The Pomp Letter

If you are not a subscriber of The Pomp Letter, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

To investors,

Russia invaded Ukraine last night. This conflict carries complexity across geopolitics, national security, and financial markets. It would be impossible for any one person to unpack the nuanced situation, and the subsequent ramifications, in great detail with only a few thousand words.

Rather than regurgitate the sequence of events that have unfolded over the last 24 hours, I want to turn our attention to a few topics that I am thinking about this morning.

First, war is an ugly thing. Violent conflict leads to loss of human life and incredible economic hardship for millions of people. Those who are affected most tend to be the average citizen who has no appetite for war, nor was a participant in any events leading up to the conflict. It should go without saying, but I hope that every single Russian and Ukrainian citizen is safe. My family and I are incredibly fortunate to live in the United States and have a daily life that doesn’t require us to worry about other nation states firing missiles at us or invading our city.

Second, it feels like there is a significant shift in geopolitical order that is playing out before our eyes. Russia’s invasion of Ukraine is essentially an attempt by Vladimir Putin to call the United States and NATO’s bluff. He doesn’t believe they have the political will to impose painful enough sanctions, while also understanding that there is very little appetite for war among the citizens of member nations. Simultaneously, China is ratcheting up their provocations of Taiwan, including 9 Chinese Air Force planes entering Taiwan’s airspace this morning and a warship violating Taiwan’s defense zone.

Both Russia and China understand that the long-standing American protectionism has weakened in the various regions and they are making a play to gain more global power, influence, and resources. I am not an expert on geopolitics, but it is hard to ignore the importance of these events, specifically through the lens of the confidence game on a global stage.

Third, Russia is the third largest oil producer globally. They are responsible for approximately 12% of the global production. Brent oil prices in the United States, and globally, have been quite high in recent months, so the current US administration has been asking for more oil to be supplied to the market in an attempt to curtail price increases. Both Russia and Saudi Arabia have said they will not increase production, so that leaves the US in an awkward position. To further complicate the situation, brent oil prices spiked significantly on the news of Russian invasion and now is trading well over $100 per barrel.

In some weird way, the increased price of oil combined with the continued purchasing of Russian oil by the international community, means that Russia is actually profiting handsomely from the invasion. Unfortunately, the United States and our allies can’t stop purchasing the oil for any material amount of time because we have made prior decisions that make us dependent on non-US oil producers. I won’t play Monday morning quarterback on those prior decisions, but the importance of energy independence is fairly obvious right now.

Fourth, Russia’s actions will likely lead to a flurry of financial sanctions from the United States and our allies. The most significant action would be the removal of Russia from the SWIFT system. There could also be sanctions against Vladimir Putin personally, along with a cadre of other high-ranking Russian leaders. Regardless of the exact sanctions, it would be naive of the international community to think that Russia hasn’t war-gamed this situation in preparation.

Many people don’t know this but Russia has one of the largest foreign currency and gold reserves in the world. They were the fourth largest behind China, Japan, and Switzerland at the end of 2020. This $600+ billion in foreign currencies and gold will be a tool in their toolbox once sanctions are implemented. Now I don’t know exactly what Russia has planned, but it is very clear that they are willing to take the risk of catastrophic sanctions. They either don’t believe the US and NATO will levy crippling sanctions or they have a plan on how to get around them.

This brings me to my final point. The United States has been the producer and distributor of the global reserve currency for decades. One of the benefits of that position is that we can impose financial sanctions on those that we disagree with or those that are violating our view of good and evil. The nuance to financial sanctions though is that they only work if the intended target is using the currency that you produce and distribute. Given that Russia has an incredible amount of foreign currencies and gold, these sanctions may not be as effective as they would have previously been.

This brings me to the most important point — the United States has to start considering what to do in a world where a large portion of the world doesn’t use the US dollar as their reserve currency.

The hypothetical situation would see Russia and China, who have long publicly stated their intention to get off the US dollar system, decide that the costs to using the current global reserve currency has become too high. They are unlikely to use rubles or renminbis as the new reserve currency. There isn’t enough global buy-in, along with a general challenge of convincing the world that these new nation states won’t repeat the mistakes of the past nation states.

This game theory leads us to bitcoin. The next best option to being the producer and distributor of the global reserve currency is to be the most advanced user and holder of a global reserve currency that no single country controls. That incentive leads these superpowers to realize that bitcoin will be essential for decades to come. The countries that have a large ownership stake, along with conducting mining and other pro-bitcoin activities within their country, will have a significant advantage.

The United States shouldn’t give up on the US dollar. In fact, we should continue to optimize for the production and distribution of the global reserve currency. There is safety and stability when you occupy that position. But we must also begin to hedge ourselves. It is time for insurance. Even if our leadership believes there is an incredibly small percentage chance that the US dollar may not be the global reserve currency in 50 years, we should position ourselves to be a leader in that small possibility.

The United States should put bitcoin in the central bank reserves. We should immediately incentivize as many bitcoin miners globally to move to the US. We should remove the capital gains tax on bitcoin spending and treat it like a traditional currency. And the United States should begin educating its population on the decentralized, digital currency. These steps will take years to successfully complete, but it is important that we begin now.

There are many politicians in both Congress and the Senate who are working on these initiatives. We need many more. The current geopolitical situation will be written about in history books. It is imperative that we remain compassionate to those who are adversely affected by war, we remain steadfast in our disagreement with the aggressors, and we plan for various future scenarios, regardless of how unlikely we believe they are.

Hope everyone has a great day in light of the circumstances. Give your loved ones an extra hug when you see them. Most of us reading this are so fortunate. I’ll talk to everyone tomorrow.

-Pomp

If you are not a subscriber, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

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Podcast Sponsors

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* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

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* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra lets you trade, borrow, and earn interest on crypto. Earn up to 13% interest on USD stablecoins or crypto, borrow USD stablecoins, and trade in 110+ cryptocurrencies in a simple, secure app. Download Abra and get $15 in free crypto when you fund your account.

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. Those products include BlockFi Wallet, no fee Trading, crypto collateralized Loans and the World's First Crypto Rewards Credit Card. To get $75 back on the first swipe of your BlockFi Rewards Credit Card, sign up today at http://www.blockfi.com/Pompcc 

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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 invention of blockchain technology solved a decades-long computer science problem and unleashed a monetary revolution in the form of bitcoin. This decentralized, digital currency has taken the world by storm. It has been adopted by hundreds of millions of people globally and is worth approximately $1 trillion in market cap based on daily fluctuations in US dollar price.

Not bad for a technology that is completely open-source. Bitcoin has no CEO, no marketing department, and raised no venture capital dollars as it was being built or scaled. Decentralization means that no one individual or group controls the product. Any major changes need the agreement of a large portion of the community, including software developers to miners to node operators, in order to be implemented for users.

As you can imagine, the legacy system has watched the rise of bitcoin with a combination of admiration and fear. Many of the traditional institutions, especially central banks, are impressed with the creation of truly digital currency, along with how quickly people have adopted this technology in every economy. These same people are watching in fear as they realize that their organizations have zero control of the money supply in this new digital financial system.

The control and production of money has historically been reserved for central banks, but this monopoly on money is directly tied to the central bank’s close relationship with government. The government has a monopoly on violence, so they are able to ensure that central banks will continue their singular control and production of money. Any attempt to circumvent the central banking structure has been met with a swift and ruthless response.

This is why the decentralization of bitcoin is so important. Without a single point of failure, including a CEO or corporation or centralized servers, there is a much smaller attack surface for governments and their violent monopoly. Since central banks can not rely on governments to shut down this new entrant to the system, central bankers have been forced to consider how they can compete in the free market.

Central bankers aren’t known for being innovative. In fact, I would argue that central bankers are successful because they move at a glacial pace and make systemic bets on the world changing very slowly. But bitcoin has forced these institutions to consider digitizing their fiat currencies in a way that emulates bitcoin’s technology, but contains some key differences.

Digitizing the dollar/euro/peso/etc is merely a technology upgrade. The monetary policy of these fiat currencies are unchanged. Similar to how physical currencies were transitioned to electronic CUSIPs in centralized databases, central banks are considering a technology upgrade to token-based fiat currencies that are compatible with digital wallets.

So why are they considering this transition?

The optimistic person would argue that the incorporation of new technology is an attempt at modernization for an antiquated system. Individual users of central bank digital currencies (CBDCs) would be able to send any amount of money 24/7/365. The thought of hours of operations would be a thing of the past. The payment rails that CBDCs would be built on would be more efficient - faster settlement times, cheaper transaction fees, etc. Lastly, there would be an increased transparency in the system which theoretically could decrease crime and increase the safety of the market.

That is the positive perspective. But we have to be very careful here. Central bank digital currencies will likely be one of the greatest violations of human rights in history.

Central bank digital currencies remove the privacy and decentralized nature of physical cash. It creates an environment where central banks have complete control over every aspect of a citizen’s financial life. Here are a couple of examples of the nasty s**t that we can expect to see in the coming decades:

Personalized inflation — Central banks currently have the ability to manipulate interest rates and expand/contract the supply of money. Any changes that they make are applied to all citizens equally. Individual market participants may make decisions to benefit or suffer from these decisions, but the dollars that I hold are subject to the same monetary policy as the dollars that you hold. This is going to change with CBDCs. The central bank will be able to personalize the monetary policy to the individual. Just as your newsfeed, search results, and music playlists are personalized based on vast amounts of data, the same is coming to money. Maybe I get a higher inflation rate in an attempt to get me to spend money, while you receive a lower inflation rate. The differentiation of monetary policy can be cut a million ways, including where you live, who you are, your wealth status, your occupation, your purchase history, and much more.

Financial censorship — Once a central bank digital currency is in the hands of a population, the central bank has solidified complete control. They will no longer have to go to the court system or invoke emergency powers to tell you who you can transact with. This can all be implemented through remote, digital technologies. These central bankers will be able to see what is in your bank account, who you transact with, what you purchase, and anything else they are curious about in your financial life. That full transparency with the state removes all elements of privacy, while also giving the institutions the ability to censor any and all transactions, regardless of whether they have a legitimate reason or not.

Social credit system — When central banks and governments gain complete control over the financial system, they have the ability to reward or punish individual citizens for the actions they take. Have you been eating too much candy? You can’t buy candy anymore. Have you been gambling? Now you can’t use public transportation that heads in the direction of the casino. This all sounds like crazy talk until you realize that the Bank of England is openly talking about this in public now. China already has one in place. Canada is implementing one in real time right now. Are you fat? Only healthy food can be purchased. Do you associate with people the central bank doesn’t like? No entertainment for you. This is a slippery slope that is approaching quickly.

Expiration of money — If you’re a central banker, you are constantly trying to incentivize people to spend money in the economy so that you can increase the velocity of money. Without the velocity of money, the system starts to break down. So what better way to increase velocity of money than to have people’s money expire if they don’t spend it in certain period of time. The US already has a version of this through SNAP benefits and EBT cards, where the money expires one year after it is issued unless it has been used. The expectation is that the government will expand this idea of expiration of money to include shorter timelines and a larger number of programs in the future.

These are just four examples of various activities that I anticipate central banks will engage in once they are successful in creating and distributing central bank digital currencies. As the saying goes, absolute power corrupts absolutely. The dream of every dictator or authoritarian leader globally is to have full control over every aspect of their citizens’ lives. If the government can not only censor your financial transactions based on a social credit system, but they can also personalize the monetary policy and give you money with an expiration date, then we are headed to a dystopian future that no one will want to live in.

The basic human right is that we are all born free people. The creation of central bank digital currencies will completely eliminate that premise. Every human born will be starting off in an authoritarian state that requires them to be a digital slave to a central bank that has total control over their life. If you don’t have the freedom to transact, you don’t have freedom.

Central bank digital currencies are the next frontier for the battle of freedom. Every human should have the right to financial privacy and independence. This is an important conversation that must start now. Without global awareness, central banks will pull off the greatest violation of human rights we have ever seen and citizens will cheer them on while they do it.

Hope you have a great day. Talk to everyone tomorrow.

-Pomp

If you are not a subscriber, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

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Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra lets you trade, borrow, and earn interest on crypto. Earn up to 13% interest on USD stablecoins or crypto, borrow USD stablecoins, and trade in 110+ cryptocurrencies in a simple, secure app. Download Abra and get $15 in free crypto when you fund your account.

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. Those products include BlockFi Wallet, no fee Trading, crypto collateralized Loans and the World's First Crypto Rewards Credit Card. To get $75 back on the first swipe of your BlockFi Rewards Credit Card, sign up today at http://www.blockfi.com/Pompcc 

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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 situation in Canada has received international attention across the internet. People are wondering how a liberal, democratic country could descend into authoritarian chaos so quickly. Disagreeing with subsets of your population, or opposite sides of the political debate, are an expected component of democratic societies, but the shocking aspect is how the Canadian government has decided to react.

Rather than meet with the protestors to hear their complaints or encourage their protesting within a designated area of the city, the Canadian leadership has responded to dissent with a ruthlessness that is usually reserved for dictatorships. As David Sacks wrote over the weekend, “A Social Credit System Arrives In Canada.”

In the piece, Sacks argued:

“For years, ideologues have used accusations of bigotry to hound people from their jobs, kick them off social media, and rescind their right to participate in the online economy. However, many observers shrugged off these cases as outliers—fringe examples that could be ignored because they affected unsympathetic individuals. But now we have a wide-ranging group of working-class people and their supporters who are being financially deplatformed for civil disobedience.”

It is pretty incredible to watch this play out in real-time. There are individuals who are being financially sanctioned in a way that was previously reserved for enemies of war. Take the Russia - Ukraine situation as a current example. The United States is threatening financial sanctions, including potential removal from the SWIFT system, if Russia chooses to invade Ukraine.

There is not much difference between the threat of sanctions to Russia and the current financial sanctions that are being levied against Canadian citizens by their own government. That is wild to think about.

If there is one positive outcome of this situation though, it is that millions of people in the western world are being alerted to the perils of financial censorship. Previously, most people thought these authoritarian measures would never happen in their own countries. Canada has made them change their mind and start paying attention.

This morning, co-founder of Basecamp and creator of Ruby on Rails David Heinemeier Hansson (known as DHH), wrote a piece titled “I was wrong, we need crypto.” He started with the following excerpt:

To say I've been skeptical about Bitcoin and the rest of the crypto universe would be an understatement of epic proportions. Since the early 2010s, some of my most ferocious Twitter battles have been against the HODL army with the laser eyes.There's just so much to oppose: Bitcoin's grotesque energy consumption, the ridiculous transaction fees and low throughput, the incessant pump'n'dump schemes in shitcoins, the wild price swings in the main coins, the obvious fraud that is Tether, the lack of real decentralization in most of the current web3 infrastructure, and on, and on, and on.Beyond all these very real problems and challenges, my bigger beef was actually fueled by a lack of imagination. I could see the fundamental promise of a digital currency free of banks if you were living in a failing state like Venezuela or an overtly authoritarian one like China or Iran, but how was this relevant to the vast number of Bitcoin boosters living in stable Western democracies governed by the rule of law? Beyond the patina of philosophical respectability it could apply to yet another get-rich-quick scheme?

You have to give DHH credit for the intellectual humility necessary to admit you were wrong in public. But his journey is not that dissimilar from many others. The idea of bitcoin as freedom technology was a distant thought because it has been hard to see dystopian or authoritarian environments in the western world. Sure, maybe those situations play out in the developing world far away, but that couldn’t possibly happen in my country, right? RIGHT???

DHH continues his write-up with the following comments:

“I still can't believe that this is the protest that would prove every Bitcoin crank a prophet. And for me to have to slice a piece of humble pie, and admit that I was wrong on crypto's fundamental necessity in Western democracies.And that it was the Canadians who brought this on? You might as well have told me that it was really the Care Bears who ran Abu Ghraib.Especially since I had some sympathy with fears projected by the US progressive left who spent four years fretting Trump might pull stunts like these. Then it turns out that the worries of an authoritarian overreach would be fulfilled by Trudeu to the North instead? Who's writing this script? M. Night Shyamalan?Meanwhile, plenty of American commentators are cheering this on. Those terrible, horrible, no-good, very-bad truckers got what they deserved! To protest for a repeal of pandemic restrictions, so as to live the life enjoyed in Denmark by a population less vaccinated than the Canadians? That's clearly beyond the pale!But in a weird way, I'm glad we all got this warning from Trudeu in Canada and not Trump in America. It would have been far too easy for Europeans in particular to dismiss authoritarian assertions of martial law from Trump as being irrelevant to the European experience. Just like I had for so long deemed the practical desire of people in Venezuela or Iran or China for crypto irrelevant to the entire Western experience.Is France really that different from Canada? Is Austria? Is Denmark? This is a real wakeup call.”

Ultimately, bitcoin serves as the chaos hedge. It is insurance for a dark, dystopian world that everyone hopes won’t become reality.

The hard part about technologies that bring freedom, security, privacy, and sovereignty is that the mainstream population doesn’t actually care about these ideas. They want convenience. There is a disconnect between the conversation and the actions when it comes to these topics.

This is an area that bitcoin is drastically undervalued and misunderstood. Bitcoin is a freedom technology disguised as a get-rich-quick scheme. Millions and millions of people join the revolution initially to make money, not to adopt a secure, censorship-resistant currency. Economic incentives run the world. Show someone how they may get rich and you’ll watch adoption follow. That is exactly what bitcoin has done. It is the best performing asset over the last decade, including a 150%+ compound annual growth rate during the decade.

Here is the catch though — millions of people come for the profits, but stay for the revolution. Bitcoin has a unique way of teaching economics, computer science, personal finance, mathematics, philosophy, geopolitics, and much more. In fact, I’d argue that most bitcoiners have learned more from the bitcoin community than they did in school. This is what hardens the bitcoin holders. They don’t care about price fluctuations. Name another asset where it goes down 20% multiple times a year and there is a 50% loss in price every year for the last 4 years, yet majority of the investors continue to hold for the long term?

Bitcoin isn’t about profits. The investors and holders have no plans to sell. Bitcoin is a freedom technology. It is a peaceful protest that arms the average citizen with a censorship-resistant technology that prevents their government from enacting authoritarian measures that encroach on their basic rights. Without the freedom to transact, you have no freedom.

Canada has awaken the western world to the perils of financial censorship. Bitcoin is the solution. It is just a matter of time before millions more realize it.

Hope you have a great day. Talk tomorrow.

-Pomp

If you are not a subscriber, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

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Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra lets you trade, borrow, and earn interest on crypto. Earn up to 13% interest on USD stablecoins or crypto, borrow USD stablecoins, and trade in 110+ cryptocurrencies in a simple, secure app. Download Abra and get $15 in free crypto when you fund your account.

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. Those products include BlockFi Wallet, no fee Trading, crypto collateralized Loans and the World's First Crypto Rewards Credit Card. To get $75 back on the first swipe of your BlockFi Rewards Credit Card, sign up today at http://www.blockfi.com/Pompcc 

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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,

BlockFi, a leading crypto lending company, announced yesterday that they have reached a resolution with the SEC pertaining to the regulatory scrutiny that they have faced over the last 8 months. As many of you know, I am a large investor in the business, but today’s letter is only my personal opinion. I do not speak for the company and nothing below should be attributed to BlockFi or their team. 

BlockFi’s suite of products includes lending against crypto collateral, interest-bearing accounts, crypto exchange, and a credit card that pays rewards in bitcoin. The company was a pioneer in developing, launching, and scaling a number of these products, but most notably was the interest-bearing accounts and the bitcoin credit card. 

Their interest-bearing accounts, known as the BlockFi Interest Account (BIA), came under regulatory scrutiny during the summer of 2021. The product is very similar to your checking or savings account at a bank — you deposit funds, the company lends them out to generate yield, and the company shares some portion of the yield with you before keeping the remainder for themselves. The big difference is that the banks pay an average of less than 0.05% nationally, while BlockFi has been paying up to 9% APY with their interest-bearing product. 

The delta between the legacy world and the crypto world seems steep, right? It is. But there is a simple explanation for how BlockFi and other lenders can pay such high interest rates — there is an imbalance in supply and demand for deposit funds in the market. Quite literally, there are tens of billions of dollars worth of borrowing demand, but total deposits (supply) haven’t been able to keep up at a similar pace. This imbalance leads to borrowers paying a high interest rate to lenders.

Another contributing factor is that companies like BlockFi pass through a large portion of the yield they generate to their customers. For example, your bank makes more than 0.03-0.05% on your deposits but shares only a small percentage of that yield with you. BlockFi, and other crypto lending companies, have made a habit of sharing majority of the yield they generate with their customers. So if you combine the imbalance in supply and demand with a large portion of interest yield being passed on to the customer, you can see why BlockFi can offer up to 9% APY.

This comparison to the legacy banks is important for another reason as well though — the banks are able to offer interest-bearing accounts to their customers without having to register them as securities, nor do the banks have to abide by securities law for that specific product. The general thought process in the crypto industry was that if a company offered interest-bearing accounts with bitcoin and crypto, rather than US dollars, the company would be required to follow the same legal and regulatory frameworks as the banks. 

As you already guessed, the regulators have a different perspective. The SEC and state regulators took a position that BlockFi is offering a debt security, which would require them to register the interest-bearing product and operate under securities law. I won’t bore you with the negotiation details, but it is safe to say that the regulators and the BlockFi team spent a lot of time discussing various options on how to proceed.

The company announced yesterday that they have reached a resolution with the SEC and state regulators. This agreement entails the following:

* BlockFi will register the BlockFi Interest Account product as a security offering

* BlockFi will pay a $100 million settlement

* BlockFi will be able to offer the BlockFi Interest Account to all Americans once the SEC approves the S-1 submission

There are a few aspects of this resolution that I want to cover today. First, various market participants in crypto have been asking for regulatory clarity for years. This agreement between BlockFi and regulators creates crystal clear regulatory clarity related to interest-bearing crypto accounts. Some people won’t like the outcome, but that is one of the risks that come with seeking regulatory clarity. Now that the rules around this type of product are clear, every company in the industry will be able to offer this functionality to their users with the confidence that they are playing within the regulatory guidelines.

Second, BlockFi’s resolution is highlighting an interesting development in the crypto market. They are being asked by US regulators to treat their customers in the United States differently than their international customers. BlockFi is able to offer a wider range of assets and products to those outside the United States than those within our domestic borders. While this may not seem like a huge deal, my personal opinion is that this trend will create a competitive disadvantage for US-based companies in the crypto industry.

Third, the critics of the crypto industry have long claimed that it was opaque, filled with criminal activity, and a systemic risk if there was too much adoption. BlockFi’s resolution will create an adherence to the highest degree of transparency, audibility, and risk management that is available in public markets. Regulators will have direct oversight of the product and company, which negates the critics argument around opaque operations.

Fourth, the $100 million settlement amount is grabbing headlines and for good reason. This is a record amount for a crypto company to pay in a regulatory matter. It is important to understand that the $100 million is split between the SEC and the various state regulators. Additionally, the current SEC administration has said publicly that they believe past financial penalties were too small because they did not deter market participants from continuing their unregulated activities. My view is that the big number that BlockFi is paying here is the manifestation of the SEC’s view that penalties in crypto will only grow in size moving forward.

Fifth, it must be explicitly stated that BlockFi is pioneering a way for American citizens to earn up to 9% APY in a regulatory compliant way. There are a lot of individuals, organizations, or institutional investors that have sat on the sidelines waiting for regulatory clarity. Now these investors will have the opportunity to benefit from high-yield interest-bearing accounts, which has increasing importance in a high inflation environment. The positive impact on portfolios with a product like this can’t be understated.

Sixth, the BlockFi resolution showcases the maturity of the business. In order to succeed in the crypto industry, companies are going to be required to have expertise in technology, finance, and regulation. Most teams have native experience in technology and finance, but BlockFi’s ability to navigate this regulatory environment will likely serve them well as they continue building one of the leading businesses in the industry. Everyone from customers to public market investors are likely to have increased confidence in the companies that can build the regulatory muscle needed to thrive in a fast-paced, ever-changing industry.

Lastly, if regulators are willing to engage with centralized, well-funded companies like BlockFi, then the industry must realize that the “decentralized” offerings will come under pressure as well. Many of these platforms are referred to as “DINOs” by regulators, which stands for Decentralized In Name Only. This belief that the decentralized platforms are actually centralized operations would suggest that regulators have plans to pursue these teams and bring them within their regulatory purview. This is essential to understand because true decentralization is likely to become more and more important over time.

The BlockFi situation is a watershed moment for the crypto industry. It is clear that regulators are not playing around and the market is going to become bifurcated — one group will represent those who want to work with regulators and the other will represent those who want to fight the regulators. Either strategy can be appropriate depending on the situation and details. BlockFi has chosen the path of working with regulators to pioneer regulatory clarity for one of the most exciting parts of the crypto industry.

Clarity reduces risk. Reductions in risk lead to increased market participation. Increased market participation creates maturation of the industry. Slowly, but surely, we continue to push these innovative technologies into the hands of hundreds of millions of people around the world.

Hope each of you has a great day. I’ll talk to you tomorrow.

-Pomp

If you are not a subscriber, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

SPONSORED: Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more.

Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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,

It was reported late last week that the United States would be confiscating billions of dollars from the central bank reserves of Afghanistan. This seemed a little weird at first, but I didn’t want to jump to conclusions since governments are always doing counter-intuitive or seemingly insane things.

After digging into the story, it appears that this is a highly unusual decision that could have significant impact on finance, geopolitics, and technology moving forward. Here is what is happening:

* Afghanistan’s central bank reserves have been kept in various US-based financial institutions.

* There is approximately $7 billion of total assets that belong to the Afghan central bank, but are held in the US.

* President Biden signed an Executive Order compelling all US financial institutions to “transfer this property into a consolidated account held at the Federal Reserve Bank of New York.”

* Approximately $3.5 billion of the $7 billion in assets will be routed back to Afghanistan with the hopes of helping the Afghan citizens.

* The remaining roughly $3.5 billion assets will be held by the US government and earmarked for victims of the 9/11 terrorist attack.

Now it is important to call out that this is a highly complex situation. But it is also a highly irregular situation as well. The central bank of Afghanistan was holding billions of dollars in US-based financial institutions and had no sovereignty over those funds. This wouldn’t seem overly weird for a central bank except the US had invaded the country and was actively occupying it for the better part of 20 years.

Second, the use of an Executive Order to compel US-based financial institutions to turn over client assets to the Federal Reserve is as outrageous as it sounds. The Federal Reserve is allegedly an independent, private organization so it is noteworthy that the President and his administration is forcing one private organization to allow another private organization to confiscate client assets.

Third, the $7 billion of Afghan central bank assets are the property of Afghanistan. Any attempt by the United States, the President, or the Federal Reserve to prevent the country of Afghanistan, and it’s citizens, from accessing or retrieving their property is equivalent to theft. Regardless of the reasoning or the moral appeal, the United States is confiscating billions of dollars of assets from a country that we are no longer at war with, and a country that we are reportedly trying to help become independent.

Fourth, the United States is conducting this highly suspicious activity at the same time that it is becoming clear that the Afghan people are suffering immensely. In the White House press release related to the Executive Order, these are the facts outlined to highlight the dire situation on the ground:

* Even prior to the events of last August, Afghanistan’s economy was on the brink. Afghanistan faced poverty rates above 50 percent. International donor grants financed about 75 percent of public expenditures and 50 percent of the government’s budget. A two-year long drought had reduced many crops to 40 percent of their usual yields, and Afghanistan had one of the least developed financial systems in the world—with just 10-20% of adults holding bank accounts. Rampant corruption crippled sectors that should have been profitable.

* The Taliban’s forced takeover made the already frail economic situation worse. The IMF estimates that Afghanistan faces an economic contraction of 30%, and many of the senior officials and technical experts needed to provide sound economic management have fled the country as a result of the Taliban’s actions.

* These problems reflect longstanding, structural issues that predated the events of August 2021 and have worsened due to uncertainty and perceived risk surrounding the Taliban’s capacity to run the economy. This includes its ability to implement anti-money laundering measures and measures to counter the financing of terrorism.

So we know the citizens of Afghanistan are struggling and the current administration has still decided to withhold potential aid, and the property of those citizens, because of political motivations. It is really crazy to think about the nuances of this entire situation.

So why am I writing about this?

The idea of financial censorship is becoming more pervasive. We have the US confiscating Afghan central bank assets. We have the US threatening Russia with removal from the SWIFT payment system depending on what actions Russia pursues in Ukraine. We have the Canadian government pressuring technology companies and financial institutions to confiscate any funds that are being sent to the truckers’ Freedom Convoy protest.

Each of these situations is different, but they are all a form of financial censorship. The more aggressive that governments become with financial censorship, whether towards each other or towards their own citizens, the more popular that bitcoin becomes in the eyes of those on the internet. Every attempt at financial censorship is a marketing campaign for bitcoin.

Bitcoin is censorship-resistant money. No one can prevent you from sending it to anyone else. No one can confiscate it from you without your permission. No one can debase the currency. 

Bitcoin is freedom technology. It gives a user, from individuals to organizations to nation states, the freedom to choose how to use the digital currency. You can hold it. You can spend it. You can send it to someone. Whatever you want to do, you’re allowed to do it. No government, company, or individual can impose their views or desires on you.

If the Afghan central bank has sovereignty over their assets, the US couldn’t confiscate them easily. If the Freedom Convoy raised money through a censorship resistant currency, no one could have taken those funds from them.

That is where the world is headed. Sovereignty. Censorship-resistance. Decentralization. Individual rights. Slowly, but surely.

Bitcoin is inevitable. It returns the world back to sound money and to individual sovereignty. Those may seem like crazy ideas on the surface, but we are watching multiple examples play out that prove why it is so important. 

Have a great day today. I’ll talk to everyone tomorrow.

-Pomp

If you are not a subscriber, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

SPONSORED: Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more.

Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Rishi Khanna is the CEO of Stocktwits.

In this conversation, we discuss Stocktwits' business model, social investing, NFTs, Cryptocurrency and the vertical integration of trading infrastructure and the social audience that Stocktwits has.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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

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

To investors,

There have been a plethora of rumors about bitcoin and cryptocurrencies in Russia over the last few months. The country sits in a unique geopolitical position — they are frienemies of the United States and have a deepening relationship with China, another frienemy of the western superpower.

As a refresher, the mainstream media has been pushing the narrative of a pending Russian invasion of Ukraine. The response by the United States in an attempt to deter the invasion is financial sanctions, including potentially the exclusion of Russia from the SWIFT payment system.

It is important to caveat that no one actually knows what is going on between Russia and Ukraine. Americans have nearly zero appetite for another invasion or war. The average citizen couldn’t even point Ukraine out on a map, while they have little concern about their safety due to actions that Russia may or may not take halfway around the world. That doesn’t mean that the United States shouldn’t be paying attention, but there are major questions about the narrative being pushed by the mainstream media.

Additionally, the threats of financial sanctions on a large country like Russia are noteworthy. More than a decade ago, these sanctions carried significant weight. The United States could cut you off from the global financial system and essentially sentence you to financial system purgatory.

These sanctions are likely to be less effective in the current time period though. Let me give you two examples — China and bitcoin.

Chinese President Xi Jinping hadn’t met with a foreign leader in person since the start of the global pandemic in 2020 until he recently sat down face-to-face with Russian President Vladimir Putin a few days ago. The two countries issued a 5,000+ word joint statement following that meeting. Here is the opening paragraph:

“Today, the world is going through momentous changes, and humanity is entering a new era of rapid development and profound transformation. It sees the development of such processes and phenomena as multipolarity, economic globalization, the advent of information society, cultural diversity, transformation of the global governance architecture and world order; there is increasing interrelation and interdependence between the States; a trend has emerged towards redistribution of power in the world; and the international community is showing a growing demand for the leadership aiming at peaceful and gradual development. At the same time, as the pandemic of the new coronavirus infection continues, the international and regional security situation is complicating and the number of global challenges and threats is growing from day to day. Some actors representing but the minority on the international scale continue to advocate unilateral approaches to addressing international issues and resort to force; they interfere in the internal affairs of other states, infringing their legitimate rights and interests, and incite contradictions, differences and confrontation, thus hampering the development and progress of mankind, against the opposition from the international community.”

This new interest in collaboration between Russia and China creates the potential for bi-lateral trade to be settled outside the US dollar regime. Obviously, if these countries begin to conduct trade without using the global reserve currency, the sanctions from the issuer of that global reserve currency will be significantly less effective. It is unclear how much of this is tough talk compared to committed action, but it is an important development.

Second, the rise of bitcoin and cryptocurrencies provides an open, decentralized payment system that is not controlled by anyone. This may seem like a wild idea theoretically, but we are watching bitcoin gain adoption globally at an insane pace.

It is important to highlight that sanctions is just another name for censorship. The creator and distributor of the global reserve currency is attempting to censor who uses their currency and payment system. There may be good reason for the censorship. There may not be. Either way, sanctions are just a different terminology for censorship.

Bitcoin is censorship-resistent money. No one can shut down the system. No one controls it. Anyone in the world can send monetary value to anyone else in the world. There are no middlemen. There are no rent seekers. The peer-to-peer system is unique in design and powerful in application. So it is weird that the central bank of Russia started to question bitcoin’s relevance in the country at the same time that it may become incredibly important to the nation state.

To explain further, the Bank of Russia recently floated the idea of banning bitcoin and cryptocurrencies within the country. This led to a heated debate internally and externally of the country. Last night, it appears that the Russian government and the central bank reached an agreement on digital assets. They will not be banning them, but rather treating them like other foreign currencies.

There are other aspects to the agreement (read statement here), such as regulatory frameworks, proper licensing for crypto exchanges, increased taxation, submission of various information to a state-run surveillance tool, and more. Ultimately, the important takeaway is that Russia is not going to ban bitcoin or crypto assets, but rather they are going to increase the usage and adoption within the country by creating frameworks and rules that everyone understands.

Many people may not know this, but Russia is already one of the largest crypto countries. They are the third largest country in terms of bitcoin’s hash rate, there are more than 12 million crypto accounts held by Russian citizens, and it is estimated that those people hold more than $26 billion worth of cryptocurrencies. Not exactly something that is easy to ignore for the government or central bank.

So let’s take this one step further.

If Russia becomes sympathetic to the bitcoin and crypto industry, including putting the digital currency on their balance sheet or mining with state resources, it will force the hand of the United States. There is a global competition underway that has a decentralized, open system at the heart of it. Anyone can plug into the system. The game theory is that no one wants to start the cascade, but once your adversary does it, you are forced to adopt the technology or risk being left behind.

El Salvador was a great first step. The smaller country doesn’t have any enemies though. The largest superpowers could simply ignore the strategic move and carry on with normal operations. If Russia was to make a move on the chess board, it would be impossible for global superpowers to look the other way.

Eventually every country is going to adopt bitcoin and the open payment system. The question is not whether it will happen, but rather the sequence of events that will play out. As with most innovative technology, those who have courage and conviction to invest earliest are rewarded with the largest benefit. This situation is no different.

Russia’s decision to treat bitcoin and crypto as currencies is a step down this path. It will be interesting to see how far, and how quickly, they go. The United States can’t afford to fall behind. We must be the leader on the global stage. We must act. The stakes are too high.

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

-Pomp

SPONSORED: Mode allows you to buy, earn and grow Bitcoin, all in one app. Pay with Mode & receive up to 10% Bitcoin Cashback from its growing list of online partner brands directly into your Mode wallet.Mode, the UK fintech app is one of a kind.

They’re FCA registered and are listed on the LSE in the UK and OTCQB in the USThey choose to hold Bitcoin on their balance sheet. They are piloting a Bitcoin Payroll product to pay UK employees in BTC.

Download Mode on the App Store and Google Play today to get started. Check out the Rewards tab in the app for the 30+ brands where you can earn Bitcoin Cashback! Only available in the UK.

THE RUNDOWN:

Infinity Ventures Crypto Closes $70M Fund: Infinity Ventures Crypto, a Taipei-based Web 3 investor, said it raised $70 million to deploy to startups in Asia and the Americas in its first fund, which closed today. The fund’s strength is bridging the gap between the east, particularly southeast Asia, and the west, partner Brian Lu said in an interview with CoinDesk. Read more.

US Officials Seize $3.6B in Bitcoin From 2016 Bitfinex Hack: Federal officials seized some $3.6 billion worth of bitcoin tied to the 2016 hack of the crypto exchange Bitfinex. Agents arrested two individuals in New York on Tuesday on charges they conspired to launder proceeds from the Bitfinex hack in 2016. The married couple, Ilya "Dutch" Lichtenstein and Heather Morgan, will appear in court at 3:00 p.m. ET in New York, according to a U.S. Department of Justice press release. Read more.

Judge Stays Release of Bitfinex Hack Laundering Suspects: A federal judge has halted the release of two individuals suspected of laundering proceeds from the 2016 Bitfinex hack. Chief Judge Beryl Howell, of the U.S. District Court for Washington, D.C., stayed an earlier order by a New York Magistrate Judge to release Ilya "Dutch" Lichtenstein and Heather Morgan on bail. The two were arrested Tuesday by federal officials on charges stemming from a 2016 hack of the Bitfinex cryptocurrency exchange. The U.S. Department of Justice also said officials seized 94,000 BTC, worth over $3.5 billion at today's prices. Read more.

Coinbase Files to Form a PAC Ahead of 2022 Midterms: Coinbase is backing a political action committee (PAC) this election cycle. On Monday, the publicly traded crypto firm registered “​​Coinbase Innovation PAC” with the Federal Election Commission, sending a strong signal of its desire to sway federal officials during the 2022 midterm election cycle. The crypto exchange is hardly alone: Industry heavyweights formed their own pro-crypto PAC late last month. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system.

In this conversation, we discuss Bitcoin, on-chain metrics, market structure, and what to expect from the rest of the bitcoin bull market.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

* Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.

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,

News broke yesterday that the tax treatment of staking protocols, and the subsequent tokens earned, could be changing in a positive way. I’m not an expert on taxation, nor staking, so I asked one of the groups (Proof of Stake Alliance) involved to write up a quick summary on what has happened and the potential implications. Here is their analysis:

On December 20th, Josh Jarrett – a Tennessee business owner, father of three, and Tezos aficionado  – received an early Christmas present. Just as his holiday vacation was starting, the DOJ sent him a letter informing him that the IRS had approved a tax refund, 18 months into his legal battle to determine how his staking reward tokens are taxed under the U.S. income tax. However the story is not over…

In 2019, after Josh created XTZ tokens through staking on Tezos, he paid income tax on those rewards based on the price of the tokens when he created them. Like so many taxpayers involved in proof-of-stake blockchains, Josh faced uncertainty and a lack of clarity in determining how the IRS would treat his staking rewards. Even though proof-of-stake protocols represent billions of dollars – and seven of the top ten blockchain protocols by market cap use, or plan to use, a proof of state consensus mechanism – the IRS has not issued guidance about the taxation of tokens created from staking.  

In 2020, Josh’s legal battle with the IRS began in earnest. He filed for a refund on the income tax he paid on his staking rewards based on their value at creation, supported by a legal brief by Abe Sutherland. The brief articulated that these rewards were created property, and that, like all other created property – whether it’s gold that is mined or bread that is baked – it should be taxed at the time of sale, not at the time of creation. 

After two years, Josh finally received a note from the IRS in December 2021, offering Josh a refund. 

This is a big deal as the IRS doesn’t roll over easily – especially in cases that are so visible and will shape the taxation of multi-billion dollar industries. Josh’s win marks the first indication of just how strong Josh’s legal position is – a huge development for the growing industry. 

But for Josh, this offer of a refund is not enough. Because the IRS has not issued guidance confirming that it will not attempt to tax staking rewards at the time they are created, this refund could be a one-off and the Jarretts could face the same uncertainty in future years.  In order to push the IRS to definitively state that it will tax staking rewards as property or have a judge decide the matter, Josh has refused the IRS refund – and is continuing his case against the IRS.  

What this means:

The offer of a refund from the IRS is a promising sign that the US tax laws treat staking – a process of creating cryptocurrency rewards through participating in a proof-of-stake blockchain network – as new property and not income. But while this news is exciting, a one-off tax refund is not sufficient to offer clarity to a multibillion dollar industry. We need the courts to resolve this once and for all, or else for the IRS to clearly agree that such tokens are not taxable income until sold.

POSA for the past three years has been leading the fight for clear IRS guidance that staking rewards are not taxable income the moment they are created. In order to advocate for the proof-of-stake industry, POSA coordinated a day of action on Capitol  Hill and meetings at the Treasury Department in November 2019, during which they briefed the IRS about the need to confirm that staking tokens will be taxed as created property.  Subsequently, the Blockchain Caucus wrote a letter to the IRS urging them to issue guidance that staking rewards would be treated as property. With proof-of-stake tokens approaching nearly $600 billion in value, and some 16% of American adults having traded, invested, or used cryptocurrencies, it's well past time for the US government to acknowledge this industry and provide it with clear, common sense and fair tax treatment. If the IRS does not offer explicit guidance confirming that staking rewards are not income, the US risks becoming a second-rate market for staking and pushing the burgeoning multi-billion dollar industry to inevitably take those dollars elsewhere. 

What’s next?

* The Department of Justice is reviewing Josh’s lawsuit. If the case continues to move forward, the court could make a determination on the taxation of Josh’s staking rewards.

* POSA is continuing to fight for a definitive statement from the IRS that it will not tax staking rewards as income when they are created – Only with explicit guidance can our growing and innovative industry plan for the future. 

* You can help us demand guidance from the IRS by raising your voice to advocate for fair taxation of staking rewards. 

* Learn more here: www.proofofstakealliance.org 

POMP’S REACTION: As you can see, this would be a really big improvement to the current tax treatment of proof-of-stake systems. It leads me to the question of “will this same tax treatment be extended to bitcoin mining or other proof-of-work systems?” The logic would be if staking is considered the creation of taxpayer property, then mining would also be considered the creation of taxpayer property.

If this logic holds, it would completely change the economic models for bitcoin miners. They would be able to hold 100% of the bitcoin they mine, net of the cost of operations. In the past, we saw miners being forced to liquidate bitcoin due to tax obligations. Removing that burden would lead to billions of dollars in profits for these businesses globally. Additionally, it would likely create a much larger incentive for investors to acquire bitcoin through mining compared to other means.

We don’t have the answers yet, but these are a few things worth considering. Hope you all have a great weekend. Talk to everyone on Monday.

-Pomp

Do you want a job in the crypto industry? My team and I have been working with the top HR teams in the industry to create a training program that teaches the fundamentals of crypto.

We cover everything from how central banks work to bitcoin’s technical architecture to smart contract platforms to niches of the industry, such as NFTs, DAOs, and much more.

This 3-week intensive program has 50+ events packed into the most valuable training program in crypto. We helped more than 400 people get hired last year and you can be one of them.

Our next cohort starts in February. APPLY:

https://www.pompscryptocourse.com/

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Darius Dale is the Founder & CEO of 42 Macro, the leading macro risk manager adviser.

In this conversation, we discuss the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and what you should be considering as you're investing your capital.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* MyBookie allows you to bet and withdraw with Crypto. Use promo code ‘POMP’ to double your first crypto deposit at MyBookie.

* Coin Cloud is the world's leading digital currency machine operator. To get your $50 in free Bitcoin, visit www.Coin.Cloud/Pomp 

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* BTCS was the first US-public company to secure today’s top layer one protocols. Test out the BTCS Data Analytics Dashboard today at BTCS.com  

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go tookcoin.com/pomp

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 job market in the bitcoin and crypto industry has exploded over the last 12 months. My team and I have built a standalone business that has become the largest employment and training company in the space. I asked Colton Sakamoto, CEO of that business, to put together a report on the trends in 2021. Below is the report. Enjoy!

2021 was an inflection point that accelerated mass adoption of Bitcoin and crypto. Led by El Salvador making bitcoin legal tender, Coinbase going public, and Square rebranding to Block, Bitcoin and crypto took the world by storm. 

Out of fear of being unseated, the incumbents were also forced to adopt a Bitcoin and crypto strategy. Facebook underwent a rebrand and changed their name to Meta. Fintech companies like Robinhood, Webull, and SoFi adjusted their stances to accommodate crypto users. Even legacy financial institutions including Blackrock, Goldman Sachs, Morgan Stanley, and State Street added or expanded their bitcoin and crypto offerings. 

With disruption comes opportunity. In 2021, thousands of the brightest minds around the world left their jobs to join the Bitcoin and crypto revolution. According to LinkedIn, Bitcoin and Crypto job postings grew 395% in 2021, representing more than 3x the growth of the broader tech industry. 

“Bitcoin changes absolutely everything. I don’t think there is anything more important in my lifetime to work on” - Jack Dorsey, CEO of Block, Inc.

Top talent is pouring into the Bitcoin and crypto industry. Here’s what the Bitcoin and crypto job market looked like in 2021:

Estimations of hiring in 2021 put the total well above 10,000 people joining the Bitcoin and crypto industry. The Block collected responses from just 27 crypto firms and discovered that the interviewed companies hired 8,400 people in 2021. A LinkedIn “crypto” search reveals close to 200,000 people working in the industry in total. Job seeker demand for the crypto industry continues to rise, and new openings are quickly filled. 

“It feels a bit like the 1990s and the birth of the internet all over again. It’s that early, that chaotic and that much full of opportunity” -Sridhar Ramaswamy, CEO, Neeva

Exchanges were responsible for the most hires

* Coinbase - 1,532 

* Binance - 1,500 

* Kraken - 1,035 

* BlockFi - 520 

* Gemini - 402 

As retail demand for digital assets exploded in 2021, so did headcount at crypto exchanges. Coinbase more than doubled their headcount over the past year, and they expect to continue to hire aggressively in 2022. Retail demand drives infrastructure, and infrastructure drives hiring.

“Even though Kraken has increased its headcount by 50% since the start of the year — and we have plans to hire a further 1,200 in the second half of 2021 — our demand for staff continues to outpace the supply of suitable candidates,” - David Ripley, CEO, Kraken

All skill sets needed

There is a common misconception that bitcoin and crypto companies are only looking for shadowy super coders. 2021 job data ran counter to this narrative. Accounting, Marketing, Sales, and Business Development openings were on the rise in 2021, and we can expect the continuation of this trend as more startups are formed, more companies go public, and job seeker interest continues to rise. 

Remote first

36% of all crypto job postings allow for remote work, compared to just 7% for all other US job postings. Led by companies without headquarters like Coinbase and Kraken, crypto companies are looking for top talent and are often location agnostic. Gone are the days of commuting to a 9-5. Remote work is here to stay, and the crypto industry is leading the charge for remote-first work. 

$30B in Venture Capital Funding 

Venture funding in 2021 went parabolic in the crypto sector as VCs continue to place big bets on bitcoin and crypto companies. The crypto industry received more than $30B in funding across 1,700 deals in 2021, which represents a 709% year-over-year increase in total funding. 

“The investments I’m making now are not in traditional businesses. In fact, 80% of the investments that I make that are not on ‘Shark Tank’ are in or around cryptocurrencies.” - Mark Cuban (Source)

$6B in Mergers & Acquisition Activity 

2021 was also a big year for crypto mergers and acquisitions. The sector saw over $6B in M&A volume in 2021, which is a 730% year-on-year increase and is approximately 2x the amount of the industry’s previous 8 years combined. 

“Bridge transactions” — deals between more traditional companies and crypto firms, rapidly accelerated in 2021. Some examples include Nike buying virtual products company KTFKT and Robinhood acquiring cross-exchange crypto trading platform Cove. 

65+ companies in the crypto sector have reached unicorn status with a valuation of $1B or more

The past year created more unicorns than the previous 4 years combined. Entrepreneurs across the globe are taking risks and starting companies to solve real-world problems. 

In 2021, crypto companies took invested capital and used it to build successful teams. With an increase in funding, crypto companies are now able to go toe-to-toe with top tech companies for talent, often paying equal salaries and offering greater potential upside.

“It’s not necessarily the case that you have to go take one-third of your Big Tech salary anymore, because a lot of these (crypto) companies are so well capitalized” - Evan Cheng, CEO, Mysten Labs

What’s next? 

We are at an inflection point in history, where a better financial system is being built to replace the antiquated system. Talent is leaving the top companies of today to build the companies of tomorrow. 2021 was a massive year for the Bitcoin and crypto job market, and 2022 looks to be a continuation of the trend. 

As bitcoin and crypto continue to go mainstream, we can expect more companies to go public, more startups forming, and job openings continuing to grow at an exponential rate. 

Want to join the revolution and don’t know where to start? 

Our Bitcoin and crypto hiring platform has helped more than one person PER DAY start a career in the industry. Browse hundreds of openings at top companies:

https://pompcryptojobs.com/

Want to learn, network, and get in front of recruiters?

Our three-week, intensive training program has helped students get hired at Coinbase, Gemini, BlockFi, Strike, and more. Our next cohort starts on February 15th. APPLY:

https://www.pompscryptocourse.com/

I hope this report was valuable for each of you. Hope you have a great start to your day. Talk to you tomorrow.

- Pomp

SPONSORED: Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more.

Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system.

In this conversation, we discuss bitcoin, on-chain metrics, market structure, and what to expect from the rest of the bitcoin bull market.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* MyBookie allows you to bet and withdraw with Crypto. Use promo code ‘POMP’ to double your first crypto deposit at MyBookie.

* Coin Cloud is the world's leading digital currency machine operator. To get your $50 in free Bitcoin, visit www.Coin.Cloud/Pomp 

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* BTCS was the first US-public company to secure today’s top layer one protocols. Test out the BTCS Data Analytics Dashboard today at BTCS.com  

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go tookcoin.com/pomp

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

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

To investors,

There has been a rise in interest for audience funded content over the last few years. Some of this has been driven by a decreasing trust in the mainstream media. Some of it has been facilitated by the explosion in tools and services aimed at helping individuals create and distribute content more easily. And some of it is an attempt to create content that is immune from advertiser pressure.

Regardless of the reason, it is hard to miss the increasing number of paywalls around the internet. Two of the most popular services for email paywalls are Substack and Ghost. These products allow an individual to create content, deliver it to their readers’ inbox, and receive payment in exchange.

As Jack Dorsey pointed out over the weekend, there are trade-offs between these services.

Substack is a centralized, closed-source software service that uses Stripe for payment processing. Ghost is an open-source software service that uses Stripe for payment processing. I am personally a fan of Substack from the user perspective, but both products are effective at serving their customers.

The identification of Stripe as a crucial centralized point is important. It is true in both the closed-source and open-source model. Substack obviously recognizes this because they have added bitcoin payment integration using OpenNode. My guess is that Ghost, who currently has all payment APIs closed, will eventually add bitcoin payments as well.

But what would the world look like if individuals didn’t want to wait on Substack, Ghost, or any service provider to create bitcoin-enabled paywall infrastructure?

Strike, the payment infrastructure company focused on the Lightning Network, held a hackathon recently where someone created a product called PlebPay. This allows anyone in the world to create a paywall, for any piece of content, instantaneously and with no payment processing fee. The beauty of this product is that it leverages the Lightning Network, so you can require micropayments as small as $0.01 for someone to view the desired content.

Here is an example:

Click here to access the video via the paywall. You’ll see that with the scan of a simple QR code, you can pay $0.01 and immediately watch the hilarious video of young Jack Mallers. There was no need for YouTube to create paywall support. There was no requirement for YouTube to integrate with Bitcoin or the Lightning Network.

This is what the future of the internet looks like. A decentralized, digital payment system that is built on open-source software, which is continuously improved on to facilitate global, frictionless, free payments.

This idea of decentralization around payments is really important. We don’t need to accept the fact that payments will forever be a centralized point of failure. There is a better solution in bitcoin. The layer one technology is well understood, but quickly the world is going to wake up to the superiority of the Lightning Network as well.

I don’t know what use cases internet users will come up with for PlebPay. It feels exciting though to have the capability of adding micropayments to any internet action with just a few clicks of a button. Companies have spent decades trying to figure out how to build this type of functionality, but an engineer built this functionality in approximately 4 hours at a hackathon. The revenue model for businesses online is rapidly shifting and the era of advertising is under pressure. Advertising won’t go away, but the trend of audience-funded content is only beginning.

We are watching an innovation in the payment industry that is truly zero to one. There is nothing from the legacy system that can remotely compete. These early iterations look like a toy today, but they will be the basis for global disruption in the future. Hindsight will be 20/20. You just have to squint hard enough to see where we are going right now. But the light at the end of the tunnel is there. I can’t wait to see it come to fruition.

Go check out PlebPay and set up a paywall for something on the internet. Send me the link and I’ll pay a small fee to help you experience the magic :)

Have a great day. I’ll talk to everyone tomorrow.

-Pomp

Do you want a job in the crypto industry? My team and I have been working with the top HR teams in the industry to create a training program that teaches the fundamentals of crypto.

We cover everything from how central banks work to bitcoin’s technical architecture to smart contract platforms to niches of the industry, such as NFTs, DAOs, and much more.

This 3-week intensive program has 50+ events packed into the most valuable training program in crypto. We helped more than 400 people get hired last year and you can be one of them.

Our next cohort starts in February. APPLY:

https://www.pompscryptocourse.com/

THE RUNDOWN:

Google Cloud Hiring Team of Blockchain Experts: Google Cloud is hiring a team of blockchain experts to capitalize on the move to decentralized Web 3 applications, the company wrote in a blog post Thursday. While tech and cloud giants such as Google and Amazon represent the heights of Web 2 centralization, Google is seeing the opportunity presented by newer decentralized blockchain technologies. Read more.

State Senator Introduces Bill to Make Bitcoin Legal Tender in Arizona: A bill introduced in Arizona would make bitcoin legal tender in the state in the unlikely event that the legislation passes and the law goes into effect. The bill, SB 1341, was introduced by state Sen. Wendy Rogers, a Republican. It seeks to amend the list of accepted legal tender to include bitcoin, which means the cryptocurrency would be accepted for the payment of debt, public charges, taxes and other dues. Read more.

Bitcoin Miner Greenidge’s NY Power Plant Permit Delayed: The New York State Department of Environmental Conservation (NYSDEC) has delayed its decision whether it will allow Greenidge Generation to continue to use its power plant in the town of Dresden for bitcoin mining, Bloomberg reported. The decision is now expected to come by March 31, two months later than originally planned, the report said. Read more.

The Unhosted Crypto Wallet Rule Is Back: A controversial proposed rule that would enforce know-your-customer rules on unhosted or self-hosted crypto wallets may again be under consideration by the U.S. federal government. The rule was first proposed at the end of 2020 by the Financial Crimes Enforcement Network (FinCEN), the U.S. money-laundering watchdog. If enacted, crypto exchanges would be required to collect names and home addresses, among other personal details, from anyone hoping to transfer cryptocurrencies to their own private wallets. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Saagar Enjeti is the Host of "Breaking Points with Krystaal and Saagar", a fully independent show focused on taking out cable news and bringing trust back to journalism.

In this conversation, we discuss the broken cable news structure, the economy, Joe Rogan's popularity and why Saagar loves Bitcoin.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* MyBookie allows you to bet and withdraw with Crypto. Use promo code ‘POMP’ to double your first crypto deposit at MyBookie.

* Coin Cloud is the world's leading digital currency machine operator. To get your $50 in free Bitcoin, visit www.Coin.Cloud/Pomp 

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* BTCS was the first US-public company to secure today’s top layer one protocols. Test out the BTCS Data Analytics Dashboard today at BTCS.com  

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go tookcoin.com/pomp

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,

Financial markets can be crazy at times. The complexity of an economy makes it nearly impossible to predict what will happen in the short and long-term. Humans are really bad at dealing with uncertainty, specifically when there is a dopamine-driven feedback loop of volatile price movements thrown in their face every few minutes.

Let’s use bitcoin as an example. On at least 6 occasions last year, the digital asset fell in price more than 20%. There was a 50% drawdown in approximately 95 days, which was the 4th time in 4 years that bitcoin had fallen by 50% or more. To say that bitcoin’s US dollar exchange price is volatile would be an understatement. There are few financial assets that compare.

This volatility in price is mirrored by wild swings in investor sentiment in the market. During January 2021, Bitcoin crossed $38,000 for the first time in history. The Fear and Greed Index registered at extreme greed. In January of 2022, Bitcoin crossed below $38,000 and the Fear and Greed Index registered at extreme fear.

This is a great example of wild swings in sentiment. The price of the asset is the exact same, but the difference of one year (and the direction of the asset’s movement) led to very different beliefs about the future.

This is top of mind right now because we are watching the complexity of financial markets play out related to bitcoin. The Federal Reserve spent the last two years flooding the market with cheap capital, which pushed investors further out on the risk curve. Wall Street funds and institutional investors adopted bitcoin as an inflation hedge asset. Public companies started to put bitcoin on their balance sheet. The price of bitcoin pushed higher as inflation raged on.

Now that the Federal Reserve is talking a tough game, including increasing interest rates and tapering quantitative easing, the price of bitcoin and other risk assets have fallen significantly. The anticipation of more expensive capital, and ultimately lower inflation growth year-over-year, has investors scrambling to gain more exposure to value investments.

Simultaneous to the Fed-related speculation, there is a geopolitical game theory playing out involving bitcoin. China has taken an abrasive stance towards bitcoin miners and investors. This led to a massive migration out of China, which can be seen in on-chain metrics and the global hash rate measurements. Elected officials in the United States continue to propose legislation that would create high friction for companies, investors, and miners. El Salvador has leapt onto the global stage by embracing bitcoin in a major way. They are buying bitcoin, building bitcoin ATM networks, launching bitcoin software products, creating a bitcoin city, and raising capital through a bitcoin-backed municipal bond.

The various approaches of China, United States, and El Salvador have been playing out for months. A new entrant to the global game theory is Russia. Their central bank has taken a fairly adversarial position to the industry, including a proposed ban on crypto trading and mining. It appears that Russian President Vladimir Putin disagrees with the central bank and has reportedly signaled his support for a proposal from the Finance Ministry that would allow crypto mining and trading, but in a heavily regulated manner.

Price volatility. Sentiment swings to the extreme. Some countries embracing bitcoin. Other countries attacking bitcoin. The Fed saying one thing, but doing another. There is uncertainty in the market. No one knows what is going to happen. It is easy to be fearful. It is easy to get distracted. The world is moving fast. How can you possibly keep up?

Well, maybe you don’t have to try. The beauty of taking a long-term approach to investing is that you can live a less stressful life. You are able to do the work to identify secular, multi-decade trends and allocate capital accordingly. Barring some significant invalidation of the thesis, a long-term investor can then focus on dollar cost averaging into the investment over time.

MicroStrategy’s Michael Saylor was on UpOnlyTV yesterday and he clearly articulated his bitcoin strategy. Cobie, one of the hosts of the show, asked him “Is you strategy, you just don't give a s**t, you're buying Bitcoin no matter what?” to which Saylor answered “yeah.” This may seem crazy to the ill-informed eye, but the conversation evolved to unpack this even further. Michael Saylor explicitly explained that he would periodically buy the tops of bitcoin price cycles, along with buying bottoms.

When you are dollar cost averaging, it is impossible to know whether you are buying the top or the bottom. But if you have a long-term view, you don’t care. You simply continue to convert your currency into the asset of choice. Regardless of what is happening in the world, a long-term bitcoin investor will continue to simply dollar cost average. Geopolitics? Noise. Fed decisions? Noise. Wall Street adoption? Noise. Sentiment? Noise. Price? Noise.

The key to generating outsized returns over decades is to ignore the noise. Focus is a superpower. You lead a less stressful life. You don’t get distracted. As Warren Buffett once said, “our favorite holding period is forever.” Many investors in modern markets could benefit from understanding this advantage. Hope each of you has a great day.

I’ll talk to you tomorrow.

-Pomp

Do you want a job in the crypto industry? My team and I have been working with the top HR teams in the industry to create a training program that teaches the fundamentals of crypto.

We cover everything from how central banks work to bitcoin’s technical architecture to smart contract platforms to niches of the industry, such as NFTs, DAOs, and much more.

This 3-week intensive program has 50+ events packed into the most valuable training program in crypto. We helped more than 400 people get hired last year and you can be one of them.

Our next cohort starts in February. APPLY:

https://www.pompscryptocourse.com/

SPONSORED: Brave Wallet is the first secure wallet built natively in a web3 crypto browser. No extension required.

With Brave Wallet, you can buy, store, send, and swap assets. Manage your portfolio & NFTs. View real-time market data with an integrated CoinGecko dashboard. Even connect other wallets and DApps. All from the security of the best privacy browser on the market.

Protect your crypto. Whether you’re new to crypto, or a seasoned pro, it’s time to ditch those risky extensions. It’s time to switch to Brave Wallet. Download Brave at brave.com/Pomp, and click the wallet icon to get started.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Sven Henrich is the Founder of Northman Trader. He's a highly respected technical analyst and commentator about markets and the macro economic environment.

Sven recently changed his stance on Bitcoin and has started to allocate capital into the asset. In this conversation we talk about the macro environment, fiscal policy and how these unprecedented times led Sven to considering Bitcoin as an allocation in his portfolio.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

* Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

* Mode allows you to buy, earn and grow Bitcoin, all in one app. Download Mode on the App Store and Google Play. Only available in the UK. 

* Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

* Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

* Abra is an all-in-one secure app that allows you to trade over 110 cryptocurrencies. Download Abra today and get $15 in free crypto once you fund your account. 

* FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

* MyBookie allows you to bet and withdraw with Crypto. Use promo code ‘POMP’ to double your first crypto deposit at MyBookie.

* Coin Cloud is the world's leading digital currency machine operator. To get your $50 in free Bitcoin, visit www.Coin.Cloud/Pomp 

* Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

* Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

* BlockFi provides financial products for crypto investors. To start earning today visit: http://www.blockfi.com/Pomp

* Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Visit circle.com/pomp today; terms apply.

* BTCS was the first US-public company to secure today’s top layer one protocols. Test out the BTCS Data Analytics Dashboard today at BTCS.com  

* LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

* Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go tookcoin.com/pomp

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