Meta Investments News (July 2022)
Meta Investments News (July 2022)
Meta Investments News is a monthly newsletter sent to our investors and supporters.
Top News/Articles for July 2022
Are We On the Precipice of An(other) Existential Bitcoin Moment?
(Discussed Below)
Ethereum: What is it and Is the Upcoming Merge a “Generational Investment Opportunity”?
(Discussed Below)From Maverick to Mogul, Madonna’s Manager Guy Oseary Transcends the Music World to Take on NFTs
He has hobnobbed with presidents (Clinton, Obama), movie stars (Matthew McConaughey, Woody Harrelson, Chris Rock, Adam Sandler, Ben Stiller), business titans (Salesforce’s Marc Benioff, Sean “P. Diddy” Combs) and moguls turned philanthropists (David Geffen).
Today, Oseary’s management roster still includes the megastar who put him on the map, Madonna, as well as U2 and the Red Hot Chili Peppers. His digital investments with longtime partner Ashton Kutcher include early bets on Spotify, Airbnb and Nest, among others.
As cryptocurrencies and Web3 entertainment possibilities began to swirl around his rarefied circles of friends and business partners, he put his mind to learning all about it.
He has been at the center of the action of Web3 with Bored Ape Yacht Club and corralling celebrity pals to bring their star power for acquiring Ape characters.
Howard Marks Memo: I Beg to Differ
In 1973-74, the OPEC oil embargo and the resultant recession took the S&P 500 Index down a total of 47%.
If you seek superior investment results, you have to invest in things that others haven’t flocked to and caused to be fully valued.
In order to outperform, your thinking has to be different and better.
Being right may be a necessary condition for investment success, but it won’t be sufficient.
You have to be more right than others . . . which by definition means your thinking has to be different.
Unconventional behavior is the only road to superior investment results, but it isn’t for everyone. In addition to superior skill, successful investing requires the ability to look wrong for a while and survive some mistakes.
Crypto can be a way to forge a global community that doesn’t center on restrictive old-timey Hollywood clubs — and, possibly, even help the industry find the next “Godfather” or “Pulp Fiction.”
By gamifying and even financializing the notion of feedback, it can lubricate a robust community that is available to all.
The power of Web3 is that you don’t have to attend Chapman, USC, NYU, UCLA or AFI to have a shot to meet the right industry people,”
“Twitter and Reddit cracked the foundations, Web3 tears down the walls.”
Whether it’s casting or development or locations or anything across our industry, crypto and blockchain are going to allow us to find more of what we need and work better as a business than we ever have before.
What We’re Listening To
Lex Friedman with Brian Armstrong: Coinbase, Cryptocurrency, and Government Regulation
Crypto Banter: Ran Neuner: Losing Over $100 Million With Luna Helped Me Reevaluate My Life
The Tim Ferris Show with Balaji Srinivasan: 5-10-Year Predictions, How to Start a New Country, Society-as-a-Service (SaaS), Bitcoin Maximalism, Memetic Warfare, How Prices Are Born, Moral Flippenings, The One Commandment, and The Power of Missionary over Mercenary
What bitcoin did with Lyn Alden: Will Bitcoin Replace Central Banks
Real Vision with Raoul Pal: Raoul Pal’s Take on the World
On the Precipice of An(other) Existential Bitcoin Moment.
Bitcoin was publicly released on October 31 2008 through its famous whitepaper and introduced the world to the first decentralized blockchain network.
Its price chart is a rollercoaster of emotions: exhilarating climbs and stomach churning drops.
Bitcoin has consistently overcome existential crises through its relatively short history:
Mt. Gox Crypto Exchange (Hack #1).
June 2011: hackers got ahold of Mt. Gox auditor’s computer and changed the price of bitcoin to 1 cent on the exchange.
Hackers + customers bought material amount of bitcoin at manipulated low price.
*In spite of the 2011 hack Mt. Gox established itself as largest bitcoin exchange in the world by 2013*
China & People’s Bank of China (PBoC).
2013: PBoC issued statement saying Chinese financial institutions should not trade the digital currency.
2014: banks and payment companies required to close all accounts opened by the operators of websites that trade bitcoin.
46% of bitcoin-fiat trades conducted in Chinese Yuan (44% USD)
Mt. Gox Crypto Exchange… again.
2013: accounted for 70%-80% of global bitcoin transactions.
2014: discovered that 650,000 - 850,000 bitcoins were missing (equivalent of $14B-$19B based on recent BTC price of $22,000).
Wired: The Inside Story of Mt. Gox, Bitcoin's $460 Million Disaster
Quadriga Crypto Exchange.
Processed ~$2 billion in trades from 363,000 individual accounts.
2018: CEO dies (or disappears) in India.
2019: Bankruptcy filing with custodied bitcoin missing.
Vanity Fair: Ponzi Schemes, Private Yachts, and a missing $250M in Crypto: The Strange Tale of Quadriga
China & People’s Bank of China (PBoC)… again.
2017: China pressures all local bitcoin exchanges to close.
2019: China labels bitcoin mining as “undesirable” industry that should be encouraged, restricted or phased out by local governments.
Significant % of bitcoin hardware manufactured in China.
>50% of bitcoin mining domiciled in China.
2020: Chinese government blocks >100 foreign websites offering crypto exchange services.
2021: Crypto mining and trading outlawed.
Coindesk: China Crypto Bans: A Complete History
Any one of these aforementioned moments could have, and frankly should have, left Bitcoin for dead.
The Lindy effect proposes that the longer a technology has survived the longer its remaining life expectancy is.
Bitcoin’s blockchain has, and continues to, survive thrive.
The underlying technology offers a way for untrusted parties to reach agreement on a common digital history without using a trusted intermediary.
Rewards (i.e. bitcoins) are provided to computers that solve a cryptographic mathematical puzzle.
The rewards are deflationary and halved every 210,000 blocks (or ~4 years). Each block takes approximately 10 minutes to confirm.
Rewards started at 50 bitcoins per block in 2009 and 6.25 bitcoins are currently earned in each block following its 3rd halving event in May 2020.
The asymptotic limit of 21M tokens will be reached around the year 2140.
Bitcoins are commonly referred to as "digital gold" and are becoming recognized as a store of value within our increasingly natively digital world.
Can we see bitcoin move from beyond store of value to money?
Economists and historians suggest that “good money” is the result of possessing certain characteristics:
As Cathie Wood’s ARK Invest put it, “Bitcoin’s market capitalization still represents a fraction of global assets and is likely to scale as nation-states adopt as legal tender.”
[see: ARK Invest Big Ideas 2022]
Bitcoin is a fully decentralized, immutable, censorship resistant, permissionless financial network that operates without any trusted government/authority around the world 24 hours a day. 7 days a week. 365 days a year.
Fact: Bitcoin settled $13.1 trillion on its network in 2021 (compared with Visa’s $10.4 trillion) demonstrating the growing use, adoption and value as a global payment network.
Will this particular period of political unrest and financial challenges be THE existential crisis to end Bitcoin?
Or will this particular period accelerate Bitcoin’s growth and adoption?
If you’re intrigued by Bitcoin then you would enjoy Lyn Alden’s 3 Reasons I’m Investing in Bitcoin and Fidelity’s paper on why investors need to consider bitcoin separately from other digital assets.
Ethereum: What is it and Is the Upcoming Merge a “Generational Investment Opportunity”?
Ethereum is the world’s first decentralized smart contract platform.
Like Bitcoin, Ethereum lets you use digital money without intermediaries.
Ethereum’s differentiation is that its platform is programmable.
Launched in 2015 (6yrs after Bitcoin), Ethereum has quickly become the dominant foundation layer of Web3.0.
Ethereum provides permissionless access to digital money and data services for everyone with access to an internet connection:
Banking: lending, borrowing and savings products.
Peer-to-peer network: move money / make agreements directly with anyone and anywhere 24 hrs/day, 7 days/wk, 365 days/yr.
Trusted intermediary is not required nor are you beholden to the “convenient” banking hours of 9am-5pm from Mon-Fri.Decentralized and censor-resistant: No person, company or government owns / controls Ethereum.
Anyone can receive payments or use services on the network anytime.Guaranteed commerce: Customers have a secure built-in commitment that funds will only change hands if everything agreed was provided.
Non-fungible tokens (NFT): Digital certificates that provide provable ownership of items [refer to our NFT overview from January 2022].
Decentralized autonomous organizations (DAO): Internet-native businesses collectively owned and managed by its members.
Ethereum is commonly referred to as a “triple point asset”
Capital Asset: ongoing source of value with expected returns derived by the net present value of future returns.
share in the Ethereum Network.
claim on Ethereum’s fees.
right to produce work for Ethereum.
Store of Value: asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without deteriorating in value.
Ethereum token as collateral or locked via decentralized finance or “DeFi” [link: what is DeFi].
Consumable Asset: used or transformed into another asset.
Ethereum token is consumed every time an activity is done on the network.
asset is moved.
loan is generated.
exchange is made.
purchase is executed.
DAO is started.
…
Ethereum currently uses a Proof-of-Work (PoW) consensus mechanism (like Bitcoin) to validate transactions & blocks [video: what is proof of work].
However, Ethereum is in the final stages of moving to a Proof-of-Stake (PoS) consensus mechanism, which should occur over the next few months [video: what is proof of stake].
Ethereum token issuance currently originates from two places:
Mining rewards: ~13,000 ETH/day.
Staking rewards: ~1,600 ETH/day (at current staked ETH levels).
Following “The Merge”, mining rewards will be eliminated.
The Merge will dramatically cut Ethereum token issuance by ~90% (13,000 / 14,600) and turn it from inflationary to disinflationary (or even deflationary!).
Pre-Merge Actual:
Post-Merge Simulation:
Source: https://ultrasound.money/
Less supply met with the same (or increasing) demand suggests the price may increase (materially).
If you’re intrigued by Ethereum then you would enjoy reading Own the Internet: A Bull Case for Ethereum and Ethereum: A Generational Investment.
July Cryptocurrency Market Update.
Despite some of the most challenging economic data, financial markets rallied in July, with gains from both Bitcoin and Ethereum surpassing equity market returns.
GDP Growth: The US economy technically entered a recession as GDP contracted in 2 consecutive quarters.
Q2 2022: -0.9% annualized decrease.
Q1 2022: -1.6% annualized decrease.
Federal Reserve raised interest rates by 0.75%, matching June's historic move.
"Short-term borrowing rates are now between 2.25% and 2.50%, comparable to levels in 2019."
Inflation: Annual inflation rate in the US accelerated to 9.1% in June of 2022, the highest since November of 1981.
Consumer Sentiment: Consumer Confidence in the United States averaged 86.06 points from 1952 until 2022, reaching an all time high of 111.40 points in January of 2000 and just off its record low of 50 points last month.
Purchasing Managers Index: Business confidence in the United States fell in July of 2022 (slowest growth activity since June of 2020) in a sign that consumer demand is abating.
Financial markets rallied in July despite some of the most negative data and challenging economic news.
Why?
Markets are forward looking and June’s low prices seemed to have incorporated the upcoming bad news.
This doesn’t mean that markets cannot contract from here but rather this current round of bad news was anticipated and priced in.
A long term investment outlook offers an opportunity to accumulate great investments at relatively attractive prices.
“In the short term, the market is a voting machine but in the long-run, the market is a weighing machine.”
-Benjamin Graham
“Unconventional behavior is the only road to superior investment results, but it isn’t for everyone. In addition to superior skill, successful investing requires the ability to look wrong for a while and survive some mistakes.”
-Howard Marks
Meta Investments maintains that Bitcoin and Ethereum will play a prominent role in our increasingly digitally native future.
We remain very bullish on the investment opportunity that blockchain + cryptocurrencies represent, especially at these “voting machine” levels.
