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- Crypto News for Realtors – Issue 38
October 23, 2022 | Issue 38 A WORKABLE APPROACH TO CRYPTO Former SEC Chair Arthur Levitt and CEO of Lumida, a digital-asset advisory firm, Ram Ahluwalia, wrote an opinion piece in the Wall Street Journal advocating that the SEC, Congress, and crypto industry work through the thorny regulatory issues. The authors caution that "[t]his regulatory standoff poses a risk to the growth of blockchain and cryptocurrency technology." "No matter what regulators do, they shouldn’t stifle the innovation that is at the heart of this market. Blockchain is the first technology that enables two parties to transact without a centralized intermediary such as an exchange, broker or bank. The implications are profound." They state the crypto industry needs to accept oversight and the regulators need to go beyond enforcement. Currently, there is not a clear path to compliance. The SEC should provide constructive guidance to the crypto market and congress should develop stablecoin audit standards. They conclude that if agreement is reached among the parties, "The US can strengthen its standing as the world's leading capital market and global reserve currency." I will be pleasantly surprised if any clear guidance from regulatory agencies or bills from Congressional committees emerge before the Congressional session begins in January. In the meantime, let's keep learning more about crypto. If you have any questions about crypto, reach out to me and I'll find the answers. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Listen in and, hit SUBSCRIBE. All past issues of Crypto News for Realtors can be viewed on my website. Have a productive week and stay crypto curious! Rich Hopen firstname.lastname@example.org | 908.917.7926 PS. 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 ▸ Bitcoin Mining Operators Flock to Texas in Search of Stranded Energy "Stranded energy" in west Texas typically looks like natural gas that is burned off and wasted. Bitcoin miners search for stranded energy and use the gas to power their computers which can operate 24 hours a day. The large petroleum reserve in the area, known as the Permian Basin, contains an abundance of natural gas that isn't captured by a pipeline. Instead, it is released into the atmosphere. Texas welcomes bitcoin miners, these miners can impact the grid. Miners claim they stabilize the electric grid because during peak electricity demand they can power off their computers. This past summer, on July 11th during a record heat wave, every bitcoin miner shut down their operation and it prevented the need to have blackout. Miners, however, would like to run their operations continuously. One interesting venture run by former Twitter CEO Jack Dorsey is a $12M bitcoin mining pilot project in West Texas powered by solar panels. The project stores electricity in Tesla batteries so the computers can run during the night. The pilot project is currently unprofitable, but the founders expect to find a path to profitability. ▸ Mastercard Offers Crypto Service to Banks Mastercard partnered with Paxos Trust Company and launched a crypto trading and custody program for banks. Paxos will provide the crypto services and Mastercard will integrate the services into the banks' user interfaces. Recently, Visa launched a partnership with crypto exchange FTX to offer debit cards in more than 40 countries. ▸ Galaxy Reports $1.8B In NFT Royalties Galaxy, a crypto analytics firm, reported that over $1.8B in royalties were paid to creators of Ethereum-based NFT collections. The average royalty paid on OpenSea doubled to 6% from 3% last year. The major NFT brands earned "hundred of millions of dollars in income from royalties generated on secondary sales." The report found that 10 entities brought in 27% of all royalties and 482 NFT collections accounted for 80% of all royalties. Here are the top 10 entities and their earned royalties 1) Yuga Labs (BAYC) – $147M 2) Art Blocks – $82M 3) OpenSea Storefront Creator – $77M 4) Chiru Labs – $52M 5) PROOF Collective (Moonbirds) – $31M 6) The Sandbox – $26M 7) Doodles – $24M 8) VeeFriends (Gary Vaynerchuk's NFTS) – $21M 9) NFT Worlds – $15M 10) World of Women – $13M CRYPTO CLASS – Will Blockchain Upend Banking? The existing payments system used to send money inside the US and internationally is cumbersome, slow, and costly to the sender and receiver. It's also highly profitable to banks. Over 11,000 entities currently use the SWIFT messaging system. It allows member banks to communicate with one another. SWIFT is currently overseen by central banks in the US, UK, Canada, France, Belgium, Italy, Japan, Netherlands, Sweden, and Switzerland. SWIFT sends 42 million messages per day. SWIFT does not, however, send the funds. It sends the payment orders and the money is processed through intermediaries. Each intermediary charges a fee. International payments take longer and have higher fees. For example, if someone in the US wanted to send part of their paycheck to someone in London, they might need to pay a $25 flat fee for a wire transfer and additional fees up to 7%. Blockchain technology with its decentralized ledger could facilitate faster payments at lower fees than banks. Bitcoin transactions take an average of 25 minutes to settle and sometimes longer. This is significantly quicker than the average 3-day processing time for domestic bank transfers and international payments. INFLUENCERS - People to follow Hal Finney Finney graduated from California Institute of Technology and worked as a software engineer in California. He was a cryptographic activist and wrote, "The computer can be used as a tool to liberate and protect people, rather than control them." In 2004, Finney created the first reusable proof of work system before bitcoin was launched. He embraced bitcoin when it launched and on January 12, 2009. He received the first bitcoin transaction from bitcoin's creator, Satoshi Nakamoto. Finney died in 2014 from complications related to ALS. RESOURCES – Books, websites, podcasts, interviews, articles, videos Thanks to Emma Taub who sent me a link to a terrific primer on NFTs. CRYPTO WORD – Satoshi (SATS) The smallest unit of bitcoin with a value of 0.00000001 BTC. Like any other fiat currency, cryptocurrencies can also be divided into smaller units. Just as the U.S. dollar can be divided into cents and the pound into pence, the smallest available unit of Bitcoin is a satoshi. (From CoinMarketCap) OH, ONE MORE THING – Bitcoin is defiance... Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- Crypto News for Realtors – Issue 37
October 16, 2022 | Issue 37 CRYPTO BEING EMBRACED BY INSTITUTIONS While many crypto influencers debate BTC and ETH pricing trends, large mainstream financial institutions are embracing crypto. As reported below, BNY Mellow announced a new digital custody platform for clients’ bitcoin and ETH holdings. Also, Visa and JPMorgan announced a partnership to use a private blockchain to speed up cross-border payments. What about real estate institutions adopting crypto? I haven't seen any of them give a full-throated endorsement of crypto. Perhaps because the current real estate market is in a frozen state of fear as it watches macro economic conditions unfold. In the meantime, if you have ANY crypto topic that you would like me to cover, let me know. I'll dive in and share what I've learned with everyone else. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Listen in and, hit SUBSCRIBE. All past issues of Crypto News for Realtors can be view on my website. Have a productive week and stay crypto curious! Rich Hopen email@example.com | 908.917.7926 PS. 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 ▸ BNY Mellon Announces It Will Hold Crypto BNY Mellon began accepting cryptocurrencies. It is the first major US bank to be a crypto custodian. The bank will hold the crypto holder's "private keys," which is essentially the password. This gives the bank control over the assets. BNY Mellon's bookkeeping services that it provides for stocks, bonds, and commodities will now be offered to customers with crypto assets. BNY Mellon is the oldest bank in the US. It leaned into crypto in 2021 when it created an enterprise Digital Assets Unit. "Touching more than 20% of the world's investable assets, BNY Mellon has the scale to reimagine financial markets through blockchain technology and digital assets," said Robin Vince, Chief Executive Officer and President at BNY Mellon. "We are excited to help drive the financial industry forward as we begin the next chapter in our innovation journey." Spurring the bank forward was a 2022 survey it conducted of its institutional clients. The survey showed: 70% of respondents would increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions. 88% are moving forward with their plans. 91% are interested in investing in tokenized products. There was other news this week about companies embracing crypto. The online advisor Betterment launched a crypto investment portfolio for their retail and advisor customers. And Google's parent company Alphabet signed a deal with Coinbase allowing Google's cloud service's clients to pay in crypto. ▸ SEC Chair Gary Gensler on Regulating Crypto, Exchanges, and Greater Authority to the CFTC Gensler announced this week, "I think the CFTC could well have greater authorities. They currently do not have direct regulatory authorities over the underlying non-security tokens.” He quickly added there are likely less than 10 tokens that fall into this category. In an interview with CoinDesk's Nikhilesh De, Gensler stated his position on regulating crypto. Q. When will the SEC provide regulatory clarity? A. "Most of the tokens meet the traditional standards that our Supreme Court has laid out, and that we, the SEC, have a role to help protect investors and instill and enhance trust in these markets." Q. How should crypto exchanges, like Coinbase, be regulated? A. "Right now, if you're investing on any one of these service providers [or] platforms, you're not getting those basic protections insuring against fraud, manipulation, what's called front-running. The platforms are an amalgam of different services. Not only are they doing what you might be familiar with at the New York Stock Exchange, but they are also … acting as a broker against you. They're like an amalgam of dealers trading against their public, they could be trading ahead of you. And our securities laws say no, that's not allowed. So there are a lot of protections that you right now are not getting the benefit from but should be because it's the law." ▸ FTX Superbowl Ad Characterized As Targeting Companies, Not Retail Investors FTX CEO Sam Blankman-Fried said that the well-received (and very funny) Superbowl ad was for branding purposes. He said, “It’s much, much more about our branding as a company, and the institutional relationships we can create, than it is about mass-market activity.” About 208 million people watched the Superbowl ad which featured Larry David as a naysayer throughout history. He questioned the utility of the wheel, a fork, indoor toilets, coffee, dishwashers, the US Declaration of Independence, the moon project, and crypto. CRYPTO CLASS – Bitcoin Spot ETFs & Futures ETF Buying cryptocurrencies involves purchasing through an exchange such as Coinbase or Gemini, and then figuring out how to move control of the bitcoin from the exchange to the buyer's wallet. This process creates a lot friction and many investors interested in diversifying into crypto are reluctant to do so. Exchange-traded funds (ETF) offer a solution to investors with a brokerage account. It allows investors to be exposed to bitcoin without the hassle of buying the actual crypto. A bitcoin EFT simply tracks the price of bitcoin instead of a direct investment of the asset. Currently, bitcoin ETFs are limited to futures contracts. Futures contracts allow investors to bet on bitcoin’s future price by agreeing to buy or sell bitcoin at a specific price on a set date. Futures contracts are traded at the Chicago Mercantile Exchange (“Chicago Merc” or “CME”). The CME was established in 1898 as the Chicago Butter and Egg Board and was used for trading agricultural products. Over time, the traded commodities expanded beyond butter, eggs, pork bellies, and orange juice. Other asset classes include currencies, energy, interest rates, metals, stock indexes, and since 2021, a bitcoin futures ETF. An alternative to a futures ETF is a spot ETF. A spot ETF would allow an investor to purchase the ETF based on bitcoin’s current price. Grayscale applied to the Security & Exchange Commission for a spot-based ETF in October 2021. Grayscale is the world’s largest digital asset manager, has 850,000 investors in the US, and owns more than 3% of outstanding BTC. The SEC rejected Grayscale's spot bitcoin ETF application and Grayscale filed a lawsuit against the SEC. This week, Grayscale filed its initial brief. Grayscale argued that SEC’s approval of a futures ETF relies upon the same indices as would a spot ETF. An investor’s risks are the same and the SEC’s rationale to reject a spot ETF is flawed because it favors one type of product. Grayscale’s chief legal officer, Craig Salm, said, “[T]he test the SEC has applied to Bitcoin-related ETFs, and only Bitcoin-related ETFs, is flawed and has been inconsistently applied with a ‘special harshness’ to spot Bitcoin ETFs.” Over the next few weeks, legal briefs will be filed with the court by other companies and industry groups in support of Grayscale. The SEC will then file its response. INFLUENCERS - People to follow Rostin Benham - @CFTCbenham Benham is the Chair of the Commodities Futures Trading Commission. As Chair, Benham, has advocated for the CFTC to use its authority to bring greater transparency to the complex markets, e.g. options, futures, and swaps. He also helped create a committee focused on how weather and climate changes will impact low-to-moderate income communities. Before serving on the CFTC, Benham was Senior Counsel to the U.S. Senate Committee on Agriculture, Nutrition, and Forestry. RESOURCES – Books, websites, podcasts, interviews, articles, videos If you want an overview of the most important aspects of Bitcoin and crypto, this is a terrific primer. CRYPTO WORD – Rehypothecation. Rehypothecation is the practice where banks, and even the brokers themselves, use assets that have been posted as collateral by their clients for their own purposes. Clients that permit rehypothecation of their collateral can be compensated through a lower cost of borrowing or a rebate on fees. (From CoinMarketCap) OH, ONE MORE THING – WHAT IS BITCOIN? This testimony by Coin Center's head of research, Peter Van Valkenburgh, gives one of the most clearly articulated explanations of crypto that I've seen. If you can find 5 minutes, you'll learn a lot. Thanks for reading! See you next week.
- Crypto News for Realtors – Issue 36
October 9, 2022 | Issue 36 EVERYTHING IS CONNECTED Last week's special issue of Crypto News for Realtors focused on macro economic issues that impact crypto. I wrote about inflation, CPI, the Fed, treasurys, consumer sentiment index, the prime rate, mortgage rates, and more. This week, while many of these topics were fresh in my mind, I saw how reported data in one area impacted another. For example, on Friday, the unemployment numbers were released. I knew from my research last week that if unemployment had not increased, the Fed would continue their tough stance on rates, and that is what happened. Over 263,000 jobs were added and the unemployment rate fell. The markets expect that the Fed will not ease up on their rate hikes. The stock market dropped and, as I wrote two weeks ago, crypto correlates with stocks and crypto also dropped. What about mortgage rates, which is a major driver in buyer demand? The 30-year fixed mortgage rate follows the 10-year bond. Since the 10-year bond will move up, it is very likely that mortgage rates will do the same. I have discovered that paying close attention to crypto has spillover benefits in my real estate world. I now have a deeper understanding of what drives the real estate market. If you missed last week's issue on the economy, I highly recommend reading it. Enough of the economy, this week's news is 100% crypto. If there is ANY crypto topic that you would like me to cover, let me know. I'll dive in and share what I've learned with everyone else. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Listen in and, hit SUBSCRIBE. Have a productive week and stay crypto curious! Rich Hopen firstname.lastname@example.org | 908.917.7926 PS. 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 ▸ Federal Risk Panel Warns About Crypto Treasury Secretary Janet Yellen chairs the Financial Stability Oversight Council and this week the council issued their Report on Digital Asset Financial Stability Risks and Regulation. Yellen said, "the current regulatory framework has helped largely insulate traditional financial institutions from crypto-asset-related financial stability risks." However, she warned that as crypto grows, if new regulations are not in place, crypto's interconnectedness with traditional finance could pose risks to the U.S. financial system. The Council asked Congress to consider legislation to ensure crypto regulations are enacted. Another federal entity, the Consumer Financial Protection Bureau, reported an increase in consumer complaints against crypto exchanges. ▸ Celsius Founder & CEO Alex Mashinsky Steps Down Celsius was a large crypto lender that built its customer base by paying high interest rates (up to 18%) and claiming that Celsius was safer than a traditional bank. When crypto prices fell in June, Celsius froze customer accounts and then filed for bankruptcy in July. Celsius owed its customers $4.7B. Bankruptcy filings released this week showed that Mashinsky withdrew $10M in tokens between May and the bankruptcy filing. Mashinsky stepped down as CEO in September. ▸ Kim Kardashian Pays $1.26M to Settle With SEC In June 2021, Kardashian promoted the crypto token EthereumMax as a good investment. She posted on her Instagram page, "This is not financial advice but sharing what my friends have just told me about the EthereumMax token!" Kardashian was paid $250,000 by the crypto company for the post. SEC's Chair Gary Gensler said, "“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.” CRYPTO CLASS – MakerDAO MakerDAO is a decentralized credit system that is fully collateralized and sits on the Ethereum blockchain. It is the longest running project on Ethereum. The MakerDAO token is a stable coin called DAI. It maintains a one-to-one ratio with the US dollar. Each DAI is backed by Ether. DAI's collateral ratio is currently 134% and can be confirmed by going to www.daistats.com. On September 6, the community that governs MakerDAO invested $500M in US Treasurys and corporate bonds. The funds are from the over-collateralized stablecoin. INFLUENCERS - People to follow Braeden Anderson -@braedenandy Andersen is an attorney at Kirkland & Ellis who defends companies and individuals being investigated by the Dept. of Justice, SEC, and other federal and state agencies. He was recently interviewed about crypto regulation by Pomp. RESOURCES – Books, websites, podcasts, interviews, articles, videos Fascinating interview of Vitalik Buterin (Ethereum Co-Founder) by Ezra Klein. Buterin gives brilliantly articulated answers to questions about the crypto industry's maturation, the underlying value of a trustless protocol, governance, aggressive crypto marketing campaigns, and more. CRYPTO WORD – Hash Rate. The hash rate of a mining rig is the number of hashes that it can calculate per second. The combined hash power of a cryptocurrency network is the sum of the hash rates of all mining rigs that are in operation at any given moment. (From CoinMarketCap) OH, ONE MORE THING – This dog who solicits onlookers for a pat on the head or a treat, reminds me of the SEC asking crypto companies to meet and discuss potential regulatory issues. Thanks for reading! See you next week.
- Crypto News for Realtors – Issue 35
October 2, 2022 | Issue 35 ** SPECIAL ISSUE ** THE ECONOMY Three months ago, I devoted an entire issue of this newsletter to the economy and it was well received. Apparently, I wasn't the only real estate agent confused about how the Federal Reserve's actions could alter the housing market. Today, the economy is dominating the news and the housing sector has turned on a dime. The supercharged sellers market is gone and we are trying to figure out what's ahead for home buyers and sellers. It's a perfect time to focus on the economy. Let's start with what I wrote in June – "We are at a point where we are saying good bye to rising asset prices, stable pricing of consumer goods, a red hot housing market, a rising stock market, record low unemployment, and a crypto market that has outperformed all investments." Pretty much all of those things came true – asset prices dropped, the housing market has turned, and the stock market and crypto have plunged. The only piece that hasn't responded to the Federal Reserves' increase in rates has been unemployment. As I'll discuss below, that is problematic for the Fed. It is unlikely that you spend a lot of time reading business publications or watching CNBC. I am assuming you aren't fluent in "Fed speak" or know a lot of economic terms. In this issue, I will explain the fundamentals. I suggest you take your time reading it and not just skimming through it. After you digest it, you'll feel comfortable discussing real estate issues in the context of economic news. These economic issues touch everyone, but they are especially relevant to prospective home sellers and buyers. Let me know if you find this issue helpful. Have a productive week and stay crypto curious! Rich Hopen email@example.com | 908.917.7926 PS. You can find all CNR newsletters here and my new YouTube Channel. PPS. 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. It's not a good sign when a highly-regarded economist that I follow, Nik Bhatia, entitles his weekly newsletter, "Financial Instability, Liquidity Drying Up, Alarm Bells Ringing." And Bhatia is not an outlier. All week, the financial, business, and economic news has been disheartening. Instead of disputing the news, searching for a ray of sunshine, or ignoring it, I wanted to go beyond the headlines and understand what is going on. Below, I discuss Inflation, CPI, The Federal Reserve, Fed's Fund Rate, Terminal Rate, Prime Rate, US Treasurys, Inverted Yield Curve, Consumer Sentiment Index, Mortgage Rates, New Construction, Unemployment, Commodities, and the impact of the strong dollar on the Global Economy. INFLATION is a measure of the decline of purchasing power and is tracked by the US Bureau of Labor Statistics. They calculate the Consumer Price Index (CPI) by measuring the average change in price, over time, of a "basket" of selected goods and services. The CPI is based on 94,000 price quotes from 23,000 retail and service establishments, and 43,000 rental housing units. Inflation dropped from July to August, but not by enough. The August rate was 8.26%, but not as low as the Fed expected. It is also quite a distance from the 2% target inflation rate – last experienced in February 2021. Inflation is at a 40-year high. Until consumers believe that inflation has peaked and change their buying behavior, inflation won't come down. Conversely, if consumers feel that inflation is not over, they will continue spending because they don't want to pay more for goods and services over the next few months. A surge in shopping could create shortages which will then trigger higher prices. This is a cycle that won't end well. The job of taming inflation falls on the Federal Reserve (The Fed). The Fed is mandated to use monetary policy to achieve stable pricing and maximum employment. The Fed can slow down inflation by making it more painful for people to spend money. They do this by raising the "Fed funds rate." The federal funds rate is the rate that banks charge each other for lending cash or excess reserves. It is also the rate that commercial banks lend to each other. On September 22, 2022, the Fed set its target range at 3% to 3.25%. This was a 0.75% increase. The Fed's longer term projections were also revealed. Comparing the June projections to the current projections revealed that the Fed underestimated inflation. Inflation has turned out to be more difficult to control than anticipated. Their hawkish language was clear – the Fed will do whatever is necessary to bring down inflation. Fed Vice Chair Lael Brainard said, "Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target." The "terminal rate" is a mapping of projected rates over time on a "dot plot." It shows that the Fed will raise rates to 4.375% by the end of 2022 and it will peak at 4.625% in 2023. This implies a pace of rate hikes next year. Inflation is projected to drop from the current 8.26% to 5.4% by the end of the 2022 and 3.1% in 2023. The prime rate is the rate that commercial banks charge their most creditworthy customers. It’s based on the federal funds rate plus 3. The current US prime rate is 6.25%. It has not been this high since January 2008. How is this reflected in consumer spending which accounts for two-thirds of US economic output? The Commerce Department reported that retail sales rose in August, but that is primarily due to a rise in auto sales. Excluding motor vehicles, sales dropped 0.3%. A reliable gauge of future consumer spending is the consumer sentiment index. It measures how consumers feel about their jobs and the economy by asking a handful of questions: ● Compared to a year ago, financially, are you better off, worse off, or the same? ● A year from now, do you think you’ll be financially better, worse, or the same? ● In a year, will US business conditions be good, bad, or other? ● In the next five years, do you think the US will see continuous good times or unemployment/depression? ● When it comes to major household appliances, is buying now a good time or bad time? The most recent index showed that consumers feel a bit better in September than in August, but their attitude about the economy is much lower than last year. They are pessimistic about the economy long term. (This jives with the "inverted yield curve" discussed below.) Households continue to benefit from strong labor market, and gasoline dropped since June. However, expect to see the slowing housing market weigh on purchases of goods such as furniture and appliances. Consumer confidence is key to bringing down inflation. Companies raise money by selling bonds. The US government does the same, except that the US bonds are secured by the government. This makes them safe because payment is guaranteed by the US government. The bond holder, investor, pays a price for the bond and receives a yield as the bond matures. When it matures, the holder receives the face value. The 10-year Treasury bond yield is important because it signals investor confidence. The US Treasury sells bonds through an auction and the yield is set through a bidding process. Bonds are also sold on a secondary market by brokers and third parties. When confidence in the US economy is strong and investors have a higher appetite for risk, they put their money into stocks and the demand for bonds is low. However, when the confidence in the economy is waning, investors want safe investments and they flock to Treasurys. Investors want to minimize their risk and move their money out of riskier investments such as stocks. Economists compare the 2-year and 10-year Treasury bonds. Normally, investors expect to be receive a higher yield when they buy longer term Treasury bonds. Today, however, the 10-year yield (3.76%) is lower than the 2-year (4.22%). This phenomenon is know as an “inverted yield curve” and it signals a recession. Except for one time, an inverted yield curve signaled every recession since 1955. It shows that investors are more confident in the short term health of the economy than the long term. The Fed wanted to see a cooling of the housing market and they certainly got it. After a series of historic increases in the fed funds rate, the housing market did an about face. Here's how that happened. The 10-year Treasury bond closely tracks 30-year fixed mortgages. When the 10-year Treasury yield moves up or down, it’s followed by mortgage rates. Today, a 30-year fixed mortgage is 6.7%. A year ago it was 3.01%. Today’s rates have not been this high since July 2007. Selma Happ at CoreLogic said, "The surge in mortgage rates has brought the housing market to an impasse. Many buyers moved to the sidelines as the cost of homeownership became prohibitively high, while sellers were unwilling to give up locked-in record-low interest rates and expectations of peak sales prices.” High mortgage rates have put the breaks on demand and sellers are reluctant to sell because the days of insanely high priced multiple offers are over. Also, sellers who refinanced are not willing to give up their current low mortgage rates. What about new construction? US homebuilder sentiment has fallen every month in 2022 according to surveys conducted by the National Association of Home Builders. A lead analyst for HousingWire, Logan Hotashami, said, "No new building. This is almost useless; the housing market has already gone into a recession, and the builders are done building anything new until they get rid of the excess supply they already have. We have 10.9 months of housing supply with 9.84 months in construction. The builders will take their time finishing these homes and ensuring they sell them at a price that is useful for their business model." After the last financial crisis, home building dropped below historic norms for more than a decade. This resulted in the housing shortage that we have been experiencing. It appears that this will continue and there will not be sufficient inventory for the tens of millions of millenials looking to buy a house over the next decade. UNEMPLOYMENT – The unemployment rate was 3.7% in August. This remains near a half-century low of 3.5%. There are practically two job openings for every unemployed person seeking work. Federal Reserve Chairman Jerome Powell has said the ratio of job openings to unemployed workers must narrow to bring the labor market into better balance. Even though the Fed is mandated to keep unemployment low, the current rate is too low. Many economists predict that the Fed tightening won't stop until unemployment increases. COMMODITIES – Major commodity prices have been falling, including copper. Copper is used in many products and lower prices show a drop in global demand and the end of supply chain problems. This is considered a bellwether and indicates a contraction. GLOBAL ECONOMY – As The Fed raises rates to eliminate inflation, the US dollar's value is increasing around the world. This is wreaking havoc around the globe because the dollar is the world's reserve currency. According to the International Monetary Fund, 40% of the world's transactions occur with the US dollar. In Europe, the dollar's rise in value compared to the British pound and Euro, is increasing inflation which is already at 10%. Europeans are seeing 41% higher energy prices compared to a year ago. It is going to be a challenging winter. New York Times reporter Patricia Cohen wrote in "The Dollar Is Strong. That Is Good for the US but Bad for the World" that a strong dollar is also worsening starvation in Nigeria and Somalia because it is increasing the price of imported food, fuel, and medicine. Foreign investment is also being curtailed in India and South Korea. Thanks for reading! Please send me an email and let me know if you learned anything about the economy. See you next week. Best, Rich Go to Crypto News for Realtors to read previous issues and check out my YouTube Channel and Podcast.
- Crypto News for Realtors – Issue 34
September 25, 2022 | Issue 34 THE ECONOMY & BITCOIN It's not possible to develop an understanding of crypto's future in real estate without understanding what drives crypto adoption. I often write about the moves by policymakers in Washington and the industry influencers, but I rarely address macro economic factors. This newsletter's lead story is about the price correlation between bitcoin and the stock market. Anyone that owns bitcoin and checks on its price, notices the when the S&P drops or surges, chances are that crypto, not just bitcoin, does the same. I have also observed that when crypto pricing trended up and to the right (a while ago), more agents reached out to me with an interest in learning about crypto. I h ope that happens again soon. Another issue this week that caught my attention was the Treasury's request for comment on criminal crypto activity. Many of you know that in addition to crypto and my local real estate market, I spend time on wire fraud prevention. I recently learned from my friends at CertifID, a leading wire fraud prevention software provider, that criminals who steal real estate funds will often convert those funds into crypto. I hope that CertifID, NAR, ALTA, and other industry representatives respond to the Treasury's request for comments and share information that may help thwart wire fraud criminals from stealing buyers and sellers money. Also, many of you reached out to me about my YouTube videos. Thanks! Please SUBSCRIBE and LIKE the videos. If there is ANY crypto topic that you would like me to cover, let me know. I'll dive in and share what I've learned with everyone else. 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 and my new YouTube Channel. PPS. 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 ▸ Bitcoin and S&P As the Federal Reserve tightens monetary policy in its battle against multi-decade high inflation, real estate agents have been focused on the impact for home buyers and sellers. In the crypto world, the focus is the price of bitcoin. Nik Bhatia, a USC business professor and author of a highly-regarded book Layered Money, explains that over the past five years, the price correlation between stocks (S&P 500) and bitcoin has been the second highest correction among all asset classes. Price correlation measures how different asset classes behave in relationship to one another. Asset correlation is crucial in investment portfolios because investors need balance. They don't want their investments to move in the same direction at the same time. Bhatia notes that there have been periods when bitcoin uncouples from stocks and experienced major price increases. Bitcoin market watchers are looking for those signals. ▸ Nasdaq Jumping Into Crypto Custody Service According an article in The Block, Nasdaq will provide a broader service in crypto beyond facilitating trades. Nasdaq will offer crypto custodial services – holding onto investors' crypto assets. Nasdaq is responding to growing demand among institutional investors. In a CoinDesk article about Nasdaq by journalist Margaux Nijkerk, she asks if traditional finance will take over crypto or will crypto reshape traditional finance? The large crypto exchange FTX introduced stock trading this year. ▸ US Treasury Seeking Public Comments to Fight Crypto Crime The Treasury published a notice asking the public to submit comments on the Treasury's efforts to assess and mitigate finance risks tied to crypto. Here are some of the questions: ▸ What regulatory changes would help to mitigate illicit financing risks associated with digital assets? ▸ What additional steps should the U.S. government consider to address the illicit finance risks related to mixers and other anonymity-enhancing technologies? ▸ Are there specific countries or jurisdictions where the U.S. government should focus its efforts, through bilateral outreach and technical assistance, to strengthen foreign AML/CFT regimes related to virtual asset service providers? ▸ How can law enforcement and supervisory efforts related to countering illicit finance in digital assets better integrate private sector resources? CRYPTO CLASS – Utility Tokens NFTs (non-fungible tokens) are crypto assets that prove ownership of real or digital items. They are typically associated with graphic images purchased by speculators and celebrities. However, there is a subset of NFTs, known as utility tokens, that have value beyond being a unique digital asset. In March 2021, musical group King of Leon released three types of NFTs. Holders of the "Limited Deluxe" version received a digital album, vinyl album, and an animated album cover. "Golden Ticket" holders received tickets to a concert and VIP perks like front row seats for life and a personal concierge for shows. And there was a "Limited Open Edition" which allowed fans to create, or mint, their own "When You See Yourself" NFTs before a deadline. Another popular utility token was "The Muhammad Ali Experience Mystery Box Collection." This NFT had six levels with different perks that included access to the Muhammad Ali Experience Museum, digital Muhammad Ali artwork, a print and canvas signed by Ali, and one signed by artists Mike Bundlie and Lonnie Ali, Ali's wife, which featured $500 of gold flakes. Gary Vaynerchuk launched VeeFriends NFTs which offered access to VeeCon, a conference on marketing and entrepreneurship. INFLUENCERS - People to follow Layah Heilpern -@LayaHeilpern Heilpern wrote Undressing Bitcoin, hosts a YouTube show, and appears on a lot of business shows. RESOURCES – Books, websites, podcasts, interviews, articles, videos CoinMarketCap is not only a great resource for looking at market data on crypto coins, it also has terrific page on latest crypto news. CRYPTO WORD – Dead Cat Bounce. A temporary recovery in prices after a prolonged decrease. OH, ONE MORE THING – Hmmm... Thanks for reading! See you next week.
- The Crypto Ecosystem
I lived three blocks from the ocean in the Pacific Beach section of San Diego. Most days, I would take a long bike ride and finish at the beach to watch the sun disappear over the horizon. At night time, I'd sleep with my window open and listen to the waves crashing against the shoreline. I marveled at the power and beauty of the ocean, but I didn't appreciate it as an interdependent ecosystem until I had a summer job at Sea World as a tour guide. During my training (in the 80s the word "onboarding" hadn't been invented yet), I was handed a three-inch binder filled with photos and facts of all the animals and plants at Sea World. I was instructed to prepare ten talks about the park's attractions. I learned about whales, dolphins, penguins, sea lions, walruses, sharks, fish, and the tide pools. I also discovered that the oceans function as an interconnected system. They are fragile and resilient. Ten years after living in San Diego, I moved to South Florida. As an environmental lawyer, I had an opportunity to learn about another ecosystem – wetlands. In the mid-1990s, Broward County developers were building new homes on massive tracts of farmlands that were once thriving wetlands. As a condition to obtaining a building permit, many developers had to agree to restore a portion of the property back to its original wetland condition. Not surprisingly, many of the wetland projects languished and failed after the developers finished their work and homeowners associations had to maintain the wetland mitigation projects. A small patch of wetlands surrounded by roads and homes didn't have much a chance to survive. One solution to the failing mitigation restoration projects was to aggregate tiny wetland projects into larger projects. I partnered with another law firm, an environmental engineering firm, and a world-renowned wetland biologist to create the first federally-permitted entrepreneurial wetlands mitigation bank in the US. We borrowed the concept of carbon credits and created Florida Wetlandsbank. We sold wetland credits to developers and used the money to build a 345-acre thriving wetland. The project was successful and we replicated it elsewhere. Fast forward to today and I'm living next to another wondrous ecosystem – the protected forest of the Watchung Preserve in New Jersey. Walking the trails daily (without my iPhone) is calming and inspiring. Watching how the forest and animals adapt to the seasons is fascinating. However, I didn't understand the forest in my backyard until I started reading about trees. Trees in a forest are part of a community that work together. Look up at the canopy and you'll see that most trees stop growing its branches when it touches another tree's branches at the same height. This ensures better air flow and light for all the trees. Nature teaches us that healthy ecosystems evolve by developing a system of inter connectedness. Weak connections fail and strong ones take their place. The healthy trees, plants, and animals survive and thrive. I see this happening in the crypto ecosystem. In May 2022, stablecoin USD Terra was not able to maintain its correlation to the US dollar because it was built on a faulty foundation. Unlike Tether and USD coin which are backed by assets such as cash and short-term US government securities, Terra was an "algorithmic stablecoin." As withdrawals increased, it sought to prop up its stablecoin by creating new coins, Luna coins. The best lay explanation I read was from CZ, CEO of crypto exchange Binance. He said, "The design flaw: minting coins (printing money) does not create value, it just dilutes the existing coin holders." When the dust settled, $50 billion disappeared. USD Terra wasn't a lone tree in the crypto forest. It had roots connected to other crypto trees. Celsius, a crypto lending platform, was having problems recovering money from its customers and froze customer withdrawals in June. Celsius had managed $11.4 billion in assets and had 1.7 million customers. As Celsius was collapsing, it lost billions of assets from hedge fund Three Arrows Capital. And as reported below, Three Arrows filed for bankruptcy protection last week. Other impacted crypto players include BlockFi and Voyager. As Nik Bhatia and Joe Corsorti published in their newsletter, "This all made for a spectacular ‘Lehman moment’ for crypto — only in this instance, there are no bailouts. The free market immune system did its work by eliminating the fragile market participants. Only strong, healthy balance sheets will survive." Bitcoin is fundamentally different than the crypto companies who have died or are on life support. Those who hold bitcoin are not holding someone else's liability. I believe the crypto ecosystem is being challenged and that it will survive.
- Bitcoin's Impact On The Environment
Ethereum's successful switch from the the energy-intensive Proof-of-Work to Proof-of-Stake mechanism to ensure blockchain integrity will reduce Ethereum's energy consumption by 99.95%. This is great news for carbon reduction and addresses the common criticism that crypto is hurting the planet by contributing to global warming. Ethereum changed platforms, will bitcoin do the same? No, it's not feasible, according to many bitcoin maximalists. Also, in responding to accusations that bitcoin is bad for the environment, it's important to understand the type of electricity that's being harnessed and how bitcoin compares to other industries. Michael Saylor, Executive Chairman of MicroStrategy, a publicly-traded business intelligence firm, recently wrote an article explaining bitcoin's energy consumption – Bitcoin Mining and the Environment. Here is a summary of his main points along with some of my thoughts. 1. Bitcoin's Energy Use If a company's manufacturing process requires using a large amount of electricity, the cost of electricity will be a major factor in determining site location. However, it's only one of many factors. The executives will look at labor costs, workforce availability, real estate costs, tax laws, tax incentives, utility costs, and other factors. Electricity is the major operating expense for bitcoin miners and the lower the cost of electricity, the more attractive it is to bitcoin miners. Saylor said that miners tend to locate "at the edge of the grid, in places where there is no other demand, at times when no one else needs the electricity." Bitcoin miners usually pay 2 to 3 cents per kWH compared to retail and commercial consumers in major metropolitan areas who pay 10 to 20 cents per kWH. 2. Bitcoin Mining Can Benefit The Environment One-third of the world's energy power is wasted. Bitcoin mining can use "stranded natural gas" or methane gas to power its computers. For example, bitcoin miners in Texas set up operations on oil fields where excess natural gas is released into the environment. With bitcoin mining, instead of the methane being released into the atmosphere, it is captured and used. Miners can also set up operations at landfills and capture that methane. Saylor pointed out that "No other industrial energy consumer is so well suited to monetize excess power as well as curtail flexibly during periods of energy shortfall and production volatility." Bitcoin miners can also locate where there is excess power due to low demand of near clean energy sources such as solar, wind, hydro, and geothermal. 3. Bitcoin Compared to Other Industries Almost sixty percent of bitcoin mining uses sustainable sources. Also, computers that power bitcoin miners became 46% more energy efficient over the past year. Saylor states that bitcoin is far less energy intensive than tech firms Google, Netflix, or Meta and one to two times less energy intensive than airlines, logistics, retail, hospitality, and agriculture. 4. Bitcoin Cannot Use Proof-of-Stake Saylor argues that if bitcoin mining moved to proof-of-stake, the security and control of the network would would be concentrated in a small group of software developers. This would be not be suited to an open, fair money or global settlement network. Supporting his argument, consider that since Ethereum has migrated to Proof-of-Stake, 52% of ETH is staked by only three entities, Lido, Coinbase, and Kraken.
- Crypto News for Realtors – Issue 33
September 18, 2022 | Issue 33 THE MERGE & A PUBLIC SERVICE ANNOUNCEMENT A historic week for crypto. In this issue of my newsletter, last week's issue, and in my Youtube videos, I have spent a lot of time discussing Ethereum's transition from proof-of-work to proof-of-stake. Why? The same reason why I just wrote a very long piece in Inman entitled Playing the long game? Here's what's next for crypto. In the article, I explain the events this Spring that triggered bankruptcies and the massive crypto selloff. I dive into the collapse of the TerraUSD stablecoin, Celsius, and Voyager. Agents who want to understand the crypto industry, will read articles and continue educating themselves. That's you! As crypto matures and homebuyers start using crypto, you will be prepared to comfortably discuss crypto. ● Caveat Agente – Beware of bogus buyers claiming to have crypto funds. Over the last five months, I have heard from six agents around the US about a scam where prospective buyers contacted the agent and said they wanted to use crypto to buy a $5M to $7M house. Not one was a legitimate buyer. The "buyer" usually makes initial contact via text and tries to move the the conversation to Whatsapp or LINE (a fast growing messaging app). The buyer is vague about their identity and not willing to talk on the phone because of their poor English. Here is how to determine if the buyer is real. Explain that you need proof of funds and ask for a screen shot of their crypto balance and their public wallet address. A public wallet address (a string of alphanumeric digits) allows anyone to see the crypto holder's account balance and the type of crypto. A real crypto buyer would happily provide their public address. If the buyer provides a wallet address, feel free to contact me and I can explain the next steps to verify their identity. Also, reach out with any questions. What is the scam? I don't know, but based on one agent's experience, I believe the scam is to get the agent to download software and share financial information. ● My Crypto YouTube Channel. This past week, I began sharing videos. It's been very cool talking about crypto on camera and incorporating visuals into the stories. It adds a new dimension and lets me deliver my story as if we're having a face-to-face conversation. Please check it out and subscribe. If there is ANY crypto topic that you would like me to cover, let me know. I'll dive in and share what I've learned with everyone else. Have a productive week and stay crypto curious! Rich Hopen email@example.com | 908.917.7926 PS. You can find all CNR newsletters here and my new YouTube Channel. PPS. 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 ▸ The Ethereum Merge Was Successful. Now what? The crypto world marveled at Ethereum's successful transition to the Proof-of-Stake model. The technical feat of the Merge was the "biggest event in crypto since the creation of bitcoin and Ethereum," according to the Wall Street Journal's quote from Jon Charbonneau, a researcher at Delphi Digital. This event was almost miraculous because it occurred as Ethereum was running about 3,500 applications and handling billions of dollars in crypto. The platform's operations were not disrupted. It's been analogized to changing rocket engines mid-flight or replacing the foundation of a large fully occupied office building. In addition to Ethereum cutting its energy use by 99.95%, the new network will be faster, cheaper, and attract more developers and investors. Perhaps one of the most significant changes will be that people who hold Ethereum's cryptocurrency, ETH, will be able to earn a yield by "staking." Staking is the process whereby the holder relinquishes control of their ETH for a set period of time and earns interest. The crypto is used to maintain the network. Bloomberg's Opinion columnist Matt Levine wrote in Money Stuff, "[T]his is cool: Crypto has rediscovered interest from entirely different principles. In traditional finance, you get interest on your money because you are lending it to someone else to build some productive business. In crypto, you get interest on your money because you are getting paid for maintaining the ledger." On the downside, offering a yield may also cause the Securities & Exchange Commission to characterize Ethereum as a security. Gensler said that staking may meet one of the legal factors under the Howey test because "the investing public is anticipating profits based on the efforts of others." Jake Chervinsky, Head of Policy for the Blockchain Association, said, ""[T]he people who actually understand US securities laws will tell you that the merge not only "doesn't" make ETH appear more like a security, but in fact was a significant de-risking event." ▸ White House Releases Framework for Digital Assets The White House issued a report providing high level policy proclamations on digital assets. The "Fact Sheet" states that nine reports have been submitted to the President as mandated in a March 9th Executive Order. The Blockchain Association's Executive Director Kristin Smith commented, “Today’s reports and summaries from the Biden administration’s executive order on digital assets are a missed opportunity to cement U.S. crypto leadership." Smith said the report focused on risks and did not include substantive recommendations on how the United Stated can promote the crypto industry to Americans. NLW, Host of CoinDesk's podcast The Breakdown, said, the Biden report is "neither 'comprehensive' or a 'framework.' [W]e really need Congress to be in charge of developing the framework for the responsible development of digital assets." ▸ Coinbase Shares Crypto Policy Efforts With Its 103 Million App Users Coinbase CEO Brian Armstrong is sharing the crypto policy positions of elected officials with Coinbase's customers. Coinbase customers who use the app will see how their elected leaders feel about the crypto industry. It gives the politician's "Crypto Sentiment" and offers advice on how to advocate for change. Brilliant! CRYPTO CLASS – Can Bitcoin Transition to Proof-of-Stake? Ethereum's success switch from the the energy-intensive Proof-of-Work to Proof-of-Stake mechanism to ensure blockchain integrity will reduce Ethereum's energy consumption by 99.95%. This is great news for carbon reduction and addresses the common criticism that crypto is hurting the planet by contributing to global warming. Ethereum changed platforms, will bitcoin do the same? No, it's not feasible, according to many bitcoin maximalists. Also, in responding to accusations that bitcoin is bad for the environment, it's important to understand the type of electricity that's being harnessed and how bitcoin compares to other industries. Michael Saylor, Executive Chairman of MicroStrategy, a publicly-traded business intelligence firm, recently wrote an article explaining bitcoin's energy consumption – Bitcoin Mining and the Environment. Here is a summary of his main points along with some of my thoughts. 1. Bitcoin's Energy Use If a company's manufacturing process requires using a large amount of electricity, the cost of electricity will be a major factor in determining site location. However, it's only one of many factors. The executives will look at labor costs, workforce availability, real estate costs, tax laws, tax incentives, utility costs, and other factors. Electricity is the major operating expense for bitcoin miners and the lower the cost of electricity, the more attractive it is to bitcoin miners. Saylor said that miners tend to locate "at the edge of the grid, in places where there is no other demand, at times when no one else needs the electricity." Bitcoin miners usually pay 2 to 3 cents per kWH compared to retail and commercial consumers in major metropolitan areas who pay 10 to 20 cents per kWH. 2. Bitcoin Mining Can Benefit The Environment One-third of the world's energy power is wasted. Bitcoin mining can use "stranded natural gas" or methane gas to power its computers. For example, bitcoin miners in Texas set up operations on oil fields where excess natural gas is released into the environment. With bitcoin mining, instead of the methane being released into the atmosphere, it is captured and used. Miners can also set up operations at landfills and capture that methane. Saylor pointed out that "No other industrial energy consumer is so well suited to monetize excess power as well as curtail flexibly during periods of energy shortfall and production volatility." Bitcoin miners can also locate where there is excess power due to low demand of near clean energy sources such as solar, wind, hydro, and geothermal. 3. Bitcoin Compared to Other Industries Almost sixty percent of bitcoin mining uses sustainable sources. Also, computers that power bitcoin miners became 46% more energy efficient over the past year. Saylor states that bitcoin is far less energy intensive than tech firms Google, Netflix, or Meta and one to two times less energy intensive than airlines, logistics, retail, hospitality, and agriculture. 4. Bitcoin Cannot Use Proof-of-Stake Saylor argues that if bitcoin mining moved to proof-of-stake, the security and control of the network would would be concentrated in a small group of software developers. This would be not be suited to an open, fair money or global settlement network. Supporting his argument, consider that since Ethereum has migrated to Proof-of-Stake, 52% of ETH is staked by only three entities, Lido, Coinbase, and Kraken. INFLUENCERS - People to follow Cypherpunks - The Cypherpunks In 1992, three computer scientists started a mailing list that discussed cryptography, mathematics, politics, and philosophy. They believed that the Internet would become a battleground for freedom. Interesting, right? RESOURCES – Books, websites, podcasts, interviews, articles, videos Bloomberg sends out a bi-weekly email with crypto news written by top journalists. CRYPTO WORD – 51% Attack. If a malicious actor, or group of actors, controls over 50% of the total mining power of the blockchain network, it may be possible for them to disrupt the integrity of the blockchain. OH, ONE MORE THING – Another great comic from The New Yorker... Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues & YouTube to see my crypto videos.
- Crypto News for Realtors – Issue 32
🇺🇸 September 11, 2022 🇺🇸 | Issue 31 BE CURIOUS, LEARN, AND SHARE When I was a first year law student studying legal research and writing, I was instructed to write legal briefs as if the reader was an intelligent 12 year old. It did not matter that the reader was a lawyer or judge, I had to explain the facts, legal issues, law, my analysis and conclusions so that the reader could easily understand and follow my logic. I've been working on this skill since I was 25 and it is still challenging. Understanding the crypto industry requires learning about economics. This week's Crypto Class is about the Federal Reserve's efforts to improve the payment system in the US. This entailed learning about the existing system that banks use to pay each other and the private systems layered on top. My research meandered from podcasts, blog posts, videos, Federal Reserve reports, and transcripts of Senators speeches. Sound boring? Not to me. I love learning new things and the more challenging the topic, the more interested I am. But it's not until I finish taking notes and write my article that I am forced to explain things so that an intelligent 12 year old would understand. If there is ANY crypto topic that you would like me to explain, let me know. I'll dive in and share what I've learned with everyone else. 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 and my new YouTube Channel. PPS. 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 ▸ White House Releases First Crypto Report & It's a Disappointment The White House Office of Science and Technology Policy (OSTP) released a report requested in President Biden's March 9th Executive Order "Ensuring Responsible Development of Digital Assets." The report focused on the environmental impact of digital assets. The recommendations revolve around the administration's goals to minimize carbon emissions and ensure that crypto mining doesn't increase the cost of electricity for consumers. The report initially received a lot of attention because of a statement that it would consider banning energy-intensive mining if it cannot be made more sustainable. The report states: "Should these measures prove ineffective at reducing impacts, the Administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining.” Was Congress going to ban proof-of-work mining? There were a lot "click-bait" headlines asking whether Bitcoin mining would be banned in the US. Most of the criticism by industry insiders and crypto commentators centered around the sloppiness of sources relied upon by the report authors. The critics claim that key data underpinning the recommendations were from older studies that have been widely debunked. The bottom line is that this report will be one of dozens that will be considered in the next congressional session when a comprehensive bill is introduced. ▸ The Ethereum Merge Is On Schedule This is a very big week in crypto. The network for the second largest digital asset will make the transition from the energy intensive proof-of-work protocol to proof-of-stake. The Ethereum blockchain will reduce its energy needs by 99.95%. (See Proof-of-Work and Proof-of-Stake.) The PoS protocol, also called a "consensus mechanism," will authenticate crypto transactions. It's referred to as a merge because an Ethereum PoS network was introduced in 2020, the "Beacon Chain." So far it has only been used as a staging area to prepare for the PoS upgrade. Ethereum's core developers decided that rather than setting a specific date and time for the transition, they determined that once miners reached a set level of difficulty, the merge would occur. (See TTD below in Crypto Word). This should happen this week. ▸ Startup Venture Mysten Labs Created By Former Meta Employees Raises $300M Meta's efforts to build a commanding presence in Web 3.0 was too slow for a handful of Meta engineers. So they left the company to launch their own venture. In a Medium post of December, 2021, the team stated "We believe fundamental limitations in existing crypto infrastructure are frustrating broader adoption of Web 3.0." The founders are cryptographical program engineers who were building the blockchain architecture for Meta's crypto-payments platform and mobile wallet. Mysten's new round of funding raises the company's valuation to over $2B. The VCs behind Mysten include FTX Ventures, a16z crypto, Binance Labs, Franklin Templeton, Coinbase Ventures, Apollo, and other top firms. This infusion of venture capital is part of the $33.8B invested in 2022 to crypto and blockchain-related startups through August. In a Wall Street Journal article, crypto research firm Messari, said that the VC spending this year has exceeded the total invested in 2021. CRYPTO CLASS – The Federal Reserve Is Committed To Meet Consumer Demand For Instant Payments Receiving payment immediately is essential to many. For example, those who cannot wait several days between receiving a paycheck and having the money to pay their bills are forced to choose between paying late fees to landlords/mortgage companies or, paying fees to check-cashing stores or payday lenders. The Federal Reserve Bank Vice Chair, Lael Brainared said, “FedNow will transfer the way everyday payments are made throughout the economy bringing substantial gains to households and businesses through the ability to send instant payments at any time on any day, and the the funds being immediately available to recipients to make other payments or manage cash flow efficiently.” The US electronic banking system relies on two systems that transmit funds between financial institutions. The Automated Clearing House (ACH) provides overnight transactions and also offers same day payment transfer. Also, the Real-Time Payments system, a network owned by the large banks, allows customers get their money almost instantly. FedNow should be operational the summer of 2023. The Federal Reserve has also been studying implementing a CBDC. It’s possible that many of the problems that a CBDC seeks to address would first solved by FedNow. This Federal Reserve project should be compared to efforts by private developers who are building systems such as Bitcoin and Lightning Network which allow for cheap and instant payment. INFLUENCERS - People to follow Margaux Nijkerk-@cryptauxmargaux Nijkerk is a reporter with CoinDesk and reports on blockchain protocols. She focuses on the Ethereum network. She has terrific guests on her interviews and panel discussions. She never hesitates to ask hard-hitting questions. RESOURCES – Books, websites, podcasts, interviews, articles, videos CoinDesk has been covering the countdown of Ethereum's Merge. In this interview, an Ethereum protocol developer, Preston Van Loon, explains how the transition will occur. CRYPTO WORD – TTD As the Ethereum Proof-of-Work network transitions to a Proof-of-Stake network, miners will encounter a growing difficulty adding blocks to the PoW network. At some point, it will become so difficult that miners will be forced to transition to the PoS network. The level of difficulty is measured by TTD, the total terminal difficulty. The TTD is calculated to be 58,750,000,000,000,000,000,000. OH, ONE MORE THING – Below is my new YouTube channel which will feature crypto videos including selected portions of the Crypto News for Realtor newsletter and other crypto videos. Want to help me with a successful launch? Please go to the site, WATCH a video, LIKE it, SUBSCRIBE, and SHARE a video with a friend or colleague. Thanks very much! YOU are the best!!! Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- Crypto News for Realtors – Issue 31
September 2, 2022 | Issue 31 AN ANTI-CRYPTO CONFERENCE On September 5th and 6th, there will be a conference to promote critical review on the cryptocurrency space. The "Crypto Policy Symposium – 2022" will be held in London and will cover policy, regulations, systemic risk, NFTs, DeFi, Web 3, and blockchains. I have mixed feeling about the conference. While I support a venue for naysayers, I'm not sure it will help address risks. Ideally, this conference would be crypto agnostic and feature experts with all perspectives. Perhaps the crypto industry has not matured enough to hold a conference drawing cynics and supporters. I have not attended any crypto conferences, but based on what I've read and seen in videos, attendees were beyond bullish about crypto's future. If I was a cynic, I wouldn't feel welcomed at such a venue. In the real estate crypto space, I have not seen events covering the multitude of perspectives on how real estate will be impacted by crypto. Maybe in 2023. Until then, I'll continue to write about crypto's challenges and opportunities. Have a productive week and stay crypto curious! Rich Hopen email@example.com | 908.917.7926 PS. You can find all CNR newsletters here. PPS. 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 ▸ Snoop Dogg & Eminem In the Metaverse Here, on planet Earth, as crypto is fighting economic and regulatory headwinds, there's a party in the metaverse. MTV's Video Music Awards (VMAs) featured rap artists Snoop Dogg and Eminem singing as their Bored Ape Yacht Club's (BAYC) NFTs. The rappers' performance helped promote BAYC and Otherside. Yuga Lab, the owner of BAYC, is building a game "Otherside' where people can own digital real estate with NFTs. The digital real estate is called "otherdeeds" and 55,000 virtual plots were auctioned in April. Within three hours, all lots were sold, for a total of 16.7 million ApeCoin or $317 million. ▸ Bankrupt Celsius Network, Ltd Requested to Return $50M This week, Celsius Network petitioned a bankruptcy judge to release $50M of crypto to customers who had custodial accounts. Custodial accounts did not offer a yield. It is similar to having a safety security box at a traditional bank. Customers never relinquished control of their title to Celsius. There were about 58,300 Celsius custodial accounts totaling $200M. Other customers who sought to earn interest transferred title of their crypto to Celsius. The earned accounts totaled $4.2B. Celsius's liabilities are about $6.7B, its assets are $3.9B, and there is a shortfall of $2.8B. ▸ House Oversight Subcommittee Seeks Info From Crypto Companies On August 1, 2022, Chair Raja Krishnamoorthi sent letters to several large crypto companies requesting documents showing how fraud risks are being addressed. The letter states, " I am concerned about the growth of fraud and consumer abuse linked to cryptocurrencies.... [C]ryptocurrency exchanges must themselves act to protect consumers conduction transaction through their platforms. By implementing audit policies, requiring certain disclosures, delisting, and adopting other safety mechanisms, cryptocurrency exchanges can – and should – create safer environments for consumers. CRYPTO CLASS – Accounting Rules For Digital Assets Are Coming, But Not For NFTs Investors and businesses who hold digital assets have asked the the Financial Accounting Standards Board (FASB) how to treat their holdings. FASB created a project, Accounting for and Disclosure of Crypto Asset, to study and propose rules. This week, FASB narrowed the focus of the project to digital assets that meet the following criteria – ● It is intangible. ● Asset holder has no enforceable rights to, or claims on, underlying goods, services, or other assets. ● Created or lives on a blockchain and secured with cryptography. ● Fungible. NFTs are clearly outside the scope of the project as they are unique (non-fungible) and could carry rights to goods or services, e.g., utility tokens. Businesses who hold digital assets that will not be covered by a FASB rule, look instead to guidelines from the Association of International Certified Professional Accountants. The guidelines require the holder to assess the value yearly. If it falls below the purchase price, holders may need to write down the value. If it rises, companies should record the gain when they sell it. The guidelines are problematic because of crypto's volatility. A better approach for these businesses, according to a Wall Street Journal article, is to apply fair-value accounting rules which would treat crypto as financial assets. Losses and gains in value would be recognized immediately. INFLUENCERS - People to follow Mike McGlone – @mikemcglone11 McGlone is a Bloomberg Senior Commodity Strategist who is followed by most of the top crypto folks I follow on Twitter. That warranted me checking out McGlone's work – very advanced charts that are miles above my head. However, I watched some interviews and was hooked on his insights and fascinating perspective on crypto. Below, is an interview worth watching if you dig the macro stuff. RESOURCES – Books, websites, podcasts, interviews, articles, videos Mike McGlone said that the "speculative excesses" left the market and the Fed's aggressive interest rate hikes will likely favor Bitcoin. He sees bitcoin transitioning from a risky asset to a "risk-off" asset like bonds, gold, and US Treasury long bonds. When? 2022. CRYPTO WORD – Mainnet An independent blockchain running its own network with its own technology and protocol. OH, ONE MORE THING – Below is the video of Snoop Dogg and Eminem. Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- Crypto News for Realtors – Issue 30
August 28, 2022 | Issue 30 ARE YOU EDUCATING ME OR SELLING ME? For 30 weeks I've been writing about crypto. The news is always interesting and writing about it educates me or reinforces what I have already learned. I am happy that others are writing and presenting to agents about crypto. However, I'm often puzzled by the style and approach of the handful of entrepreneurs who are trying to bring crypto to real estate. After being immersed in the nascent crypto industry for for about 10 months and witnessing the massive disruption inside the crypto world, anyone predicting how real estate will utilize crypto is either deluding themselves or is trying to convince you to buy their service or course. Crypto and real estate are driven by macro economic conditions. Accurately predicting the economy, real estate market, or crypto is not possible. Be wary of the crypto entrepreneur who shows you a roadmap or timeline of crypto adoption by home sellers, buyers, and agents. Instead, educate yourself and do it at a comfortable pace. Every week, I give you the news highlights with links to learn more. I'm also available to answer your questions. 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. PPS. 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 ▸ Crypto Investors Looking For Assurances – Tether Is Taking Its Time It has been a long, painful summer for crypto investors and one lesson has been taught repeatedly – investor beware. In 2021, the Commodity Futures Trading Commission (CFTC) settled an enforcement action against Tether for falsely claiming that its crypto tokens were backed by US dollars. Tether paid a $41 million penalty. Knowing the type of reserves that back up Tether would be extremely valuable to investors. One way to do this is through a financial audit. Tether, the largest stablecoin, has been promising to provide an audit since 2017. However, it has only provided an "attestation" of its reserves and liabilities. An audit can provide a much better look into a company's financial condition than an attestation. According to a Wall Street Journal article, there is only a "thin cushion of equity" and a 0.3% drop in assets could make Tether insolvent. ▸ Senate Ag Committee Hearing in September on Crypto Exchanges Crypto publication, The Block, reported that the Senate Agricultural Committee is drafting a bill that will be discussed at hearing in September. The bill establishes that crypto exchanges will report to the Commodity Futures Trading Commission (CFTC). Given the upcoming mid-term elections, the likelihood of a crypto bill becoming law is very slim. However, the value of the hearing is to become part of a comprehensive crypto bill in the next legislative session which will begin January 2023. ▸ Who Owns Your NFT? Alex Thorn of Galaxy Digital said that NFT holders may not own the intellectual property rights of their NFTs. Instead, that would be retained by the NFT creator. In a comprehensive report by Galaxy Digital which examined NFT license agreements for the top NFT collections, Galaxy Digital concluded the following: ● The vast majority of NFTs convey zero intellectual property ownership of their underlying content. ● Many issuers, including the largest Yuga Labs, appear to have misled NFT purchasers as to the intellectual property rights for the content they sell. ● Only one NFT collection in the top 25 by market capitalization (World of Women) attempts to confer intellectual property rights to the purchasers. ● The Creative Commons license renders NFT ownership obsolete from a legal perspective as it moves the intellectual property fully into the public domain. ● Without improvements in the on-chain representation and transfer of intellectual property rights from NFT issuers to NFT token holders, the expansive vision of Web3 will remain unrealized. CRYPTO CLASS – Is Crypto a Security or Commodity and Why Does It Matter? A security is the legal category that covers stocks and bonds. There are several components that define a security. First, it is fungible. This means that the asset is tradable and interchangeable because there is nothing inherently unique about it. For example, US currency is fungible. One $10 bill is just as valuable as another $10 bill or equal in value to two $5 bills or 40 quarters. Non-fungible assets include homes, cars, and in the crypto world, NFTs (non-fungible tokens). Second, a security is a negotiable financial instrument that has monetary value. Securities can represent – (1) ownership in a corporation as stock (equity), (2) creditor relationship in a corporation or governmental body (bond), or (3) rights to ownership by an option. Securities were first regulated in the Securities Act of 1933 with the purpose of protecting the public by ensuring that potential investors received accurate financial information from those selling securities. Later, the Securities & Exchange Commission (SEC) was created to develop and enforce the regulations. There was a lot of uncertainty as to whether or not an asset met the legal definition of a security. In 1946, the US Supreme Court interpreted "security" in a landmark case, Howey vs SEC. Howey states that an investment is a security if it meets a four-prong test: 1) There is an investment of money. 2) The investment is made into a “common enterprise.” 3) The investors expect to make a profit from their investment. 4) Any expected profits or returns are due to the actions of a third party or promoter. With this broad understanding of a security, what is a commodity? Commodities are basic goods used in commerce often referred to as “inputs in the production of other goods or services.” There are four basic groups – energy, metals, livestock, and agriculture. Trading commodities is usually through “futures” contracts on exchanges. Common tradable commodities include wheat, soybeans, livestock, coffee, sugar, cotton, corn, frozen orange juice, crude oil, natural gas, gold, and silver. “Futures” are contracts that obligate parties to buy or sell an asset at specific date and price. Commodity futures are regulated by the Commodity Futures Trading Commission (CFTC). Is Crypto a Security or Commodity? It depends on whom you ask and what criteria they are using. SEC Chair Gary Gensler is taking an expansive view that most cryptocurrencies are securities. Many legislators disagree and believe that most cryptocurrencies fall under CFTC's jurisdiction. And a bi-partisan bill introduced in June 2022 by Sen. Cynthia Lummis (R, WY) and Kersten Gillibrand (D, NY) sought to exempt some crypto currencies out of SEC's jurisdiction and create new concepts for some digital tokens issuers. The reason why this is a major issue for crypto issuers and crypto exchanges is because security regulations are burdensome, costly, and will hinder the US from becoming the global leader in growing the industry. Industry advocates want consumer protection and regulation because without it, there won’t be widespread adoption. This will happen through the legislative process and when regulatory agencies begin publishing reports, policies, guidelines, and draft regulations followed by public comment. INFLUENCERS - People to follow Mark Cuban – @mcuban Billionaire entrepreneur, TV celebrity, owner of NBA team Dallas Mavericks, owner of film distributor Magnolia Pictures, and crypto evangelist. Cuban tweets regularly on crypto and is very bullish on Ethereum. RESOURCES – Books, websites, podcasts, interviews, articles, videos Documenting Bitcoin is a Twitter account that has images, videos, and links that are educational and entertaining. It's a fun Twitter account to scroll when exhausted by the weight of the crypto world. CRYPTO WORD – Node A computer that connects to a blockchain network. OH, ONE MORE THING – Super relevant to VC-funded crypto ventures. (Turn on sound) Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.