Bostoncoin update Sept-Oct 2022
Nasdaq plus crypto equals new opportunity
,We interrupt this ordinarily cheeky newsletter with some “serious business news” from a recent Australian press piece:
Nasdaq plus crypto equals new opportunity
Reading press from the last few months, you might think that the “crypto-craze” has ended, gone the way of roller-blades and Tamagotchis. It is true that Bitcoin dropped over 50% in June, whilst projects such as Terra/Luna and Celsius crashed and highly touted crypto funds such as Three Arrows Capital declared bankruptcy.
However, cryptocurrency may have more life in it yet, especially with Nasdaq and other major players coming on board.
Experienced investors may remember the 1999 “Tech Wreck” where the dot-com bubble supposedly burst, driving many internet companies into the ground. After rocketing up with 400% gains in the early 1990s, many dot-com companies went spectacularly bankrupt; some within a few months of their IPO.
Whilst the majority of 1999 dot-com companies may have been unsustainable, the crash took down some truly great companies as well. Cisco and Apple dropped 80%, Amazon and Microsoft were crushed by up to 60%, and yet they recovered.
Notwithstanding a loss of 80% of its stock price in 1999, Amazon has since grown over 212 000%, with Microsoft up 242 000%, and Apple up over 196 000%. There is clearly a reward for those who can handle dramatic volatility.
Despite cryptocurrency crashing up to 80% a few times in the short history of this asset class, cryptocurrencies such as Bitcoin and Ethereum have also made stellar gains over time: more than 6 000% and 12 000% respectively.
It seems that some major players are rushing in where others fear to tread. Nasdaq Inc, the second largest stock exchange in the world has launched the Nasdaq Digital Assets Unit, hiring Ira Auerbach, formerly from the Winklevoss twins’ Gemini crypto brokers. Nasdaq Digital plan to increase staff by another 40+ people by the end of the year, coinciding with the timeframe where the US government tentatively plans to introduce crypto legislation.
Trillion-dollar fund management firm BlackRock Inc. has similarly stepped out from its traditional stock and bond funds and partnered with crypto giant Coinbase Global Inc to launch its own digital assets business, joining the likes of JP Morgan, Fidelity, Charles Schwab, Citadel and BNY Mellon who are already in the crypto space.
“We are very pleased to see some new competitors enter the crypto space,” says Jennifer Robertson, CEO of Boston Trading Co.
Ms Robertson co-founded the world’s first diversified crypto mutual fund in 2016, and the Bostoncoin fund has outperformed Bitcoin every year since.
Ms Robertson is no stranger to Nasdaq, having started a collaboration with Nasdaq’s governance division in 2021 in her other business, well-respected and long-standing corporate governance advisory firm, Board Matters.
Ms Robertson stated she welcomes Nasdaq to the crypto table: “For several years Bostoncoin was the only crypto mutual fund in existence, and we measured the BOS fund performance against Bitcoin as there was no peer benchmark. It will be great to see more competition in the crypto mutual fund space, as competition is great for innovation and generally better for the investors.”
Traditional investors who may have dismissed crypto as a fad or sworn off it after the most recent crash may need to take heed. Where Blackrock, Nasdaq, Fidelity and JP Morgan go, they take billions (if not trillions) of dollars with them. The 1999 Tech Wreck was a cautionary tale. Whilst many new startups may fail, we now know that gains of 100 000% were possible for dot-com companies. What will be possible for cryptocurrency?
Jennifer Robertson, FAICD, co-founder of Bostoncoin, Managing Director of Board Matters and NASDAQ Centre for Board Excellence Advisory Board Member.
We now return you to your existing irreverent newslette
“Crypto flipto”: markets turn around
It has been a big month in crypto markets, with some wags coining the names “SeptemBear” and “OctoBull”, which we found very amusing. (For those who grew up on Sesame Street and were not whelped on Wall Street, a bear attacks with downward claws, and describes a down market, whilst a bull attacks with upward horns and epitomises an up market).
After stocks and crypto markets running basically downhill from May-June to September, it was nice to see a few green charts emerging as crypto flips to do what it is supposed to do, and act as a store of value in hard times.
This month the Fed continues to raise rates in the US, allegedly to combat the higher inflation that was caused by an earlier Fed decision to print cash like a drunken sailor.
Despite rampant cash printing causing inflation in ancient Rome, middle-ages China, 20th century Germany, 21st century Brazil, Argentina, Zimbabwe and other nations, the Fed tried to reassure the public that they were smarter than 3000 years of history, and that higher inflation would be “transitory”.
Meanwhile, the cost of living continues to rise around the world, due to supply chain shortages, an ongoing Russian ground war and economic policy from politicians who clearly never had to work at school or in life, or pay their own bills.
Anecdotal evidence suggests that much of the COVID cash printing and stimulus package handouts made their way to multi-billion-dollar multi-national companies instead of furloughed workers, in a twisted version of “trickle-up” economics.
The rapidly disappearing middle-class used to opine that “the rich get richer”, and it seems that pandemic response has shone a brighter light on economic inequality. We have previously mentioned that average CEO income in the 1970s was around triple that of an average worker, as their responsibilities and duties were seen as three times more onerous.
In more recent years, average CEO incomes have tended toward three hundred times as much as an ordinary worker’s, leading to ridiculous levels of economic disparity.
Several studies completed in the USA between 2006 and 2019 have shown an inverse correlation between CEO income and economic performance; that is: the more the boss is paid, the worse the company does. It would be interesting to see a chart comparing the income of politicians versus their decision-making prowess; perhaps that would make the rest of us smile with the insanity of the outcomes.
Meanwhile, prices for fuel and energy in the UK continue to skyrocket, leading many gas and electric customers to retro-fit their homes with wood-burning stoves to survive the British winter. Please do not tell Greta what all that burning timber will do to the air quality and the environment, but at least we showed Putin, right?
Not really: the Russian rouble has gone up in value, the British pound has gone down, and the USD is rising for all the wrong reasons: it is the “dollar milkshake theory” to a tee, and it does not end well for the average investor.
Meanwhile, policymakers in Germany are planning on dealing with the increased cost of living (caused by the central bank printing and handing out too much paper cash), by (wait for it): printing more worthless paper cash!
It is true: printing excess cash caused inflation, people cannot afford the higher prices, so Germany will print some more cash to try to fix things. This is just as insane as trying to dig yourself out of a hole*, and shows that German politicians may not have paid attention in history class**.
*(For those who have not visited ‘The Simpsons’ for some time, you may enjoy this meme from S05 E11 “Homer the Vigilante”)
**(The German Weimar Republic dropped their gold-backed currency in WW1, and started to print unbacked cash as the war ended. The German mark was worth around USD$0.25 and sank to around USD$0.0001, and then things started to get really bad, with US$1 being worth around 4 Trillion marks).
We can tell ourselves that “this time it is different”, despite every single historical occurrence of rampant cash-printing ending up in hyperinflation.
a) nobody can point to a single time when this cash-printing strategy worked out well for the people, and
b) it would be arrogant or foolish to assume that 21st-century politicians are far smarter than any of their predecessors from the last several thousand years. We may have smartphones, but we seem to be less clever as a species than those who built Colosseums and cathedrals.
Moving briefly back to the UK, where policymakers are not (yet) printing more cash, but instead planning on initiating tax cuts. At first glance, tax cuts sound like a good thing, until you realise that 66% of the UK tax cuts go to the wealthiest 20% of people. We are starting to think that politicians may not be acting in the best interest of the general public, but acting only for a select few…
The rich get richer, so be rich
Higher costs of living are here, and may be here for a while. What can you do?
We have seen from prior bouts of fiscal stimulus (cough, cough, “COVID cash”) that the purchasing power of weekly wages has been slashed by around 30% in just 2-3 years, whilst prices of assets such as stocks and properties went up.
If you did not own stocks or property that rose more than inflation since 2019, you may wish to change a few things. No matter the high prices, it is possible to get into most asset markets using syndicates or mutual funds.
Those who do not have the cash to purchase entire commercial properties, whole government bonds, full windmill farms or entire Bitcoins can readily access smaller parts of these types of investment with as little as $500.
There have been literal screeds and tomes written on how to slash expenses, downsize budgets and free up cash for more investing, so we will not go into detail here. Subscribers to the Bostoncoin newsletter should have been offered a free copy of the best-selling book, “Who’s Taking Your Money? (and how to get some of it back!)”, or you can pick one up for under $5 on Amazon.
The point is “do whatever you can to invest like the rich; even if you have to take baby steps”. Apps such as RAIZ, Acorns, RobinHood and others may allow you to start investing with under $1. Even a single dollar invested into Amazon, Apple, Microsoft or Bitcoin on the right day would be worth over $200 000 now.
Do something today that your future self will thank you for.
How did we go this month?
Whilst markets are down, there are opportunities everywhere. We have had the chance to “stack some more satts”, buying Bitcoin under US$19 000, as well as to invest into a few more projects that promise to change the face of crypto.
The charts below show obvious dips in May/June when the fallout from Terra/Luna and Celsius was at its worst. Prices are now starting to increase again as the markets recover, and we anticipate new record highs as more institutions such as NASDAQ, Blackrock and Fidelity pile into the market.
DART price is up 9.48% from last month
As at Sept 30th 2022
DART NAV 111.714912
DART Price 122.919404
BOS price is down around 4% this month but continues to outperform Bitcoin and shows some excellent returns for those with a longer-term investment timeframe. Strap in and hold on for better times ahead.
Returns from BOS over
2 years 240.22%
3 years 310.31%
4 years 209.41%
As at Sept 30th 2022
BOS NAV 70.0753017
BOS Price 77.0828318
We cannot promise that future crypto returns will be as astronomical as what stocks did post-1999s Tech Wreck, but we do like it when history echoes. Turning $10 into over a million dollars is possible, but it takes a little luck, a smidgen of strategy and a lot of courage. Be brave when others are fearful, as Buffett says.
See you next month