Stormrake - Insights #Politics

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

All statements made in this newsletter are made in good faith and we believe they are accurate and reliable. Stormrake does not give any warranty as to the accuracy, reliability or completeness of information that is contained here, except insofar as any liability under statute cannot be excluded. Stormrake, its directors, employees and their representatives do not accept any liability for any error or omission in this newsletter or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided in this newsletter is owned by Stormrake. You may not alter or modify this information in any way, including the removal of this copyright notice.

Copyright © 2024 Stormrake Pty Ltd, All rights reserved

The Rake Review: July 2024

Thu, 01 Aug 2024 16:02:14 +1000

"Then you win."

Safe to say July has been a notable month for Cryptocurrency and global events. Bitcoin went through a major sell off before politics took centre stage and assisted with a recovery. It was expected that a change in political sentiment would be positive for Bitcoin, but no one could have expected how these events would have unfolded.

It’s Been Ignored, Laughed at, Fought Against, but is the Final Era of Bitcoins History Finally Here?

Just over a year ago, we put out a Rake Review covering the growing concerns surrounding government actions to deliberately restrict everything to do with cryptocurrency. SEC lawsuits were flying left and right, everything other than BTC was being labelled a security, banks were removing AUD rails to crypto exchanges and major financial institutions were bad mouthing Bitcoin.

As of today, we have won. A mere 16 months later, Bitcoin and Ethereum have had spot ETFs launched with BItcoin seeing record breaking inflows within the first 24 hours of trading. Institutions such as Blackrock who’s CEO Larry Fink was a renowned Bitcoin dismisser has flipped his tone and admitted he was wrong about the asset. Bitcoin is now at the point where it is being politicised to garner more votes and support.

Bitcoin 2024 saw invites to both Donald Trump and Kamala Harris to speak. Trump a new endorser of BTC, whilst Harris has been considered the opposite with the Democrats spending the last four years battling Bitcoin and Crypto. Since taking over for Biden, Harris herself has yet to give her stance on Bitcoin and Crypto.

At Bitcoin 2024, Trump has announced his plans for Bitcoin and Crypto if he were to be elected; he intends to make the US the crypto capital of the world, create a strategic Bitcoin reserve, fire Gary Gensler, end Operation Choke point 2.0 and bring Bitcoin mining back to the US.

For those who are unfamiliar with some of the propositions above. Gary Gensler, a Democrat and the current SEC Chairman has been the one leading the fight against cryptocurrency, whilst Operation Choke Point 2.0 is a concerted, government-backed effort to discourage traditional finance institutions from servicing the crypto industry.

All these propositions by Trump are extremely bullish for Bitcoin and crypto. As a result of this, Trump has received support from the majority of the crypto space. Similarly, Independent nominee Robert F Kennedy has endorsed Bitcoin and announced that he will sign an executive order for the US to buy 550 Bitcoin per day to build a reserve of 4 million BTC, if elected president. However, it is statistically improbable for RFK to win the election, the support for Bitcoin is positive. The Democratic Party is pushing Harris to ‘reset’ her crypto stance in an attempt to garner more support from crypto users.

Politicians or their advisors are realising that most Bitcoiners are "single-issue voters" who will vote solely based on the candidates crypto stance.

Overall, it is an outstanding change in sentiment from the government, one that can only be viewed as a positive for the longevity of Bitcoin. As the ones who were fighting Bitcoin the hardest, are now the ones who are offering Bitcoin products and supporting it.

The price doesn't reflect the enormous change of political sentiment yet, however we think there is a large chance that the next 6 months may well fix that. So, now may be the best time to take advantage of prices not reflecting the positive news.

June’s timeline of key events and impact on BTC with prices:

July has been an incredibly volatile month for Bitcoin and cryptocurrency. Here is a simplified timeline of the events that had a great impact on BTC price.

July 1-8:

Mt Gox, German Government and US DOJ begin mass selling of Bitcoin (BTC falls from $63.9k to $53.5K - approximately a 15% pullback).

July 12:

Germany run out of BTC (12 July, $57k).

Assassination attempt on Donald Trump (12 July). The Trump Pump starts a BTC rally, 15% in 5 days ($57k to $66k).

July 17:

Bitcoin reaches $66k as a result of the Trump Pump.

July 15-22:

Mass ETF Inflows, BTC reaches $68.5k.

July 22-24:

Grayscale move almost $3 B worth of BTC to exchange (8% decrease from $68.5k to $63.5k).

July 24:

Ethereum ETF is launched, with almost $1.1 billion in volume traded, but only a net inflow of $100m due to Grayscale outflows (ETH falls 11% in a day from $3500 to $3080).

July 26-27:

The anticipation and rumours begin of Donald Trump endorsing Bitcoin at BTC 2024. BTC increase 10% from $63.5k to $69.4k.

July 28:

Trump speaks at BTC 2024, laying out his bullish plan for Bitcoin if he is to become President again. BTC reclaims $70k for a brief period of time before retracing back to the current levels of $66k.

Market Update

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

Bitcoin increased 3.3% in July.
The Ethereum ETF launched at the end of the month yet fell ~6% in July.
No new coins in the top 10, XRP and DOGE moved up in the rankings this month moving from 8th to 6th and 10th to 9th respectively.
A volatile month for the total crypto market cap;ending the month 1.5% up after being down 15% and up 8% at times throughout July.
The total net flow of BTC ETFs was + $124.1 million USD.

Video of the month

Donald Trump's Official Keynote; Bitcoin 2024

In the news

US Elections: Trump shot, Biden catches COVID and pulls out, Harris takes over.

This race for the US Presidency may be one of the most controversial, eventful and entertaining elections of all time. Donald Trump survived an assassination attempt. The last assassination attempt on a US President was 1981, 43 years ago. Joe Biden caught COVID and pulled out of the race. Vice President Kamala Harris become the likely Democratic Presidential Candidate. Many conspiracies were born as a result of these events.

Ethereum ETF Launched:

After receiving SEC approval months ago, the Spot Ethereum ETF has launched. The short term impact was not favourable for the price of Ethereum. ETH is currently 20% lower than when it was approved. The launch was met with great volatility before retracing 11%. This is due to the people buying the rumour and selling the news paired with major outflows from Grayscale. Is this a pattern we will see when more crypto ETFs are launched? Extreme volatility followed by a short term pullback of the asset or is it due to Grayscale outflows.

Grayscale Movements (Bitcoin and Ethereum)

Grayscale outflows continue to hinder Bitcoin and we are beginning to see the same effect on Ethereum as a result of the Spot Ethereum ETF. Grayscale BTC outflows were a catalyst for Bitcoin reaching $53.5k. Whilst the Grayscale ETH outflows was the major catalyst of ETH retracing 11% on its launch day.

July saw a total of $354 million in net outflows

Grayscale’s ETHE net outflows totalling $1.7 Billion of outflows since July 24.

Education

Understanding Grayscale: Their Impact on Bitcoin and Ethereum

You may have heard the term grayscale, we’ve mentioned it in many of our reports. For those unfamiliar with grayscale and what they do and who they are. Here is an educational piece that will help you gain an understanding of why they are so important and can dictate Bitcoin and Ethereum's price.

Who are Grayscale?

Grayscale Investments is a digital currency asset manager and a subsidiary of the Digital Currency Group. Established in 2013, Grayscale has become one of the largest and most influential players in the cryptocurrency investment space, for good and bad reasons.

Grayscale’s Cryptocurrency Trusts:

One of Grayscale's most significant contributions to the cryptocurrency market is their series of investment products known as trusts. These trusts have been around for much longer than the recent spot ETFs launched this year. GBTC launched in 2013 and ETHE launched in 2017.

The full list of Grayscale’s cryptocurrency trusts can be found below:

The full list can be found here: (https://www.morningstar.com/asset-management-companies/grayscale-BN00000J3G/etfs)

Grayscale’s Challenges and Restrictions:

Grayscale faced several significant challenges and restrictions that impacted investors' ability to sell and redeem their holdings. The major obstacle was the hostile regulatory environment that the crypto space faced for many years.

Regulatory Hurdles:

The primary challenge for Grayscale was the regulatory environment. Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), were initially hesitant to approve cryptocurrency ETFs due to concerns over 'market manipulation, security, and investor protection'. Without regulatory approval for ETFs, Grayscale's investment products remained structured as trusts. This lack of regulatory clarity and approval prevented Grayscale from converting their trusts into ETFs, which meant investors were not able to redeem/sell their GBTC or ETHE shares until the SEC approved ETFs.

How Grayscale Trusts Differ from Other Spot Bitcoin ETFs:

Grayscale Trusts, like the Grayscale Bitcoin Trust (GBTC), are structured as closed-end funds. They do not continuously issue or redeem shares for underlying assets, often resulting in shares trading at a premium or discount to the net asset value (NAV). In contrast, Bitcoin ETFs like IBIT are open-ended, allowing for the continuous creation and redemption of shares. This mechanism keeps the ETF's market price closely aligned with the NAV, providing greater price transparency and reducing significant premiums or discounts.

Grayscale Trusts also have a six-month lock-up period for newly issued shares, limiting immediate trading and reducing liquidity. Additionally, they generally have higher management fees compared to Bitcoin ETFs. On the other hand, Bitcoin ETFs like IBIT offer daily liquidity and lower expense ratios. They can be traded throughout the day on public stock exchanges, making them more accessible and affordable for a wider range of investors. These differences in structure and operational efficiency make Bitcoin ETFs a more attractive investment option compared to Grayscale Trusts.

Grayscale Finally able to sell:

The official launch of the Spot Bitcoin and Ethereum ETFs have allowed Grayscale investors to convert GBTC and ETHE into ETF products. This has allowed investors who were not able to sell their GBTC/ETHE for many years to finally dispose of these assets.

Since the launch of both Spot ETFs, we have seen consistent outflows from GBTC as those investors are finally able to sell their GBTC. Many of these investors are realising gains from investments made years ago. This same effect has been seen on ETHE with the recent launch of Spot Ethereum ETFs.

These mass outflows has been the main hindrance and anchor to Bitcoin and now Ethereum, when major outflows occur, prices of these assets fall.

Grayscale has played a crucial role in the cryptocurrency market by providing early investment products like the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). Whilst these products were an early opportunity for investors to gain exposure, these investors were soon stuck and not able to sell their holdings.