This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.
To investors,
The Federal Reserve announced an emergency interest rate cut of 50 basis points this morning. This announcement puts the target rates between 1% and 1.25% moving forward. This decision was done in response to the coronavirus scare, which has led to a week of stock market declines and general uncertainty.
Frankly, this is exactly what I have been talking about for months now. Central banks only have two tools when we near recessionary periods — cut interest rates and print money. As I wrote last July, these forms of monetary stimulus are very positive for Bitcoin.
What is really interesting about this development though is not that it happened, but rather the timing of all of it. People have been calling for interest rates at 0% and more quantitative easing for over a year now. Some of this desire is driven by zero rates or negative rates in other countries and some of it is driven by the selfish expectation that markets should go up and to the right forever.
It doesn’t hurt that last week’s market sell off, combined with the fear of an incoming economic slowdown due to coronavirus, helped to accelerate the Federal Reserve’s decision to cut rates. Add in the fact that the last three times that the Federal Reserve has created an emergency 50 basis point cut is for 9/11, the housing crisis/Lehman issues, and today.
Yes, you read that right. The central bank of the United States is responding to the current environment with as much importance and force as they did for 9/11 and the housing crisis. Pretty incredible.
Here is the craziest part of all of this though — the rate cuts and subsequent money printing is going to occur within months of the Bitcoin halving. So while the fiat currency world is accelerating the devaluation of their base unit of account, Bitcoin will be programmatically increasing the scarcity and value of their base unit of account. You literally can’t make this type of stuff up.
Cut rates. Print money. Watch Bitcoin’s supply shock occur.
That is what is about to occur over the next 60-75 days. We got the rate cut today. The money printing is coming. And the Bitcoin halving will occur in May 2020. Wait, you don’t believe me that money printing is coming? Check this out:
Less than one hour after the Federal Reserve announced the emergency rate cut, President Trump was already tweeting about cutting rates even more and printing more money. Literally one hour later. Again, you can’t make this stuff up.
But here is the catch to all of this — the interest rate cuts and the quantitative easing are going to be MUCH less impactful than they have been in the past. We are already addicted to the monetary stimulus. Just like a crack addict needs more and more drugs to get high over time, our economy needs larger and larger stimulus to continue lurching forward.
Take a look at the fed’s balance sheet over the last few months. The name of the game has been expansion. They can say this is not quantitative easing, but if it is not, then I don’t know what it is.
It hasn’t mattered though. We still find ourselves in a position where the Fed has to step in with an emergency rate cut today. They have to become more extreme over time in order to still have the same impact as they used to have. Historically, the Fed has cut rates by 500 basis points or more during recessionary periods, but we obviously don’t have that much to cut, so if I was a betting man, I would bet that we see negative interest rates in the US shortly.
Cut rates. Print money. The central bank playbook is being tested right now. And when you have a hammer, sometimes everything looks like a nail.
Stay alert out there. We are entering uncharted territory. Manage your risk and get comfortable in the chaos.
-Pomp
This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.
THE RUNDOWN:
U.S. Sues to Tap Crypto Accounts Tied to North Korean Hack: The U.S. sued to gain control of cryptocurrency accounts North Korea allegedly used to steal more than $250 million from Bitcoin and Ether exchanges in 2018 in a move that comes as Kim Jong Un’s regime launched one of its biggest military provocations in months. The suit filed in federal court in Washington on Monday seeks the forfeiture of 113 accounts. According to the complaint, the hackers used phishing emails containing malware to target the exchanges, which were located in South Korea and elsewhere. Read more.
Bitcoin’s Rally May Have More Room to Run, Technicals Suggest: Bitcoin’s starting the week on the right foot after its worst week since November. Now, a number of technical indicators are signaling the potential rally may have further room to run. On Monday, amid a rally of more than 4% to $8,886, Bitcoin retook its lower band, according to the Trading Envelope Indicator, a gauge that smooths moving averages to map out higher and lower limits. It may potentially test the upper limit, which could bring the coin to around $10,600. Read more.
Binance Lets Turkish Customers Directly Deposit Fiat With Bank Integration: Binance has launched a direct channel integration with a Turkish bank, providing clients with a gateway enabling seamless transfers between fiat currencies and digital assets. Binance said Monday that its new integration with Istanbul-based Akbank, its first-ever direct link with a bank, will allow users to seamlessly deposit Turkish lira into their exchange accounts and instantly withdraw value back out again. Turkish citizens with an Akbank bank account can use the direct channel as of today. Read more.
Coronavirus Is Killing the Bitcoin Conference Business: On Saturday, the French authorities announced a ban on large indoor gatherings; Paris has closed the Louvre, its eminent museum, and the Paris Half Marathon has been cancelled. Crypto events have followed suit, with the French capital’s flagship blockchain event, Paris Blockchain Week, postponed until December 9. As the coronavirus—and fear of infection—spreads across the globe, could this be the end of crypto events as we know them? Read more.
How Elizabeth Warren’s Beef With Facebook Could Benefit Bitcoin: Sen. Elizabeth Warren is crusading against big banks as one of her core platforms for the 2020 presidential election, but it’s her social media policies that may have the most direct impact on bitcoiners. Namely, she’s taken a hard stance against bank overreach, wants to reduce risky corporate lending and weaken the “monopoly influence” of companies like Citibank, Wells Fargo and Google. Read more.
LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE
Robert Breedlove is the Founder and CEO of Parallax Digital, a professional services firm specializing in digital asset investments and digital securities consulting. He has an incredible command on the importance of Bitcoin and did a great job of explaining it in terminology that anyone can understand. This episode is likely to be one of the most popular that we have ever recorded, so recommend that you take a listen!
In this conversation, Robert and I discuss:
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The historical perspective of breakdown of money
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Why gold served that purpose for so long
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How free-market capitalism must be allowed to thrive
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And w go point by point in his open letter to Ray Dalio on why Dalio agrees with Bitcoiners assessment on the macroeconomy; but is missing the importance and ultimate success of Bitcoin
I really enjoyed this conversation with Robert. Hopefully you enjoy it too.
LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE
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