Stormrake - Insights #Diversification

The Rake Review: August 2024

Thu, 05 Sep 2024 15:28:29 +1000

More Banks Won't Bring More Prosperity

August is complete, and we are still trading within a range. We have been inside this pattern for 6 months, and we are still looking for a catalyst to take us higher. For those of you that are more visual, Austin Powers himself can show you what it feels like to be stuck in a range at times. For 6 months, Bitcoin has not been able to reach March's All Time High.

A Look Outside Australia - Stormrake's Asian Tour

It's easy to get stuck in echo chambers these days, from your friendship circles to social media that feeds you the same content over and over. In this way, it's also easy to assume what happens in Australia and New Zealand applies to the rest of the world, but we represent a relatively small part of the world. In August, Stormrake visited the Philippines on a tour designed to review the Philippine crypto scene.

The findings were very interesting:

1) The Philippines is a country with enormous economic potential. With over 100 Million incredible, friendly and talented people (12th largest in the world) the Philippines has a building block of opportunity. Can the country up skill its people and provide the infrastructure required to make the place an economic powerhouse? I think it's very possible.

2) We are incredibly early. Whilst at a large event in Manila, we saw first hand the reaction of regular people to the concepts our readers will probably find relatively obvious. The locals had little knowledge about the very basics of money, monetary history, inflation, money printing and government intervention in money markets. How, then, can they understand Bitcoin?

We saw firsthand that Manila's elite are not yet aware of the real need for a transparent, borderless, decentralised monetary system like Bitcoin. Bitcoin is not just a "money go up investment"; it also provides freedom and protection from money printing.

For investors from down under who think they have missed the boat, the message is loud and clear: buying today makes you an early adopter. You are still early and the opportunity is fresh.

3) Manila has more bank branches then I've ever seen. There seems to be more bank branches then fast food outlets. There is one on every corner. On one short drive (in kms not time), we drove past the following banks:

BNP, China Savings Bank, Metro Bank, Commercial Bank, Eastwest Bank, ChinaBank, PSBank, RCBC, DBP Bank, BDO, Landbank, Security Bank, SEC Bank.

Here's how many Banks the Phillipines has:

45 universal and commercial Banks

44 Savings Banks

400 Rural and Cooperative Banks

and a further 6,267 Non-Banks with quasi banking functions all licensed under the General Banking Act 2000 as of 2022

You might ask why a relatively poor nation requires 6-7,000 banks (Some with many branches). But also how do they all keep themselves afloat? How do they make their money?

Here are some factors that may contribute:

A) ATM fees, ATM fees as a % of ATM withdrawals are incredibly high compared to what we are used to. A taxi fare will often cost you less than an ATM fee. However, I don't think that explains why there are so many banks.

B) Government subsidies and monetary policy.

PDIC - A deposit insurance scheme is an indirect subsidy born by taxpayers which budgets around 10 Billion PHP (Circa $265Million AUD).
Direct Subsidies - PHP 24 billion ($633 Million AUD) was given out in 1 year just to Landbank for "Development projects"
Other Rural Programs - The Phillippine government also grants various regional banks significant subsidies for various rural projects (it is hard to say how much oversight exists to check those funds are not disappearing but all I can say is that the countries infrastructure leaves a lot to be desired.
Bailouts - 2008 and 2018 saw significant bailouts where the taxpayer paid banks to stay afloat. It's another reason bankers can take big risks with other people's money. If it goes pear shaped they will be saved.

However as disgusting as all that is, it also exists elsewhere so that brings me to point C.

C) Remittance Revenue

The Philippines has an enormous workforce working outside of the country and sending funds back home. The remittance business is incredibly large and the Philippines is the 4th largest inward remitter in the entire world. 39 Billion USD$ worth per year comes into the Philippines via remittances. The cost of sending money overseas can be 7-10% in Australia for popular pairs. For the PHP, the charge is often more than that. A huge portion of those comes through banks gouging poor Filipino workers. That's circa $4Billion in remittance fees the banks above are likely earning just from inbound funds. That's enough to have a huge competing network trying to take a slice of the pie.

This leads me to the front cover:

As we drove past Bank after Bank we noticed that a lot of them had homeless people sleeping out the front. In fairness and respect to those people we didn't take any photos and instead offer the above AI dramatisation.

The message is clear, though:

Having more Banks does not create wealth and won't lift your country out of poverty. The solution must be something else. Central Banking isn't solving the problem.

The Solution:

Keep more of what you earn!

As more business move to a Bitcoin standard it will soon be possible to get paid directly in Bitcoin. If you are a handyman or an artist - ask to get paid in Bitcoin.

If you do, you can actually own that money and you don't need a bank to store it. You can store it yourself or failing that a trusted broker ;)

If you need to send it to your family in a different country you can do it directly and not be charged egregious fees by Banks or money transmission services.

You can trade in and out of whatever you want through Stormrake with ease and reap the rewards yourself.

Be sovereign - Rely on Yourself - Own your own future.

August's timeline of key events and impact on BTC with prices:

August has seen plenty of news. Here is a simplified timeline of the events that had a great impact on BTC price.

August 4:

Japanese Yen Carry Trade Unwinds. Global Markets rocked by sharp losses on the Yen Carry Trade which has been the easiest trade going around. The shock is felt by Crypto first as investors are unable to exit equities on the weekend seek liquidity elsewhere. Monday is a bloodbath in world equity markets.

August 21:

The US Bureau of Labor Statistics revised downward the estimates for non-farm payrolls by 818,000 for the 12 months to March 2024. That announcement sent a shudder through world markets because it meant that the US economy was probably in recession and previous reported estimates were wildly optimistic

August 23

Kennedy (RFK) drops out of US presidential race and endorses Trump putting the likelihood of a Trump-Pump higher. Both Trump and Kennedy had promised positive regulations and support for Bitcoin earlier.

On the same day, Jackson Hole meeting produces first dovish statement from Chairman Powell suggesting US interest rates may soon start to fall. (Closely linked to the news 2 days earlier)

August 24:

Pavel Durov, founder of Telegram, arrested in Paris, France on terrorism charges. TON coin experiences volatility as fear of a negative impact on the coin as a result of Pavel's arrest. (He has since been released but can not leave the country).

August 26:

Allegations of misconduct in the Australian Gold industry are exposed with Economist John Adams taking on ASIC for corruption which implicates Australia's PM Anthony Albanese.

Market Update

Here is the fast five of what you need to know about the market in August 2024:

Bitcoin struggled to breach the 6 month sideways trend ending the month lower.
The Ethereum ETF's underperformed and ETH failed to regain $300B Market Cap.
TON coin dropped out of the Top10 being replaced by Tron (TRX) on the back of Telegram founder Pavel Durov's arrest.
Outside the Top10, Helium (HNT) bucked the downward trend. HNT is the only coin in the top 100 up over 10% in the last week.
MATIC (Polygon) begins its migration to POL (Its own dedicated chain). The MATIC price actually fell though so this could be an opportunity

Video of the month

Your favourite Stormrake Broker will be touring the country to speak about the importance of Bitcoin as a tool for self sovereignty. Some tickets are still available at Eventbrite. Link below:

https://www.eventbrite.com.au/cc/the-great-australian-roadshow-3608699

In the news

TON Community Unites over Founder's Arrest in Paris

The nation of France steeped in the tradition of Liberty has taken the incredible step of arresting the founder of global messaging app Telegram. Pavel Durov was arrested after arriving at the Bourget Airport for actions related to criminal activity on the platform, including complicity in illegal gang transactions, “laundering of crimes in an organized gang,” and refusal to communicate information to authorities, according to the French prosecutor’s statement. Our view is that these charges are egregious to say the least and fly in the face of France's history of freedom and liberty. Investors in TON have to be wary though and a strategy needs to be formulated. Talk to your broker if you've not developed one.

Ethereum ETFs Underperform:

So far the Ethereum ETF's have underperformed expectations compared to the results of the Bitcoin ETF's. We saw a streak of ETH ETF outflows which have added to downward pressure on Spot ETH market price.

US Economy Slowing

There has been a consistent pattern of overestimating the economy in the US. The latest Job numbers saw the largest ever jobs revision of almost 1 Million jobs. The market took a stumble and many commentators are expecting the US to slow to an official recession.

Stormrake x Sharewise Partnership Announced

Diversification is the name of the game. Now its even easier to diversify across asset classes with our new partnership with Equities Broker Sharewise based in Sydney, Australia. Speak to your broker to find out more.

Education

Risk Warning: Scammers are Getting Smarter

The entire crypto industry has experienced a wave of scam attempts by sophisticated scammers trying to lure unsuspecting Aussies and Kiwi's into their trap. AI tech may be helping scammers convince more victims to send them their hard earned funds.

What are scammers trying to do?

Scammers are not interested in working hard for a small fee. They want 100% of your funds. They often achieve this by convincing you that they have the ability to offer incredible results that no one else can achieve for you. All you have to do is send them money and you can become rich.

Once scammers have your funds the likelihood of recovery is close to zero. Worse still they will likely try again and again.

How to protect yourself

First and foremost, look out for unrealistic promises. A genuine opportunity would never guarantee income and returns. In real life reward comes with risk. You can't have your cake and eat it too! You can't have great returns without the risk associated.

Secondly, know who you are getting in bed with. Real financial professionals are happy to meet you and have a public profile. Ask questions, know who you are dealing with. Do not talk to people through unsolicited calls or online contact.

If you think you have been scammed.

If you think any of the above is ringing alarm bells. Contact us to let us know because we may be able to help.

Some scam victims may feel a sense of embarrassment which prevents them from reporting the scammers. If this is you please don't hesitate to call. You may be helping prevent others from getting scammed just like you.

Lastly "If its too good to be true it probably is". Don't be afraid to build wealth slowly.

Our Article

We released an article earlier to help identify scams and it can be found here

If you have been contacted by a scammer they may already be reported in this list.

Please trade responsibly.

Written by Michael Milmeister

Memes of the month

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No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Stormrake is not a financial adviser and does not provide financial product advice. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. Stormrake is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this newsletter.

Disclaimer

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What's Wrong with Bitcoin?

Tue, 04 Jun 2024 10:33:09 +1000

As a cryptocurrency brokerage we are often seeing new clients come to us for alts.

Hello, I'm new to Stormrake, can you buy Shiba, Akita, Dogwifhat, Kira the injective cat or HarryPotterObamaSonic10Inu Coin?

While its true that we can service a very large set of coins the question has to be asked - What's wrong with Bitcoin?

Diversification in Crypto

Do investors seek alt-coins because they want Diversification?

Warren Buffett himself is famously quoted saying, "Wide diversification is only required when investors do not understand what they are doing". For Buffett every investment needs to be thoroughly researched and understood. Once you have conviction it is ok to have an outsized position in a single asset that you actually understand. He was also quoted as saying "Diversification may preserve wealth, but concentration builds wealth". If you are trying to build wealth then diversification may actually be preventing you from having a chance of reaching that goal.

In the context of crypto there are over 14,000 coins but Bitcoin is worth over 50% of all the top 125 coins. Effectively it is the majority of the market on its own. If you follow classic diversification over 50% of your portfolio should be bitcoin.

Bitcoin leads the way and the rest follows. The whole point of diversification is bringing together assets that act differently at different times (Negative correlation). However, in an environment where the other coins are just following Bitcoin you may be just increasing risk by adding high volatility altcoins.

Overall, diversification is not a great reason to be collecting altcoins.

There is enough data and information for even the newest crypto investors to understand that when Bitcoin is in a bull market, altcoins have experienced a greater rise. However, when the tide turns and Bitcoin faces a downturn, the ripple effects are felt far more acutely across these altcoins. Altcoins are considered to be leveraged bets on the performance of Bitcoin.

Over a Decade on, Bitcoin Still Reigns Supreme

The rise and fall of projects claiming to be ‘BTC killers’ serve as cautionary tales against betting on anything other than the proven resilience of Bitcoin. The chart above shows the performance of over 2400 coins between 2010-2020. The main takeaway is that Bitcoin (black line) continues to grow whilst altcoins struggle to last more than a couple of cycles and more often than not, become worthless (as shown by majority of the coloured lines converging at the horizontal red line). Time and again, we hear about the ‘next big thing’, it is rare these coins become a cornerstone of the crypto space. People have made millions in these alt coins. However, we've witnessed the hype surrounding these alt coins dissipate, leaving the majority of investors disillusioned, left holding coins that were once worth something but are now worthless and regretting not rotating their profits into Bitcoin.

Ethereum is often hailed as Bitcoin's chief rival, ‘the one to flip Bitcoin’ and claim Bitcoin’s number one spot. Ethereum has been revolutionary in the crypto space through introducing groundbreaking concepts such as smart contracts and decentralised applications. However, It’s held back by scalability issues and network congestion that seem to be ongoing through the countless ‘upgrades’ and the nearly decade it has been around. Furthermore, Ethereum lacks the scarcity that underpins Bitcoin's value proposition, casting doubt on its long-term viability as a store of value. Then there is the centralisation issues, a topic worthy of its own article

The Allure of Altcoins

As the cryptocurrency world continues to grow everyday with new coins, new investors and new money entering the space. Bitcoin remains the benchmark for the entire industry. So why venture elsewhere? Especially for those new investors who are yet to grasp the nuances of this emerging asset class, the rationale behind exploring alternative cryptocurrencies doesn’t make sense. For a lot of people, the allure of crypto is the potential to make ‘quick and easy money’. New investors want to make a quick 100x by buying into the latest fad that some online influencer has promoted. However, veterans and mature traders understand that when something is too good to be true, it usually is and their warning signs start flashing.

As for the allure of altcoins, investors are drawn to the prospect of quick profits and speculative trading opportunities. Others are enticed by the promise of revolutionary technologies or visionary founders. However, amidst the frenzy of the crypto ecosystem and the enticement of making a quick buck, it's vital to keep a clear understanding of Bitcoin's unmatched value proposition.

Over the last 12 months we have witnessed the beginning of a bull market as the crypto market saw itself more than double in market cap reaching just over $2.2 trillion USD. As we know, when crypto markets rally, altcoins should outperform BTC. At the previous cycle, during the peak of the crypto space, 85 of the top 100 coins had outperformed Bitcoin. However, things were different over the past year, with only 29 of the top 100 cryptocurrencies outperforming Bitcoin. This is incredibly disappointing news to those who chose to hold altcoins rather than Bitcoin. As the crypto space grows, Bitcoin continues to mature, become more mainstream and recognised by traditional institutions, it will get harder for altcoins to outperform Bitcoin.

At the heart of the matter lies a fundamental truth: Bitcoin's dominance in the crypto space is here to stay. Since its inception, Bitcoin has consistently held the top spot in the industry and shows no signs of relinquishing its position anytime soon.

The table above shows Bitcoin's Compound Annual Growth Rate (CAGR) vs other major investments. Bitcoin continues to show why it has been the number one investment performer over its lifespan with an average return of 155% p.a, whilst Gold has only returned 7% over the same 14 year period.

This proves that the accumulation of Bitcoin is one of the most rewarding investments. To receive the full benefits of Bitcoin's CAGR, one should continue to accumulate BTC over the years regardless of the price. By doing so, one is likely to be rewarded and greatly outperform all alternative investment options.

In conclusion, the case for Bitcoin as the premier cryptocurrency is clear and compelling. By consolidating investments in Bitcoin, investors can navigate the volatile crypto market with greater confidence and stability. As Warren Buffett stated, “The stock market is designed to transfer money from the Active to the Patient.” Similarly, in the realm of cryptocurrencies, patience and prudence, anchored by Bitcoin's proven track record, are the keys to long-term success and wealth preservation in the crypto space. So let me ask you, what is wrong with Bitcoin?

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No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.