Crypto Download #67
Biden $4 Trillion Infrastructure Plan, Treasury Yields Popping, China Sees Price Inflation, ARK Invest CEO Cathie Wood "Bitcoin at $1 Trillion is Nothing," Visa and PayPal Deepen Investment in Crypto
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Macro
Virus & Vaccines:
Vaccines Become a Race Against Time as CDC Warns of Covid Surge
India’s Steady Recovery Thrown in Doubt by Spike in Virus Cases
Biden Seeks to Reverse Decades of Disparity in Next Economy Move: More than a half century after Lyndon Johnson’s war on poverty, President Joe Biden is planning to take on the nation’s enduring challenge of inequality with a mass expansion of government spending and a revamp of the tax code. The effort, which Biden will start to detail in a speech Wednesday in Pittsburgh, is already proving just as divisive among economists as it is among lawmakers. While right-leaning economists warn about damage to overall growth from higher taxes on companies and the wealthiest Americans, liberals say the “trickle-down” approach of recent decades has failed and it’s time for a new strategy. The president’s remarks will lay out the infrastructure portion of an overall package expected to total more than $3 trillion. While social-spending programs will be outlined later in April, the administration’s drive to expand help for the poor will be visible even in infrastructure, through proposals such as the provision of safe drinking water. Read More.
U.S. stock futures under pressure as bond yields resume rise: U.S. stock-index futures edged lower Tuesday, with technology shares seen likely to come under pressure after Treasury yields saw a rise. A renewed selloff in U.S. Treasuries overnight was driving activity across markets Tuesday. The yield on the 10-year Treasury note traded above 1.77% for the first time since January 2020 and remained up nearly 6 basis points near 1.769%. Rising yields were lifting the U.S. dollar and weighing on technology stocks and other growth-oriented shares. Technology and growth stocks are more sensitive to rising bond yields as the net present value of their future earnings growth is reduced by the higher discount rate implied by rising bond yields. Biden’s infrastructure plan, meanwhile, is expected to cost as much as $3 trillion to $4 trillion, offset by tax hikes of up to $3 trillion. Read More.
“The latest moves seem tied to resurgent concerns around inflation. Market-based inflation measures have shot higher as well, perhaps as investors brace for Biden’s multi-trillion infrastructure announcement tomorrow…Coming on top of the latest avalanche of federal spending, such an enormous investment package could turbocharge economic growth and by extension inflationary pressures,” said Marios Hadjikyriacos, investment analyst at XM.
China, Long a Source of Deflation, Starts Raising Prices for the World: Rising raw-materials costs and unrelenting supply-chain constraints are prompting many Chinese exporters to increase prices for the goods they sell abroad, raising fears it may add to global inflationary pressures. The fears have deepened in recent days, after a grounded container ship blocked the Suez Canal, further straining global supply lines stretched by the coronavirus pandemic and stronger-than-expected demand for computer chips and other goods. Rene de Jong, director of Resysta AV, an outdoor furniture manufacturer based in the southern Chinese city of Foshan, said he plans to raise prices by around 7% on new orders this summer. That’s largely because prices of chemicals and metals that are used to produce cushions, foams and frames in the company’s factories in China and Indonesia have climbed rapidly in recent months. Shipping freight rates have also climbed roughly 90% since last June, though they are often paid by clients. Read More.
“In my nearly 25 years in China, I’ve never seen anything like this. I’ve never seen shipping costs like this before while steel and aluminum prices shot through the roof,” he said, adding that the company’s profit margins are under pressure.
One of World’s Greatest Hidden Fortunes Is Wiped Out in Days: Bill Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time -- a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink. One part of Hwang’s portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos’s net capital, had reached north of $10 billion. And as disposals keep emerging, estimates of his firm’s total positions keep climbing: tens of billions, $50 billion, even more than $100 billion. It evaporated in mere days. The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over? One part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago. Read More.
Bitcoin
Cathie Wood On Bitcoin: '$1 Trillion Is Nothing Compared To Where This Will Ultimately Be': ARK Invest CEO Cathie Wood’s most recent statements about Bitcoin suggest that the digital asset’s trillion-dollar valuation is nowhere close to where it might be in the near future. Wood also described the current market conditions as favorable for a Bitcoin ETF, with the right amount of liquidity and demand from institutional investors. ARK CEO believes that the demand from institutions will be the driving force of Bitcoin’s rise in valuation. According to research from ARK based on “a million Monte Carlo simulations,” if institutions want to minimize volatility and maximize their Sharpe ratio, they should put something between two and a half and six and a half percent of Bitcoin in their portfolios, because of its low correlation to any other asset class. Read More.
“If we add all of the potential demand relative to the limited supply, we come up with incredible numbers over the long term. We have just begun. One trillion dollars is nothing compared to where this ultimately will be…We are now moving into what I believe will be prime time,” she said.
Blockstream Issues Security Token Tied to Bitcoin Hashrate, Payable in BTC: Bitcoin development company Blockstream is launching a token that is tied to the company’s Bitcoin mining production and which is redeemable in bitcoin. One Blockstream Mining Note (BMN) represents 2,000 terahashes per second of hashrate from one of Blockstream’s mining facilities. The first tranche of 62.5 BMN will go on sale next week, April 7, and can be redeemed after three years for the bitcoin equivalent to the total hashrate the note represents. Hashrate contracts are just one of many roundabout ways investors can gain exposure to bitcoin. Bitcoin-holding companies, like Microstrategy and Square, have offered stock exposure through what some see as a de facto bitcoin ETF. Read More.
Tether releases an assurance report that shows its stablecoins are fully backed: Tether has released an assurance report delivered by accounting firm Moore Cayman that shows that its stablecoins are fully backed. The report, shared with The Block by Tether on Tuesday, is dated February 28 and has an assurance opinion by Moore Cayman that Tether's consolidated assets exceeded its consolidated liabilities as of the date. Specifically, Tether's consolidated total assets amounted to nearly $35.3 billion as of February 28, and its consolidated total liabilities amounted to $35.2 billion, of which $35.1 billion were related to stablecoins issued. That means Tether's reserves exceeded the amount required to redeem the stablecoins issued, per the report. Read More.
Crypto
Digital Currencies Jump as Visa Pilots Crypto Settlement: Bitcoin and other cryptocurrencies rose after Visa Inc. said its payments network will use a stablecoin backed by the U.S. dollar to settle transactions, as blockchain technology gains more acceptance in the established financial system. As part of a pilot program, Visa is using USD Coin to settle transactions over Ethereum, with the help of the Crypto.com platform and Anchorage, a digital-asset bank, according to a statement Monday by the San Francisco-based payments giant. Visa will offer the service to more partners later this year. Read More.
PayPal launches crypto checkout service: PayPal Holdings Inc will announce later on Tuesday that it has started allowing U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally, a move that could significantly boost use of digital assets in everyday commerce. Customers who hold bitcoin, ether, bitcoin cash and litecoin in PayPal digital wallets will now be able to convert their holdings into fiat currencies at checkouts to make purchases. The service, which PayPal revealed it was working on late last year, will be available at all of its 29 million merchants in the coming months, the company said. Read More.
"This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet…We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants," said President and CEO Dan Schulman.
Former SEC Chairman Jay Clayton to Advise One River Asset Management on Crypto: One River Digital Asset Management, which manages over $2.5 billion in institutional assets, announced Former U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton will join the firm’s newly formed Academic and Regulatory Advisory Council along with economist Jon Orszag, and former White House adviser Kevin Hassett. Read More.
“The One River Academic and Regulatory Advisory Council will help us consider how these new digital systems and the investment opportunities they present will best fit within existing policy, while also helping us think through how to advance these frameworks in ways that ensure the US continues to lead the world in financial innovation and asset management,” said Eric Peters, CEO of One River Asset Management.
SEC Sues LBRY Over $11 Million in Token Sales: The Securities and Exchange Commission (SEC) has charged crypto firm LBRY with selling unregistered securities. LBRY, a decentralized publishing platform that claims 10 million users, facilitated its operations via LBRY Credits, which are blockchain-based tokens. People can pay creators in LBRY Credits to view uploaded content. According to the SEC, however, before developing the network, it sold the tokens as investment contracts, with the assumption that their value would go up. The SEC in a complaint filed today in a US District Court, "LBRY received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering." Read More.
UFC Champion Francis Ngannou's NFTs Sold For More Than His Title Fight Purse: UFC heavyweight champion Francis Ngannou is having a good week. On Saturday evening, The Predator avenged his loss to former heavyweight champion Stipe Miocic by knocking him out in the second round to claim the belt. This earned him a guaranteed fight purse of $500,000, with a sponsorship bonus of $30,000. But the fighter’s embrace of blockchain technology has earned him another victory—one that's seen his line of NFTs sell for more than his fight purse. Ngannou’s NFT collaboration with digital artist BossLogic has already generated $581,038.88 on the NFT marketplace MakersPlace. That’s more than his guaranteed income from the fight—and with several NFTs still for sale, the offers are still rolling in. Read More.
Media
How to Trade the End of a Bull Market with Willy Woo
Mark Cuban: What the Fed-Driven Bubble Means for the Financial Establishment (w/Raoul Pal)
Anthony Pompliano: Bitcoin | Lex Fridman Podcast #171
Cheers,
Verks
**This is not financial advice. Investing in bitcoin and cryptocurrency is extremely risky. Please do your own research. The ideas and news presented in this newsletter are my personal opinions and meant for informational and entertainment purposes only.