The Watershed Moment – Gradually, Then Suddenly

Here we stand again, at the edge of what comes next. 2023 has been one of the most turbulent years for the crypto market since I started investing in this space in 2014. Bitcoin & cryptocurrency have been relentless in their fight for adoption, integration, and proper regulation. We now sit at the base of an impalpable peak; less than one month away from a supposed Blackrock BTC ETF approval, banks have now been green-lit to hold BTC on their balance sheets, all amidst a new senate proposal from Elizabeth Warren. (who is the absolute worst plutocrat; serving the bankers instead of people).

LF Performance – Quadruple Digits:

Laissez Faire has been performing nothing short of stellar, most notably outperforming BTC (the underlying benchmark) since it’s inception. $1,000 invested at the beginning of the fund’s inception is now $12,830, vs what would be $9,760 if you had bought Bitcoin at the bottom of the cycle. A lot of this is highlighted by LF’s profitable bear market navigation in 2022.

This is in line with it’s thesis of LF’s ability to normalize the volatility of BTC over a long period of time to create a more stable return curve, akin to ‘drawing a line through the sine wave’. I expect it to continue to outperform most asset classes in 2024, and navigate what could be potential recession and several risk events in the broader economy.

The Bitcoin ETFs – Blackrock is in the room:

Guys – Blackrock owns everything. Their entrance to this market could be one of the most consequential events in Bitcoin’s history.

The SEC’s stance on the approval of the BlackRock Bitcoin ETF is still somewhat uncertain, as the regulatory body has a history of delaying or rejecting such applications. However, there is a growing sense of optimism in the market, with experts giving it a 90% chance of launching in January 2024. The SEC has up to 240 days to accept or reject the application, which could mean a decision as late as February 2024.
A few key events and factors may influence the SEC’s decision and timeline:

– BlackRock’s reputation and influence: The company’s strong reputation and close ties to U.S. regulators and Democratic politicians could work in its favor.
– The potential for a “Great Accumulation Race” among Bitcoin ETFs: The approval of one Bitcoin ETF could lead to a race among other applicants to launch their own products, which might encourage the SEC to act sooner rather than later.
– Legal battles and precedents: The outcome of Grayscale’s lawsuit against the SEC and the potential for a final judgment in the next few months could impact the SEC’s decision-making process.
– Market reaction to institutional involvement: The market’s reaction to BlackRock’s filing in June 2023, which saw Bitcoin’s value surge from $25,500 to over $40,000, may signal to the SEC that there is significant interest and demand for a Bitcoin ETF.
While the SEC’s stance on the BlackRock Bitcoin ETF remains somewhat uncertain, there are several factors that could influence its decision and timeline. The potential for a “Great Accumulation Race” and the outcome of legal battles may play a role in the SEC’s decision-making process. Market participants and analysts are currently looking at a potential approval window between January 5th and January 10th, 2024, but the SEC could make a decision earlier or later depending on various factors.

A good comparative scenario to an ETF’s affect on a commodity like asset is that of Gold, which the first spot ETF launched for in Nov 2004.

Macroeconomic factors – Inflation, Recession, etc:
Well, it seems like the U.S. economy is currently in a state of flux. On one hand, we’ve got mixed economic data, with GDP growth continuing at a “strong” pace in the third quarter, but likely to be below potential growth in the medium term. Unemployment remains low, but the labor market is loosening up a bit. On the other hand, inflation is still high, and the Fed is keeping interest rates restrictive to combat it.
Speaking of the Fed, their recent meeting minutes indicate that they’re not planning on cutting rates anytime soon, and they’re going to keep a close eye on the data over the next couple of months to see if their current policy is working. Meanwhile, bond traders are taking profits on dovish Fed wagers, and short-term inflation expectations are climbing to a seven-month high.
Looking at the yield curve, it’s been inverted since October 2022, which is a classic recession indicator. And while some folks are hoping for a soft landing, others are worried that the credit cycle might be dead, and Mr. Market could be in for a rude awakening.
As for the latest on the Federal Reserve policy and interest rates, well, the Fed is keeping things restrictive for now, and most Fed officials saw upside risks to inflation. Many also saw downside risks to growth. So, it’s a bit of a mixed bag, but the overall picture seems to suggest that the economy is slowing down, and we might be headed for a recession. 
In the current economic climate, the Federal Reserve has been raising interest rates to control inflation. As mentioned earlier, the latest data shows that inflation is still above the Fed’s target, but it has been easing over the past year. The Fed has also indicated that they may start lowering interest rates next year if inflation continues to ease.
Bitcoin’s resistance to inflation is a topic that has garnered significant attention in recent years. Many people view Bitcoin as a hedge against inflation due to its finite supply and decentralized nature. Unlike traditional currencies, which can be subject to inflationary pressures from government policies and economic factors, Bitcoin has a predetermined issuance schedule that caps the total supply at 21 million coins.
This scarcity and predetermined issuance schedule make Bitcoin uniquely resistant to inflationary pressures compared to traditional fiat currencies. In fact, some people even refer to Bitcoin as “digital gold” due to its potential to serve as a store of value and hedge against inflation.
However, Bitcoin’s relationship with inflation is not entirely straightforward. While some argue that Bitcoin’s deflationary nature makes it an effective hedge against inflation, others point out that Bitcoin’s price is subject to volatility and speculation, which can impact its ability to serve as a reliable store of value.

Really, Why Bitcoin?

Institutional Adoption / Regulation:

In 2020, when BTC was at $13,000 – I wrote about an increasing money supply, institutional adoption, and the direct correlation between that and the price of bitcoin. Shortly after, Bitcoin rose over 400% to $65,000. The market we’re currently in has echoes of this, and I think this is a valuable time to look to the past – before Tesla / Square / Microstrategy, and so many other large corporate players balance sheeted Bitcoin. We sit at another watershed moment now, where the access to this asset is very close to expanding at an exponential rate via the Blackrock ETF, improved regulations, sentiment restoring, and large players such as pension funds and hedgefunds re-entering the market.

Institutional Adoption – Gradually, Then Suddenly

Bitcoin as Digital Gold:

I think there is ample evidence to suggest that Bitcoin has achieved a degree of standing and adoption in that it can be a serious store of value. It is provably scarce, and the first digital asset to ever create and store value derived from energy. I encourage everyone to read this article from 2020 – which spells out the fundamental characteristics of Bitcoin.

Ford’s Energy Currency, Hayek’s Good Money, and the Halving

The supply of Bitcoin is determined by miner block rewards, which half every four years. Bitcoin is inherently deflationary and scarce, like gold in the ground – but blocks on the internet. Miners are incentivized to use their compute power as they’re rewarded in BTC for doing so, and in turn that power the network of transactions.

Who controls the issuance of Bitcoin?

The network itself controls the issuance of Bitcoins, derived by consensus through all Bitcoin participants. Ever since Bitcoin was first designed, the following consensus rules exist to this day:

  • 21,000,000 Bitcoins to ever be produced
  • Target of 10-minute block intervals
  • Halving event occurring every 210,000 blocks (approximately every 4 years)
  • Block reward which starts at 50 and halves continually every halving event until it reaches 0 (approximately by year 2140)

Any change to these parameters requires all Bitcoin participants to agree by consensus to approve the change.

Past halving event dates

  • The first halving event occurred on the 28th of November, 2012 (UTC) at block height 210,000
  • The second halving event occurred on the 9th of July, 2016 (UTC) at block height 420,000
  • The third halving event occurred on the 11th of May, 2020 (UTC) at block height 630,000

Past halving price performance

It is always a debate on what Bitcoin will do in terms of pricing for a halving event. Some people believe that the halving is already priced in by the market and thus there’s no expectation for the price to do anything. Others believe that due to price equilibrium, a halving of supply should cause an increase in price if demand for Bitcoins is equal or greater than what it was before the halving event. Below is a chart showing past price performance of the last three halving events:


Overall, I’m very optimistic about 2024 being another breakout year for BTC – and while I believe there could be several risk events that lead to 40-50% drawdowns, it’s very likely BTC and LF close another positive year in 2024. The fundamentals in this market are incredibly bullish, and I wouldn’t be surprised to see a triple digit year in 2024 for both LF and Bitcoin. The bear may be slain.

PS: Coinbase Migration

Coinbase has begun to cause issues and delays for withdrawals and deposits into the master fund. I’m currently evaluating other exchanges such as Kraken for more real-time institutional support. Now that the fund has become established and is expanding further, I think coinbase may not be the best long term partner. I will keep everyone abreast of this decision as it fundamentally changes one of the key risks to the fund, exchange risk. I will be incredibly diligent at choosing the correct exchange as to avoid anything akin to the horrors of FTX.

Quarterly Opening Months For 2023:





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