Never going on vacation again.
Friday February 25, 2022 - Issue # 5
So I unplugged for a few days. I felt some anxiety toward the end of my trip but, I unplugged while everyone else was working away. And yeah, the desk traded over $30m while I was gone, you know, it’s a lot of money, I get it, I can feel you judging me, that’s palpable. But hey, I never said I was the hero of this story.
Pardon my rendition of the Jared Vennett bonus check scene from The Big Short above. I felt it was somewhat fitting given that I missed last week’s note while I was enjoying a little taste of paradise, and our team absolutely crushed it while I was away.
I admit that I snuck a few glances at my email while I was away just to make sure nothing was on fire but I didn’t open Twitter or check any of my newsletter subscriptions once. Sitting in the airport waiting for my flight back home…I wasn’t prepared for what I was about to see…C’mon man I was only gone for 5 fricken days!
But look, this isn’t the place for fearmongering and honestly, who am I to be choosing or supporting a side for any of the weird stuff that’s been going on as of late. I’m just a lowly Bitcoiner. That’s what Twitter is for.
But as the world has been on the edges of their seat (and seemingly making drastic moves in their portfolios), bracing for the uncertain impact stemming from the Russian invasion on Ukraine, I think there’s an underlying story that hasn’t been getting much attention.
What’s the first thing that happened when Russia and Ukraine started to become involved in this back and forth about whether there was going to be an invasion or not? The first thing they did was make sure they got their Bitcoin policies, laws and regulations right — both on Russia’s side and Ukraine's side. Quite publicly I might add:
So while the world was focusing in on if this was really going to happen, who their allies are, what their strategies might be, will this be an isolated event or could this escalate, both nations made the time and felt it was so important to figure out where Bitcoin fits in amongst one of the most tense times in history for both countries. Incredible really.
As I mentioned in my previous letter, Bitcoin has become, at the very least, important from a geopolitical lens and it’s something that I’m paying very close attention to. I never thought I’d mention U.S. Senator Ted Cruz in my writings but this is the second time in the last few months — and if you can look beyond the televangelism, you can see that Bitcoin is coiling up into politics:
I mean, he makes some good points. Albeit, very high level — they’re pretty good points nonetheless. He mentions Trudeau and donations to the truckers being cut off by the Canadian government and how folks turned to Bitcoin as a means of payment that cannot be controlled…
Slowly but surely the world is waking up to why Bitcoin is so important. It’s musical chairs until the average investor stops trading it like a Tesla stock.
I really don’t want to end this letter in the midst of another crisis off the back of a speech from Ted Cruz, so bare with me as I know this is a bit of a longer read.
A quick look at how the markets responded to the Russian invasion yesterday.
On the open:
Stock markets were down big
Bitcoin and the broader crypto market was also down big
Gold was up huge
During the day up to the close there was a complete flippening in price action:
Bitcoin and the broader crypto market rallied
Gold fell sharply
To the dismay of all the gold pundits and bitcoin bears who stormed to Twitter to denounce BTC as a safe haven asset when it was down sharply to start the day.
Gold…as the price goes up, you can dig more out of the ground. When you need it during a crisis, there's no liquidity. Concentrated whale holdings can dump on you at any time.
So why did we get such a strong reversal in price action yesterday? Well, it might be because the idea that the Fed is going to raise rates and taper is at the very least, questionable at this point. A 50 basis point hike in March is almost certainly out of the question. An aggressive rate hike schedule for the remainder of the year also seems unrealistic. Also, historically, in times of war the money printer goes brrr. It’s unbelievable how quickly things can change these days. The Fed’s hawkish stance has crippled the market which had no choice but to price in an aggressive war against inflation for the remainder of the year. Perhaps their words were enough to do the trick. Maybe we’ve found the bottom. In any case, March will be interesting.
As the pandemic finally seems to be winding down after two really tough years, of course we’re immediately thrown into the uncertainties of war — we can’t seem to catch a break, can we. But as we head into the weekend, I’ll leave you with something a little lighter.
Legendary NYSE floor trader and director of floor operations for UBS, Art Cashin, talking about war and investing: