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Myth Of Money: To Hedge or Not to Hedge
Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
Welcome to this week’s edition of the Myth of Money. You may have wondered why I was quiet this past week. It was the first edition of this newsletter I missed in 14 months. I wish I had a good excuse, but the reality is… I simply did not know how to guide you. Last week, many of us saw our crypto portfolios fall by 50% and wondered if it was the end of the bull run.
I happened to be in Monaco during this time at the Grand Prix, surrounded by yachts displaying Bitcoin banners and other crypto logos. It seemed that those who arrived on private planes to celebrate the spoils of this bull run, worked hard to deflect the possibility that this might be the end of easy money. The power of positive thinking and champagne, however, prevailed all week.
Is the Bull Market Over?
There are only two possibilities at hand - either we are entering a bear market until the next halving in 2024, or this is a temporary orchestrated “FUD” (Fear, Uncertainty and Doubt) by whales, governments and institutions that will allow them to purchase Bitcoin at a lower price.
I have always said Bitcoin will be a $1 million asset one day. And I still believe that to be true.
Theory #1 - End of Bull Cycle
A smart trader told me the other day that nothing is ‘too good’ to go to zero, not even Bitcoin. No, I don’t think Bitcoin is going to zero, but I do remember the painful fall of $20k to $3k in 2018. And just because we want Bitcoin to hit $100k this year, doesn’t mean it will. Bitcoin is only as strong as the community behind it. And right now that community is shaken up.
People say - “But Bitcoin is still better than the dollar!” Yes it is, both in terms of its design and the community behind it. But historically, transitions from one reserve currency to another are slow. They don’t happen overnight and involve a lot of political upheaval in between.
If I had to give anyone any advice here, it would be to diversify. Hedge some of your assets in cash and in hard assets like real estate. If the promise of Bitcoin comes true, any amount invested will seem like enough, and won’t leave you homeless in the meantime. #NotInvestmentAdvice
Theory #2 - Bull Cycle is Far From Over
This theory mainly hedges on mappings of previous cycles. If the Bitcoin cycle resets every 4 years (last reset on May 12, 2020), then the following graph shows that we should have approximately 500+ days to a new all time high from halving. Each all time high is approximately 20x the previous all time high, taking us to $400k within the next 12 months.
Using the above chart, many Crypto Twitter “fortune tellers” will tell you to HODL and bring out your Diamond Hands. 💎 🙌
Don’t buy into this non-sense. Your portfolio is your own. Only you know your risk tolerance and how soon you will need the funds.
This is all conjecture. If we could truly predict markets, no one would work for a living. But these are the two theories, which you can use to hedge your exposure properly.
Bitcoin Indy 500 Car 🚘
Today was a special day for Bitcoiners as a Bitcoin branded car was raced in Indianapolis at the Indy 500 race.
The endeavor was all about education, sponsored by Ed Carpenter Racing. Ed admits to be an avid fan of Bitcoin, hoping to spread adoption and awareness around the cryptocurrency.
“It’s about educating, whether it’s race fans or people who are maybe afraid of it or don’t understand it…We’re trying to help bridge that gap,” Carpenter explained.
This Week By the Numbers 📈
[The Following is a summary of market performance over the last 2 weeks.]
Top Stories 🗞
Ray Dalio says he prefers Bitcoin to bonds
Ray Dalio is adding Bitcoin to his holdings. The founder and co-chief investment officer of Bridgewater Associates who has been called the king of hedge funds announced he has bought “some Bitcoin” during a panel that aired Monday during the Consensus 2021 conference. “The more we create savings in it, the more you might say ‘I’d rather have Bitcoin than the bond’,” Dalio said in a long-ranging discussion. Read Full Story.
Mark Cuban Invests in Ethereum Layer 2 Polygon
Billionaire investor Mark Cuban has made an investment in Polygon, a layer 2 Ethereum scaling solution. Cuban confirmed the investment in an email to CoinDesk but would not disclose its size or composition. The price of MATIC, the native token of Polygon, is up more than 9,535% year to date. With decentralized finance (DeFi) and other projects going live on Polygon, users have increasingly turned to the platform to escape the high transaction fees of the Ethereum mainnet. "I was a Polygon user and find myself using it more and more," Cuban said. Read Full Story.
Apple Is Looking for Crypto Experience in ‘Alternative Payments’ Job Post
Apple is looking to hire a business development manager with experience in the cryptocurrency industry to lead its “alternative payments” partnership program. In a Wednesday job posting, Apple said candidates should have five years or more “working in or with alternative payment providers, such as digital wallets, BNPL [buy now pay later], Fast Payments, cryptocurrency and etc.” The Cupertino tech giant said the manager would be Apple’s chief negotiator for the alternative payments space. Read Full Story.
Billionaire Carl Icahn Eyes Potential $1.5B Crypto Investment
U.S. billionaire and one-time cryptocurrency skeptic Carl Icahn is contemplating a potential $1.5 billion investment in digital currencies. The activist investor said he’s looking at investing in crypto in “a relatively big way,” clarifying that “big” could mean “a billion dollars, billion-and-a-half.” “I’m looking at the whole business,” said Icahn, referring to the crypto industry. “I’m not looking at what to buy necessarily at this time. I’m just looking at the whole business and how I might get involved with it.” Icahn also said he believes crypto assets are “here to stay in one form or another,” before being pressed on how much he would consider buying through his investing conglomerate, Icahn Enterprises. Read Full Story.
Product of the Week: GDA Lending
This week I’m giving a shout out to my friends at GDA Lending. Having recently worked on a loan with them, I can say that they offer the best rates for collateralized crypto loans at 4.5%, with the lowest counter-party risk. If you are looking to borrow against your BTC or ETH, ping me for an intro here.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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