Bitcoin Unjustly Punished by Unrelated Macro Issues
Plus: Gensler throws shade on Senate crypto bill; Jack Mallers goes off.
I’m going to repeat part of what I said in a newsletter article last month. Why?
Because it’s important. And if you don’t get this, you can’t understand Bitcoin.
Investment markets are in real meltdown mode. Total jump-out-the-window stuff. All kinds of investment markets. Growth stocks, value stocks, tech stocks, bonds, cryptocurrencies, even stablecoins. We should have seen this coming. Why? Simply because bubbles were created during 2020 and 2021, in a lot of asset classes.
Trillions of dollars in fiscal and monetary stimulus. Artificially low, near-zero interest rates. 2% mortgage rates. Massive unemployment assistance, and more. Real estate prices soared. Stocks and crypto rose very high, very quickly. People left work. Life was grand.
But what happens when bubbles get too big? They burst. And it’s always loud, shocking and ugly. Here is what we now have:
Inflation. World-wide, not just here. At 40-year highs. Eating up paychecks.
Fuel prices are soaring. Supply chains are disrupted.
The Fed rate hike Wednesday, leaked on Sunday, caused interest rates to soar.
Mortgage rates are now over 6% and still rising. Housing prices are cooling.
Corporations lowering earnings predictions, laying off workers. Recession looming.
“Rick, how does any of this have any effect on Bitcoin?”
I’m glad you asked.
Inflation has no effect on Bitcoin. Bitcoin’s monetary supply doesn’t increase. In fact, Bitcoin might be your only line of defense. It is, by design, anti-inflationary.
Fuel prices don’t affect the value of your Bitcoin in any way. This shouldn’t prompt anybody to sell their Bitcoin. Only invest what you don’t need for a few years.
Interest rates are rising. This scares people. Again, Bitcoin doesn’t care, and Bitcoin isn’t affected. Bitcoin just keeps doing what it is programmed to do. It’s code, not a commodity.
Earnings per share will decrease, in some companies. Bitcoin again doesn’t care, and has no EPS of its own. In fact, Bitcoin has no earnings, no workers, no management, no facilities.
Bitcoin Still Has This Nutsy Correlation to Stocks
Somebody came up with this concept of “risk on assets.” I’d like to talk to them about that. First of all, every asset purchase involves risk. Every one. Even Treasury bills. Even houses. To draw a line down the middle and say that stocks are risk-on, bonds are risk-off, and Bitcoin, that’s risk-on as well, just doesn’t make any sense. Macroeconomic concerns about inflation, prices, earnings and the like have no effect on Bitcoin. And to lump Bitcoin in with stocks is ludicrous.
Bitcoin’s fall in 2022 is the collateral damage from these concerns.
Here is some actual text from my May 13 article, worth reviewing:
“Stocks are getting spooked by all kinds of global economic conditions right now. And they’re valid concerns.
Inflation, at forty-year highs.
Corporate earnings, many disappointing, even big companies.
Global supply chains, sure to hurt earnings even more.
Fuel and grain shortages.
War in Ukraine.
Why do I point these out? To emphasize that none of these major economic troubles in the world have any effect on Bitcoin. Bitcoin has no earnings multiple, and Bitcoin is not hurt by inflation. Fiat currencies are ravaged by inflation, and the printing of fiat is the major driver of inflation. Bitcoin, with its fixed cap, should be anti-inflation.”
Re-examine what Bitcoin truly is, and what it is not. Bitcoin is code. It’s a technology. It’s a decentralized, peer-to-peer form of digital currency. Those who don’t truly get this yet are lumping Bitcoin in with all other crypto. And worse, lumping Bitcoin in with other asset classes, especially stocks.
Bitcoin is so misunderstood.
We are so early.
SEC’s Gensler Feels Lummis-Gillibrand Bill May “Undermine” Market Protections
Last week, I did an extensive review of the US Senate cryptocurrency bill put forward by Sens. Cynthia Lummis and Kirsten Gillibrand. Link to last week’s newsletter.
Not long after the ink was dry on the bill, SEC Chairman Gary Gensler came out to throw a bit of shade on the proposed legislation. Speaking Tuesday at the Wall Street Journal’s CFO Network Summit, he suggested that many crypto companies are already conducting activities that are or should be overseen by his agency. He seemed to instantly reject the proposal to classify many cryptocurrencies as commodities and thus have them regulated by the CFTC, not by the SEC.
Gensler feels that most all crypto tokens are “securities” and should be regulated by the SEC. He further stated, "we don’t want to undermine the protections we have in a $100 trillion capital market.”
Sen. Gillibrand, in contrast, had stated that the bill is clarifying roles that the SEC and CFTC will have. She also stated that she and Lummis had worked with members of Gensler’s SEC staff in drafting the bill. Stay tuned.
Tweet of the Week:
Spend three minutes listening to Bitcoin whiz kid Jack Mallers, and also read his thread, as he discusses Bitcoin payments, proof-of-work and the Lightning Network. Best thing I’ve seen in a long time.
Recommended Bitcoin Tools, Platforms, Podcasts:
Gemini - My choice for buying and HODLing Bitcoin, rated tops for safety and security. User-friendly platform and phone app. Earn Bitcoin rewards as well with the Gemini Credit Card.
Arculus - The crypto hardware wallet from Arculus is one of the best products on the market for storing your coins. Very easy to set up and to use, and very affordable.
Lolli - The Lolli shopping app lets you earn great Bitcoin rewards on practically everything you buy, whether you’re shopping on your phone, computer, or in-person.
Twitter - Follow The Bitcoin Files on Twitter at @BitcoinNewslet1 for all of my articles, commentary and links to my contributions to Bitcoin Magazine.
Medium - Check out my writings on Medium, including articles not featured in the newsletter. Join my 500 other followers who read and write about crypto. medium.com/@rickmulvey
Podcasts - To hear the top names in Bitcoin, and learn more than you could imagine, check out The Pomp Podcast with Anthony Pompliano, What Bitcoin Did with Peter McCormack, and The Wolf of All Streets Podcast with Scott Melker.
Issue No. 61, June 17, 2022
Rick Mulvey is a CPA, forensic accountant and crypto consultant. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.
Follow on Twitter! The Bitcoin Files Newsletter