Crypto market showing signs of maturity

Welcome to the Stormrake Monthly Australian crypto market & education update.
For sophisticated investors who want to expand their crypto knowledge.
Written by Michael Milmeister, Doug Hemingway and the Stormrake Team

Summary:

If you are a busy investor that doesn't have time to read this whole newsletter here is a brief summary:

* Bitcoin, Ethereum and Solana hit all time highs during the month
* In a first - A public pension fund has bought $25Million worth of Bitcoin
* Debate over the debt ceiling in the US has brought out the issues with Fiat.
* Taproot upgrade for Bitcoin gets closer

or Read below for all the detail.

Coming of Age

In many cultures, turning 13 is a significant milestone. This year my oldest son turns 13 and is becoming a man. It's a really important time where I have to realise that he is no longer a little boy but rather a man. He can do more chin ups and push ups than his old man, can hold a room when speaking and recently started a relationship with a girl.

Likewise Bitcoin just celebrated its 13th Birthday (The whitepaper was released October 2008). Bitcoin is no longer a little boy. It's smashing the chin ups and setting new all time highs and no longer wetting the bed (losing 80-90% on occasion). It is having adult conversations in Wall St where pension funds and boutique investment firms are adding it to the mix. It's being taken seriously - even by countries and presidents. Individual investors are proud to tell people they have bitcoin rather than being a little shy.

This brings me to the future.

4 year cycles

Most people are aware that Bitcoin (and in turn the other coins) seems to follow a 4 year price pattern. This is caused by the halving of mining rewards which happens roughly every 4 years. The "Outspiral" Graph shown at the bottom of this newsletter is constructed in 4 year circles for that very reason. This assumption has been historically solid, however, we expect that the institutional take-up of Bitcoin could significantly change the pattern. We think it's entirely possible that this is the last clear 4 year cycle because the bitcoin issuance (block subsidy) is having a smaller and smaller impact on the total supply.

[

](https://bitbo.io/)

Volatility

Institutional investors are less emotional and work to strict risk policies and expectations. They are happy to take a 20-50% profit by selling and also likely to buy in on a correction. Both actions reduce the volatility of Bitcoin over time by putting a floor and a ceiling in the price. Indeed, we have already seen volatility reducingand this will only make that pattern stronger.

It is reasonable to assume Bitcoin's volatility will continue to reduce as the market cap rises. The total valuation is over a Trillion now and we would expect significantly lower volatility as bitcoin becomes a man and grows further in size. Bonds are thought of as a fairly low risk investment but when they were first listed on the London exchange Bonds were actually the wild west with high volatility and even cases of outright fraud. But Bonds grew up and Bitcoin is too. Happy Birthday!

On a different note, our clients' reports look pretty incredible this month. We have almost no clients showing a loss and the vast majority sitting on some incredible returns. Some investors have gone 5x in a year and some individual holdings are 10x plus. Our biggest loser is GRIN which has underperformed since privacy coins were regulated to death. There are lots of winners but BTC has made the most dollar gains and coins like BNB, MANA and FTX have made some investors a lot of money. All those that kept stacking BTC are in the black. Let's not be distracted by DOG related coins though and keep stacking quality coins we can actually trust.

[

](https://youtu.be/SanyBbq63X4)

Video of the Month

Anthony Scaramucci discusses why he has built a 1 Billion USD position in Bitcoin despite not being a "Bitcoin Evangelist". We chose this video because it represents the coming of age of Bitcoin as family offices, pension funds, and other institutional investors accept Bitcoin as an Asset Class.

Markets

Bitcoin is currently trading around $61,500 USD up a whopping $18,000 USD on last month. Both Bitcoin (67,276 USD) and Ethereum ($4,467 USD) hit All time highs during the month. In an impressive move SHIB has hit the top 10 biggest currencies now worth $37 Billion USD.

* Top 8 Coins by Market Cap thanks to Coin Gecko

In the NEWS

1. Firefighters get pension investments that will secure their futures

Houston Firefighters' Relief and Retirement fund invested the first $25 Million in BTC. It's a really significant step in Bitcoin's coming of Age as expectations rise of a flood of pension / superannuation money hitting crypto. Even 1% of allocated funds would mean a very different Bitcoin price as supply is not going to increase to make way for all those funds.

2.A ustralian Crypto Bill

In surprise positive news Australia is set to improve the regulatory landscape for crypto. A senate committee has recommended reasonable and helpful changes to regulation including for custodial solutions like ours. They addressed debanking crypto users which has been echoed by AUSTRAC. Here is an extract from a letter we received.

"The effect of de-banking of legitimate and lawful financial services businesses can increase the risks of money laundering and terrorism financing and negatively impacts Australia’s economy. For this reason, AUSTRAC continues to discourage the indiscriminate and widespread closure of accounts across entire financial services sectors."
- AUSTRAC Statement

3. D emand for Bitcoin ETFs is off the charts

ProShares Bitcoin ETF has become the fastest ETF to get to 1 Billion after reaching the mark in only 2 days. Investor demand is significant and this is just another sign of Bitcoins coming of Age.

4. Two weeks until Taproot upgrade to bitcoin network

Only 1960 blocks (~ 2 weeks) remain until a technical upgrade of bitcoin is activated. Taproot is a soft-fork upgrade that brings privacy and efficiency upgrades to bitcoin. The upgrade includes the "Schnorr" signature mechanism which allows complex scripts and transactions to look exactly like regular transactions, as well as "MAST" which reduces the private information revealed when sending bitcoin, particularly in bitcoin smart contracts. While the improvements are rather technical, the way upgrades are implemented on a decentralised system is rather interesting. After all, there is no central organiser in bitcoin. Taproot is first major upgrade to the bitcoin layer 1 protocol since Segwit and the blocksize wars back in 2017. The upgrade was set in motion when 90% of the bitcoin blocks mined within a 2 week period included a signal (vote) to activate Taproot.

Education - Do you need a personal brokerage service?

Many of our readers are not yet clients of Stormrake's Brokerage and Custody service. That's ok, because the service isn't for everybody, but we thought we might use this months education session to briefly look at our service.

Who is the service for?

The brokerage service is designed for sophisticated investors, companies, super funds and trusts who would like to invest in the crypto space with over $20,000 AUD.

What does the service do?

It's an old fashioned brokerage service for a new asset class with a personal broker who can assist with buying and selling cryptocurrency. There is a huge list of available currencies and we can buy at incredible rates due to our premium access to over 20 exchanges worldwide. We have our own system called Tornado which can figure out which exchange to place client trades at to get the best possible execution price. Clients can choose to hold the funds themselves or use our custody solution that takes care of their coins using industry best practice techniques.

Why would I use this service over an exchange?

1. Personal Service - Direct line to a broker to help with crypto questions.
2. Free Custodial solution. Keeping your funds on an exchange is very risky and not recommended for large amounts.

3. Tornado execution engine for access to top prices.
4. Education - assistance with your crypto journey.
5. Assistance - We you are ready, we can help you setup your own (single or multi-sig) cold storage so you can be "self sovereign".
6. Stormrake clients have, on average, made over 100% per annum. (Historical returns are not an indicator of future returns).

Stock to Flow Valuation:

I have replaced the normal Stock to Flow model with this graph generated by clockworkpartners.com. Take your time and really understand what this is showing. Then show any 5 year old and they will tell you where that pink line is going.

The scale is a log scale and the price of Bitcoin is the pink circular line. The incredible part is how perfect the result is on this graph. Polar coordinates fit perfectly with the bitcoin halving cycle every 4 years and it seems entirely inevitable that the trend will continue in ever increasing prices by a factor of 10. Take a good look and tell us where you think the price will be in 4 years time.

Until next month, Happy Investing!

Stormrake Team

custody@stormrake.com

General Advice Warning

The information provided in this newsletter is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information contained here you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Therefore, before you decide to buy any product or keep or cancel a similar product that you already hold, it is important that you read and consider the relevant Product Disclosure Statement (PDS) of the product provider to make sure that the product is appropriate for you. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice. You can get a copy of relevant PDSs from Stormrake by email custody@stormrake.com.

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.