Welcome back to Virtuse Report, where I share major Bitcoin developments and compelling ideas that you need to know.
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Let’s get it started!
1. Why have the past two weeks been hell for Bitcoin?
As with everything else in life, there are several factors to that.
The first problem with Bitcoin was high Open interest. The best way to describe open interest is as the air pressure. If a large enough pressure is built, it has to get released at some point.
That’s why we’ve seen this drawdown. The good news is that after last Friday’s flush, we reset to the lowest value since May, meaning the market is the most spot-driven it has been since May. And that is good news.
The second issue was that institutional flow into Bitcoin slowed down. Large funds tend to sell their unrealized gains before the end of the year to window dress high performance to their investors. That has been a common strategy with traditional assets for decades.
Coupled with the uncertainty surrounding the potential rate hikes and new covid variant, it seems more than reasonable for institutions to take profits.
Nonetheless, it is highly expected that institutions will start to repurchase their positions in January and trigger the so-called “January effect.” But that depends on other macroeconomic factors that as still being played out.
So, let’s cross that bridge when we get to it.
2. WhatsApp enabled crypto for 2 billion people
Last week Novi, the digital wallet within Meta’s (Facebook) ecosystem, announced that users would be able to send and receive USD stablecoins instantly and securely for no fees, all through WhatsApp (which is also owned by Meta).
In other words, WhatsApp is adding crypto wallets to its application.
This is a huge deal.
They’re starting with USD stablecoins issued by the Paxos Trust Company (USDP, which we support on Virtuse), but eventually, I believe they will support all major cryptos, including Bitcoin. Let’s not forget that stablecoins represented $5 billion in value as recently as January 2020; that figure has since ballooned to $150 billion.
Technically, once fiat USD is added to a user’s Novi wallet, it will automatically be converted to a stablecoin-denominated balance.
What is important to realize is that it’s still only a pilot and will only be available in the United States. However, integrating a digital wallet with WhatsApp is a phenomenal development.
Users will be able to send money as efficiently, seamlessly, instantly, and free as they send photos or text messages. That is to say; it won’t be necessary to leave WhatsApp and open some crypto exchange account to send a payment.
Anyone could click and send payment instantly like any other message. WhatsApp users can now use the app for purposes beyond just communicating with friends, family, and coworkers.
What the internet did to information, cryptocurrencies do to money.
Money is information in the digital world.
The beautiful thing about this is that WhatsApp has 2bil+ users worldwide and is the largest messaging app on the planet.
This is definitely a story to follow moving forward!
3. Inflation is insanely high. What to do about it?
The inflation numbers for November have come out at 6.8%, which is the highest U.S. inflation in 39 years.
You expect high inflation in developing countries, but not in an advanced economy like the US. But we all know that those CPI numbers are highly manipulated, so likely, the inflation is in double digits.
US price increases over last year (CPI report):
Used Cars: +31.4%
Gas Utilities: +25.1%
New Cars: +11.1%
Overall CPI: +6.8%
Food at home: +6.4%
Food away from home: +5.8%
According to Fed, 36% of all the money printed in the US was printed in the last 15 months. If you pump trillions of dollars into the economy, you simply can’t expect any different outcome. The central bankers have set the wheels in motion, and there’s no way back.
What should you do about it?
First, get out of cash, sell your bonds and buy hard assets like the S&P 500 index or Bitcoin. Governments are spending that money like a drunken sailor, and inflation will continue to rise.
The number one thing is taking the inflation numbers and asking for a pay raise. It’s not even a pay increase. You’re making 6.8% less money than last year, and all you are asking for is compensation for the loss of purchasing power due to no fault of your own.
So, asking is critical.
You don’t get what you don’t ask for. And inflation is the single best argument you can have for the raise.