come home to roost in 2024. That's one of the reasons I'm in the camp of higher rates longer as a general base case because we have to refinance this debt."

It is great to see Solomon bringing constant awareness to this gigantic problem. There is probably no more important issue for our government to solve over the long-run than what they are going to do with the national debt, especially since it seems to be growing by $2 trillion or more per year currently.

Lastly, Carlyle’s David Rubenstein shared thoughts on Federal Reserve Chairman Jerome Powell’s recent performance.

“I think Jay Powell will go down in history for having done a good job if he gets the inflation rate down close to 2%. I think most people would say the hard landing scenario is not something they're worried about.”

I agree with Rubenstein that Powell will be celebrated if he can get inflation back to 2% without crashing the US economy, but as I shared recently, there is a major risk to re-inflation at the moment. The government and central bank seem ready to pivot back to loose monetary policy, but Powell’s reputation may not be as positive if the economy doesn’t get back to 2%. The last percent seems to be the hardest.

These world leaders are all openly sharing their ideas. You and I can watch the videos online of their interviews and speeches, so we can see for ourselves the context and authenticity. That was unthinkable just a few decades ago.

Technology has drastically improved our lives, along with provided an immense increase in knowledge and transparency. Thanks to these advancements, I always highly suggest listening when these leaders open their mouth.

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

-Anthony Pompliano

Aravind Srinivas is the Founder & CEO of Perplexity AI. Perplexity is on a mission to build the world's most known centric company.

In this conversation, we talk about how Perplexity is building Larry Page’s dream of a true search engine, Jeff Bezos backing Perplexity, artificial intelligence, hardware, advertising, trends, his learning experiences, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

My Conversation with Perplexity CEO Aravind Srinivas

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* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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 Espresso Displays!

I normally work on my desktop computer and am hyper productive. The second that I leave my desk, I lose my productivity on a laptop.

So I started to use a second screen and it seems to have fixed the issue.

It took awhile but I evaluated tons of different screens — Espresso Displays was by far the best one.

I use it every day. I can’t imagine working from my laptop without it now. They are lightweight, thin, and look like Steve Jobs designed them himself.

Any reader of The Pomp Letter who orders one this week will get a great deal. Highly recommend!

To investors,

Central bankers learned the QE playbook during the Global Financial Crisis. They practiced it during the 2020 pandemic. And now they are about to perfect it.

Multiple people are pointing out that the global liquidity drawdown has bottomed and it appears we are headed up for the foreseeable future. There is Michael Howell at Crossborder Capital with this chart:

You can see the Global Liquidity Index (in orange) turning up on the bottom right of the chart.

Crossborder goes on to point out that more than 1/3 of global central banks were easing at the end of 2023.

That is a very different story than the mainstream narrative inside the United States where majority of the focus has been on when the Federal Reserve is going to cut interest rates.

As I mentioned yesterday, GMI’s Raoul Pal recently pointed out that global liquidity is bouncing off the bottom of a well established trend line, which he believes signals a significant increase from here over the coming years.

Onchain analyst Cole Garner recently pointed out that the stablecoin market cap ratio is a leading indicator of crypto market performance. But PBoC’s liquidity index is a leading index of the stablecoin ratio by approximately one week. Given that PBoC has flipped bullish, we should expect stablecoins to follow and then the rest of the crypto market.

These three individuals, along with many others, are pointing out that asset prices are rising because total global liquidity is rising. The US and Federal Reserve may get all the attention, but they aren’t driving the asset price ship at the moment.

This is important because when the Fed joins the party sometime in Q1/Q2 of this year, we should expect an even larger move in investment assets.

So lets go back to the situation I posed at the start of the letter — are central banks about to perfect the QE playbook?

Bryan Hardy and Goetz von Peter from the Bank of International Settlements published a paper in December titled “Global liquidity: a new phase?” In the paper, they state the following:

“Foreign currency credit – a key aspect of global liquidity – has undergone distinct phases. The first phase recorded by the BIS global liquidity indicators (2003–09) featured soaring bank credit amid accommodative financial conditions in the run-up to the Great Financial Crisis (GFC).

The second phase (2009–21) saw a shift towards bond markets and more dollar credit, especially to borrowers in emerging market economies (EMEs), on the back of tighter bank regulation and a loose monetary stance.

Has the recent global surge in inflation and monetary tightening ushered in a new phase? Recent patterns point to a contraction in foreign currency credit, primarily in dollars, and particularly for EMEs.”

Regardless of whether you call this developing situation a new phase or a perfected playbook, the data points are lining up to tell the same story—central banks are addicted to loose monetary policy and asset prices are ready to rip higher at the first sign of the central banks giving up on their tight monetary policy dreams.

And it should go without saying, but just to make sure everyone understands my current view, if asset prices go higher then I believe crypto assets will outperform all other assets. There is something unique about asymmetric assets that are globally available during an injection of global liquidity.

But don’t take my word for it. JP Morgan’s Jamie Dimon was at Davos this morning talking to CNBC and said that he believes the government should be very cautious right now. His point is that we may not understand quantitiative tightening nor quantitiative easing nearly as much as we think. So caution is warranted as we enter this new phase.

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

-Anthony Pompliano

Raoul Pal is the Co-Founder & CEO of Real Vision. He also writes ‘Global Macro Investor” and he has a brand new asset management firm (EXPAAM), with a mission to deliver leading returns on invested capital and serve as catalysts of crypto adoption.

In this conversation, we talk about the bitcoin ETF, who is going to win the Cointucky Derby, Ethereum, Solana, his “Everything Code” thesis, macro environment, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

Raoul Pal on Bitcoin, Ethereum, Solana, and Macro Environment

Podcast Sponsors

* Frec.com - Use tax-loss harvesting to save on your tax bill, while keeping the same investment exposure you already have.

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

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To investors,

The US economy is in a precarious position. After decades-high inflation, the Federal Reserve jacked up interest rates at the fastest pace in history. We went from 0% to over 5% in less than 2 years.

The theory is that a rapid increase in the interest rate should crush asset prices and bring inflation down to the 2% inflation target.

Unfortunately, that hasn’t happened yet.

The government CPI report shows year-over-year inflation of 3.4%. If you remove food and energy, the measurement is 3.9% for major categories.

This is a big deal because inflation is 50-100% higher than the stated Fed target of 2%. But maybe this wouldn’t be so bad if asset prices have come down and people aren’t spending money on ridiculous things in the economy, right?

That hasn’t happened either. The S&P is sitting near all-time highs.

The Nasdaq 100 is up ~ 50% last year and hit a new all-time high.

The theory isn’t working. Asset prices should be going down. The academic equation is “interest rates up, inflation down, asset prices down.” That is how we have all been told the system works.

So something is wrong.

Maybe the inflation reading is inaccurate? This is a common argument on the internet. Let’s look at alternative inflation measurement Truflation.

They are showing an inflation rate of 2.14%, which is much closer to the Fed’s target. This would suggest that asset prices are merely forward-looking and investors believe the Fed will cut interest rates throughout 2024, so they are positioning to benefit.

Regardless of what the Fed does, the damage has already been done though.

The aggregated inflation since January 2020 in the United States is over 22%. This means that $1 of purchasing power at the start of 2020 is the equivalent of $0.77 today.

This type of currency devaluation is wrecking havoc on the American consumer. Household debt continues to skyrocket across the country and hit a record $17.2 trillion in Q3 2023.

Credit card balances are $1.08 trillion currently. Auto loan balances are $1.6 trillion. Student loans are $1.6 trillion. Everywhere you look, citizens are piling on debt and continuing to spend in the economy.

So why does this matter?

If markets are correct and the Federal Reserve begins cutting interest rates in the first half of 2024, there is significant risk of inflation coming roaring back. I am not arguing that we would see 9%+ CPI readings, but it wouldn’t surprise me if 3% or higher becomes the new normal.

As I have written to you all before, we could even see the Federal Reserve change their inflation target to 3% at some point in an effort to claim victory on this fight.

Add in the fact that we are heading into a Presidential election and the argument for interest rate cuts only get stronger. Then you take a look at the global liquidity cycle and, as Raoul Pal points out in Global Macro Investor, we appear to be headed back into an upwards cycle that will bring trillions of dollars sloshing into the global economy.

It is almost like we didn’t learn our lesson over the last 15 years. But there is nothing that you or I can do to reverse the path we are on. The only thing we can control is whether we are allocated to assets that will benefit from the incoming rate cuts and global liquidity injection.

Get long and chill. That seems to be the best strategy. The central banks work for us now. What a time to be alive.

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

-Anthony Pompliano

Jeff Sands is the Founding Partner at Dorset Partners. He is also the author of a great book, “Corporate Turnaround Artistry: Fix Any Business in 100 Days.”

In this conversation, we talk about Jeff’s experience turning around struggling businesses, crisis mode, hard decisions & hard conversations needed, vendor relations, debt, labor, and more.

Listen on iTunes: Click here

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Turnaround Expert Jeff Sands Explains How To Fix Any Business In 100 Days

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* 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 bitcoin spot ETFs started trading yesterday and the numbers blew away the previous ETF records. There was more than $4.6 billion in trading volume across the various funds. Grayscale saw more than $2 billion in trading volume and Blackrock had approximately $1 billion.

But neither of those funds were the big winner yesterday based on the data we have so far. Bitwise’s BITB saw the most amount of inflows with $237 million, according to Bloomberg’s Eric Balchunas.

The total inflows based on the current data is $720 million, but there will be more data that trickles in today that will update these numbers to over $1 billion most likely.

Balchunas also tweeted this graphic showing how the spot bitcoin ETFs compared to $SPY and $QQQ in volume yesterday. He said the new entrants “really held their own, especially in number of trades and shares, and even notionally they got a respectable slice of the pie.”

All of this activity is driving tons of coverage in the media. CNBC’s Squawk Box had approximately 12 different guests on yesterday during their 3 hour show to discuss the historic launch of these products.

Not everyone was as excited as the media unfortunately.

Within hours of the ETFs trading, reports started to pour in that various financial organizations were not going to offer the funds to their clients. Vanguard, which has over $ 7 trillion in assets under management, put out a statement saying the following:

“While we continuously evaluate our brokerage offer and evaluate new product entries to the market, spot Bitcoin ETFs will not be available for purchase on the Vanguard platform. We also have no plans to offer Vanguard Bitcoin ETFs or other crypto-related products. Our perspective is that these products do not align with our offer focused on asset classes such as equities, bonds, and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio.”

The statement forgot to mention that Vanguard offers penny stocks, levered inverse ETFs, currencies that have been devalued for years, or a variety of other financial products that objectively have destroyed wealth for their clients.

Imagine the arrogance it takes to prevent your clients from accessing the best performing asset in the last 15 years.

Thankfully, not all financial institutions are taking this approach. Blackrock’s Larry Fink was on television this morning in an interview with Andrew Ross Sorkin talking about bitcoin. In the conversation, Fink said bitcoin is “no different than what gold represented for thousands of years. It is an asset class that protects you.”

Again, the data supports Larry Fink’s view of the world.

Another important point is that the internet conversation surrounding this asset is a big echo chamber. I received this message yesterday from a follower:

The same follower updated me later that the funds will be available next week on the platform, but I was more surprised that the financial adviser said they had not even heard about the bitcoin spot ETF approval.

So where do we go from here?

The crypto ETF game is not over. We still need to see the data from yesterday, while monitoring the continued inflows today. Additionally, the attention will now shift to a rumored approval of the Ethereum spot ETF. Blackrock’s Fink explicitly said this morning he sees value in having one approved in the United States.

Blackrock has a 576 - 1 record when applying for ETF approvals.

This is also why you see Ethereum up since the ETF approval, while Bitcoin’s price is down. Markets are forward looking and people are already wondering what the next thing to speculate on will be.

This industry never has a dull moment. It moves at warp speed. Do your best to stay informed with the various developments, but remember that the short-term noise will be unlikely to change the long-term trajectory. As I have learned in my career, time in the market is more important than timing the market if you have the macro trend correct.

We will see if that remains true in the coming years. Hope you all have a great end to your week. I’ll talk to everyone on Monday.

-Anthony Pompliano

James Seyffart is a ETF research analyst at Bloomberg Intelligence.

In this conversation, we discuss bitcoin ETF approvals, what this means for capital inflow, predictions for the first 48 hours, 30 days, & year, fund structures, issuers, and regulatory oversight.

Listen on iTunes: Click here

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My Appearance on CNBC’s Squawk Box Yesterday Morning

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* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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,

Yesterday can only be described with one word — madness. The SEC’s account on Twitter/X posted the following message just after 4pm EST:

The market immediately went into euphoria. Bitcoin’s price went from approximately $46,600 to nearly $48,000 in less than two minutes. The internet lit up with celebratory messages, memes, and “I told you so!”

There was only one problem — the tweet from the SEC was inaccurate. Bitcoin spot ETFs have not yet been approved. SEC Chairman Gary Gensler quickly tweeted from his personal account the following clarification:

As I told you, yesterday was madness. The market quickly readjusted from bullish to bearish and Gensler’s tweet was followed by a quick sell-off within minutes to a level lower than it was pre-announcement.

So what exactly happened? That is still unclear. The SEC has not explicitly used the word “hacked” so far, but they have described a nefarious situation in the statement that followed later. It read:

“The SEC has determined that there was unauthorized access to and activity on the @SECGov x.com account by an unknown party for a brief period of time shortly after 4 pm ET.  That unauthorized access has been terminated. The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct.”

Frankly, this is probably the worse case scenario for regulators at this moment. They have held up an ETF approval for years due to concerns around market manipulation, yet the day before a rumored approval the organization is compromised and someone is able to manipulate the price leveraging the SEC’s own account.

Many people on the internet are claiming that the SEC may have made a simple mistake of scheduling a tweet for the wrong date. Their logic is that the tweet from the SEC account is worded too closely to what the regulatory organization would actually say. While it could be possible, it appears that theory is not true.

X’s safety team tweeted the following statement last night:

“We can confirm that the account @SECGov was compromised and we have completed a preliminary investigation. Based on our investigation, the compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party. We can also confirm that the account did not have two-factor authentication enabled at the time the account was compromised. We encourage all users to enable this extra layer of security. More information and tips on how to keep your account secure can be found in our Help Center.”

We have to assume that there was foul play here until we hear otherwise. Another point that people have pointed out is that the lack of 2-factor authentication goes against prior warnings that the SEC Chairman had tweeted out as guidance for market participants.

Again, this entire situation is nightmare fuel for regulators. But what insights can we take away from this debacle as investors?

There seem to be three lessons at the moment:

* The approval, which I expect to happen later this afternoon, will lead to short term euphoria and a multi-thousand dollar rally in price.

* After the initial price surge, there will likely be a lot of selling that will fall in-line with the classic “buy the rumor, sell the news” phrase.

* Traders will position themselves for the next speculative regulatory approval via an ETH ETF as they rotate out of bitcoin.

The first two are self-explanatory, but this third one is interesting. Everyone has been paying attention to bitcoin for the last few months. The digital currency is up 160% in the last 12 months. Ethereum’s token is only up 79% in the same time period.

But Reflexivity Research’s Will Clemente points out:

In a weird way, although yesterday seemed like a complete s**t-show, it actually may have served as a dress rehearsal for the real show later today. Bloomberg is reporting that the ETF approval will likely happen after the market closes this evening, which would fall in-line with my expectations for the funds to be trading tomorrow (Thursday).

This industry is full of chaos and uncertainty. There is never a dull moment. Through it all, the people who can keep their head calm and focused are the ones likely to find an outsized financial return.

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

-Anthony Pompliano

Mitchell Askew is an analyst in the bitcoin community.

In this conversation, we talk about volatility, bitcoin ETFs, institutions, inscriptions, miners, bitcoin halving, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

My Conversation with Mitchell Askew

Podcast Sponsors

* Frec.com - Use tax-loss harvesting to save on your tax bill, while keeping the same investment exposure you already have.

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* 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,

We are announcing this morning that Reflexivity Research, a company that I co-founded with Will Clemente, has entered into a binding LOI to be acquired by DeFi Technologies, a publicly traded Canadian technology company.

You can read the official press release below, but I wanted to share a few thoughts and context with this group.

First, we started Reflexivity Research less than 18 months ago with the goal of creating world-class, crypto-native research for traditional finance investors. (Here is the letter that I wrote to all of you when we launched). So much of the content in the bitcoin and crypto industry is created for industry insiders. We believed there was an opportunity to create high-quality information for those outside the day-to-day industry.

Second, we obsessed over building something unique. A key piece to this was ensuring that Reflexivity had the largest distribution of any crypto research firm. This was accomplished by building a large email list, along with signing a number of large third-party distribution deals with companies like TradingView, eToro, and others.

Third, we want to have public market exposure, rather than private market exposure, going into a bitcoin/crypto bull market. Too many tech founders have been convinced to stay private for as long as possible. The public capital markets afford unique advantages for the right companies.

Fourth, I believe the best way to monetize information in finance is through asset management. Given our advantage in the research business, it makes sense to team up with a tech-enabled asset management firm that has a differentiated offering.

Fifth, this acquisition is a 100% stock deal. The fact that we are taking no cash should speak volumes about our thoughts on DeFi Technologies, their asset management subsidiary Valour, and their products.

Lastly, I didn’t plan to build Reflexivity Research for such a short period of time before selling it. We have been exclusively focused on building a great business that delivers results for our customers. But when compelling opportunities present themselves, you need to be open to changing your mind and capitalizing on them.

Will, myself, and the rest of Reflexivity Research team are excited to team up with DeFi Technologies. There is a lot of work ahead. Everyone is staying on the team and working diligently to scale our business.

-Anthony Pompliano

You can read the official press release here:

DeFi Technologies Inc. Announces Strategic Acquisition of Private Research Firm, Reflexivity Research LLC, Co-Founded by Anthony Pompliano and Will Clemente

Toronto, Canada, January 9, 2024 - DeFi Technologies Inc. (the “Company” or “DeFi Technologies”) (NEO: DEFI) (GR: RB9) (OTC: DEFTF), a crypto native technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (“DeFi”), is pleased to announce the signing of a binding letter of intent (the “LOI”) to acquire Reflexivity Research LLC (“Reflexivity”), a premier private research firm that specializes in producing cutting-edge research reports for the cryptocurrency industry (the “Acquisition”).

Reflexivity, co-founded by Anthony Pompliano and Will Clemente, offers high-quality crypto-native research designed for traditional finance investors. The firm is known for unique bitcoin analysis, along with counting some of the most well-known cryptocurrency organisations as clients, including eToro, Solana, Avalanche, NEAR, Fantom, Sei Network, and many more. The company’s research is distributed via their homepage, a premium membership portal, and an email list of over 55,000 investors.

Reflexivity has also focused on creating a large third-party distribution channel for their research, which has been accomplished by partnering with platforms such as TradingView, eToro, and others.

The acquisition signifies DeFi Technologies' inaugural foray into the research domain, underscoring its dedication to fostering knowledge and understanding in the dynamic cryptocurrency sector. With the acquisition, DeFi Technologies not only reinforces its role as a pivotal bridge between traditional and decentralized finance but will now also offer valuable insights and intelligence to its clientele, further enhancing its comprehensive suite of services in the financial ecosystem.

Pursuant to the LOI, DeFi Technologies will acquire all issued and outstanding securities of Reflexivity Research in return for 5 million common shares of DeFi Technologies (the “Payment Shares”). The Payment Shares will be subject to a lock-up schedule of 12 months, with the Payment Shares being released in equal tranches every three months, underscoring mutual confidence in the enduring value of this joint venture. No finder fees will be paid in connection with the Acquisition. The parties intend to enter into a definitive agreement in respect of the Acquisition (the “Definitive Agreement”) by January 31, 2024. 

Anthony Pompliano, co-founder of Reflexivity Research, commented, “As traditional finance continues to allocate to this new asset class and structured products become more important in 2024, we are excited to partner with DeFi and the pioneers of the ETP market at Valour. This collaboration will enhance our research and bring insightful, actionable intelligence to our clients, bridging the gap between traditional finance and the burgeoning potential of cryptocurrency markets.”

Olivier Roussy Newton, Chief Executive Officer of DeFi Technologies, commented, “This acquisition marks the beginning of a new chapter for us as we establish our presence in the research sector. Joining forces with Reflexivity Research is a strategic step that will greatly enhance our offerings and provide our clients with access to premier insights in the cryptocurrency market.”

About Reflexivity Research LLCReflexivity Research LLC is a leading research firm specializing in the creation of high-quality, in-depth research reports for the bitcoin and cryptocurrency industry, empowering investors with valuable insights. For more information please visit https://www.reflexivityresearch.com/

About DeFi Technologies

DeFi Technologies Inc. (NEO: DEFI) (GR: RB9) (OTC: DEFTF) is a crypto native technology company that pioneers the convergence of traditional capital markets with the world of decentralised finance (DeFi). With a dedicated focus on industry-leading Web3 technologies, DeFi Technologies aims to provide widespread investor access to the future of finance. Backed by an esteemed team of professionals with extensive experience in financial markets and digital assets, we are committed to revolutionising the way individuals and institutions interact with the evolving financial ecosystem.

Join DeFi Technologies’ community on Linkedin and Twitter, and for more details, visit https://defi.tech/

About ValourValour Inc. issues exchange traded products (ETPs) that enable retail and institutional investors to access digital assets like Bitcoin in a simple and secure way via their traditional bank account. Established in 2019, Valour is a wholly owned subsidiary of DeFi Technologies Inc. (NEO: DEFI) (GR: RB9) (OTC: DEFTF).For more information on Valour, visit https://valour.com

Cautionary note regarding forward-looking information: This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to the entering into of a Definitive Agreement; closing of the Acquisition; development and listing of future ETPs; the regulatory environment with respect to the growth and adoption of decentralized finance; the pursuit by DeFi and its subsidiaries of business opportunities; and the merits or potential returns of any such opportunities. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company, as the case may be, to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, but is not limited the acceptance of Valour exchange traded products by exchanges; growth and development of decentralised finance and cryptocurrency sector; rules and regulations with respect to decentralised finance and cryptocurrency; general business, economic, competitive, political and social uncertainties. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

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