DAiM September 2020 Recap, BitMex, Bitcoin New Wallet Addresses, China & MicroStrategy

New Money: Issue #17

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


For the month of September, Bitcoin was down (7.53%) tapping $12,000 to begin the month before rejecting strongly and ending the month at $10,787. Bitcoin briefly traded under $10,000 for a 4hr candle before quickly getting bought back above the vaunted $10,000 level, hovering for most of the month around $10,600. Bitcoin has now spent a record 70 consecutive days above the $10,000 level. While the beginning of the month offered a healthy retracement after almost 5 months of gains, sentiment measures have once again begun to turn bullish as the price continues to be supported despite negative news flow that in prior years would have adversely impacted Bitcoin’s price. However, it would be a mistake to get comfortable about where asset prices head from here, with so much uncertainty ahead of us with fiscal stimulus and a potentially ugly election driving much of the macro picture through early November.

Performance

Last month we briefly talked about our model portfolio allocation to Ethereum and humble bragged about its outperformance relative to Bitcoin and the explosion of DeFi(Decentralized Finance) and the double and triple-digit returns different tokens/projects were experiencing. Between food named tokens like Yams, Hotdogs, Sushi, and Uni, the DeFi space had reached full-blown mania as the greed around DeFi had reached a fever pitch by the end of August.

However, September was a very different story. As the market always does with parabolic returns and rampant greed when it comes to Bitcoin and Digital Assets, what goes up, must come down. One of the projects, “SUSHI” had the rug pulled, creating a catalyst for wiping out the investors and profit-taking in other projects that were both healthy and necessary. The DeFi Index was down (-36%), with other prominent DeFi projects like YFI (-33%), COMP (-45%), and SUSHI (-80%) all seeing significant double-digit losses, leading ETH to finish the month down (-17%) underperforming BTC by around 9%.

That being said, we believe the correction was of course necessary and healthy. Total Value Locked(TVL) in DeFi continued to accelerate and make new ATHs in September, despite the strong price correction. This is impressive and we believe when the dust settles there will be opportunities for us to recommend for clients in the months ahead.

The two major news items of the month were both net positives for Bitcoin. The crackdown of BitMex and arrest of one of its founders for violating money laundering and the Bank Secrecy Act and the continued investment of Bitcoin on the balance sheet of MicroStrategy by its CEO Micheal Saylor which I will touch on later. In terms of BitMex, a derivatives exchange that is nothing more than a casino for degenerate gamblers using 100x leverage was a welcoming sign. If we are to legitimize and clean up the crypto markets for more traditional players to enter, removing renegade firms like BitMex is a very good first step. A few key points worth noting:

  1. The charges brought against it by the CFTC were for violating US anti-money laundering regulations and had tie-ins to the Bank Secrecy Act. There's a lot of US-based exchanges that have done business with Bitmex. There's DeFi projects that are potentially subject to similar money-laundering accusations due to the lack of KYC/AML. These DeFi projects need to get there house in order and truly become decentralized. US long hand of the law is going to flex and take their pound of flesh, undoubtedly so our criminal US banks which launder tons of money can get in the game. I reckon this won't be the end of this story

  2. BitMex being taken out of the market is actually good for a Bitcoin ETF. Remove the leverage and manipulation and the markets become more orderly. 

  3. Have to wonder if they went this hard at Bitmex, then a full-throttle attack on Tether ain't fair behind.  We’ve talked ad nauseum about Tether in the past and it appears the war on Bitcoin and how money gets in the system is on. Regulators and centralized powers want to map wallets and know who is doing what at all times.

With respect to BitMex, while I don’t love their operation because it’s a degen casino, I thought this tweet was super relevant about how our legal system works.

News:

  • Donald Trump was diagnosed with CoronaVirus

  • Asian Crypto Exchange KuCoin Hacked for $150mm in Crypto

  • MicroStrategy Buys $175mm More Bitcoin, Brings Total to $425mm 

  • Bermuda Stock Exchange Approves Listing of World’s First Bitcoin ETF

  • US State Bank Regulators Agree to Blanket Set of Rules for Money Transmitter Licenses

  • Kraken Wins SPDI Bank Charter in Wyoming, First-Ever for Crypto Company

  • OCC Allows Federally Chartered Banks to Custody Stablecoin Reserve Accounts

  • DEX trading volumes hit $23billion

MicroStrategy Does It Again

One of the most bullish fundamental drivers for Bitcoin continues to be the conversion of cash reserves on the balance sheet of MicroStrategy (NASDAQ:MSTR) into Bitcoin. I spoke about MicroStrategy in great detail back in my newsletter back in August And So It Begins..... A Public Company Buys Bitcoin on Their Balance Sheet” about why this was such an important “FIRST” and event for Bitcoin. To my great surprise, MSTR’s initial purchase of 21,454 Bitcoin would be followed up by an additional purchase of 16,796 Bitcoin bringing them to a total of 38,250 Bitcoin.

After completing the purchases, CEO Michael Saylor was open to talking about how they came to buying Bitcoin, saying “We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting,” Saylor said.

“I want something that I could put $425 million into for 100 years,” Saylor told CoinDesk.

“I went down the rabbit hole” during COVID-19, Saylor said, admitting he “was wrong” to have doubted bitcoin back in the $600 range. I wish I knew then what I know now,” he said.

“I started to cheerfully assign homework” to MicroStrategy’s executives and directors, Saylor said. He staged “a series of learning exercises to bring everyone up to speed.” If MicroStrategy was really going to move millions into bitcoin, then everyone had to be on board. MicroStrategy has settled on bitcoin as the treasury alternative.”

“This is not a speculation, nor is it a hedge,” said Saylor. “This was a deliberate corporate strategy to adopt a bitcoin standard.”

To listen more about Michael Saylor and how MSTR became the first public company to own Bitcoin as a cash reserve on its balance sheet I highly recommend listening to the following podcasts. They are simply fascinating beyond your wildest imaginations and he even hints that he is currently advising other companies who want to follow his lead.

Pomp Podcast #385: Michael Saylor On Buying Bitcoin With His Balance Sheet

  • In this conversation, we discuss how Michael built MicroStrategy, how he sold a domain for $30mm, what his $500 million dilemma earlier this year was, and why he choose to put more than $400 million into Bitcoin with the company's balance sheet.

Steven Livera Podcast: SLP213 Michael Saylor - Bitcoin Dematerializes Money

  • Why did MicroStrategy buy $425 million of Bitcoin and adopt it as primary treasury reserve asset? How did the team learn about Bitcoin? What is driving people to learn about Bitcoin in this high inflation environment? Michael Saylor, CEO of MicroStrategy joins me to discuss. 

What We Are Watching

New Bitcoin wallet addresses went parabolic in the last week of September/beginning of October. It’s unclear at the moment if this is a one-week anomaly as a result of trader exodus from Bitmex or an intriguing bullish backstory that could mark a new bull market catalyst. What we do know is that this is something we should be keeping an eye on. (h/t @ColeGarnerBTC )

Image
data | @glassnode

Here’s why: Volume precedes price and Bitcoin active address counts are a reliable on-chain leading indicator of volume. A spike in activity by new participants entering into BTC not yet reflected in price does not occur often. When price action is down or flat and volume is up, this is what traders call a divergence. In this case, it’s a bullish divergence.

Historically speaking, Bitcoin tends to see about 5-10k new Bitcoin addresses/day. That figure grew it its highest level in over two years last week, peaking above 22k/day.

Image
data | @glassnode

The important question is, where are these addresses coming from? While the exodus from Bitmex after it being charged by the CFTC for violating the Bank Secrecy Act would make the most sense, the on-chain data shows this is not the case.

After getting charged by the CFTC and one of the founders being arrested, a massive spike of 4,500 in withdrawals began Oct 1. Withdrawals have since returned to normal.

Image
data | @glassnode

If BitMex were responsible for the address growth we’d naturally expect to see new addresses spiking prior to the batched BitMex withdrawals. Once the withdrawals are processed, the addresses should revert to the norm in lockstep with BitMex transfer data. Except, the data shows the opposite.

  • No particular spike in address growth before the withdrawals.

  • Growth gets stronger after withdrawals have fully returned to normal.

  • ~100,000 new $BTC addresses since Oct 1. But only 4,500 BitMex withdrawals.

Image
data | @glassnode

So where the hell might all these new addresses be coming from? It’s impossible to know for sure but On-Chain analyst, @ColeGarnerBTC offered a plausible explanation from a story that made its rounds the last week of September that mostly passed under the radar — despite being one of the most bullish backdrops for the market.

It’s particularly odd to see the Chinese government pushing out propaganda supporting crypto assets, which is contrary to its ever-increasing tightening control over fx exchange at the retail level. However, the source and validity of the newspaper is the Reference News, the #1 circulated newspaper in China. News and information does NOT get published here without a greenlight from the CCP.

So what could be the intent? Well, as we’ve discussed in prior issues of New Money, the People’s Republic of China is rolling out their DCEP, more publicly known as the Digital Yuan, an updated and more innovative currency and payments infrastructure poised to take over trade and remittances in emerging markets and challenge American influence on the global stage.

If you want to learn more about China’s initiative to integrate adoption of the DCEP and blockchain technology using the BSN(Blockchain Services Network) across government, big business, and emerging markets, I highly recommend reading, “China’s Checkmate: The Technology Weapon You Didn’t See Comingby Tatianna Koffman where she discusses “how the BSN will be the backbone infrastructure of interconnectivity through mainland China, city governments, private businesses, and individuals, in both China and abroad. This network will form a new Digital Silk Road to create a link to China and its trading partners globally.”

The about-face from China is extremely fascinating and almost totally on-brand. While China has been one of the harshest and negative forces over the years, often suppressing Bitcoin momentum(perhaps intentionally to keep the price down as they accumulated and positioned themselves over the past 10 years), it’s also strongly supported Bitcoin miner activity in a major way, dominating miner hash rate and controlling a large amount of newly minted Bitcoin supply, holding more Bitcoin than any other country by a large margin. While the United States prints money in infinite terms to satisfy its insatiable appetite to bail out rich people, corporations and keep the Ponzi scheme going for its outrageous debt load that is impossible to ever pay back without creating rampant inflation, Bitcoin has quietly become China’s national treasure.

Sooner or later, maximizing Bitcoin’s potential becomes an unavoidable economic incentive and it appears with the rollout of the DCEP, the Chinese government seems to want to ignite the bull market.

Overall:

While I see reasons to be cautious over the next few weeks heading into the election with all the f*ckery expected from Trump in playing games with Democrats, holding back stimulus, manipulating the stock market, his issues with Covid-19, suggesting he may not accept a peaceful transition of power if election results run against him and a Supreme Court nomination process that could stir up the deepest angst of America’s culture wars coming at an unimaginably difficult moment, I am extremely bullish about the direction of Bitcoin over the next 3 months and into 2021.

While it’s very likely we see volatility, sideways actions, and lower prices to shake out weak hands over the next few weeks/months, fundamentally speaking, we see this period as an excellent and dare I say the last great buying opportunity to build a multi-year long-term position and/or deploy new capital if you're thinking to increase BTC exposure around $10k before the bull run takes off. It’s my belief that Bitcoin holders will be very happy by Christmas 🎄🎅🏻and that 2021 will be a lot of fun for HOLDers. (I know 2020 has been 💩 💩 but I mean in Bitcoin terms).

Company // Employer-Sponsored 401k Plans w/ Bitcoin

As mentioned last month, we are launching the first-of-its-kind ERISA compliant employer-sponsored 401k plans with Bitcoin. We’d love to help you or your company enroll in this plan. If you would like to learn more about how DAiM can help your business or your employer offer an employer-sponsored 401k plan with Bitcoin, please fill out the following form and we’ll get in touch with you immediately!

Bitcoin 401k Plans


Odds & Ends

Bitcoin. “A bet against the ruling class.” I’m personally developing a crush on Chamath Palihapitiya and believe we need to protect him at all costs.

If you fancy watching the entire interview (I recommended there’s lots of free jewelry), you can do so here as Laura Shin and Chamath talk about a wide range of issues, including Bitcoin, COVID, civil unrest, wiping out hedge funds and corporations and broad economic trends and forecasts. 

Invest with DAiM

If you are interested in investing in Bitcoin and digital assets while earning positive cash flow (and potentially tax-deferred or tax-free returns) while waiting for the massive call option on Bitcoin becoming a recognized form of global money to play out, you can contact us below to schedule a consultation to evaluate your options:

Contact Us

Or if you a ready to go and want to get moving quickly you can start an account by filling out our new client profile:

New Client Profile


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If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

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DAiM August 2020 Recap, Bitcoin 401k's, Gold 2.0 and Paypal Turns to Bitcoin

DAiM August 2020

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


The month of August was a continuation of bullish behavior from the prior 4 months. Bitcoin briefly touched $12,500 before ending the month up 3%. Ethereum topped out at $450, logging a 25% gain for the month, while many small-cap altcoins and DeFi(Decentralized Finance) related coins returned generous double-digit and triple-digit gains, helping many crypto index funds to return 7-10% for the month.

Performance

Back in late June of this year, we adjusted our model portfolio and recommended a strategic adjustment for clients away from a Bitcoin-only investment allocation. Since that adjustment, our model portfolio has returned an additional 13% over that time period then solely being invested in Bitcoin. We’re really proud of that.

As Investment Advisors, our objective is not only to help clients get invested in Bitcoin and access it through their retirement accounts but to optimize their investment so they can accumulate more Bitcoin than they started with. At times that means being 100% invested in Bitcoin when we expect Bitcoin dominance and outperformance, which had been our recommended allocation since opening DAiM in June 2018 until June of 2020. During this time, which was the majority of the bear market, Bitcoin significantly outperformed all majors and mid-cap digital assets significantly. On the other hand, there are moments like now as we enter a bull market where it makes sense to have opportunistic exposure to more risky large and mid-cap digital assets that we believe will outperform over the medium and long-term horizons.

By not being indexed or forced into a single strategy, DAiM offers clients a hybrid form of active management that is flexible, adaptable, prudent, and customizable. Our approach allows clients the option to follow our recommendations as we focus on helping them generate alpha and build wealth based on our understanding of trends, themes, market structure, and risk/reward. Our model portfolio is complemented by our lending program that allows clients to earn an additional 4-6% yield on their digital assets compounding daily while they wait, as well as our Partner Program that generously rewards clients who recommend friends, colleagues, and financial professionals to DAiM a share of fees. Through our yield and partner program, we’ve made investing through DAiM a positive carry investment.

Over the last 6 months, we have grown our AUM over 1000%. We’ve improved our onboarding flow, lowered IRA set up costs and trading fees, and launched interest/yield accounts. As demand for Bitcoin grows, we are positioned perfectly to help new individuals begin investing in Bitcoin and Digital Assets, especially using qualified retirement accounts.

I feel strongly saying that we are the Gold Standard in Investment Advisory and offering access to Bitcoin in your IRA and tax-advantaged accounts. Not only is our overall cost structure lower than anyone in our industry(and in most cases a positive carry), but competitors in our space have signed commercial deals with industry partners that specifically name DAiM as a firm they can’t do business with. It’s a testament to the business we’ve built and we feel absolutely flattered and proud that other firms see DAiM as such a serious threat that they need to target us specifically to try and hold us back.

If you are interested in investing with DAiM or would like to schedule a consultation to learn more, please tap the link below:

Invest with DAiM


Big Product Announcement - 401k Plans w/ Bitcoin

We are proud to announce that we are launching the first-of-its-kind employer-sponsored 401k plans with Bitcoin at the end of the month. The demand that DAiM sees from individuals wanting to invest in their employer-sponsored 401k plan is off the charts but because of the plan rules and structures, we’ve never been able to help or provide an alternative option until now.

This is a major achievement for DAiM, our industry, and employers/employees across the country. I’ve been personally working on this initiative for over a year, executing a trial balloon last November and then working out all the record-keeping, administration, custody, connectivity, ERISA compliance, and portfolio options so that we can seamlessly offer any small/medium/large-sized business and/or solo entrepreneur the opportunity to have access to Bitcoin in their 401k plans which are often frustratingly limited and filled with conservative mutual funds and model portfolios that don’t return much more than the rate of inflation after fees.

If you would like to learn more about how DAiM can help your business or your employer offer an employer-sponsored 401k plan with Bitcoin, please fill out the following form and we’ll get in touch with you immediately!

Bitcoin 401k Plans


Now to the main event. In this letter, I want to share a few thoughts about the case for Bitcoin and it’s emergence as Gold 2.0, how to think about risk/risk-off and some of the noise the ecosystem revolves around, and lastly some speculative thoughts on the PayPal/Venmo announcement.

Bitcoin’s Scarcity and Gold 2.0

Bitcoin is considered sound money because the supply of Bitcoin is fixed at 21mm units. This makes Bitcoin extremely scarce, relative to US Dollars, Euros, YEN, and other fiat currencies which can be created out of thin air in infinite amounts. Because there’s a finite supply, once all of Bitcoin is issued, that’s all there ever will be available. The price of Bitcoin is not linked to the US dollar, rather it is a function of supply and demand.

As humans, we naturally desire that in which is scarce, using scarcity heuristics to place a higher value on an object that is scarce, and a lower value on those that are in abundance. The simplest manifestation of the scarcity heuristic is the fear of losing access to a specific resource resulting from the possession of a small or diminishing quantity of the asset.

  • diamonds are more valuable than rocks because diamonds are not as abundant

  • artwork, originals are more valuable than prints, and work from artists who have passed on are more valuable than those living because their work has a finite supply. 

  • Black Friday, items being sold out, low inventory create scarcity for consumers

  • Gold derives its value from monetary, commercial, cultural, and numismatic characteristics.

And while Bitcoin is the most scarce monetary asset on the planet, moreover, it’s the world’s first truly scarce digital object. While there are assets with limited quantity, like Gold and others that are digitalized, Bitcoin combines both in a world first. 

The implications of that are considerable, to say the least. To put things in perspective, the race for one bitcoin has never been so uncertain, because of that same math.

  • As of February 2020, there are over 7.7 billion people on Earth. 

  • If BTC is distributed evenly among all of them, it would mean that one human being will own 0.003

  • Said alternatively, there is 1 Bitcoin for every 333 people out there.

  • Putting its scarcity into perspective, Bitcoin is so scarce that there are more millionaires walking on this planet than Bitcoin available. 

    • There are around ~48mm millionaires in the world today and there are less than 21mm Bitcoin

  • In a recent report by Glassnode, it cited that only 23mm entities hold Bitcoin, which Is 0.3% of the world’s population. We are currently trading at $11,000 with just .3% of the world participating. As more and more people discover and understand Bitcoin, it's natural scarcity and limited supply will play a huge role in the price in years to come. It will pay to become an early adopter.

Is Bitcoin becoming Gold 2.0?

I strongly believe in the case for both Bitcoin and Gold in an environment where money is forcibly being devalued by central bankers through money printing and intentional inflation to get us out of the crushing levels of debt we’ve accumulated globally. While many Bitcoiners throw shade towards Gold, I believe the price of Gold, especially a powerful breach of $2,000 will be a significant boon to Bitcoin, as more and more people become familiar with Gold, the store of value concept, and begin asking questions about money.

It’s clear to me that most people don’t understand how Bitcoin but they very much understand Gold. It’s historical role and established trust over time is a narrative and conversation around "Store of value" that is much more easily understood by asset managers, investors, and Joe public. Gold powerfully breaching $2,000 will have an immensely positive effect on BTC, as dimwitted and mostly clueless media personalities will parrot the Gold Store-of-value narrative, filling the airwaves and educating the masses about Money and why investors are flocking to Gold. This will naturally open up a larger conversation about Bitcoin, how it’s scarcity is similar to Gold in a world where fiat money is plentiful and produced infinitely.

While Bitcoin has had very little correlation to Gold or Risk assets over longer time periods, its correlation to Gold(as you can see below), equities, and risk assets, in general, has increased, as investors converge on the store of value/inflation hedge and the market more or less becomes all one trade.

Image

Risk-On / Risk-Off

This leads to thoughts on risk. The term “risk-off” is often used by financial media regurgitating what they are hearing from investors and traders. Investors and traders respond to risk-off in different ways. During risk-off environments, Traders, more specifically algos and HFT’s, are often forced to sell a percentage of most of the assets they hold because of the leverage and risk-parity investing they follow. The algo’s are all connected to trading platforms across various asset classes of the obvious traditional stocks but also to digital asset exchanges through APIs. Because Bitcoin has established itself as a legitimate global risk asset and investors are converging on the store-of-value/inflation theme, when capital markets move into an aggressive risk-off state, Bitcoin and digital assets are no longer spared. This was the case in March, and similarly at the beginning of September when the market sold off. 

As an investor the response to risk-off is different. Weak handed investors sell, while the majority hold, absorbing paper losses while waiting for the market to come back. The strongest and boldest of hands, use volatility as their friend, using fear and sell-offs to invest more and accumulate at better prices. In the last bull market, it was common for Bitcoin to endure 20-30% pullbacks. We expect this to be common over the upcoming run. Holding tight during moves like this and not being duration-dependent is key. Having capital to deploy or a plan to dollar-cost average in works extremely well in these situations.

Paypal/Venmo Moves to Offer Bitcoin

PayPal and Venmo announced that it would offer direct sales of Bitcoin and other digital assets was topline news two months ago that is worth discussing due to its imminent launch and significance. Bitcoin sales on PayPal and Venmo are speculated to happen in a month. With Square’s CashApp, Robinhood, Revolut continuing to see record growth from Bitcoin sales, it would almost seem fiscally irresponsible for PayPal not to incorporate Bitcoin and Digital Assets within its business model and compete for fees. When(not if) it does, it would represent a stunning 180-degree about-face for a company who’s CEO Bill Harris, labeled Bitcoin as “the greatest scam in history,” while claiming that it’s simply a mechanism to transfer wealth from the ill-informed to internet scammers.”

PayPal was one of the first electronic payment platforms, and as of Q1 2020 had 325 million active users. Venmo has 50mm users. When it comes to wider adoption and the path to the vaunted Trillion dollar market cap, 375mm users with access to buy and sell Bitcoin is a very big deal. Putting that number into perspective in terms of scarcity and supply/demand, there simply is not enough Bitcoin. If each Paypal/Venmo user wanted Bitcoin, they would only be able to buy a measly .05 BTC or 1/20th of 1 Bitcoin! My plan for when they roll it out will be to convert my spare cash in those platforms into Bitcoin. What will be yours and what do you think others will do?

News & Highlights:

  • MicroStrategy became the first public company to buy Bitcoin on their balance sheet in lieu of holding cash. $250mm worth. - read more here

  • Hester Pierce, aka ‘Crypto Mom’ is a commissioner of the SEC.

  • The OCC cleared the way for FDIC-insured banks to custody crypto.

  • Many of the largest fintech companies are active in crypto. Many more like Paypal are ramping their involvement in the space in real-time.

  • CME Bitcoin futures open interest nearly reached $1bn.

  • Tether moves more value than Paypal. 

  • Every central bank in the world is thinking hard about launching its own Central Bank Digital Currency. Many are already working on it.

  • Gold broke out to new all-time highs.

  • The “digital gold” narrative of Bitcoin has never been stronger.

Links:

**Must Read: Bitcoin: A Novel Economic Institution - ARK Invest

This is an absolutely terrific read on Bitcoin and how it is different than the monetary/financial system that we are subjected to today authored by Yassine Elmandjra from ARK Invest in conjunction with the team from Coin Metrics. It’s a long but excellent 30-minute read that concisely lays out the advantages of Bitcoin when compared to the incumbent system.

They define four economic assurances that any monetary/financial system should aim to provide their users:

  1. Value should be exchanged freely and globally

  2. Wealth should be owned wholly and protected

  3. Rules should be enforced reliably and predictably

  4. Integrity of the system should be verifiable

I highly recommend that you read this piece and share it with anyone you know who may be interested in learning more about Bitcoin. This is a high quality first stepping stone that does a great job of clearly describing Bitcoin's value prop by juxtaposing it to the current dominant monetary/financial system. Individuals can only begin to identify where the traditional system falls short when they truly understand the assurances these systems should provide.

Final Note: It's Still Very Early in the Adoption Process

If I were to make an analogy of where Bitcoin is in the adoption process, I would say we are still in batting practice or maybe the top of the 1st inning. With only .3% of global adoption and given it's potential to capture addressable markets such as Store of Value (Gold ~$10 Trillion) and Broad Money (~$80 Trillion), Bitcoin has risk/reward profile that is inherently skewed to the upside. 

One must consider the risks and ask what is the real risk?? 

Is the risk owning Bitcoin or is the real risk, not owning Bitcoin at all?

image.png

Invest with DAiM

If you are interested in investing in Bitcoin and digital assets while earning positive cash flow (and potentially tax-deferred or tax-free returns) while waiting for the massive call option on Bitcoin becoming a recognized form of global money to play out, you can contact us below to schedule a consultation to evaluate your options:

Contact Us

Or if you a ready to go and want to get moving quickly you can start an account by filling out our new client profile:

New Client Profile


Spread the Word 🗣

If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

Share


And So It Begins..... A Public Company Buys Bitcoin on Their Balance Sheet

New Money: Issue #15

NEW MONEY is a long-form discussion of trends and macro events related to Bitcoin, Money and Digital Assets, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


I rarely ever talk about stocks because it’s no longer an asset class I follow day-to-day given Fed interference in capital markets and lack of alpha generation and my dedication to building the future of money and finance with Bitcoin and Digital Assets. However, the following is one of the strongest and evidential pieces of news I've seen period over the last few years with respect to Bitcoin adoption. MicroStrategy(MSTR), $1.25bn publicly traded Nasdaq stock, has become the first large corporation to hold Bitcoin as a cash reserve asset.

This has enormous implications for other public and tech companies to follow but the sheer size of their purchase relative to their market cap even warrants consideration for MSTE as a pure stock market play on Bitcoin with tech valuations. I'll be writing about it in this week’s issue of New Money, as I reckon it will be used by investors as a proxy for Bitcoin and another tipping point for mainstream adoption as other publicly traded companies look to follow. Enjoy…..

--

MSTR: Microstrategy

There's a lot of things I find very interesting about Bitcoin and the developing ecosystem, but nothing has quite captured my attention recently as the following announcement from a public company, MicroStrategy, that they are holding Bitcoin as part of their treasury program. When I first heard the announcement last week, I thought it would be something like a toehold position, meaning a few Bitcoin here and there, but it turns out they bought 21,454 Bitcoin which equals $250mm in Bitcoin or 60% of their balance sheet cash for a company with a market cap at the time of writing of $1.25bn!!!!!  

It's my belief that tech companies and other public companies adopting Bitcoin as a reserve currency is a precursor to small nations following suit which is something I noted in my Get Off Zero: The Case for Bitcoin report (password: getoffzero) discussing Bitcoin adoption and the final Gartner Hype cycle as nations states add Bitcoin to their foreign reserves which I expect in 2-3 years from now as the market size and liquidity makes this feasible.... Regardless, MicroStrategy jumping in is so impressive in terms of the magnitude of the purchase and the clarity behind the decision. It’s inevitable that other companies will follow, but Microstrategy doing it under the radar offers them huge, first-mover advantages!!! 

Full Press Release and Article:

MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset MicroStrategy® Incorporated (Nasdaq: MSTR) (linked)

Probably the most important part of the entire announcement is how Matt Saylor, the CEO of MicroStrategy, articulated his belief and thought process:

Some key excerpts:

Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.

MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.

Amazing right? This person is not a Bitcoiner, doesn’t make Bitcoin products or blockchain-based products and is not trying to hoodwink unsuspected investors by adding blockchain or crypto to its name. MicroStrategy, as a company is simply looking out for shareholder value in these unprecedented times. Saylor perfectly articulates the case for a decentralized, digital currency. He goes on to say:

“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”

And So it begins….

It’s not hard to read the above and realize that a certain form of magic internet money that was initially bought on the fringes by geeks, cypherpunks, anarchists, and innovators continues to move closer and closer towards mainstream adoption and acceptance.

As Governments indebt themselves and Central Banks continue to destroy the value of money by printing unlimited quantities, the reasoning behind why individuals, corporations, and central banks will look to add Bitcoin as the reserve asset on their personal, corporate and nation-state balance sheet becomes pretty clear: Bitcoin is sound money built for a digital world.

Until now, Bitcoin’s remarkable rise has largely been an organic grassroots effort by retail investors. With Hedge Funds sniffing (Paul Tudor Jones) as noted in the Bitcoin Tipping Point from back in April, large public corporations jumping into the pool and nation-states entering in only a matter of time, we should see an incredible acceleration of adoption in Bitcoin’s US dollar value given its scarcity and limited supply.

For those on the sidelines, this should be as much of a seminal event to nudge you off the sideline. If there was any doubt about where we are going, whether the price is too high (HINT: it’s low) and/or if you missed the move, I say this with forceful conviction:

GET OFF ZERO

If you want an analogy of where we are, I’d argue the last 11 years have been a long drawn out Spring Training and we’re just now wrapping up batting practice before the 1st inning of Opening Day. Bitcoin is a $200bn market cap. The entire Digital Asset market cap is $340bn. For context, AAPL has gained $1 trillion in market value alone since March.

Bitcoin is competing for addressable markets such as Global Store-of-Value and Global Money. It’s literally a tiny little dot that is likely mispriced due to its complexity and lack of understanding. In the words of Paul Tudor Jones,

“At the end of the day, the best profit-maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping in the performance dust because you thought you were smarter than the market. If I am forced to forecast, my bet is it will be Bitcoin.”

“So that was the flavor behind some of the discussions that were had when scoring the suitability of each asset as a store of value. What was surprising to me was not that Bitcoin came in last, but that it scored as high as it did. Bitcoin had an overall score nearly 60% of that of financial assets but has a market cap that is 1/1200th of that. It scores 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value. Something appears wrong here and my guess is it's the price of Bitcoin.”

DAiM Updates, Earning Yield, Getting Invested

A lot has been going on over the last month and a half that is tremendously great for DAiM. We’ve onboarded a record amount of assets and new clients, we forging new services and relationships, we’ve offered interest income/yield on Bitcoin and we’re close to rolling out Employer-sponsored 401k plans with Bitcoin. We’re about to start raising funds for ‘NEW MONEY’ the brokerage and Wealth Management platform I’ve been working on to compliment the Investment Advisory services we offer through DAiM. Furthermore, we’re learning that other businesses in our industry are signing exclusive deals with other institutions that prevent them from working with DAiM because we are the best way to onboard at the lowest costs in the industry. We see this as the ultimate compliment that they see us as the gold standard and a threat to their predatory and high fee business lines. We couldn’t be more flattered.

A big thanks to our existing clients for their trust and support in helping us build the first licensed Registered Investment Advisor business for Bitcoin and Digital Assets. Their continued relationship with us and the recent deluge of referrals are most appreciated by us. It is truly the highest compliment we can receive as your Investment Advisor.

There may be a few reasons for our recent success and explosion in AUM. There’s been increased interest in the asset class given Federal Reserve money printing and dollar softness as investors look for alternative ways to store value. Our model portfolio adjustment in June to 80% Bitcoin, 20% Ethereum has allowed investors to pick up close to an additional 9% in returns as Ethereum has impressively outperformed Bitcoin since that adjustment. However, the biggest game-changer has been our new ability to offer positive cash flow against our investors’ Bitcoin and Digital Asset portfolio.

What do we mean when making this statement? In its simplicity, our investors are able to buy and custodial Bitcoin, Ethereum, and other Digital Assets with us and we subsequently lend it out in a very safe and compliant manner while earning interest income paid in Bitcoin or USD for our investors. Earning an additional 5-6% yield while sitting in Bitcoin, not only makes Bitcoin a positive carry asset that more than covers our management and custody fees, but offers close to 8-10% in tax-equivalent yields inside your IRA/Retirement accounts.

If you are interested in investing in Bitcoin and digital assets while earning positive cash flow (and potentially tax-deferred or tax-free returns) while waiting for the massive call option on Bitcoin becoming a recognized form of global money to play out, you can contact us below to schedule a consultation to evaluate your options:

Contact Us

Or if you a ready to go and want to get moving quickly you can start an account by filling out our new client profile:

New Client Profile


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New Money Weekend Links

Weekend Links: 07/25/20

NEW MONEY Weekend links is a recap of relevant news, links, and content from the week in Bitcoin, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


Jumping into the new format as promised. If you find this valuable, please share it with interested friends and/or your social media for others to find. I appreciate you.


This Week in Bitcoin and Digital Assets

Crypto Custody in U.S. Banks - In a powerful move toward mass adoption, the U.S. Office of the Comptroller of the Currency has finally acknowledged, "banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency." Read More

PayPal Takes Another Step Toward Crypto - PayPal has reportedly officially partnered with Paxos in an effort to launch crypto services very soon, which could increase prices through mass adoption. Read More

Senate Hearing Sees Digital Dollar as a Tool for Economic Supremacy - The idea of a U.S. digital dollar is no longer a fringe novelty, it may be a means to an end. See what the Senate is saying about it and recall my comments from back in April on the coming digital dollar and what that means for surveillance and privacy. Read More

ETH is the Star of 2020 (So Far) - "Ether, the second-largest cryptocurrency by market value, has more than doubled in value this year..." Read More

"Bitcoin is money." - A D.C. federal court rules that Bitcoin is indeed money in the context of money transmission licensing Read More

Visa, Mastercard And PayPal Are Changing Their Tune On Bitcoin And Crypto Banks, credit cards, and even eventually central banks will all capitulate on bitcoin. The if you can't beat it join it mentality is a natural reaction to bitcoin's ever-increasing growth driven by demand caused by its incentive structure. - Read More


Weekend Reading Links:

Jim Chanos: ‘We are in the golden age of fraud’ - Harriet Agnew, FT

The infamous short-seller dishes on being a bear in a bull market, betting against Tesla and why he thinks ‘trouble’s coming’

Dumb Money Making Smart Stock Picks in Yearlong Robinhood Rally - Bloomberg

One unexpected casualty of the 2020 market will be the popular notion that the pros have it over the amateurs when it comes to choosing stocks. Between r/wallstreetbets, Tiktok pump groups and Dave Day Trader Global, the amateurs are winning big

No Business Like War Business - Radigan Carter

Step back and see who doesn't waste the opportunity to spend money on wars. In a strong bipartisan vote, House lawmakers passed a $740.5 billion plan for the annual defense authorization bill, including provisions for a hefty military pay raise next year, as long as the Defense Department rename bases honoring Confederate leaders. Thanks Democrats. Real courage here.

The Poison of Male Incivility - Rebecca Traister

The framing of uncivil men being passionate and disruptive while women responding to it being labeled as fiery, chaotic, doing it for their brand or status-seeking is such a hypocritical double standard form of gender power imbalance that needs to be confronted. "until we can see how white men have taken advantage of sexism and racism for their own gain — how they’ve built their own “brand”— on the backs of the f*cking bitches forever, we’re not really reading a full story."

Quantitative Easing, MMT, and Inflation/Deflation: A Primer - Lyn Alden

This is a super long read but one of the best content pieces I've seen to understand inflation/deflation, Quantitative Easing, MMT, and all the f*ckery and sorcery central bankers are doing with your money to keep the party going.

Hackers Tell the Story of the Twitter Attack From the Inside - Nathaniel Popper, NY Times

Several people involved in the events that took down Twitter this week spoke with The Times, giving the first account of what happened as a pursuit of Bitcoin spun out of control.

100 Couples Share Their Secrets to a Successful Relationship - Polina Marinova

This is a little off the beat, but I thought others might find it interesting. Given how Covid-19 has forced us to live on top of each other and in many cases a greater degree of closeness to our partners and loved ones, we could benefit from experiences and advice from others. “If you stop investing in yourself, your bad habits and poor communication will chip away at your relationship — whether you’re married or not.”

Following Funds From The Twitter Hack & Bitcoin Scam - Affecting Joe Biden, Elon Musk, And Others - Nicholas Gans, Forbes

Bitcoin is a public blockchain, so anyone can pull and investigate all of the hack-associated transactions and addresses from the Twitter Hack and the public address used and follow the funds. In this article, the author uses this publicly available blockchain data to model the funds received and subsequently sent by the scammer(s).

The Message Behind Gold's Rally: The World Economy Is in Trouble

As 5yr real yields on US Treasuries are hovering near seven-year lows, Gold topped $1,900 an ounce first time since 2011. t's easy to forget now but there was a time early on in the pandemic when the price of gold was in freefall.

What Is Yield Farming? The Rocket Fuel of DeFi, Explained - Coindesk

Broadly speaking, yield farming is any effort to put crypto-assets to work and generate the most returns possible on those assets. At the simplest level, a yield farmer might move assets around within decentralized services, constantly chasing whichever pool is offering the best APY from week to week.


Podcasts:

The What Bitcoin Did Podcast - Brian Armstrong, Coinbase CEO

This interview with the founder of Coinbase discusses the difficulties in running a large startup, regulations, the Neutrino acquisition & providing analytics to government agencies with Coinbase Analytics was so polarizing to the digital asset community that #deletecoinbase began trending on Bitcoin twitter.

The Joe Rogan Experience - #1508: Peter Schiff

Peter Schiff is a well known Gold bug and Bitcoin hater. The wide-ranging, three-hour with this interview covered a number of topics, including a critique of socialism, the 2020 presidential election, the recent social unrest, how to fix troubled communities, how the minimum wage hurts workers, and the economic impacts of the coronavirus

The Importance of Free Speech by @Ayishat_Akanbi

This is not really a podcast but it’s long enough(~5min or so) that it sort of fits in this section. I’ve watched this video at least 5x and can’t reiterate how important it is to listen carefully and understand what she is trying to say. Humans are complex, they're not the packages of pure good and pure evil, and once you're quick to vilify them, you immediately take away from all the good that they have done & you hurt other important causes. Free speech must be protected at all costs, so different ideas can keep going to battle until the best argument wins. It's the only path to the truth.


New Money Bits

Bill Miller, formerly of Legg Mason Value Trust, reiterates what we’ve been pounding the table at DAiM. That Bitcoin should be at least 1% of every individual’s portfolio. Don’t believe me, even if you hate Bitcoin, just follow the data from our Modern Portfolio Theory research analysis. If you are an individual and you want help adding Bitcoin to your brokerage or retirement accounts email me adam@daim.io. If you’re a Financial Advisor/Wealth Manager and you’d like to learn about Bitcoin or explore how you can provide access to clients email me as well. We are happy to help anyone that wants safe, secure, and compliant access to Bitcoin and Digital Assets.

Learn To Money

My colleague and friend, Tyrone Ross, Jr just launched “Learn to Money” ..Learn to Money will cover budgeting, saving, managing and avoiding debt, making smart purchases, investing, home buying, credit scores, and more. He’s gonna do it in a way that won't put young people to sleep. The videos will be full of dope graphics, expressed in relatable language, and will be posted on Instagram, YouTube, Twitter, and TikTok. If you want to support his extraordinary venture, you can at GoFundMe.

The Black Bitcoin Buyout is happening. You should participate.

The #BlackBitcoinBuyout is designed to showcase the buying power of the black community with millions of Black people buying Bitcoin at once. If you are considering Bitcoin, this a powerful movement and way to GET OFF ZERO.

If you are ready to get started with Bitcoin and want to open a brokerage or retirement account(401k, IRA or SEP), fill out our client profile. Everything is free to get going. Once you are a client, you can refer friends and earn USD or Bitcoin for any referrals of friends and colleagues.

The next Bitcoin Bull market is getting started…I’m absolutely here for it 🚀🚀🚀

Ok..that’s it for the first issue of Weekend Links. If you like this format or want to provide feedback let me know.


Spread the Word 🗣

If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

The Roth IRA is the GOD vehicle for Bitcoin

New Money: Issue #14

NEW MONEY is a recap of the week in Bitcoin, published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Opinions are my own. Twitter: @callmethebear


At Digital Asset Investment Management, the licensed Registered Investment Advisor for Bitcoin I’ve been building with my partner Bryan Courchesne, we help individuals invest in Bitcoin using their 401k, IRA(Traditional, Roth, SEP and Simple, Coverdell) and brokerage accounts. We’ve built a model organization that is regulator vetted, transparent, and customizable to every individual that works with us.

What sets us apart from other firms and organizations in the Bitcoin industry is that we did the hard work to get properly licensed and operate in a fully regulatory compliant manner. We work with clients who want help navigating Bitcoin and Digital Assets and our flat fee model does not steal your hard-earned money through predatory and punitive setup costs or hidden transaction and trading fees. For every client, we build you a secure environment to invest safely and we NEVER have custody of your money.

I often get asked why we charge 2.5% for management and the reason is simple: We are absolutely f*cking worth it.

A single trade at most Bitcoin on-ramps like Coinbase, CashApp, Robinhood and other easy to use platforms cost you 1.99% to 2.1%. A single trade!!!!! Each additional trade 1.99% to 2.1%. For comparison, we trade at 25bps or almost 1.8% less. Do you know what you get from those platforms for that? Weak security, 2-3 day support tickets, no humans to ever talk to when you have questions, worthless sh*t coins shilled to you in email campaigns, and zero availability to invest using your retirement accounts.

Other options to invest in retirement accounts include a competitor firm called BitcoinIRA that sucks the life out of your investment through 10-15% of your initial capital and 1-5% trading fees and the GBTC and ETHE equity tickers available at most brokerage accounts that trade at 30% and 500% premiums to NAV with 4% expense fees. If you own Bitcoin and Ethereum this way, no offense but this is absolutely foolish and beyond irresponsible to yourself when you can buy 1.3x more Bitcoin and 5x more Ethereum directly. Individuals who own GBTC and ETHE to get exposure, have no idea that institutional investors are depositing BTC and ETH to the trust, creating new shares at NAV and then waiting 6 months to dump the shares in the open market at a premium to eager retail investors who have no idea they are overpaying for something that is completely detached from the underlying value. Institutional Investors are collecting free money on the back of retail investor stupidity and lack of knowledge of other available options.

Take a look at ETHE, the stock equivalent security for exposure to ETH. The price has dropped by nearly 60% since the June 4 high. Ethereum is down maybe 8% but the collapse in premium is the result of the accredited investors, predominantly hedge funds, liquidating their holdings after their mandatory lock-up period for new placements into the trust came to an end. They are legally fleecing unsuspected retail investors.

Do I sound grumpy and salty? Well, I kinda am.

It bothers me that exchanges and on-boarding ramps treat unsuspecting new investors like ATMs and it boils my blood that regulators allow retails investors to get hosed using these terrible products. On a personal level, it frustrates me that I haven’t done a better job letting people know we exist, but it confuses me that individuals push back on our 2.5% management fee and then go pay more punitive costs elsewhere because it’s embedded or hidden inside the product or user experience.

At the end of the day, if you want to invest in Bitcoin, you have a lot of options available to get started, but buyer beware. If you desire a personalized experience where you have a legally licensed advisor to answer questions or speak to 24/7, transact at institutional below market rates, get educated, learn and be empowered, have cutting edge security, investment recommendations, earn yield, be able to utilize retirement accounts and have the ability to optimize your investment and experience all for the same cost as a single trade at platforms where you get nothing else, send us an inquiry here or shoot me an email at adam@daim.io and let’s talk.

We can help you:

  • roll over a 401k from an old job to invest in Bitcoin

  • transferring or creating a Traditional IRA to invest in Bitcoin (SEP, Simple, Roth)

  • executing a back door Roth IRA conversion

  • managing 100% of your assets and building you a Modern Portfolio with Bitcoin exposure

  • partnering with your existing Financial Advisor to invest in Bitcoin

  • employer-sponsored 401k plans with Bitcoin (this is a new product that we are rolling out: If you are a small business owner and want to offer it to your employees or work at a company and want your employer to offer 401k plans that allow you to invest in Bitcoin please contact me adam@daim.io)

  • yield generation (invest in Bitcoin and earn 4-9% yields while you wait)

  • cash brokerage accounts with Advisor access

  • creating a Self Direct IRA for a one-time fee and using our institutional rates to trade

  • learning and research about Bitcoin and other digital assets

  • avoid punitive trading and transaction costs that you will get charged at other platforms

Even if you are considering dipping your toes in Bitcoin and Digital Assets, at the very least, my partner and I will take the time to evaluate your options and be extremely transparent with you to put you in the best place to succeed. We are of course fiduciaries and legally required to do so but I just want to see people get off zero and do it in the way that’s best for them. I can’t say the same for other people and organizations in this industry and although it can appear easier to buy Bitcoin at Coinbase or some other platform, consider the details and whether or not you’re actually getting any value for using them and the expensive fees they charge.

Lastly, if your financial advisor at JP Morgan, Morgan Stanely, Raymond James, Merrill Lynch, Fidelity or wherever they are, are not offering Bitcoin or having conversations with you about getting off zero and having at least 1% exposure then they are being extremely negligent, lazy and/or incompetent. We’re long past the easy criticism that Bitcoin is some fringe investment. Not only is it the best-performing asset of the past decade but its inclusion in every portfolio not only brings diversification benefits but it builds portfolios with higher absolute and risk-adjusted returns.(see our Modern Portfolio analysis).

The ROTH IRA is the God Account for Bitcoin

Which brings me to the Roth IRA and why its the greatest vehicle to invest in Bitcoin. I often refer to the Roth IRA as the God Account for Bitcoin. Why? Because a Roth IRA allows you to invest tax-free for the rest of your life and the difference in the returns between a brokerage or Traditional IRA is ungodly. For an investment like Bitcoin that has an asymmetric return profile, this offers incredible long term benefits to avoid taxes along the way and on the way out.

According to the IRS, Bitcoin is treated as property. However, like-kind transactions are considered taxable events. This means if you hold Bitcoin in regular brokerage accounts, investing in Bitcoin and swapping some of it to buy Ethereum or some other digital asset(equities, bonds, real estate will all be tokenized/digitized one day) or if you decide to sell Bitcoin one day in the future will create huge taxable events. You can bet the IRS will be paying attention.

Roth IRAs are funded through contributions on an after-tax basis. However, keep in mind that your eligibility to contribute to a Roth IRA is based on your income level. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $137, 000 for the tax year 2019 and under $139,000 for the tax year 2020 to contribute to a Roth IRA, and if you're married and file jointly, your MAGI must be under $203,000 for the tax year 2019 and 206,000 for the tax year 2020. The maximum total annual contribution for all your IRAs combined is:

  • $6,000 if you're under age 50

  • $7,000 if you're age 50 or older

The ability to shield taxes and never pay anything to the IRS on transactions or gains ever again is extremely underappreciated by most investors, especially if you believe taxes will be going up in future years.

Because of the income limits, individuals who make over $139,000 are ineligible to make contributions to a Roth on a yearly basis. However, they can contribute to a Traditional IRA on a pre-tax basis then convert it to a Roth IRA through the “backdoor”. The Backdoor Roth Conversion is a very attractive option for anyone who is considered ineligible, has a traditional IRA, 401k or SEP, and wants to convert their retirement vehicle to a Roth and grow their money tax-free. Both Traditional and Roth IRAs can receive contributions of up to $6,000 for 2019 until July 15.

Let’s Examine the Data

Let’s look at a 401k/Traditional IRA vs a Roth IRA for Bitcoin. The difference between the two vehicles is paying taxes now or later. One of the considerations we evaluate with clients is whether or not they should convert their 401k/Traditional IRA to a Roth through the back door. In order to do this, one needs to pay taxes upfront/today in order not to pay in the future. Does this make sense? Well, that depends on several factors unique to each individual:

  • your current tax rate

  • a realistic estimate of your future tax rate

  • how many years until retirement

  • rate of return/opportunity cost for investing taxes paid in the market until retirement

  • a guesstimate of the future price of Bitcoin

Let’s examine someone investing $10,000 in Bitcoin through a Traditional IRA and analyzing whether they should do a backdoor conversion to a Roth IRA. In this example, we’ll use someone with 25 years to retirement, 40% in current taxes, 45% in future taxes, and a market return of 7% a year as an opportunity cost.

In the chart below, the Roth and Traditional IRA account values are represented by the black and orange lines with the total account value plotted on the left y-axis against the future price of Bitcoin on the x-axis. The blue bars represent the excess return (right y-axis) of the Roth IRA vs the Traditional IRA based on potential future prices of Bitcoin.

If you look at the data below, the breakeven point for the future price of Bitcoin for this transaction to make economic sense is somewhere around $57,500 per Bitcoin. If you believe that the future price of Bitcoin is likely to far exceed $57,500 at some point in the future before you retire, then taking the tax hit today to convert your 401k or Traditional IRA to a Roth IRA would be extremely beneficial. If you believe like most Bitcoiners, that Bitcoin will become a Store-of-Value and potentially global money and the future price will far exceed $100k and potentially $1mm/BTC in the future, then investing Bitcoin in a Roth IRA would be an exceptionally smart transaction for simply paying a small amount of tax today to prevent paying taxes(whatever that rate might be) in the future.

For anyone curious about the inputs and how the upfront taxes, future taxes, and opportunity costs all flow through, I break out the data and calculations in the following way. If anyone has questions feel free to leave a comment or contact me.

As you can observe, converting your 401k and/or Traditional IRA can have exceptional benefits if you have a strong opinion about the future price of Bitcoin and believe taxes are headed higher in the future. If this transaction is something you are interested in or want to talk about, please contact us here.

Contact Us


61% of Bitcoin hasn't moved in over a year. That's an all-time high. This is extremely bullish and illustrates the strength of the Bitcoin investor base as long term HODLers.

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Wanna understand why HOLDers are so important to the success of Bitcoin? Read Dan Held’s “HODLers are the Revolutionaries”. I promise you will learn something.


The US just reported it’s highest COVID-19 daily case count ever. This can be described as nothing more than pure failure. I don’t know who needs to hear this and you can do what you want, but you should probably avoid large crowds, bars/restaurants, gyms, etc. Just because things are open doesn’t mean you need to risk your health for consumption. I’m prepared to take the “L” for 2020 and suck it up until there’s treatment or a vaccine.

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Wanna understand why the cases continue to spike and the United States is absolutely sh*tting the bed in terms of preventing the spread of COVID-19? Look no further than two examples below. People are absolutely stupid and ignorance kills. It’s honestly hard to believe our country is this poorly educated and wearing masks has become some sort of political statement when dealing with an invisible pathogen. When foreigners refer to Americans as stupid, maybe we should believe them.

Yikes.

If you want to read about how f*cked up our healthcare system and its corresponding lobby, click in the tweet below and read the thread by this gentleman. I sincerely hope this man spends the rest of his life doing everything in his power to scream, be loud and be heard by anyone that’ll listen to help reverse the damage and lack of humanity he and his colleagues have had in the name of profit over people. 👇🏼👇🏼

What I am Listening to (Podcasts):

The Breakdown with Nathaniel Whittmore: How Monopolies Sow the Seeds of Their Own Destruction, Feat. Tuur Demeester

  • The four preconditions for a reformation, and how they apply today

  • Why inflation is becoming a more significant threat today

  • How bitcoin memes function like unifying doctrines from past revolutions

  • Why millennials could be the Greatest Generation 2.0 

David Portnoy (@stoolpresidente) of Barstool Sports.

Follow this man on twitter if nothing more than for entertainment value. He’s been day trading for the past couple of months, but in the process, Dave Portnoy is single-handedly exposing the sham of the stock market and central bank policy. I’m not sure he even knew what he was doing when he started, but he does now. Younger investors and even veteran investors are taking note of his refreshing, nothing sacred approach. He will likely cause a lot of people that follow him to lose money but he is helping people wake up and realize what a joke our money has become due to central banks printing it in infinite amounts to hold up the stock market.

Indeed. Bitcoin 🚀.

What I am Reading

Mark Zuckerberg is the biggest oligarch in the history of mankind - Scott Galloway

The American Press Is Destroying Itself - Matt Taibbi

A Superior Financial System - Chris Burniske

Trust No One - Michael Krieger

Covid has exposed America as a failed state - Unherd

Recent Issues of New Money:

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If you know anyone interested in ₿itcoin, that might want to keep up on the news, learn or stay in the loop, please share this newsletter with them. I appreciate your support.

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