August 7, 2022 | Issue 27 DID BITCOIN REACH A KEY MILESTONE? Anthony Pompliano wrote in his Substack newsletter, The Pomp Letter, about BlackRock's partnership with Coinbase. Pomp believes this is significant because of BlackRock's size as world's largest asset manager teaming up with the largest publicly-traded crypto exchange after bitcoin's 67% drop in price. He argues that when institutions aren't leaving bear markets, it bodes well for the long-term. Also this week, Katherine Molnar, chief investment officer of the Fairfax County Police Officers Retirement System, announced investing $35 million in two crypto funds. Crypto's price volatility and regulatory uncertainty present risks to retail investors, but when institutional investors like BlackRock jump in, it reveals their conviction that bitcoin will survive the short-term and thrive the long-term. But what about crypto and real estate? Is that still a long-term play or are there immediate opportunities? I am hearing from real estate agents who have received offers in crypto. However, the crypto currencies are often obscure currencies that have little to no value. There are over 20,000 currencies tracked by CoinMarketCap, and unless the buyer has one of the commonly traded cryptos, their offer would not be attractive to a savvy seller. If you received a crypto offer and would like some help figuring out whether or not the offer is real, contact me. Or... (and here's my plea to you) if you are working on a crypto deal or have closed one, please send me an email with the key points – location, close date, sale price, type of crypto, and brief description of how the crypto was transferred to USD or if the seller accepted the crypto. I'm trying to get my arms around the crypto real estate deals around the country. Also, if you'd like me to speak to your office about crypto, I'm scheduling talks for September and October. Have a productive week and stay crypto curious! Rich Hopen firstname.lastname@example.org | 908.917.7926 PS. You can find all CNR newsletters here. PSS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me.
CRYPTO NEWS ▸ BlackRock Inc Partners With Crypto Exchange Coinbase BlackRock is teaming up with the largest US cryptocurrency exchange Coinbase so BlackRock clients can add bitcoin to their investment portfolios. Bitcoin will be financed and traded on Coinbase's exchange. Shares of Coinbase grew by 44% after the partnership was announced. In a Bloomberg article, Owen Lau, an analyst at Oppenheimer & Co. said, "After this validation, it is possible that Coinbase will be able to partner with more traditional financial industries. It shows that even with the size of BlackRock, they are going to partner with a crypto-native company, rather than building their own capabilities.” The partnership is limited to bitcoin only. If client demand is robust, other digital assets will be added, according to a BlackRock spokeswoman as cited in a Wall Street Journal article. Coinbase is also being investigated by the Securities & Exchange Commission (SEC) for trading digital assets that should have been registered as securities.
▸ MicroStrategy CEO Michael Saylor Steps Downs At Saylor's direction, MicroStrategy, Inc. began purchasing bitcoin with its corporate reserves in August 2020. They purchased $250 million in bitcoin. Several more purchases were made after raising debt.
Saylor's strategy was wildly successful as the price of bitcoin rose from $11,900 in August 2020 to $69,000 in February 2021. But then, bitcoin's price declined and the company had to record a loss each quarter. The losses totaled close to $2 billion. MicroStrategy announced that its president would assume the CEO role. Saylor said he will focus his time on bitcoin advocacy. Today, MicroStrategy owns 130,000 bitcoin which is valued at $3 billion.
▸ Senate Ag Committee Advocates for CFTC Control Over Bitcoin and Ethereum Senate Agricultural Chair Debbie Stabenow (D., MI) introduced a bipartisan bill that gives the Commodity Futures Trade Commission (CFTC) jurisdiction over bitcoin and ethereum. Bitcoin and Ethereum account of 60% market cap of all crypto currencies.
More broadly, the bill creates a new asset class, digital commodities. The committee presented their bill a week after SEC Gary Gensler announced an enforcement actions that alleges select cryptocurrencies were securities. In response, CFTC board member Caroline Pham issued a press release castigating the SEC for "regulating through enforcement." In June, Senators Lummis (R. WY) and Gillibrand (D. NY) introduced a comprehensive bill that exempted cryptocurrencies from securities laws, banking regulation, and tax code. The turf wars will continue when Congress resumes after their August recess.
CRYPTO CLASS – CRYPTO CREDIT Last week, I wrote about crypto bankruptcy and discussed the challenge of equitably dispersing funds to crypto borrowers and lenders. Some of the problems that caused the crypto bankruptcies included not having adequate reserves, misrepresenting customer risks, and making under collateralized highly risky loans. However, these failures should not be interpreted as the end of a credit system in crypto. Nic Carter, venture capitalist and columnist for crypto publication CoinDesk published a terrific opinion piece on credit, "The Credit Crunch Is Not the End of Crypto Lending." Here are the key excerpts... Bitcoiners attacking lending institutions are undermining their own interests. Many adherents to the Bitcoin maximalist doctrine maintain a curious disdain for credit. They often … believe fractional reserve banking to be “fraud,” even though the idealized “full reserve banking” generally never emerges in free market conditions. “Full reserve” banks wouldn't be able to extend credit or transform maturity – they can scarcely be described as “banks” at all. A world with no credit is a dismal one. Credit – responsibly extended – is the cornerstone of civilization. It unleashes savings and puts the money to work in productive areas of the economy. A world without credit is a sterile, stagnant one. If [the Bitcoin maximalist] victory condition is “no credit is ever extended based on a crypto asset ever again,” they guarantee a loss. Yes, the lending industry has taken a hit, but it certainly won’t cease to exist. The desire for leverage and a lower cost of capital on one hand, and yield on the other, is inherent to free, capitalist enterprise, and that urge will never disappear. Bitcoiners who ostensibly believe in free markets should recognize that this necessarily includes the market for money, as well. Consumers throughout history have preferred banknotes to hauling specie around. Businesses and individuals have desired leverage, and banks have been happy to give it to them. Well, here we are. We have suffered our first true systemic credit crisis. Virtually no lender has been unaffected. We got no government-level bailouts, no state intervention, and yet the credit markets will recover from here. The dust still hasn’t settled, but it’s clear that we already have the tools to build a more robust lending system. As it happens, bitcoin is the perfect form of collateral upon which to build banks. As a cryptographically auditable, digital bearer instrument, with cheap physical delivery, it vastly outperforms gold specie as a collateral type. The problem with gold is it’s costly to verify, meaning it ends up in walled gardens and consumers rarely want to redeem notes for specie. So the gold-based system empowered banking institutions at the expense of depositors. The problem with the 1.0 version of crypto credit markets was the opacity of the system, its dependence on artificial DeFi (decentralized finance) yields and a general undercurrent of fraud, facilitated by the loosest financial conditions in living memory. Maximalists interested in a better managed credit sector won’t achieve anything by bleating to each other about the dangers of crypto lenders. If everything is a scam to them, their warnings contain no information. They cannot extinguish the demand for credit or yield – and entrepreneurs will always emerge to fill this need. Instead, they should start their own financial institutions, using bitcoin as a neo-gold with superior collateral qualities and setting reasonable underwriting standards. It is a mistake to view bitcoin’s success as trade-off against the creation of credit. Its future depends on it.
INFLUENCERS - People to follow Jake Chervinsky – @jchervinsky A crypto lawyer and head of policy for the Blockchain Association.
RESOURCES – Books, websites, podcasts, interviews, articles, videos Bloomberg TV Crypto Show News show that highlights the main crypto stories with a focus on crypto company finances and influencers.
CRYPTO WORD – Sharding Splitting a blockchain into multiple, identical chains called “shards.” These shards each execute transactions and smart contracts in parallel, making a network more efficient and scalable.
OH, ONE MORE THING –
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