Dispatch #22 – 2021
July 9th, 2021
I hope everyone enjoyed a relaxing Independence Day weekend. The Dispatch was in South Florida and got a glimpse of a property market even hotter than the DC suburbs. The continued strength of residential real estate goes against the long-term trends of lackluster median income growth and high unemployment. It’s a good example of how ample liquidity can smooth over fundamental realities for an extended period. There is no dominant theme this week, but there’s ample evidence of market frothiness in several of the stories that follow.
- Money flows into stocks look elevated
- Pfizer vaccine and the Delta variant
- An update on the bitcoin price since 3rd halving vs earlier cycles
- The average bitcoin wallet holding has fallen to 0.25 btc
- Sotheby’s to accept bitcoin and ether
- Not-yet-launched crypto exchange valued at $9bn
- Crypto comes to 401k plans
- BITCOIN SCHOOL – Still on summer break!
Money flow and positioning in equities (stocks)
As the data below from Topdown charts illustrates, equity sentiment is elevated. The AAII captures individual investor sentiment.
Pfizer vaccine and the Delta variant
The Dispatch reads the WSJ headline and interprets that mRNA vaccines are providing strong protection against the Delta variant. However, our media world is driven to draw eyeballs and the headlines often frame the data with a negative skew. For example, could the WSJ headline have read “Pfizer vaccine highly effective against Delta variant”, since 94% of recipients are protected from severe illness? Isn’t that 94% a remarkably effective vaccine protection judged against all vaccines we consume as a society?
The section above from this CNN article should provide confidence that the Pfizer mRNA vaccine does indeed offer strong protection again the latest Covid variant. This news of rising infections in Israel was partly attributed to the stock market weakness last week.
Bitcoin price update since the 3rd halving
This is an updated Ecoinometric chart that illustrates the bitcoin price since the 3rd halving (May 2020) versus the two prior halving cycles. Given the recent price action, it should come as no surprise that the price trajectory has dropped below the earlier cycles. The top of the blue shaded area is the price move in 2013 and the bottom is the 2017 cycle. Note this is a log scale chart. The current debate centers over the question of whether we have seen a price peak for this third cycle. Since the Dispatch advocates a small allocation with a minimum five-year view, that debate is somewhat academic.
Evolution of number of bitcoin held by the average wallet
The tweet below from well-regarded block-chain analyst Willy Woo shows how the average bitcoin owner’s position size has evolved. While ownership has become more widespread, it’s worth noting that 1000 bitcoin in 2009 was worth $1 whereas 0.25 bitcoin is worth roughly $8,500 today.
Note that when you take into account exchange wallets that commingle thousands of individuals’ coins into a single address, the estimated average holding drops from 0.69 btc to 0.25 btc.
Sotheby’s to accept bitcoin and ether
This continues the gradual penetration of the digital asset acceptance for large-ticket transactions. Potential bidders who want to use crypto will now be able to transfer digital value directly to the auction house rather than trade the tokens at an exchange for fiat, move fiat currency to a bank and finally move that to Sotheby’s. This Market Watch article provides more details of the auction.
SPAC deal values not-yet-launched crypto trading firm at $9bn!
This is a SPAC (Special Purpose Acquisition Company) deal valued at $9bn for a yet-to-be-launched crypto exchange! Seriously, this is another sign of the crazy times we live in. Sure, the backers are blue chip entities like Peter Thiel and Blackrock, but this still makes the Dispatch shudder. Coinbase has a $53bn market cap as a mature (by crypto standards) business model and this newbie gets a $9bn valuation. It is more evidence of market frothiness that has been generated by the Fed liquidity spigot, in the Dispatch’s view. More details in this Reuters story and Blockworks article.
Crypto comes to 401K plans
We end by highlighting this June WSJ article about a small 401(k) plan administrator named ForUsAll Inc that is bringing digital assets to savers. ForUsAll only has $1.7bn in in plan assets, a tiny fraction of the $22trillion retirement market. This scrappy upstart is innovating with a smart plan will limit crypto exposure to 5% to start, and plan participants will get reminders to rebalance once crypto exposure goes above 5%.
BITCOIN SCHOOL – Still on summer break!
Enjoy life returning to normal. Stay safe and do reach out if you have any questions or comments about the material in this Dispatch.
|This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of RockDen Advisors LLC and are subject to change at any time based on market and other conditions. Past performance may not be indicative of future results.|