The Pomp Letter

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

To investors,

I interviewed Raoul Pal, the CEO of Real Vision Group and macro trader, about two weeks ago. He predicted that the COVID-19 issue would become the greatest financial event of our lifetime. At the time of the interview, many people were questioning the salacious nature of Raoul’s statement. That is no longer the case though. Many people are now worried that he may actually be correct.

The country is grinding to a halt. Every day brings new challenges for small businesses and individuals. We are seeing some cities and states ordering bars and restaurants to close, while other cities are asking people to “shelter in place” and not leave their homes for any non-essential activity. It is not possible to have material economic activity or growth when everyone is sitting in their homes for weeks at a time.

These letters have been focused on the macroeconomy and the Fed’s actions the last few days, but I want to take time today to talk about what is on the horizon — the unemployment numbers in the United States have the potential to quickly match the numbers from the Great Depression.

I understand that the statement may seem ridiculous at first glance, but let me walk you through some math. The United States currently has about 164.5 million people in the work force and the unemployment rate is hovering around 3.5% (5.8M Americans).

Here are the statistics on the Great Depression:

* Timeline: August 1929 - March 1933

* Duration: 43 months

* Size of total labor force: 49 - 51 million people

* Peak global unemployment: 24.9%

* Low of US unemployment: 3.1% in 1929 (1.5M Americans)

* High of US unemployment: 24.7% in 1933 (12.8M Americans)

* Real GDP decrease during depression: 25%

It goes without saying that the Great Depression was incredibly bad. At the peak, 1 in 4 Americans were unemployed. But the Depression started off in 1929 with a relatively low unemployment rate (3.1%), which is actually 40 basis points lower than where the United States was in February 2020.

There was a relatively slow ramp up in unemployment in the beginning of the Depression. Here are the year by year unemployment statistics in the US:

* 1929 — 3.1%

* 1930 — 8.7%

* 1931 — 15.9%

* 1932 — 23.6%

* 1933 — 24.9%

* 1934 — 21.7%

* 1935 — 20.1%

So as you can see from the data, it took until the third year of the Depression before we hit double-digit unemployment numbers. People always focus on the peak number of 24.9%, but they forget that 3 of the 5 years of the Depression (1929-1933) had unemployment levels under 20%. This doesn’t mean that 8 - 20% unemployment levels are good. It just means that the peak number isn’t a great representation of the entire period.

Today the United States is sitting at 3.5% unemployment as of the end of February 2020. This means that 5.8M Americans are without a job but still counted in the workforce. In order to reach the various annual unemployment levels of the Great Depression, here are the number of Americans that would be without a job:

* 9% unemployment = approximately 14.8M Americans without a job

* 15% unemployment = approximately 24.7M Americans without a job

* 25% unemployment = approximately 41.1M Americans without a job

Given that we only have 5.8M people unemployed today, these numbers feel astronomical and frankly, unattainable. That may not actually be the case though. Most people don’t realize that we are facing one of the greatest immediate drops in unemployment in American history. There has been a near complete shutdown of the hospitality industry and a significant blow dealt to the travel industry. Plenty of other businesses are being crushed as well.

According to the US Bureau of Labor Statistics, there are approximately 16.8M people employed in the hospitality industry, including 14.3M in the Accommodations & Food Services Sector and 2.5M in the Arts, Entertainment, and Recreation Sector. The hospitality industry is obviously getting hit incredibly hard as multiple cities and states are ordering the closure of restaurants, bars, theaters, and other related venues. In many cases, these businesses are run on super thin margins, so the owners of the business are forced with the decision to immediately fire majority, if not all, of the staff or run at deep losses due to a lack of material revenue.

Here are the various levels of national unemployment we would have according to specific percentages of the Accommodations and Food Services (AFS) Sector being laid off:

* 10% AFS layoff = 1.68M people = 4.5% US unemployment (current + 10% AFS)

* 25% AFS layoff = 4.2M people = 6.1% US unemployment (current + 25% AFS)

* 50% AFS layoff = 8.4M people = 8.6% US unemployment (current + 50% AFS)

* 75% AFS layoff = 12.6M people = 11.2% US unemployment (current + 75% AFS)

I highly doubt that we are going to see more than 50% of the Accommodations and Food Services Sector laid off, but there is a good chance that we could see at least 25%. Again, that will seem ridiculous right now, but there are a few important early data points to keep in mind.

First, the LA Times published an article recently that stated 18% of respondents to a survey said that they have already lost their job or had their hours cut at work. The article goes on to state:

“The proportion affected grew for lower-income households, with 25% of those making less than $50,000 a year reporting that they had been let go or had their hours reduced, according to a survey released Tuesday by NPR, PBS NewsHour and Marist of 835 working adults in the contiguous United States.”

So we are only 2-3 weeks into the COVID-19 slowdown and we are already seeing double-digit numbers of unemployment or earning losses being reported. There are plenty of people who will brush these numbers aside because it is a poll of less than 900 people though. Lets keep digging deeper.

There are other data points surfacing that suggest the jump in unemployment is going to be multiples from where they are today. Take this tweet about unemployment claims jumping almost 7x in the state of Ohio from one week to the next.

But some readers will brush this data off as an anomaly. They may even claim this is directly attributable to the fact that Ohio has been aggressive in closing restaurants, bars, and other service-oriented places of employment. But unfortunately, this doesn’t appear to be “an Ohio thing,” but rather it is happening all over the country.

This explosion in Google searches for “unemployment benefits” would suggest that people are seeking relief after finding themselves without a job. Again, many readers will claim that Google search trends aren’t a great proxy for actual impact on unemployment. Lets dig a little further.

This tweet shows that the state of Minnesota had 31,000 people apply for unemployment insurance in just the last two days.

If the extrapolation to the national numbers is correct, that would mean 1.8M people across the country have applied for unemployment insurance in THE LAST TWO DAYS. That is f*****g wild. Why? Because that would be equivalent to more than 10% of the Accommodation and Food Services Sector (remember that would put us at 4.5% unemployment nationally).

This isn’t an Ohio, Minnesota, or Google search thing though. This is happening all over the country. In a recent Politico article, they stated:

“In New Jersey, 15,000 people applied for unemployment benefits on Monday, a twelvefold increase over normal levels. In Connecticut, nearly 8,000 applications arrived over the weekend, an eightfold increase over the norm. Rhode Island officials reported Tuesday a five-day rise in claims due to the coronavirus from 10 on March 11 to 6,282 on March 16.”

This isn’t about a small increase in unemployment claims, but rather multiples from the levels that we have seen over the last few months. The second year of the Great Depression saw 8.7% unemployment, which would 2.4x increase from our February unemployment numbers. It makes me incredibly sad to say this, but I think we could see those types of numbers by the end of Q3 2020.

Year 3 of the Great Depression saw 15.9% unemployment, which would be 4.5x from our February numbers. Again, this type of increase over a long period of time would be crazy, but the early data we are seeing would suggest that many states have seen larger increases on a percentage basis just in the last few days.

The government isn’t asleep at the wheel on this either. It was reported that Treasury Secretary Steven Mnuchin told politicians yesterday that if the US doesn’t act now, we could see 20% unemployment numbers rather quickly. Why? Because everyone is being forced to stay in their homes due to COVID-19 and many businesses are being asked or forced to shut down operations also.

As I have talked to people about this issues over the last 24 hours, most are relatively calm about it because the general belief is that it would take quite awhile for high levels of unemployment to take hold. The data says otherwise though. These large increases in unemployment filings tells a much different, and very scary, story.

While I don’t want to cause panic or fear monger, it appears that most investors are drastically underestimating the economic crisis we have on our hands. This is not going to be a few weeks of pain. This is likely to be months and months, if not a few years, of material slowdown in economic activity. Here are a few people who are waking up to the realities on the ground:

Again, I really hope that I am wrong here. I just don’t think that the data would support any other conclusion. The COVID-19 virus has literally stopped the world in its tracks. It has forced people to retreat to their homes and economic activity to fall off a cliff. The healthcare and science community is hoping that a vaccine or cure can be found quickly, but this thread tells us that we may be more than a year away from that occurring (highly recommend reading the Imperial paper that is linked here).

This entire data exercise has been incredibly demoralizing. The world feels like it is collapsing in some weird way. I have to continue to remind myself that we have experienced worst things and we will get through this, just like we overcame previous obstacles. There will be people in your life, whether family, close friends, or mere strangers, that are going to go through tough times in the near future. Please be kind to everyone. You never know what others are going through. Together, we are always stronger 🙏🏽

-Pomp

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

THE RUNDOWN:

BitGo Allows Customers to Extend Crypto Insurance Cover Over $100M: Customers of digital asset security specialist BitGo can now boost their insurance limit beyond $100 million to cover the loss or destruction of crypto stored in special vaults. BitGo came out with a Lloyd’s-backed cold storage insurance product in February 2019 and is now allowing customers to extend the $100 million worth of cover to suit their needs. It’s a sign of the continued maturation of the crypto insurance sector. Read more.

Tezos Co-Founder Turns to Gaming With ‘Hearthstone’ Competitor: Digital card games like Hearthstone are fun, but getting the cards needed to play is not. That's a problem that Coase – a company launched by Tezos co-founder Kathleen Breitman – aims to solve with its new game, Emergents. The new title, whose alpha version opens up to a select few in early April, comes as the market for online card games nears $2 billion in size and coronavirus-related shutdowns drive gamers indoors. Read more.

Regulated Exchange Launches in US With Crypto-Backed Visa Card Offering: A FinCEN-registered crypto exchange has launched with its own debit card that allows holders to pay for goods and services with digital assets. Utah-based CoinZoom announced Wednesday it would begin onboarding new institutional and retail clients, and will offer a Visa payment card that instantly converts cryptocurrencies into U.S. dollars. Read more.

Coinbase Card Users Can Now Make Crypto-Backed Payments With Google Pay: Google Pay users can now make payments with cryptocurrencies, thanks to a tie-up with Coinbase's debit card offering. The cryptocurrency exchange announced Tuesday that Coinbase Cards can now be added to users' Google Pay wallets, enabling crypto-backed payments from Google Pay-enabled devices, such as phones or smartwatches, apparently for the first time. Read more.

Toyota Reveals Blockchain Lab Exploring Auto-Industry Applications: Toyota has said declared its deeper aspirations for blockchain technology within the automotive industry, recently announcing that it would be exploring opportunities from research it began in early 2019. Toyota Motor Corporation and Toyota Financial Services Corporation revealed a previously launched "cross-group virtual organization" known as Toyota Blockchain Lab on March 16, announcing the group had been operational since April 2019 alongside four other Toyota group subsidiaries. The group is hoping to better understand the applications of blockchain within the auto industry. Read more.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Scott Adams is the creator of the Dilbert comic strip, and the author of several nonfiction works of satire, commentary, and business. His recent books include Loserthink: How Untrained Brains Are Ruining America (2019) and Win Bigly (2017). Scott has spent decades perfecting a view of the world that is not only impressive, but also incredibly refreshing. I really enjoyed talking to such a clear-headed thinker who can articulate ideas in an easily digestible way. This episode is a highly recommend from me!

In this conversation, Scott and I discuss:

* The coronavirus

* The impact on the healthcare system and the economy

* How he evaluates President Trump's response

* What his current thoughts on the November election are

* Why he recently sold Bitcoin

* What his best advice to business leaders is during the current environment of uncertainty

I really enjoyed this conversation with Scott. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Podcast Sponsors

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

* TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

To investors,

The main focus for many people right now is to stimulate economic activity. The COVID-19 issue has driven cities and states to heavily encourage people to stay in their homes, which is grinding the US economy to a halt across numerous industries. While airlines and hotels are seeing significant drops in demand, there are bars and restaurants in major cities that are being ordered to shut down for weeks on end.

This is a tough situation. We know that social distancing is effective in “flattening the curve” in the spread of COVID-19. We also know that many businesses, regardless of how fiscally prudent they have been, will suffer in a material way. In a way, we are watching those in positions of leadership have to make the decision between the health of the people and the health of the economy. Obviously the health of the people appears to be winning, but that doesn’t lessen the burden on the thousands of small businesses across the country.

Many people believe that the government should step in with relief for the small businesses, along with help for the average citizen. There are a lot of different ideas that have been floated, but many of them fall into two camps:

* Monetary stimulus — The US government should inject capital into the small business through various forms of payment. This could be a one time payment per business, a payment per business per day affected by shutdowns, or a payment per employee that the business continues employing. A few other plans involve extending loans on attractive terms to these small businesses as well. The exact details of each proposal are thin at best, but the general idea would be that the government conducts a version of UBI for small businesses for a period of time.

* Fiscal stimulus — The US government should lower tax obligations or provide tax credits to small businesses in an attempt to put more cash in their hands. These include payroll tax cuts, federally funded paid sick leave, and tax relief for specific industries. This could be done in a variety of ways, but again many of the proposals are thin on details given how early we still are.

The short answer is that there is not a single bullet that is going to solve the current problem set. We have structural issues in the legacy finance system (credit bubble, etc). We have small businesses that are going to suffer to the point of possibly having to go out of business in a matter of weeks. We have half our country that lives paycheck to paycheck, so they will start to worry about financial demands within 2-4 weeks.

You need different solutions for different groups. Some of the solutions will have to be monetary stimulus and some will have to be fiscal. The ideal solution will expertly weave together both forms of stimulus to create the intended benefits, while mitigating the potential downside. Unfortunately, I’m not sure if there will ever be agreement on that ideal solution.

While I have been thinking through these challenges and the potential solutions, two things keep dominating my mental energy — federal tax income relief for people and the share buyback vs bailout debate. I’m going to do my best to explain both of these below.

First, lets look at the federal tax income relief for people. The argument would be that the federal government voids federal income tax for individuals for 2019. If you already paid your federal tax, you would receive a 100% refund. If you owe something for your federal taxes, you would be relieved from having to pay that amount. This would obviously be a big boost in cash for people, which could range from 10-37% of a single year’s income. The downside of this plan is that about 45% of Americans don’t pay federal income tax, so they wouldn’t receive a direct benefit from this effort.

As I said before, we shouldn’t expect every solution to have an impact on every potential group. Instead, we should try to find easy to enact solutions that will have a positive impact on large quantities of people quickly. I think the federal income tax relief could be one of those solutions. Additionally, someone sent me a tweet this morning that highlighted that France is doing something even more aggressive:

As many people pointed out, the payment of taxes is likely something that can be repeated in other countries, but the relief from utility bills is likely a France-only thing because much of their utilities are centralized via government control. Either way, it is interesting to see the suspension of taxes for companies, so it wouldn’t be a stretch to extend that same type of relief to the individual.

Speaking of companies vs individuals, this brings me to the highly controversial debate of stock buybacks and bailouts. The basics of the debate are that companies have been using a lot of their free cash flow, and at times even debt, to buyback their own stock. The proponents of the strategy would argue that companies only do this when they have nothing better to do with the money (think of this as “efficient use of capital”) or they believe their stock price is trading below market value. The detractors of the strategy would argue that executives’ compensation is usually tied to short term stock performance, so executives are merely propping up the stock price in order to enrich themselves.

Honestly, the proponents and the detractors are both probably right to a degree. Some companies are prudent and only buyback stock when it would make sense. Other companies are run by idiots and they pump their stock price so they can enrich themselves. For example, from 2010 to 2019 the companies in the S&P 500 on average used 52% of their free cash flow to buyback their stock.

For those that don’t know, share buybacks were illegal until 1982. There are many people who would argue that share buybacks should still be illegal. I am not one of those people. I generally think companies should be allowed as much freedom as they want, but I also believe that companies should be responsible for the risk they take.

This brings us to the industry bailouts. Currently, the US airline industry is one of many that are asking the federal government for assistance. People are really cautious about using the word “bailout” because of the negative connotation, but there is really no other way to describe it. These same companies that are now asking for a bailout (due to slowing demand for their product because of COVID-19), have spent incredible amounts of their free cash flow on stock buybacks:

So what should happen here? The airlines obviously need the bailout or some of them will fail. The airlines would also have a lot stronger balance sheets if they hadn’t spent the last decade spending majority of their cash on buying their own shares. My solution would not be to eliminate stock buybacks, but instead ask companies to take ownership for the risk they take.

This would meant that companies could participate in stock buybacks, but if they do, they become ineligible for a bailout in the future. If a company refrains from participating in a stock buyback program, they remain eligible for a bailout in the future. My guess is that most companies would choose to participate in the stock buyback program, rather than be eligible for a potential rainy day, but they would proceed with much more caution in how they execute these programs.

Maybe United Airlines would only spend 10-20% of their free cash flow on stock buybacks, instead of the 80% they spent in the last decade. Or maybe they would continue to spend 80% — who knows. But with this positioning, the federal government wouldn’t be responsible for bailing out the organizations that are poor allocators of capital. Business is a game of survival and profits. Most of the executives who have been playing are solely focused on profits, but have forgotten the game of survival.

The problem is that you can’t make profits if you don’t survive. We are watching these poor allocators of capital ask the government to make up for their sins. That doesn’t make a lot of sense to me. Instead, we should allow the bad companies to fail and help new companies enter the market to compete for profits. Competition ultimately drives better products for the customer, more efficient allocation of capital, and ultimately more profits for the government to tax.

If you want to take risk, you have to be willing to live with the consequences. Not sure if that will happen this time (Buffett or the government is likely to bail these folks out), but a guy can dream of that day. In the meantime, many economies around the world are going to need help over the coming weeks and months. These economies are not alone though. The small businesses and individuals will need help too. The solutions are not black and white. They are quite complex and will involve both monetary and fiscal stimulus.

I remain confident that the United States will prevail in this challenge. We have done it before and we will do it again. The debate will rage on as to which solution is the correct one, but at the end of the day we should optimize for getting something done rather than chasing perfection.

-Pomp

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

THE RUNDOWN:

Coinbase Chief Legal Officer Leaves to Take Senior Role at US Bank Regulator: Coinbase's chief legal officer, Brian Brooks, is leaving the crypto exchange to become the second in command at the U.S. Office of the Comptroller of the Currency. The OCC announced Brooks' appointment Monday, saying U.S. Treasury Secretary Steven Mnuchin designated Brooks as the new deputy effective April 1, 2020. Read more.

Retail Investors Are Buying the Bitcoin Institutions Are Selling, Traders Say: As institutions unload bitcoin along with stocks as part of the coronavirus-driven global sell-off, cryptocurrency’s traditional base – retail investors – is doing most of the buying, market participants said. And while pricing screens may still be flashing red, business is brisk at many trading platforms. Read more.

Gemini’s Nifty Gateway Bets on Celebs to Drive Interest in Crypto Collectibles: The “Bitcoin Billionaire” twins, Tyler and Cameron Winklevoss of the Gemini crypto exchange, now also have a regulated, fiat marketplace for non-fungible tokens (NFTs). Gemini first acquired Nifty Gateway in late 2019 with Tyler Winklevoss saying in a statement, “We believe that both real-world and digital collectibles will migrate onto blockchains in the form of nifties.” Read more.

Swedish Central Bank Bids to Host BIS Hub for Digital Currency Research: Sweden’s Riksbank says its digital currency researchers are the best in central banking. That lofty claim comes in Riksbank’s March 3 bid to host a Bank for International Settlements Innovation Hub, a new initiative by the "bank of central banks" that now wants to scatter the world with local financial innovation policy clearinghouses. Read more.

Binance Launches $50M ‘Blockchain for India’ Fund: Binance and its local subsidiary have set up a new fund to reinvigorate growth in blockchain startups in India following a Supreme Court decision to allow banks to service crypto firms. Binance and India-based bitcoin exchange WazirX – which Binance acquired last November – announced Tuesday their new "Blockchain for India" fund would incubate and invest in local startups that contribute to the creation of a sophisticated cryptocurrency and blockchain ecosystem for the subcontinent. Read more.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Duncan and Griffin Cock Foster are the founders of Nifty Gateway which was recently acquired by Cameron and Tyler Winklevoss' Gemini crypto exchange. This world of digital collectibles is new to me, so this conversation was super informative and entertaining. They convinced me that there will be large market opportunities in the space and I was impressed with how they are thinking about the future of Nifties.

In this conversation, Duncan and Griffin and I discuss:

* What it was like growing up together

* Why they pursued startups

* How NFTs work

* Why Nifties are likely to be so valuable in the future

* How the Gemini acquisition came together

* What artists are launching collections on their new US dollar centralized NFT exchange

I really enjoyed this conversation with Duncan and Griffin. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Podcast Sponsors

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

* TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

To investors,

Yesterday was an absolute bloodbath across markets. It feels like I am writing that almost every day now. There is not a person participating in financial markets that doesn’t have a pit in their stomach. This feeling can only be described one way — it sucks. Prices keep falling and falling. There is no end in sight. We all know that every asset is not going to zero, but the uncertainty of it all can be overwhelming to some.

There is one main difference between all these market drops though. Every financial market in the world except one has hours of operation and structural mechanisms to prevent high levels of volatility. Take the US stock market for example. It trades from 930am to 4p EST every day. If stocks ever fall 7% in a single day, trading is halted for 15 minutes. If they proceed to fall 13% in a day, trading is halted again. And god forbid they fall 20% in a single day, trading is over for the day. Why does the market operate this way? Those in power believe it is the best way to protect investors.

But this is not how free market capitalism works. Take the Bitcoin market as a comparison. There are no hours of operation. Bitcoin trades 24/7/365 on a global basis. The market can go up as much as it wants and it can go down as much as it wants. Circuit breakers are non-existent. For example, Bitcoin literally dropped more than 50% at one point yesterday, before rallying back significantly to end the day only down approximately 30%.

That is a level of volatility that most traditional investors couldn’t stomach. They are too used to the non-volatile, traditional asset markets. But the current liquidity crisis is screwing up that level of comfort. We are watching the traditional investors get uncomfortable really fast. Yesterday, the S&P 500 was down 9.5% for the day. If you look at historical volatility levels, this would be the equivalent of Bitcoin dropping 51%. The difference is that Bitcoiners are used to the volatility, while the stock investors are acting like the world is ending.

Additionally, the S&P fell 9.5% even though (a) the circuit breakers went off after the initial 7% fall upon the opening of the market and (b) the Fed announced a monetary stimulus plan that totaled more than $1.5 trillion. Yes, you read that right. The S&P 500 was as volatile as Bitcoin’s 51% price drop on a relative basis, yet this all happened in spite of the market structure mechanisms that have been put in place. Most traditional investors will argue that those market structure mechanisms are net positives, but I would argue the exact opposite.

The stock market is full of fragile assets. They can’t withstand volatility or pressure. The investors are soft. They don’t know what true free markets look like anymore. Whenever something bad starts to happen, they just start yelling for the Fed to come in and bail them all out. This isn’t capitalism, this is a form of socialism. The rich people just don’t like to use that word when they’re the ones doing the begging for help. Why should majority of Americans pay for the misdeeds and bad decision making of the investors who keep buying the stock market equivalent of shitcoins?! Short answer — they shouldn’t.

But this isn’t just my opinion though. In a weird new development, the market is starting to call the bluff of the Fed. When the Federal Reserve announced $1+ trillion in monetary stimulus yesterday, the stock market recovered about 200 basis points for a few minutes before puking even lower. 

Simply, the market doesn’t believe that the monetary stimulus will work. We already know that the market has priced in a near 100% chance that the Fed will cut rates at the next rate decision and most people believe an eventual 0% interest rate is a foregone conclusion at this point. This leaves the big decisions on the quantitative easing side — how much money can the Fed print?

The short answer is that the Fed can print as much money as they want. It is literally backed by nothing other than the belief of people. If the market is unresponsive to $1.5 trillion in stimulus, this may be a sign that the Fed will have to print trillions of dollars. Yup, I wrote trillion with an “s” on the end. Absolutely insane.

Remember, economies are like crack addicts. The crack addict was once sober. Then they tried a little bit of crack and got high. They liked it. So they do it again. And again. And again. Each time they try to get high, it takes a little more crack. At some point, the crack user becomes a full-fledged addict and needs incredible amounts of crack to get the same high.

This is how economies become dependent on monetary stimulus too. They were once void of it. Then they tried a little bit of stimulus and it worked. They liked it. So they did it again. And again. And again. Every time they did it, they had to do a little bit more because the market was already “addicted” to the stimulus. We have now reached the point where the legacy financial system has become a full-fledged monetary stimulus addict.

This is why yesterday’s announcement probably didn’t have an effect. It wasn’t enough stimulus. The stimulus addicts needed more to get their high. As you can expect, this is a very scary world to be living in. The Federal Reserve will have to print so much money to get the market to respond that they actually risk high inflation at minimum and full-on hyper-inflation at a maximum.

Bitcoin was built for this scenario. While all the nonsense and wealthy socialism is going on in the traditional markets, the decentralized digital currency will keep doing exactly what it is supposed to do. Block after block after block being produced. The strongest computing network in the world continues to march on.

The liquid markets for Bitcoin will keep doing what they are designed to do as well. Trading 24/7/365. No circuit breakers. No government intervention. No socialism. Just a global, free market where anyone can come to buy or sell the hardest money the world has ever seen. Most people on Wall Street don’t understand the importance of this. They are too indoctrinated in the legacy system. They were literally begging for the Fed to pump billions or trillions of dollars into the system on national television yesterday!

But all is not lost. There are a small few from the old world that get Bitcoin. They understand why the world needs this asset to be the parachute from the chaos. Take Dan Tapiero for example. He has spent decades in the traditional financial system and is widely respected by many people across the global macro investing world. He tweeted this last night:

Dan gets it. Eventually more will too. On a historical volatility basis, both Bitcoin and the S&P 500 had the same volatility yesterday. The difference is that one market is heavily manipulated by the Fed and one is a completely free market. You can choose which system you prefer, but I am uncomfortable putting my wealth in the hands of those who can (a) shut down the market, (b) devalue my currency on a whim by printing trillions of dollars, and (c) have a history of lying to the American people about what they are doing and why.

Bitcoin is the most anti-fragile asset in the world. It has withstood multiple drops of over 40% in its lifetime. It is attacked every day. And yet it keeps doing exactly what it was built to do. That same resiliency can’t be used to describe the traditional markets. The stock market is full of zombie companies that don’t have enough EBITDA to service their debt. The stock prices are being propped up by a debt-fueled buy-back program that was illegal and considered market manipulation until the early 1980s.

The legacy system is rigged against the little guy. The elites are simply playing a game to enrich themselves. You have never seen them print $1.5 trillion to help the homeless, cure a disease, or solve real problems. They do it when asset prices are starting to drop though. They do it when their personal net worths are falling. And they do it at the expense of the average American.

This all started in 1971 when the link between the dollar and gold was destroyed. Since then, the distribution of wealth has not only reversed, but the wealth inequality gap continues to widen. This is what happens when you move from sound money principles to a world where those in charge can print money at will, which is then used to prop up asset prices.

Unfortunately, 50% or more of Americans can’t afford an emergency $400 bill. They live paycheck to paycheck. The monetary stimulus doesn’t bail them out. It bails out the sophisticated investors who were so drunk on chasing profits that they continued to allocate capital to over-leveraged companies and bad risk-reward trade-offs. That is what investing is all about — take risk to earn a return. But in the legacy financial system, the idea of risk has drastically changed.

The market will close if things become too risky. The Fed will step in to save you. But we all know this isn’t sustainable. Yesterday we saw for the first time that the market may be starting to understand that as well. They announced $1.5 trillion in monetary stimulus and still ended the day down 9.5%. There will be plenty of people who yell “but look at today’s performance!,” but that misses the point (this is being posted before market opening too). A single day rally in prices doesn’t fix the underlying issues.

We must stop fearing the failure of businesses or markets. The free market must reign supreme. If Wall Street doesn’t allow that to happen, the average person will go find it somewhere else. If it wasn’t so sad, it would have been hilarious watching all these wealthy “capitalists” begging for Fed intervention yesterday.

The real capitalism is happening on the free markets of Bitcoin. The decentralized, digital currency allows anyone to live and die by the decisions they make. And I, for one, am so glad that we have this escape route as an option during this upcoming financial crisis. I’ll leave you with this hilarious tweet from my friend Josh Brown:

While it made me laugh, it also shows the difference in mindset between market participants. Bitcoin doesn’t need the Fed to ask. It is the best performing asset of the last decade and it is still up more than 25% from where it was trading on this day last year. Bitcoin’s volatility is a feature, not a bug. Those who are willing to stomach the pain on the downside are the ones who earn the right to reap the rewards on the upside.

-Pomp

If you enjoyed reading this piece, you can subscribe to get my analysis every morning. There are 40,000 other investors who read about finance, macroeconomics, business, technology, and Bitcoin every day. Hope you join us!

THE RUNDOWN:

New York Regulator Tells Crypto Firms to Develop Coronavirus Contingency Plans: New York’s Department of Financial Services (NYDFS) is requiring the state’s sanctioned cryptocurrency firms to provide detailed coronavirus preparedness plans, signaling the seriousness COVID-19 poses to businesses as well as public health. Read more.

Coinbase Moves to Cut Blockchain Load With Bitcoin Batching: San Francisco-based cryptocurrency exchange Coinbase has started grouping multiple bitcoin transactions together, rather than issue sends one by one. The adoption of "batching," the firm said in a blog post Thursday, will mean less strain is put on the Bitcoin blockchain from large numbers of transactions arising from the popular exchange. The move will further reduce transaction fees for customers, according to the post.Read more.

Makeup Mogul Michelle Phan’s Coronavirus Strategy Is Educate and HODL Bitcoin: Although the coronavirus-induced economic slowdown is hitting every sector, beauty mogul Michelle Phan has a plan. “I’m starting a podcast this year, called ‘Baby Steps,’” Phan said.“It’s essentially to help people take steps into adulthood … buying bitcoin, how to store it, what to do with it.” The 32-year-old entrepreneur, who already has an estimated net worth of $50 million, is looking to work with crypto companies to promote educational content and spread such information on her own channels as well. Read more.

Mass Surveillance Threatens Personal Privacy Amid Coronavirus: As governments look to contain the spread of COVID-19, they’re turning to every tool at their disposal, including large surveillance networks, personal cell phone tracking, and AI and facial recognition. In the interest of preserving a society's health, it makes sense to use every option available. But it does raise privacy questions that will need to be addressed when the virus (hopefully) has moved on. Read more.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

PlanB is one of the most notorious Bitcoin investors in the world. He has amassed a loyal and engaged following on Twitter and invented & popularized the stock-to-flow pricing model that is widely cited throughout the Bitcoin community. He reveals in this conversation that he is part of a ten person investment team that oversees approximately $100 billion in institutional assets, which gives a new perspective on his work. This conversation will leave you incredibly bullish on bitcoin, so proceed with caution :)

In this conversation, PlanB and I discuss:

* His discovery of Bitcoin

* What it took to feel comfortable enough to invest

* How he came across the s2f model

* Why his team hasn't bought Bitcoin in their institutional funds

* Why PlanB believes the s2f model is actually getting more accurate over time

I really enjoyed this conversation with PlanB. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Podcast Sponsors

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

* TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Travala.com is the world’s leading blockchain-based travel booking platform trusted by thousands of customers worldwide as their preferred online travel agency. The Travala.com platform currently offers 2,000,000+ properties in 230 countries with prices up to 40% cheaper than mainstream travel booking platforms.

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

To investors,

We are watching history unfold. There will be books written about the events that are transpiring in financial markets right now. Every day feels like a month. Fear and panic are dominating the minds of most people. As I wrote earlier this week though, like most things in life — this too shall pass.

Before we get into my thoughts about where we are, here is what has happened in the last 24 hours or so:

* The big news was that President Trump gave a national address last night related to COVID-19 and the subsequent economic / health impact. The key points of the speech were that travel from Europe to the US will be greatly hindered for the foreseeable future, the government is working on financial relief for small businesses and/or individuals affected by COVID-19’s economic slowdowns, and the IRS is likely to extend the tax reporting date for some.

* The NBA season was suspended indefinitely after a member of the Utah Jazz team tested positive for COVID-19.

* The Italian government “ordered all shops in the country to close except for grocery stores and pharmacies until March 25. Public transportation as well as financial and postal services will continue, but the country’s normally vibrant restaurants, cafes and bars will be shut. Factories can continue operating, but only with precautions.”

* The S&P 500 dropped 7% on opening this morning and immediately triggered the circuit breakers, which puts a halt on trading for 15 minutes.

* The Dow Jones Industrial Average is down approximately 8.5% this morning.

* Bitcoin is down approximately 23% this morning.

* Oil is down approximately 8% this morning.

* Gold is down approximately 2.5% this morning.

This is just a small selection of the various developments. It can all be summed up with a simple framework:

* COVID-19 has officially been labeled a pandemic by the World Health Organization. The necessary response requires social distancing and shutting down of large gatherings or various forms of economic activity.

* The virus is grinding economies around the world to a halt.

* The structural flaws in various markets are exposed when economies slow down, including too much leverage and lack of liquidity.

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

This is why you are seeing any asset with a liquid market tanking so hard right now. Additionally, the US treasury market (the most liquid market in the world) is experiencing incredible pain right now as well.

These two charts show that volatility is exploding and there is increasing levels of illiquidity in the UST market. If this is happening in the most liquid markets, you can imagine how bad this is becoming in less liquid markets.

Which brings me to assets like Bitcoin and gold. These assets have historically shown to be (a) non-correlated and (b) serve as safe haven assets. That all changes during a liquidity crisis though. In the short term, any asset that can be sold into a liquid market for cash is likely to be sold. Investors are incredibly insensitive to price. They need cash so badly that they will make traditionally irrational decisions in order to optimize for liquidity.

These sellers (and liquidity seekers) include retail investors, hedge funds, banks, and pretty much anyone else that has exposure to financial markets. This type of imbalance in buyers and sellers also explains why the Fed is stepping in to repo markets (overnight borrowing) with such significant size (recently increased to $175 billion). The statement that the Fed put out explains it well:

“Consistent with the FOMC directive to the Desk, these operations are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation. They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.”

If the Fed doesn’t step in, there is even larger liquidity issues. Before we get off on a tangent though, I want to get back to the sell off in safe haven assets. Remember, the short term optimization for investors is for liquidity. If an asset has a liquid market, the asset will be sold for cash. There is not an asset on the planet that is immune from this market dynamic.

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

Even though gold fell 30% during the 6 month liquidity crisis, the asset still went from approximately $650 in 2006 to over $1,800 in 2011. Why? Because people ran to gold when they feared that the United States would default on debt, that the US monetary policy measures were a bad idea, and/or that inflation was rising. Simply, gold served as a store of value and safe haven asset over the full timeline of the crisis, but it succumbed to the liquidity crisis during the worst 6 months. (data/chart provided by Delphi Digital)

This is what I believe is happening to Bitcoin right now. Bitcoin has a liquid market, so many people who are holding it will sell it for cash because they need liquidity. In fact, most of them have already sold the asset over the last week, which is why we have seen such a significant drop in Bitcoin’s price. The weak hands and/or those seeking liquidity have most likely acted already, so it is unlikely that we will see continued sell offs that cause massive price decreases from these levels. (approximately $6,000 price as of this writing).

This doesn’t guarantee that Bitcoin’s price won’t go lower for a short period of time, but it does mean that most of the people who want liquidity have likely already sold. This then brings us to the next stage in how this crisis probably plays out — holders of last resort and the safe haven status.

There are a group of people, mostly individuals, who believe very strongly in the concept of sound money. These people have spent the time to educate themselves on the technical structure, monetary policy, and potential benefits of Bitcoin. They are convinced that Bitcoin’s sound money properties are superior to any other form of money. Regardless of price movements in the USD exchange value, the holders of last resort won’t sell their Bitcoin. They are strong hands. They can’t be shaken out of their belief. In fact, they are likely to be buying Bitcoin on these large price drops, rather than selling. They are exchanging USD for Bitcoin right now.

I am one of the strong hands and I exchanged more of my fiat currency into Bitcoin this morning.

Now the question shifts from “who is still holding Bitcoin?” to “what happens to Bitcoin over the next few months / years?” This is where I get really excited. I get excited because Bitcoin was built for this scenario. It is the hardest money the world has ever seen. It is provably scarce. It is difficult and expensive to produce. And the monetary policy is programatic and transparent. These things are important for any asset, but they become exponentially more important when we enter times like we are about to enter.

While the liquidity crisis is occurring in traditional markets and asset prices are in a free fall, the US government will feel the need to step in to save the average person. The legacy system is not built on free market capitalism, but rather a watered down version that relies on large, centralized institutions and governments to step in during times of uncertainty and fear. As we have discussed previously, central banks and governments have two tools at their disposal — interest rate cuts and quantitative easing.

We have seen the Federal Reserve cut rates consistently over the last year, including a recent 50 basis point emergency rate cut in the last two weeks. It wouldn’t surprise me to see further rate cuts in the next 6-8 weeks. My guess is that we will see rates at least hit 0.25%, with a high likelihood that they hit 0%. It is also possible that the United States will enter negative interest rate land, but there is a religious aspect to negative interest rates which suggests that they will do everything in their power to avoid negative rates.

So while rates are falling aggressively, the decision on when to shoot the other bullet (quantitative easing) becomes the focus. The Fed has already expanded their balance sheet by about $400 billion over the last few months, but they continue to say that it is not quantitative easing. Rather than argue semantics, it is important to understand that we have likely not seen anything like what they are going to have to do here.

My best guess is that we will see at least $1 trillion in total quantitative easing by the time this crisis is over. Anything less than that will probably not be enough to have the intended impact. Think about that for a second — $1,000,000,000,000+ in printing.

When the government prints this amount of money, they are injecting liquidity into the system, but they are also reminding people that the US dollar is not sound money. They are increasing the risk of high levels of inflation. And many will argue that the government is even illegally stealing the wealth of the bottom 50% of Americans when they print so much money.

The interest rate cuts and quantitative easing is market manipulation. They are trying to bail out the economy. When they do this, investors have historically weathered the liquidity crisis and then sought out (a) sound money and (b) safe haven assets. Both gold and Bitcoin should do incredibly well during this time period.

But Bitcoin has one other other aspect to it than gold — the upcoming supply shock (Bitcoin halving in May 2020). Right when Bitcoin is about to become super attractive to people because the US government / central bank begin incredible monetary stimulus efforts, the digital asset is going to see the incoming supply cut in half. One of the scarcest assets in the world is about to become even more scarce. (This would be the equivalent of investors seeking gold because of inflation, but half the gold mines in the world shutting down at the same time)

I say all this because it is important for people to understand what is happening in the short term (liquidity crisis), while still understanding the structural components that are at play in the long term (monetary stimulus simultaneous to Bitcoin halving).

I have been writing about this set up for almost a year now. It always had a 60-80% chance of happening in my mind. The big unknown was how long the bull market in traditional assets could last. The COVID-19 pandemic has accelerated the need for monetary stimulus, which is now going to fall within 60 days of the Bitcoin halving. My confidence level that we will see monetary stimulus around the same time as the Bitcoin halving is now well over 95%. You couldn’t have written a better script for the continued adoption of the decentralized digital currency.

The Bitcoin price is down over the last few weeks. This is what happens in a liquidity crisis. But understand what happens next in the sequence of a crisis. Monetary stimulus has to be relied on in order to stabilize traditional markets. This will greatly benefit Bitcoin and gold. Weak hands will sell during the liquidity crisis, which is simply a transfer of these safe haven assets to the strong hands. The holders of last resort.

Be safe out there. There is a lot of volatility. Sometimes it is best to just walk away from your computer and breathe. Other times it is important to read about what is happening to ensure you understand where we are in the timeline of these events.

This time is not different. Liquidity crises have happened before. They will happen again. Monetary stimulus has driven investors to safe haven assets with sound money properties before. They will do it again many more times in the future. Welcome to market cycles if you have not been here before.

History is transpiring right now. Liquidity has dried up. Those that remain unfazed by the short term pain are usually the ones who avoid making bad decisions. I can’t believe we are getting the opportunity to live through this period in time. Thankfully, we have a parachute with us this time around.

-Pomp

If you enjoyed reading this piece, you can subscribe to get my analysis every morning. There are 40,000 other investors who read about finance, macroeconomics, business, technology, and Bitcoin every day. Hope you join us!

THE RUNDOWN:

French Financial Regulator Suggests Europe-Wide Security Token Sandbox: France’s Financial Markets Authority (AMF) has proposed that all of Europe adopt a regulatory sandbox to support the emerging security token industry. The “Digital Lab” would run for three years, the watchdog said in a March 6 legal analysis, exempting projects from financial regulations like the MiFID and CSDR that AMF’s analysis deemed incompatible with the blockchain sector’s growth. Read more.

Australian Tax Office to Warn Investors Over Crypto Misreporting: The Australian Taxation Office is set to issue warnings to hundreds of thousands of residents who may have traded cryptocurrencies. As reported by news.com.au on Wednesday, up to 350,000 Australians will be contacted by the ATO in the coming weeks reminding them of their obligations when trading in digital assets like bitcoin. Under Australian federal law, cryptocurrencies are considered as a form of property and are thereby subject to the same regulations relating to capital gains tax. Read more.

US Court Fines ICOBox $16M for Securities Violation in SEC Case: A federal court has ordered ICOBox to pay a $16 million penalty to the Securities and Exchange Commission's (SEC) for violating U.S. securities law. On March 5, Judge Dale S. Fischer of the District Court for the Central District of California granted the SEC's motion for default judgment against the ICO-as-a-service platform and founder and CEO Nikolay Evdokimov. Read more.

New York Crypto Companies Move to ‘Work From Home’ in Face of Rising COVID-19 Threat: The New York metropolitan area’s surging coronavirus count is forcing more of the region’s cryptocurrency and blockchain companies to prepare for an unsavory reality: Their offices may close without warning and their employees may need to begin working remotely. CDC officials say “social distancing” can slow the spread of the virus, also known as COVID-19, which the World Health Organization classified as a global “pandemic” on Wednesday. Read more.

Binance Stablecoin BUSD Tops $100M but Lags Behind Rivals: Binance USD, a U.S. dollar-backed stablecoin, has surpassed $100 million in market capitalization, chipping away at a market still dominated by Tether's TUSD. Also known as BUSD, the token is traded almost exclusively on the Binance exchange and its market cap - which roughly corresponds to the total value of dollars deposited with its issuer, Paxos - is currently at $115 million. Binance USD runs on top of the Ethereum blockchain. Read more.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

PlanB is one of the most notorious Bitcoin investors in the world. He has amassed a loyal and engaged following on Twitter and invented & popularized the stock-to-flow pricing model that is widely cited throughout the Bitcoin community. He reveals in this conversation that he is part of a ten person investment team that oversees approximately $100 billion in institutional assets, which gives a new perspective on his work. This conversation will leave you incredibly bullish on bitcoin, so proceed with caution :)

In this conversation, PlanB and I discuss:

* His discovery of Bitcoin

* What it took to feel comfortable enough to invest

* How he came across the s2f model

* Why his team hasn't bought Bitcoin in their institutional funds

* Why PlanB believes the s2f model is actually getting more accurate over time

I really enjoyed this conversation with PlanB. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Podcast Sponsors

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

* TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Travala.com is the world’s leading blockchain-based travel booking platform trusted by thousands of customers worldwide as their preferred online travel agency. The Travala.com platform currently offers 2,000,000+ properties in 230 countries with prices up to 40% cheaper than mainstream travel booking platforms.

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

Below is a guest post from Amy Davine Kim, Chief Policy Officer of the Chamber of Digital Commerce. I will be attending their blockchain summit on March 11th and wanted the organization to give a preview of the types of conversations that will happen at the event. Enjoy this guest post and hope each of you has a great weekend!

One of the most difficult questions plaguing the digital asset industry is that of when is a digital asset a security, and when is it not? What are the rules? In some cases, this is obvious – for example, a digital representation of a physical equity or debt is itself a security. But in others, more consideration is needed. For example, when an investment contract is formed between a digital asset (token) provider and a buyer, and the buyer then receives the token, has been the subject of much discussion. In fact, the question is so thorny that the SEC has issued at least 17 pieces of guidance, and taken 48 enforcement actions, of which 26 have gone to court.

The questions surrounding this space are creating a chill in the United States for blockchain development projects. Having the perspective of our more than 220 members and almost six years of experience representing our industry, we can see a clear shift toward projects overseas. Anywhere overseas. And businesses are not just looking for friendlier regulatory regimes. They are looking for clear rules of the road, with goal posts and yard lines well-marked, points delineated for certain accomplishments, penalties spelled out for clearly defined violations. Imagine if you were a football player, and the referees may or may not acknowledge your touchdown or call a penalty. Would you reconsider your playbook? Would you play the game at all?

The Chamber has long taken the position that violations of law must incur penalties. Orderly application of laws creates a fair marketplace. It seems, however, that we have fully embraced this role, without the corresponding consideration of how to support innovative technologies to create new and better networks.

That’s why Commissioner Peirce’s safe harbor proposal is important. In it we see the Commissioner attempt to create a period of time in which developing companies can grow a network that is never intended to be a security or operate as one. Certain consumer protection principles must be met to comply with the requirements, and the platform must meet “Network Maturity” within three years to receive the full benefit of the safe harbor and, presumably, not be considered a security at the other end.

Notably, Network Maturity is reached when a platform is decentralized or functional. This is important because it demonstrates an evolution from Director Hinman’s speech, Digital Asset Transactions: When Howey Met Gary (Plastic) in June 2018, in which he determined that certain tokens, such as bitcoin and ether, have become so decentralized that they are no longer considered securities (if they ever were). Decentralization, if we are able to define it sufficiently, would eliminate the presence of one factor in the Howey test, reliance on the efforts of others. However, the safe harbor also allows for another option, functionality. These do not need to be achieved together, but are alternatives, either of which defeats the Howey analysis because, at functionality, the item has become a consumable good.

The achievement is also notable because it no longer forces companies into one business model – that of decentralization. While decentralization is one of the true transformations that Bitcoin and other protocols offer (allowing those who do not know or necessarily trust each other to interact), requiring this element as the only way to avoid the application of the securities laws forces businesses into one type of business model. Why should founders be forced to create something that must be released to a broad community and step back from the project, relying on smart contracts and a network of validators to continue to function? While Bitcoin and others like it are extraordinary, we have seen some projects that would greatly benefit from the founders’ continued involvement to enhance or evolve the protocol’s functionality. Businesses are not static; they adapt to changing environments, competition, customer needs, and demand. We should allow for the possibility of this dynamic environment for blockchain platforms as well.

Commissioner Peirce joined the Chamber for a private meeting last week to detail her views on this proposal and take questions from our members directly. While many of our members are supportive, some asked questions probing certain points. In my view, receiving critical views can sometimes be even more productive – causing creators to think carefully about proposals and enhance them to address all angles. While we have recommendations to help enhance Commissioner Peirce’s proposal, I appreciate her effort to develop such an innovative idea and create clear rules for players to follow.

One of my favorite quotes is by Sam Rayburn (for whom the Rayburn Building in the U.S. Capitol is named): “Any jackass can kick down a barn, but it takes a carpenter to build one.” Commissioner Peirce has not only proven herself an independent voice in the community, but also shown she is a budding carpenter and, as comments come in, a busy referee.

Want to hear directly from Commissioner Peirce? Join Pomp and CryptoMom on March 11-12 at the DC Blockchain Summit at Georgetown University. Use the code – POMP – to save 15% off. Register today at www.dcblockchainsummit.com.

THE RUNDOWN:

US House Committee to Hold Hearing on Blockchain Benefits for Small Businesses: The U.S. House of Representatives Committee on Small Business is set to discuss the benefits blockchain technology can bring to entrepreneurs. Slated for March 4 at 16:30 UTC, the "Building Blocks of Change: The Benefits of Blockchain Technology for Small Businesses" hearing will explore the ways in which some startups are utilizing blockchain technology to boost productivity and increase security. Read more.

Coinbase Is Testing Clearview’s Controversial Facial Recognition Technology: Coinbase is among more than 2,000 entities from around the world working with Clearview, a controversial facial recognition technology provider. Internal documents obtained by BuzzFeed revealed New York-based Clearview AI – a startup facing legal threats from Apple and Google as well as calls for greater scrutiny into its practices – had already shared or sold its technology to roughly 2,200 companies and authorities based all around the world. Read more.

ICE’s New Intel Program Used in Every Homeland Security Crypto Investigation: Immigration and Customs Enforcement’s recently disclosed “Cryptocurrency Intelligence Program” is deployed in every crypto-facing Homeland Security Investigations case, says the agent whose unit built the tool. In an email statement, Al Giangregorio – unit chief at the HSI's National Bulk Cash Smuggling Center – shed a little light on the mysterious intel program first mentioned in ICE’s recent FY 2021 budget proposal. Without explaining exactly what CIP is or how it works, he broadly said it helps HSI agents whenever cryptocurrency is involved. Read more.

Coronavirus Hits US Stocks, Bitcoin Climbs, Haven Status Unclear: The spreading coronavirus sowed a new bout of fear among investors, triggering a stock market sell-off and flight to safe-haven assets like gold and U.S. Treasury bonds, with 47 countries now reporting infections amid widespread reports of travel cancellations, shipment delays and business interruptions. U.S. stocks fell for the sixth straight day, Treasury yields slid to a record low and gold prices were little changed close to a seven-year high. Bitcoin’s price climbed 1.4 percent to $8,902, rising along with popular cryptocurrencies including ether. Read more.

Startup Tokenizes $2.2B in Commercial Real Estate Through Polymath: Commercial real estate marketplace Red Swan has tokenized $2.2 billion in real estate through security token platform Polymath. According to Red Swan CEO Ed Nwokedi, $780 million of that is available to investors in pre-sale, while the company has another $4 billion in real estate in its tokenization pipeline. The $2.2 billion represents 16 different Class A commercial properties based in Austin and Houston, Texas, Brooklyn, N.Y., Oakland, Calif., and Ontario, Canada. Read more.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

Austin Rief is the Co-Founder of Morning Brew, a new media company bringing you informative and digestible business news. He and his team have built a business with ~ 2 million subscribers, $13+ million in revenue, and 35+ employees in less than 4 years. They are consistently on top of every media or millennial business trend, while having thought a lot about various aspects of the industry. I also try to convince Austin of Bitcoin’s future in the world which was fun. Hope you enjoy this one!

In this conversation, Austin and I discuss:

* The founding story of Morning Brew

* What media companies he is obsessed with

* How his team grew their email list so quickly in college

* Why Morning Brew is expanding into other verticals and media formats

I really enjoyed this conversation with Austin. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE

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Bitcoin’s price is up almost 50% since the start of 2019. Instead of obsessing over the volatile price movements, it is important to stay focused on the underlying fundamentals of the transaction settlement network.

Here is the current state of Bitcoin’s fundamentals:

There are just under 17,700,000 of the 21,000,000 total Bitcoins in circulation.

The hash rate securing Bitcoin’s network has increased more than 10x over the last two years.

Miners are making almost 3.5x more Bitcoin (in USD value) on a daily basis than they were two years ago.

The cost per transaction has more than doubled in the last two years, but has fallen more than 60% over the last 12 months.

The number of transactions per day on the Bitcoin blockchain have increased over 70% in the last two years and continues to rise over the last 12 months after hitting a local low point in May 2018.

The total number of Bitcoin blockchain wallets has increased over 2.5x in the last two years.

With more computing power securing the network, and more users holding & transacting the scare, decentralized digital currency, it is no surprise that an individual Bitcoin is worth more than 440% today than it was two years ago.

Bitcoin is a highly volatile asset. It is misunderstood by many. But one thing is certain, the digitally native currency continues to strengthen over time. As with anything important in life, the maturation and mass adoption of Bitcoin will take time.

Those that have the patience and discipline to stick around will be rewarded handsomely.

-Pomp

The “Off The Chain” podcast has been downloaded 800,000+ times in 160 countries. You can listen to the latest episode with Viktor Radchenko, Founder of Trust Wallet here: Click here for Off The Chain podcast

THE RUNDOWN:

Tennis Star Serena Williams Reveals Investment in Coinbase: Serena Williams, one of the world’s most successful tennis players of all time, has revealed that she is an investor in cryptocurrency exchange Coinbase. Williams recently announced her VC firm Serena Ventures – which was secretly founded in 2014 – and listed some of its investments, including Coinbase and startups in areas such as fitness, clothing, food and women’s health and community. Read more.

You Can Now Shop With Bitcoin on Amazon Using Lightning: Bitcoin spenders can now use the lightning network to shop at e-commerce sites like Amazon. Crypto payment processing startup Moon announced today that any lightning-enabled wallet can now also be used through Moon’s browser extension. Before this lightning feature, roughly 250 beta users already used Moon to spend crypto on e-commerce sites by connecting the browser extension to exchange accounts like Coinbase. Read more.

JPMorgan Expanding Blockchain Project With 220 Banks to Include Payments: JPMorgan Chase is planning to expand an existing blockchain project to include settlement features as it seeks to fend off competition from payments upstarts such as TransferWise and Ripple. The blockchain-based Interbank Information Network currently allows its over 220 banking members to quickly address payments that contain errors or get held up for compliance reasons – problems that can takes weeks to solve with multiple banks being involved across the payments chain. Read more.

Campaign to Raise $1M in Crypto for Venezuelans Registers 60,000 Beneficiaries: A charitable campaign to enable the direct transfer of $1 million in crypto donations to Venezuelans has registered around 60,000 verified beneficiaries and raised $272,000 to date. the campaign, dubbed “Airdrop Venezuela,” is using the existing blockchain and bank-connected e-wallet infrastructure from Mexico-based startup AirTM. Read more.

Hacked Crypto Exchange Zaif Resuming Full Services Under New Owner: Japanese cryptocurrency exchange Zaif, which was hacked for about $60 million last year, is under new management. The exchange announced on its corporate website on Friday that, as of Monday, April 22, the firm will have signed over its business to publicly listed Japanese investment firm Fisco and full operations will be reinstated Tuesday. Read more.

Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.

Founders are realizing that transparency, audience, and engagement are significant advantages in today’s business environment.

The invention of the internet, and the adoption of social media specifically, has led to a new set of tools being available to entrepreneurs as they build their companies. Rather than operating behind closed doors, a new crop of companies are using these tools to build highly defendable moats. Here are a few examples:

* Austen Allred and Lambda School — The company is taking on the big, bad higher education system by providing free computer science education to students. Think of it as a coding bootcamp on steroids. The best part? Students don’t pay for the education unless they earn $50,000 or more post-Lambda School. The cost isn’t paid with debt either, but leverages Income Sharing Agreements instead. Austen has expertly used Twitter to build a loyal following, drive the acquisition cost of students down, drastically increase the tech community’s support of the company, and generally create a situation where Lambda School has a sense of inevitability to it now. It would be incredibly difficult for someone to recreate the magic of Austen’s Twitter account, let alone compete head-to-head with the fast growing startup.

* Barstool Sports — The controversial media startup has grown from a one-man operation into a $100+ million empire. Dave Portnoy and his band of social media mavens have created one of the most engaged audiences on the internet, which allows the company to rally the troops around ideas, sell merchandise, drive attendance at events, and monetize a media company in a way that was previously unseen. When the company makes a mistake, they immediately admit it publicly and keep pushing forward, which has led to a level of authenticity and raw fanaticism that is rare in business.

* Kraken — The cryptocurrency exchange was recently faced with navigating the highly debated BitcoinSV debacle, which left the exchange wondering if they should continue to support the Bitcoin fork or delist it. Rather than try to make the decision in a unilateral manner, Kraken ran a Twitter poll that made the decision easy. This level of transparency and customer engagement is absent in the legacy financial system, which helps companies like Kraken stand out.

As Paul Graham of YCombinator famously says, find 100 customers that absolutely love you, rather than 1,000 customers that sort of like you. Each of the examples above, along with many more for-profit companies today, are figuring out that highly engaged, loyal audiences are a defendable moat worth building.

As crypto networks become more popular and pervasive, I anticipate that this community/network building skill set will become more important. Teams will start to sink significant dollars into building repeatable, scalable models that produce these audiences. We started to see this with the “Telegram community building” during the 2017 ICO boom (teams would race to get as many people into their Telegram messaging chats and then brag about it to investors as a sign of traction), but that was just the tip of the iceberg.

Audience is a new currency. Those that have it, have incredible power. Those that don’t are starting at a disadvantage. Whether entrepreneurs are building crypto networks or for-profit companies, those who control the message, control the future.

-Pomp

The “Off The Chain” podcast has been downloaded 800,000+ times in 160 countries. You can listen to the latest episode with Jeremy Gardner, Managing Partner at Ausum Ventures here: Click here for Off The Chain podcast

THE RUNDOWN:

Trading App eToro Launches Crypto Versions of 8 Major Currencies: A popular trading app is betting people will have an appetite for digitized versions of other major currencies including euros, yen, and Swiss francs. On Tuesday, eToro said it would offer a total of eight stablecoins as part of the broader launch of a crypto exchange service called eToroX. CEO Yoni Assia said the introduction of the stablecoins is just the start of an ambitious plan to offer tokenized version of other assets, including precious metals and fine art. Read more.

Startup Arca Seeks SEC Approval for US Treasury Bond-Backed Stablecoin: Arca Investment Management is seeking regulatory approval to sell a new type of stablecoin to retail investors. The Los Angeles-based digital asset manager filed a prospectus with the Securities and Exchange Commission Friday for a bond fund whose shares would be tokenized on the ethereum blockchain. The Arca U.S. Treasury Fund is expected to be approved later this year, a spokesperson said. It would be available to the general public, but not traded on any stock exchange or alternative trading system, according to the filing. Read more.

Sirin Labs Lays Off 25% of Staff Amid Poor Blockchain Phone Sales: Israel-based Sirin Labs, maker of the Finney blockchain phone, has laid off a quarter of its workforce. The firm said it had let go of 15 of its 60 employees – less than had been speculated in the media. The layoffs come amid a disappointing consumer reaction to the firm’s recently launched blockchain phone. “Sales are not what we expected,” Sirin told Globes. The device started shipping in November 2018, and notably features a cold (offline) crypto wallet that is effectively a second device in the same housing as the phone. Read more.

LedgerX Reveals Bid to Beat Bakkt to Physical Bitcoin Futures Launch: Cryptocurrency derivatives provider LedgerX plans to become the first U.S. firm to offer physically settled bitcoin futures contracts. The company announced Monday that it has filed for a designated contract market license, which would allow LedgerX to offer physically-settled bitcoin futures products to its customers. Unlike the cash-settled bitcoin futures offered by CME Group (and previously, Cboe), customers would receive the actual bitcoin underlying a contract after it expires, rather than the U.S. dollar equivalent. Read more.

Chainalysis Caps Series B Funding With $6 Million From Two Japanese Heavyweights: United States-based blockchain intelligence firm Chainalysis has raised a further $6 million from two major Japanese investors, the company confirmed in a blog post on April 16. Chainalysis, which secured $30 million at the start of its Series B round in February, has hinted it will target the Japanese market in the future as it aims to ingratiate its compliance technology with banks and other financial institutions. Read more.

Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.

Private pension funds may be in more trouble than you think.

In Q4 2018, these funds realized the second largest percentage loss in assets since the 1950’s and the largest loss since 2008. As Tavi Costa pointed out on Twitter, the more than 5% drop in assets leads many to believe that the retirement funds of tens of millions of people are likely to be exposed to a much higher degree of risk than previously understood.

Take Japan’s Government Pension Investment Fund, the world’s largest pension fund, who has ~50% of their assets in global equities. During Q4 2018, they saw a 9.1% drop in assets, which is about $136 billion. Read that again….one of the most conservative capital allocators in the world has a portfolio that is constructed in such a way that they experienced uncommon levels of volatility and almost lost a double digit percentage of their assets in 90 days.

It is no secret that equity valuations are incredibly high and we experienced the longest bull market in history over the last few years. But no one should be investing based on past performance, but instead focusing on what is likely to happen in the future. As my partner Mark Yusko says, “Humans do two things really well — they buy what they should have bought and they sell what they are about to need.”

The highly concentrated equity portfolios of many pensions is a scary scenario that will turn ugly really fast when valuations begin to return closer to long term averages.

So what should these institutions do? As I have been saying for months, they need to immediately evaluate the option of gaining exposure to Bitcoin, cryptocurrencies, and the blockchain industry. The assets have proven to be low correlation to date and have an asymmetric return profile. A simple 1% allocation has the potential to materially negate any losses that could be experienced through an equity market fall.

In fact, the numbers are quite compelling. If Japan’s Government Pension Investment Fund had moved to #GetOffZero and gain exposure to cryptocurrency through our Digital Asset Index Fund last year, they would have seen a 46% return on the investment year to date or 0.46% increase in overall portfolio performance. With these trends playing out over the next 2-3 years, my anticipation is that the Digital Asset Index Fund will continue to drastically outperform the S&P 500. (We were literally willing to bet on it).

Additionally, adding the low correlation and asymmetric nature of Bitcoin and crypto to these pension portfolios should actually decrease the portfolio’s risk profile, rather than increase it based on modern portfolio theory. We are at an important moment in time — the retirement funds of tens of millions of Americans are in significant danger and it is important that capital allocators understand the benefits that Bitcoin and crypto present.

These people have been promised there will be money waiting to support them in retirement as long as they work hard and do their jobs. The people have upheld their end of the bargain…it is important that the institutions now deliver on their promise.

Rather than running from innovative technology, the best investors in the world (Yale, Stanford, MIT, Notre Dame, UNC, etc) are embracing Bitcoin, cryptocurrencies, and blockchain technology. Hopefully the majority of investors follow suit before it is too late.

-Pomp

The “Off The Chain” podcast has been downloaded 800,000+ times in 160 countries. You can listen to the latest episode with Avichal Garg, Managing Partner at Electric Capital here: Click here for Off The Chain podcast

THE RUNDOWN:

Bitcoin Exchange Kraken Sued by Former Trading Desk Manager: A former employee of Kraken, one of the oldest Bitcoin exchanges, is suing the crypto platform for allegedly failing to pay him for work he did. Jonathan Silverman, who was hired in April 2017 to manage Kraken’s institutional sales and trading desk in New York, is demanding compensation in excess of $900,000, according to a suit filed April 4 in New York. That’s based on an agreement Silverman says he reached with Jesse Powell, the San Francisco-based exchange’s founder, who offered him a $150,000 salary and orally agreed to pay him a 10 percent commission of the trading desk’s annual profit. Read more.

SEC Guidance Sparks Fear and Loathing in Crypto Industry: When the Securities and Exchange Commission this week issued guidelines for cryptocurrency companies that want to sell digital tokens, many in the industry praised the SEC for new regulatory clarity, but also privately seethed the agency had gone too far. “This feels like an overt declaration of war on cryptocurrencies,” said a senior lawyer who advises crypto firms. “The guidance is terrible but people say ‘we have to say nice things or they’ll prosecute us.’ Everyone is afraid the SEC is full of thin-skinned bureaucrats, and now they’re so used to groveling.” Read more.

Blockchain Mortgage Tech Startup Acre Software Raises $6.5 Million: United Kingdom startup Acre Software raised about $6.5 million to apply blockchain technology to the mortgage and insurance application process for advisers. Nearly three-quarters of UK mortgages are facilitated by advisers, and the company aims to help them retain their position by matching the speed of an end-user service. Acre reportedly uses blockchain to store all the data about mortgage advice immutably. Read more.

Barclays, RBS, R3 Cut Property Transaction Times in Blockchain Trial: Barclays, Royal Bank of Scotland, enterprise blockchain firm R3 and other participants have completed a blockchain trial that they say resulted in faster property transactions. The tech partner on the project, R3-affiliated Instant Property Network, announced Thursday that the trial used test data to carry out simulated property transactions over a distributed ledger system over a five day period. The effort, the firm said, demonstrated that the real estate buying and selling process could be reduced from more than three months to “less than three weeks.” Read more.

Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.

Bitcoin is back, baby.

The decentralized digital currency ripped 20% over night and surpassed the $5,000 mark for the first time in months. This quick price action was met with exuberance and fanfare from crypto enthusiasts. There are very few assets in the world as volatile as Bitcoin, and when the volatility is playing out, there is a level of exhilaration that is hard to match.

Many times I hear people talk about Bitcoin’s volatility in a negative way, but I believes this is the wrong way to look at assets and their price movements. Volatility historically plays out in short time horizons, but investors focused on long time horizons actually want the short term volatility.

Why is this?

Long time horizon investors have the stomach for the volatility so it doesn’t tempt them to make short-term decisions that are driven by fear, greed, or other emotions. They also understand that volatility in new assets is necessary to create price appreciation over a long period of time.

Forget about Bitcoin and cryptocurrencies for a second. Amazon is one of the most valuable companies in the world. Nearly every investor owns a piece of it through various passive funds. However, it wasn’t always the big, steady blue chip stock that it is today. In fact, Jeff Bezos had to defend Amazon stock’s volatility in a 60 Minutes interview in 1999 (highly recommend watching this).

Since the company has gone public, Amazon has drawn down 90% or more twice. And the average intra-year drawdown for more than 20 years is 30%+. That makes Amazon stock the definition of volatile.

But it hasn’t mattered. If you bought Amazon on the day it went public and held till today, you would have received more than 120,000% on your investment. That means a small $100 investment would be worth more than $120,000 right now. Obviously, very few people bought the initial IPO and have held through the volatility. People need liquidity. They are emotional. They get nervous. And they make short term decisions.

Regardless, short-term volatility doesn’t matter to the long-term investor. Bitcoin will be no different. The digital currency is one of the most volatile assets we have seen in awhile, but that means there is incredible opportunity for investors who have the stomach to handle it.

As I have said many times, Bitcoin is a game of accumulation. If an investor has done their own research, understands the risks, believes in the system design, watches the fundamentals, and has a low time preference, they stand a chance to be rewarded handsomely. This doesn’t have to be accomplished over night either.

Many of the investors that have made the most money in Bitcoin didn’t buy a bunch of Bitcoin in a single slug. They slowly accumulated more and more over months or years. They took a long term outlook on the asset. Shockingly, many of them not only haven’t sold their positions after incredible gains, but are still buying more today.

The world of investing works in weird ways. The investors with patience, conviction, and courage look wrong for a long time….until they are right. Bitcoin’s recent move has brought back a level of excitement that the market hasn’t seen in over a year.

While fun, keep it in perspective. This is a long game and we haven’t even left warmups yet.

-Pomp

The “Off The Chain” podcast has been downloaded 800,000+ times in 160 countries. You can listen to the latest episode with Dan Zuller, Partner at Vision Hill Advisors here: Click here for Off The Chain podcast

THE RUNDOWN:

The SEC Wants to Hire a ‘Crypto Securities’ Advisor: The U.S. Securities and Exchange Commission is seeking to hire yet another “crypto specialist.” The SEC’s Division of Trading and Markets plans to hire the new legal expert in order to help develop a “comprehensive plan” to address crypto and digital asset securities. One of the key responsibilities of the new hire would be to apply their “knowledge of federal securities laws to digital asset securities and crypto matters, i.e., broker-dealer, exchange, clearing agency and transfer registrations, exchange product applications, sales and trading practices, etc.” Read more.

Canadian Police Freezes Assets of FUEL Token Issuers due to Alleged $22 Million Fraud: Canadian police have frozen assets of the founders of blockchain consulting firm Vanbex, which raised $22 million in an alleged fraudulent initial coin offering. The development was reported in a court document released on March 14. Vanbex founders Kevin Hobbs and Lisa Cheng claimed to the public that they operated a Vancouver-based cryptocurrency firm, starting from 2017. The firm, which was interchangeably called Vanbex and Etherparty, is actually a shell company that developed no useable products, the court document argues. Read more.

Coinbase Expands Into Cross-Border Payments: American major cryptocurrency exchange Coinbase has expanded into cross-border payments. Coinbase customers can now transfer funds to any user with a Coinbase account around the world using Ripple and the exchange’s stablecoin USDCoin with no fee. The development reportedly enables users to send and receive money instantly, as well as convert them into local currency. Read more.

ConsenSys Picks Latest Blockchain Startups for Accelerator Program: ConsenSys Ventures, the investment arm of ethereum development studio ConsenSys, has selected 10 blockchain startups for the second cohort of its accelerator program Tachyon. Announcing the news on Monday, ConsenSys Ventures said that the selected startups for the Tachyon 2.0 program are focused on building new blockchain-based solutions across data privacy, encryption, healthcare and decentralized finance, among other areas. Read more.

Bibox Crypto Exchange Rolls Out Blockchain Project Incubator: Estonia-based Bibox — the ninth largest cryptocurrency exchange in terms of adjusted trading volume — has revealed that it is rolling out Bibox Orbit, an incubator for blockchain projects. The announcement does not specify the exact date of the project launch and only says that “it is aimed to provide the best growing environment for high potential blockchain projects and assist them with ecological construction and long-term development.” Read more.

Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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

Join thousands of others who receive this daily analysis of crypto markets & news in their inbox every morning - subscribe now.

The crypto market is maturing.

Previously, a big problem with the industry was that data was hard to find and there were major questions about the validity of different data sets. This issue has recently jumped to the forefront after a Morgan Creek Digital portfolio company, Bitwise Asset Management, created a 226 page presentation for the SEC on why the public perception of Bitcoin market data may be inaccurate. The presentation is worth checking out.

Bitwise is in the asset management game though. There are a number of companies that have been created to address the market data issues. Here are a select few:

* Digital Assets Data — the company has built a powerful enterprise-grade platform that allows fund managers and corporations to conduct analysis of blockchain-specific data in a more efficient way. The product is quickly becoming a go-to resource for the top organizations in the industry. It helps that the founders have previously built and sold a similar data company in the past, along with adding talent from Bridgewater Associates’ team that helped build portfolio generation and investment modeling tools. Check them out here. (I’m an investor)

* Messari — the company is curating daily insights, market data, and research for clients. They acquired OnChainFX in recent months and combine the onchain data with proprietary analysis and tools. One of their big focuses in recent months has been an open source disclosures database called Messari Registry that aims to become a central repository for project information that can be freely accessed industry-wide. Check them out here.

* Delphi Digital — the company is an independent research boutique providing institutional-grade analysis on the digital asset market. They have written incredibly in-depth pieces on Bitcoin and Ethereum, along with high-quality analysis on a number of smaller cap tokens and projects. The team comes from the equity research world and the work they produce meets the bar that the public equities market expects. Check them out here. (I sit on the board of directors)

In order for the industry to continue maturing, and for institutional investors to gain more confidence in allocating capital here, we will need to see continued maturation across various aspects of the industry’s data. Investors will need to be able to (1) locate the desired data easily, (2) access it in a user-friendly interface, (3) have confidence in the data’s validity, and (4) be able to massage and manipulate it in a way that drives decision making.

I am personally excited to see cleaner, more structured data being used. The more we know, the better everyone is positioned to make sound investments. The crypto industry was operating in the dark for the better part of ten years, but finally there appears to be a light at the end of the tunnel.

-Pomp

The “Off The Chain” podcast has been downloaded 800,000+ times in 160 countries. You can listen to the latest episode with John McAfee, Founder of McAfee Software here: Click here for Off The Chain podcast

THE RUNDOWN:

Peter Thiel-Backed Crypto Brokerage Tagomi Just Got Its BitLicense: Tagomi, an institutional investor-focused crypto brokerage backed by Peter Thiel, received approval to do business in New York on Wednesday with a BitLicense from the Department of Financial Services. Following a roughly seven months-long application process, the New Jersey-based firm will now be able to work with institutional clients based in the world’s financial center—making it the 18th company to receive a BitLicense, a permit which allows companies to buy and sell virtual currency for customers in New York. Read more.

Börse Stuttgart, Axel Springer to Jointly Launch Crypto Trading Venue: Germany’s second largest stock exchange Börse Stuttgart is partnering with European digital publishing titan Axel Springer and its subsidiary Finanzen.net to jointly launch a blockchain-powered trading venue. The new initiative will aim to combine investment information services and a blockchain-powered trading venue under the canopy of one platform. Read more.

TechCrunch Founder’s Crypto Fund Tops $100 Million, Completes First Acquisition: One of Arrington XRP Capital’s largest limited partners has injected a fresh $30 million into the digital asset firm, according to its founder Michael Arrington. “The reason is, like everyone, we didn’t do particularly great last year, but we did better than the market. And that was a win,” Arrington told CoinDesk. With the additional investment, Arrington says the fund has now surpassed its initial target of raising $100 million. Read more.

Pantera Capital Nears $175 Million Target for Third Venture Fund: Cryptocurrency hedge fund Pantera Capital is close to completing funding for its third venture fund, already raising $160 million. Pantera, which debuted its first fund in 2013, has since risen to become a conspicuous player in the crypto startup industry. Its latest project, dubbed Venture Fund III, has a fundraising target of $175 million. “We project making a total of 35 investments, with an average deal size of $3.5 million, and an 11% target average equity stake,” the blog post revealed. Read more.

E-Commerce Giant Rakuten Wins License for New Crypto Exchange: Japan’s top financial watchdog has granted a license to a cryptocurrency exchange being relaunched by e-commerce giant Rakuten. The country’s Financial Service Agency announced the news Monday, stating that the new exchange, Rakuten Wallet, is now registered with the Kanto Local Financial Bureau as a virtual currency exchange service provider under the country’s Payment Service Act. Rakuten also confirmed the news in a separate statement. Read more.

Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

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