Crypto Test

It hasn’t been the smoothest start to the year for the cryptocurrency crowd.  After seeing Bitcoin rise another 63% in 2021, the latter part of 2021 and the early days of 2022 have left investors disheartened and looking for clues that will help spurn on a sustainable move higher.


There was, however, some interesting news last Tuesday when the longtime crypto skeptic Citadel decided to change course and accepted a $1.1 billion investment from Sequioa Partners and Paradigm, which is a cryptocurrency fund.  The bulk of the investment is admittedly coming from Sequioa, and some are speculating that the recent large drawdown in Robinhood trading activity is the rationale for Citadel to mine new sources of revenue in crypto trading – hence, the Paradigm relationship.


Whatever the rationale, it does help validate the ongoing theme of institutions clamoring for more cryptocurrency exposure.  And if Citadel has finally turned to the “dark side,” we can only imagine the meetings suddenly taking place amongst other institutions that now need to get involved or catch up.  Nothing like a little FOMO to get the contracts signed.


There has also been an increasing interest in stable coins.

These virtual currencies are tied to the dollar.  Tether, USD Coin, and Binance USD are the top three with an aggregate value of $137 billion.  These coins are becoming increasingly popular as a way for global investors to gain access to dollar-based assets.  There definitely is some controversy surrounding these coins, particularly Tether, but it has not discouraged demand.


Imagine if they started offering 1-2% yield as the Fed begins their (alleged) tightening cycle in 2022.  Also suppose you are a Japanese or European investor faced with zero or negative interest rates for years and now can park money in a stable coin yielding 1.5%.  Lastly, there are reports in the WSJ that Turkish citizens are flocking to Bitcoin and other tokens to escape from the plunging Lira.


Legendary value investor Bill Miller caused quite a stir last week when he conceded that he now has 50% of his new worth tied to Bitcoin. He began buying in 2014, so his cost basis is providing a nice cushion, but nonetheless, it’s a nice vote of confidence for crypto bulls.


All this positive news has done little to stem the ugly price action across the sector for weeks now. 

There are waves of selling coming out of Asia on a consistent basis which is keeping a lid on prices.  We remain cryptocurrency bulls but are prepared for the bumpy ride ahead of us.


  • 2022 has actually been a strong year for foreign assets.  China, Brazil, emerging markets, the Euro, and European banks have all seen inflows while the $USD, tech stocks, and bonds have been sold.
  • The VIX Index under or around 20 does not accurately reflect the daily machinations taking place in practically all asset classes.  We aren’t sure what the accurate number is to reflect the goings on…but it’s not 20.
crypto is volatile