1. Forecast - March was an eventful 31 days, to say the least. From bank runs to Bitcoin’s run-up in price, the month delivered its share of surprises. While the liquidity in the system seems to be improving we are staying cautiously optimistic. The government, in the interest of “investor protection”, wants to make it harder for people to buy Bitcoin. The CFTC is going after CZ. And the rash of banking failures seems to be pushing investors into money markets. Despite all of these headwinds, Bitcoin ripped higher in March ending the month up 20%. We think the opportunity to buy low is narrowing.
Ethereum and Bitcoin are normally very correlated. On 4/12 the Shanghai upgrade is projected to be released, allowing ETH holders to unlock from staking. We sense that most investors and traders will be selling or rotating into BTC. Thus creating a short-term disconnect. We will be watching the BTC/ETH ratio, noticing if it falls, and then possibly taking advantage of an opportunity to buy the ratio.
2. To Infinity and Beyond - One famous Bitcoin supporter, Balaji, seems to think that we are headed for hyperinflation and is looking to put his money where his mouth is. He placed a bet with an opposing Twitter personality that centers around inflation reaching 50% in 90 days. While this is an outlandish claim that most assuredly will not come true, it is generating more needed attention on the weakening banking sector and the potential fall of the US dollar. The sentiment in the crypto space is that the Fed has reached its objective of raising rates until something breaks. That “something” is the traditional US banking sector and more specifically small regional banks. This necessitated the BTFP, an emergency lending program established to provide banks with the needed liquidity to back depositors. Shortly after the BTFP was announced, market participants noticed that the Fed balance sheet swelled by 300 billion dollars. In theory, this money is just to backstop deposits made and won’t increase the M2 money supply. But more importantly, these events signal that the US is not equipped to handle high-interest rates, especially when they are raised at such a rapid pace. At some point the Fed will pivot and liquidity will come back for real. When it does, more money will chase fixed supply assets. Bitcoin has thrived this year in the face of turmoil in TradFi. People are waking up to the utility of an incorruptible form of money. When the US money printer turns on again and the dollar devalues, the importance of Bitcoin will become even more evident. This takes time, but when it happens we don’t think $1,000,000 BTC is outlandish. Just give it more than 90 days.
3. Show Me the Money (Market Funds) - Investors are holding a lot of cash. But what does this mean for the future? The natural speculation is that this cash is waiting for the opportunity to buy. People may be anticipating a recession or just basking in the glow of a short-term rate that exists again, but let's assume that it is earmarked for investing opportunities. If we look back at history, the last time there was a peak in Money Markets was in May 2020. The year of max Covid fear. From that point we saw money flow into investments, helping launch the next crypto bull cycle. Could we be in store for a repeat?
4. Bitcoin Salvation - Take a look at the figures below:
Looking at these numbers it appears that our country may not be sharing the wealth. Salaries rose on average only 54% in 19 years while home prices were up 150%. It is becoming painfully clear that the average American is being priced out of prosperity. For those looking for a savior, there seems to be one in Bitcoin. Bitcoin in 3 years is up over 450%. In addition to being a superior store of value, the opportunity for investors in Bitcoin to help themselves where their employers won’t is important for those looking to improve their quality of life. The ability for investors to buy fractions of a Bitcoin means that any amount makes a difference. Whether you can afford to put away $100/week or even just $10/month any amount can make a difference in the long run. Bitcoin gives power back to the people who hold it. In a world where the rich are becoming richer, Bitcoin is the great equalizer.
Remember, bank bailouts were the original motive for creating Bitcoin back in 2008. And we’ve seen investors recall this and push Bitcoin’s price higher starting the Sunday Silicon Valley Bank was bailed out. Instead of the price going down below $19k it popped to $22k. Year to date Bitcoin is the best-performing asset, up 62%. Can’t deny the facts folks. It can never be said enough, Bitcoin is the most scarce global asset, and dollars will continue to devalue. The only way to protect wealth is with an allocation to a fixed supply asset like Bitcoin.
5. DAIM Updates: Thanks to all the clients, attendees, and panelists who helped make our last two events a success. There was a lot of valuable information shared. Stay tuned for updates on our next event.
Newport Beach 3.28.23
Denver 3.24.23
