The Wolf Den #914 - It Works Until It Doesn’t
Lessons of past cycles.
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In This Issue:
It Works Until It Doesn’t
Gemini Earn Customers Will Receive Their Funds Back
Bitcoin is the 14th Largest Currency
Did Wells Fargo and BOFA Actually Add Bitcoin Products?
Bukele Claps Back
It Works Until It Doesn’t
I recently dedicated some time to revisiting old newsletters from late 2021, when Bitcoin was surging past $60,000, in an effort to understand how our grip on reality went astray. One way to assess what happened is that we were so distracted by our newfound wealth, that we completely missed the cliff we were all about to be pushed over, leading to a long and violent fall.
Of course, nobody knows the future, but it's a wild concept that our blinding euphoria was so distracting that we didn't have the slightest clue what was unfolding right beneath our feet. In my assessment, I noticed a few recurring themes that are general enough to extrapolate to today so we can do our best not to fall for the same mistake twice.
Before I begin, please note that reading this newsletter is NOT going to give you the tools to time the top—erase that from our brain now—but it may save you from being wildly bullish with your entire portfolio at the most dangerous point. This leads me to my first idea, the concept of the ‘inflection point.’
When the consensus labels a moment as an 'inflection point' or any of its synonyms—'turning point,' 'pivotal moment,' 'critical juncture,' 'watershed moment,' 'paradigm shift,' 'breakthrough,' 'revolution,' or any other euphoric term denoting significant change - alarm bells should ring in your head.
Context is crucial when using words like 'inflection point' or 'paradigm shift' to describe the present moment, as it would be accurate now, but not forever. There will come a time when these words signal the opposite of what those using them intend. This is your cue to pack your bags and turn around because the fun is over.
Another prevailing theme from the $60,000s was the consensus that the best thing to do is HODL and nothing else. Again, this is usually a piece of advice great for weathering storms and avoiding all other sorts of disasters, but when too many people agree about HODL, it’s time to either A. sell or B. buy. If the best and only advice everyone agrees on is ‘HODL’ when prices are roaring up, maybe it’s time to exercise your ability to sell… at least something
(In case you are wondering, I am NOT selling right now.)
What you will begin to notice is that we have some signs of all of these euphoric behaviors today, just not as strong as they were back then. When Bitcoin was in the $60,000s, every other post or piece of advice from those enjoying their riches was ‘touch grass,’ ‘focus on sleep,’ ‘pace yourself,’ ‘hangout with non-crypto people,’ ‘avoid leverage,’ etc. but there was very little advice or encouragement on selling.
When there is a flood of others teaching you how to live a healthy lifestyle, think more about shedding some portfolio weight than touching grass or reducing seed oils.
Lastly, strange things will begin to occur, things that would be labeled odd in any other context. As hard as it is, it becomes crucial to recognize when things are deviating from the norm rather than accepting them as the new standard. In the previous cycle, we saw examples such as dog coins surpassing major banks in value, viral teen advice, acquaintances making extravagant home purchases, and the trend of laser eyes. If you find yourself inclined to do or like something you would typically reject, it's a sign to reassess and question our position in the cycle.
Now that we have an idea what to look out for, let’s address the elephant in the room, which is what will likely end up being the case with your portfolio.
When it’s all said and done, if you did sell, you're likely to end up with 30%-50% less money than you had (or would have had if you weren't scaling out) at the absolute peak. This is why it’s imperative to consider paper gains as "found money" until they're realized and entirely out of the market. For instance, if you turn $10k into $1m, it can still be psychologically challenging to exit with $500k. However, remember that this is still an incredible outcome that’s unheard of anywhere else.
It’s inevitable that at some point, investors will once again find themselves dancing perilously close to the edge of the cliff. Together, they will fall, bounce, and fall again, clinging to the belief that the setback is temporary, still starstruck by euphoria they previously felt. Predicting when the music will stop is impossible, but those who diligently study, search, and listen for the signs may have the blessing to lighten some or all of their load before it's too late.
I hope you have a great weekend, capture the current feelings in a bottle so when they revisit, they feel familiar rather than new. Wolf, out.
Gemini Earn Customers Will Receive Their Funds Back
WOW, this is incredible news for Gemini creditors who have been in the dark for 15 months, awaiting updates on the Genesis/Gemini saga. In short, Genesis, Gemini's former back-end service partner on Earn, filed for bankruptcy in January 2023, taking Gemini's assets with it. About 200,000 customers were harmed, and over $1 billion vanished, all thanks to FTX. Considering that no collapsed platform will recover funds anywhere close to 100%, this is a HUGE win for creditors. See the details below.
“Today, we shared with Earn users that we have finally reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy that will, if approved by the Bankruptcy Court, result in all Earn users receiving 100% of their digital assets back in kind.
This means, for example, that if you had lent one bitcoin in the Earn program, you will receive one bitcoin back. And it means that you will receive any and all appreciation of your assets since you lent them into the Earn program. If approved, we will be returning over $1.8 billion in value (at today’s prices) — $700 million more than when Genesis halted withdrawals on November 16, 2022.
Looking forward, if the Bankruptcy Court approves the settlement in principle announced today, Earn users can expect to receive approximately 97% of their assets in kind within about two months. And they can expect to receive their remaining asset balance within the next 12 months.”
Bitcoin is the 14th Largest Currency
I was unaware that CoinMarketCap had a feature allowing comparisons between Bitcoin and other major world currencies, but now we know. Bitcoin is currently in the #14 position, just surpassing the Russian Ruble and closing in fast on the Swiss Franc. What's interesting about this feature is that the market caps are all displayed in terms of total Bitcoin, a concept that can be tricky for our brains to grasp, as we are programmed to think in terms of fiat currencies. Part of adoption is the human brain beginning to value things in Bitcoin over USD, which will happen at different and lengthy times for everyone. Personally, I don't think we are remotely close to this yet.
In other interesting Bitcoin stats, there seems to be a new trend of comparing the amount of Bitcoin produced by miners to the amount of Bitcoin purchased by ETFs. What's crazy about this concept is that the current ratio of 900 (new Bitcoin produced by miners) is about to become 450 in 53 days, effectively doubling the ratio. Also, this is only considering Bitcoin purchased by ETFs, not counting any other Bitcoin purchases.
Did Wells Fargo and BOFA Actually Add Bitcoin Products?
I'm a bit confused about the Wells Fargo and BOFA news as it's being reported by the crypto community. Back on January 12, Wells Fargo announced, "spot bitcoin ETFs are available for unsolicited purchases through an advisor with Wells Fargo Advisors or through our online WellsTrade platform," so I'm not sure what exactly has changed. Even the Bloomberg article that leaked the Wells Fargo story said the exact same thing as this comment back from January: "the banks are offering the approved ETFs to some wealth management clients with brokerage accounts who request the products." As for Bank of America Corp.'s Merrill Edge, they were last reported to be offering ETFs to "eligible" clients, referring to ultra-high-net-worth customers also back in January. Crypto reporters are known to spread stories like this without double-checking, and so far, nobody has said a word—kind of strange. If anything, this is proof not to believe everything you read online, even if a bunch of large accounts are resharing it.
Bukele Claps Back
There's nothing quite like watching the President of El Salvador dunk on the critics who wanted to see him, and his country fail. Shame on them. I'm all for Nayib Bukele shooting a few shots back at those who tried to tear down his vision for the country, especially the IMF, which withheld funds from El Salvador for their decision to better the country.
“Now that #Bitcoin’s market price is way up, if we were to sell, we would make a profit of over 40% (just from the market purchases), and our main source of BTC is now our citizenship program.
We won’t sell, or course; at the end 1 BTC = 1 BTC (this was true when the market price was low and it’s true now); but it’s very telling that the authors of those hit pieces, the “analysts”, the “experts”, the “journalists”, are totally silent now.
Remember this, next time they spill lies again about El Salvador.”
Take a look at this chart below, the Nayib Bukele Portfolio Tracker, which includes the 'total dollar cost average' and 'daily buy dollar cost average.' Bukele doesn't receive the praise that Michael Saylor does, but both men will go down in history as the all-stars of our industry. Also, I expect more countries to follow El Salvador this cycle at some point, which will ultimately lend more credibility and recognition to Bukele.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
Can you get Matt Hougan on to talk about what the sources of ETF inflows are (institutions, HNW individuals, Joe and Jane, etc.)?