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The Past Week
You all thought the Winklevoss twins were weird? Well then you haven’t met the Bogdanoff twins. I actually thought these two were a meme, like GigaChad, but apparently they are real - who knew? Anyway, the only story on them is that they claim to have participated in writing the source code for Bitcoin. Given they are TV personalities, who also write scientific essays, I believe this is just a stunt to go viral.
Anyway, on to other things. We will be talking again about regulation, what is happening in China, and the effects we are seeing in the markets.
The clampdown continues as more provinces are shuttering crypto mining. Why? Again, this is due to carbon neutral goals set out in the reoccurring 5 year plan as well as financial instability crypto could bring to the state controlled systems that are in place. Anyone who is familiar with China should have seen this coming. However, given the immense importance of China to the BTC hashrate, it will help diversify miners globally.
As we look at the BTC hashrate, we see an uptick suggesting both that miners have been able to get back online outside of China and that other operations have absorbed some. I am thinking that we will see several more dips as other provinces continue to stop current operations, but again those will be offset as the firms transition out of China (to Paraguay or New York?).
So, what does this mean for other countries? Well, we see two approaches. Authoritarian regimes will probably crackdown hard on crypto - offering their own alternative to further track the movement of their people. Otherwise, democratic countries will attempt to regulate what is happening.
Understandably, BTC was created to be free of regulation and side-step intermediaries. However, one downside to this is bad actors. Not within BTC, per se, but with other crypto projects. Yes, everyone CAN do their own due-diligence and more than likely are making their investment choices out of free will. However I argue, what about the scams that are SOOOO good, that it even convinces professionals? What about the ransomware attacks, rug pulls, TikTok shillers? Something does need to be done, otherwise your parents may be living with you.
Governments are beginning to push for regulations and if those who work on crypto projects choose to ignore this they will be hit hard. Look at Binance vs Coinbase as a prime example. Uniswap is setting up a fund to help with policy and understands that it does not want to be left behind. Regulation is not ALL bad, but sure it’s not all good either. We are experiencing rapid change in our lifetime - too much to keep up with, so we need a few people to slow it down before it crushes us. Crypto is increasingly being intertwined with mainstream markets and that could be a concern.
Lastly on what is happening in the markets. They have gone sideways for a few weeks now (and down - look at our portfolio). You kick 1.2B people out of something and this will happen. You tell them they can’t own crypto, well the markets are going to hurt. Furthermore, BlackRock CEO is saying that he has not been asked about crypto for the past few weeks. However, we do not see this much affecting things. Just because one is not being asked about something doesn’t mean its not important. Fidelity increased their digital assets headcount by 70%.
What else:
Another Large Bank in South Korea to Provide Custody of Crypto Assets (coindesk)
SEC Settles With Crypto ICO Ratings Site Over Undisclosed Payments (decrypt)
ECB Moves to Start Digital Euro Project (coindesk)
Thailand’s Siam Commercial Bank Investing in DeFi to Prepare for an Era of Disintermediation (blockworks)
The ECB starts work on creating a digital version of the euro (cnbc)
Lawmaker in Paraguay says he will introduce bitcoin regulation law next week (theblockcrypto)
Traders are withdrawing 2,000 BTC from centralized exchanges daily (cointelegraph)
Ghana’s Central Bank to Pilot CBDC in September (coindesk)
How the IRS is trying to nail crypto tax dodgers (CNBC)
Goldman Sachs Predicts Coinbase Q2 Earnings Beat (coinbase)
Why Wall Street Is Afraid of a Digital Dollar (bloomberg)
What do our followers think?
Disclaimer: the responses are not apples-to-apples with prior polls and we have no means to verify accuracy of the responses.
Of the 1,164 responses to the question do you own crypto - 60% said they do.
Of the 1,147 responses to the question are you bullish or bearish on crypto - 46% were bullish .
Of the 1,003 responses to the are you buying, selling, holding crypto - 21% were buying, 56% were holding, and 23% were selling.
We have a month of data now, so lets see how sentiment has changed on our portfolio holdings.
I would say almost every one of our charts will look similar. Given the crackdown in China, Exchanges being revoked, no new stimulus checks combined with vaccinated adults leaving their homes, and general uncertainty around regulations - we are seeing a perfect storm to crush the crypto enthusiasm. Nothing really changed in the crypto sphere, if anything there are now MORE applications for BTC, ETH, and the other “large” cryptocurrencies. However, the population who is eager to throw money at this (i.e. non traditional investors) do not have much more to throw. While those who do have the money (large money managers) have IPS they have to follow and are a lot more cautious.
Overall, our followers seem to be in the wait and see boat. Those who have crypto aren’t looking to sell and perhaps believe it will continue to rise. BTC, ETH, LINK, are continuing to find their ways into traditional investment products/balance sheets/portfolios.
While those like Dash and ADA may be losing favor with Wall Street, however if you look at Reddit, Twitter, etc. - at least ADA is still favored there.
As more exchanges make their ways into new countries, we believe those currencies that have been verified will continue to rise given they are one of a few options that ARE available. We continue to preach this, and we seem justified with it, that the exchanges that play by the regulations will continue to prosper and people DO want the certainty it brings.
So now we will just wait and see if our portfolio recovers and what will make it in next.
FMA People’s Crypto Portfolio:
The People’s Portfolio is having a tough time lately, while the broad equity market maintains a steady heading. We’re a long ways off from our 60% high as the portfolio moves down to $800, more than a 20% loss. Though we are still performing better than Bitcoin, all of our holdings are now at a negative return. The poor sentiment revolving cryptomarkets and their associated environmental impact has taken a severe toll on the performance of nearly all underlying cryptoassets.
Looking into the crystal ball:
Patience is a virtue and our diamond hands aren’t wavering. Low wage growth in the lower income segment (those making less than 30k per year) is still down a lot. Unemployment benefits may be contributing to that… In any event economic data is mixed as some segments return to pre-COVID 19 levels. Increased correlation of the portfolio to the market is something that we are keeping an eye on and will start monitoring as we approach the 3 month mark since inception. We’re looking forward to additional economic data availability as we approach the end of the month.
If you would like to see a live view of the portfolio, you can do that on CryptoCompare.
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We look forward to doing this all again next week, take care!