Behind the veil Bitcoin, Fiat’s crypto evolution, striking while the iron is hot


Silence

There was no baseball Monday night. At least not for New York fans. Therefore, more time to read, more time to spend on my graphics. An immobility. Almost.

My brain craves something that it can’t see. There are no puzzle pieces that fit together perfectly. Of course, the Nasdaq Composite ran two consecutive winning sessions after not doing so for almost a month … and on higher trading volume than the day before. It’s constructive. The S&P 500, Dow Industrials and Dow Transports were all down slightly at the end of the day. These Transports have now followed four consecutive winning sessions with four consecutive losing sessions, and must now retest a month old support. It is potentially less than constructive. Note that the four worst performing sectors (out of 11) on Monday were all cyclical.

I don’t think we’ll find what we’re looking for through studying large cap stocks, at least not yet. Major market moves await clarification on the future of the still-pending “infrastructure (no) deal”, in particular, and the future of US fiscal policy in general. Until then, the action is in the US Treasury market, national small caps, and cryptocurrency markets. Let’s explain ourselves.

First, demand for securities at the longer end of the U.S. Treasury yield curve has accelerated since the Bureau of Labor Statistics released weaker-than-expected employment data for the second. consecutive month. I tried to explain this because I don’t think the data is as horrible as most economists apparently do. Readers should (probably already) understand that my opinion is not dominant on this subject. I am apparently an outlier.

The US 10-year note came out Monday night paying just 1.57%, and flirted with 1.55% here Tuesday morning, where that yield hit its lowest on Friday. Keep in mind that the US Treasury will be auctioned off with $ 38 billion in new 10-year paper tomorrow (Wednesday) afternoon. Hopefully indirect bidders ignore Janet Yellen tomorrow as much as secondary market traders did on Monday.

The other two financial arenas that are gaining attention may be doing so for admittedly negotiable reasons, but perhaps less investable in the long run. Small caps have been hot as the Russell 2000 is the realm of “memes stocks” that have captured the imaginations of retail traders and high frequency algorithmic traders who thrive when this group is provoked, let alone the target take. of US Concrete Control (USCR). This is where you’ll find AMC Entertainment (AMC), GameStop (GME) and Bed Bath & Beyond (BBBY), among others.

Finally, is the history of Bitcoin / cryptocurrency perhaps moving faster than many innocent investors / speculators are willing to do? Let’s discuss it now.

Hello

I see you. Hmm. Readers may recall that I had written many times about the likelihood that on a global scale central banks and national treasury departments would end up cracking down on cryptos. We have seen it in China. Not so aggressively yet elsewhere. I had also expressed some surprise at the moderate reaction of the Federal Reserve and the US Treasury Department, which clearly have the most to lose in terms of power if an underground economy were to evolve outside the US monetary base, depriving thus any global advantage exercised by reserve currency status.

Since the demand for cryptocurrency had become, along with legitimate or innocent investors / traders / speculators, the domain of hackers / drug dealers / terrorists / money launderers and the like, readers will recall that I have suggested some time ago that perhaps the only reason the United States authorities had yet to crack down on cryptocurrencies was because the United States had learned or was in the process of learning to follow and may – even being to identify the people involved and that the information was considered for the moment more valuable than any gains made by tightly regulating a financial arena that was thought to be anonymous, considered untraceable.

On Monday, FBI Deputy Director Paul Abbate during a Justice Department briefing announced that the United States had recovered 63.7 Bitcoin of the 75 Bitcoin ransom that Colonial Pipeline was forced to pay in May in response to requests made by ‘Darkside’, a cybercrime. group that was thought to be operating from Russia. Abbate announced that US authorities had identified a virtual wallet, and without going into details, said the funds had been recovered. Unfortunately for Colonial, the recovered Bitcoin is obviously worth less than it was at the time the ransom was paid.Abbate also said the investigation found that more than 90 companies were victimized by this group alone. hackers.

This is precisely what I was trying to tell readers earlier this year. The fact that the country that perhaps had the most to lose if the world found a way around the decree had not taken action meant it was revealing what was invisible and hunting down what had previously left no behind. trace to follow. In other words, the good guys had started to figure out how to trace and track blockchain technology.

Does this mean that cryptocurrency valuations will soon go straight to zero? No. On the one hand, even if a transaction can be traceable and part of the funds recoverable, there are still no consequences without international cooperation. This, however, will change over time. I think.

Readers will note that Bitcoin in US dollar terms has rebounded to support at around $ 30,000 twice since its peak in mid-April. It turns out that this is a 61.8% retracement of the rally from July to April. Once again, our favorite 12th-century Italian mathematician has made his presence felt. This shouldn’t come as much of a surprise, given that techniques are the only way to trade an unproductive asset without any fundamental value.

Does this mean that precious metals, in particular gold, will resume the title of the main alternative investment vehicle (excluding money supply)? It’s hard to say. While it is clear that price, not value, is simply based on broad public belief, just as with fiat money itself, gold (or any precious metal) is (or can be) physical. . It can be stowed away, it can be worn (actual productive use), it hurts if you drop enough of it on your foot, and it’s always there the day the lights go out.

In my opinion, the value of Bitcoin or any other cryptocurrency is that it will eventually fall to the level of legitimate and non-criminal demand or to the level of wide acceptance as legitimate and non-criminal use as global and legal currency. . Now understand that when we talk about a digital yuan and the Federal Reserve and the European Central Bank “discuss” such an idea, the truth is that most fiat currencies have already been virtual in nature for a long time. I don’t know how long it has been since my hands touched a real US dollar or a US coin. I remember going to an ATM when we started to think that the virus that was spreading in Wuhan, China could spread beyond. I think it’s been about a year and four months since I dabbled in fiat paper.

What difference would it make for the average American consumer, except those who depend on the cash economy, whether their virtual economies are tracked as they are now or on blockchain technology? It could be a big change for the banking / financial system, but for the average Joe or Jane, the change should be unnoticeable. Yes, the US dollar and all other reserve currencies and my non-reserve currencies will become “crypto,” as this will make all transactions taxable, which is probably the ultimate goal across the nations here.

I could be wrong. I often am. I don’t see a happy ending for long-term investors or big investors in today’s independent cryptocurrencies as long as civilization endures. On that note, cryptos won’t be worth anything if civilization falls too. On this horrible day, you will wish you had stored clean water and canned food, along with gold and silver coins.

Are you sure about that?

News broke on Monday that mobile software and enterprise security company MicroStrategy Inc. (MSTR) will sell $ 400 million in debt to institutional investors and use the proceeds to add to an existing long position in Bitcoin that is said to be worth more. $ 3 billion at a BTC / USD price of $ 35,000- $ 36,000.

According to Bloomberg News, this is the first time that a company has issued speculative grade debt to finance a purchase of Bitcoin. I just have a question for a company that trades at a three-digit forward price to earnings (P / E) ratio, operates with a total debt balance that simply dwarfs its cash balance, has cash flow available with negative leverage, and a current ratio not only less than 1.0, but less than 0.9: are you sure? In fact, the question could be for buyers who will hold such debt securities. How much discount is needed to make the risk acceptable here?

How to Reveal

You may or may not have noticed that PLBY Group (PLBY), the former “Playboy” brand, filed on Monday to sell up to 4.8 million shares to institutional investors through investment banks Canaccord Genuity and Stifel in the wake of Monday’s 13%. to take advantage of such a sudden surge in the share price. The effort aims to raise around $ 240 million, and who can blame them?

Adam Aron, CEO of AMC Entertainment (AMC), has shown the way. When endowed with higher market prices for corporate equity that is not supported by the core realities of the business, the man has recapitalized the balance sheet and funded the operations of the business. Not only did Aron take advantage of this unexpected reality, he even warned small investors that maybe they should stay away from the action. It is corporate leadership with a conscience. I don’t know if I’ll ever go to the movies again (it really depends on my wife), but it’s hard not to put down roots for this guy.

No

I didn’t buy any Coupa (COUP) software on this dip, but I’m thinking about it.

Yes

The most important things for financial markets at the moment remain the seemingly stalled Biden / Capito talks, as well as the president’s opening up to an alternative bipartisan plan worked out by a group of six senators apparently led by the Republican of Utah Mitt Romney.

Economy (All Eastern hours)

06:00 – NFIB Small Biz Optimism Index (May): Expecting last 100.7, 99.8.

8:30 a.m. – Trade balance (April): Last $ 74.4 billion.

08:55 – Redbook (weekly): Last 13.0% y / y.

10:00 am – JOLTs job offers (April): Last 8.123M.

4:30 p.m. – API oil inventories (weekly): Last -5.36M.

The Fed (All Eastern hours)

Fed blackout period.

Highlights of today’s earnings (Consensus expectations for BPA)

Before opening: (THO) (2.27)

After closing: (CASY) (.86)

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