June 25, 2024

Rock buffalo. May Letter to Investors Pantera Capital

«The Times 03/Jan/2009 The Chancellor is ready to provide state subsidies to banks for the second time», – cThis started Bitcoin. Bitcoin was created in response to the previous financial crisis. Satoshi Nakamoto was worried that governments were constantly saving the wealth of wealthy shareholders by printing new money over and over again. Satoshi created a form of money whose value cannot be blurred in this way. People all over the world now have the opportunity to save their income in bitcoin, without fear that they will be devalued by printing excessive amounts of money.

Satoshi included the above headline from (London)The timesinto the first block of Bitcoin – the so-called genesis block.

The most famous sentence in the first paragraph of the BookGenesis - «Fiat lux», which in Latin means «Let there be light». Bitcoin brings light to the confusing world of worthless fiat currencies, fractional reserve banking, and fiscal policies that favor the richest individuals and lobbying groups. When we look back fifty years from now, I think we will look back on Bitcoin as one of the most positive innovations of our era.

Deities can simply order - and everything will bedone. Mortals cannot do that. You cannot order that fiat currencies have or, more precisely, retain their value. The more mortals associated with fiat currencies, the more they lose their purchasing power. The chart below shows the value of the main fiat currencies in relation to gold - an asset / element, the amount of which cannot be increased at will.


Like the cave paintings of the Paleolithic era in the Lascaux cave, this is the earliest art of the Bitcoin community - the genesis block itself:

This is not a rock buffalo, but also beautiful in its own way.


&#171;Bitcoin was born during the financial crisis. In the new crisis he will reach maturity.

Satoshi's spirit is still alive. The last block before halving contains the following message:

Block 629999:

&#171;NYTimes 09/Apr/2020 The Fed's plan to inject $2.3 trillion significantly exceeds the scale of the 2008 rescue&#187;

This was a very cool move on the part of the F2Pool mining pool, which verified/&#187;mined&#187; this block. F2Pool founder Wang Chong said in an interview:

&#171;History repeated itself. Due to the coronavirus, another ongoing wave of bailouts has been initiated, similar to the one Satoshi observed in 2008.

Qingfei Li, F2Pool Maintenance Manager, added:

“With the change in global economicDue to the economic situation, central banks of different countries began to pursue an aggressive policy of quantitative easing. We see that the problems that Mr. Satoshi Nakamoto drew attention to still exist and have only gotten worse since the 2008 crisis.

The event that caused Satoshi's wrath was so shocking to the editorsThe timesthat he was taken to the entire front page of the newspaper.


The full context looks like this:

&#171;January 12, 2009 BritishThe government has announced a second bank rescue package totaling at least £50 billion in response to the ongoing global financial crisis.

I must say that I miss those freaky onesthe old days, when someone could seriously anger the rescue of banks in the amount of 50 billion pounds. And so much so that in response to launch a movement of 50 million people.

Unlimited quantitative easing

Now we exist in a completely different reality. The US government alone now prints $50 billion every four days. In recent60 minuteIn an interview, Federal Reserve Chairman Jerome Powell made it abundantly clear that there is absolutely no limit to how much money they are willing to print:

&#171;Well, we can do a lot more. Until now, we have done everything we could in a working order. But I assure you that our arsenal of means and margin of safety are not nearly exhausted. In factno limitswhat we can do with the loan programs that we have&#8230;


This economy will certainly recover, although it may take some time. This may take some time, stretching to the end of next year - we don’t know for sure.


Assuming there is no second wave of coronavirus, I think you will see for yourself that the economy will recover steadily in the second half of this year.&#187;

I am worried that these words come fromtruly smart central bank manager. It seems obvious that there is no chance that the economy will so quickly recover to its record levels. After the 2008-2009 recession, it took three years for the GDP to return to its pre-crisis level. The current pandemic situation is much larger and more complex.

Our senior advisor and my former partnerTiger Management Ron Glanz believes real GDP will fall at an unprecedented -41% at a seasonally adjusted annual rate (SAAR) in the second quarter, down from -5.0% SAAR in the first quarter. And while the economy should recover at a historically strong pace, we will start the recovery so far off that it will likely take four years for GDP to return to the levels it was at in the fourth quarter of last year, before the virus hit our economy.

In the same way, the restoration of annual GDP to the levels of the previous year seems to take the same four years.


The graph above shows the change in real GDP after the 2008-2009 recession. and the likely trajectory of recovery from the current fall. The following shows the level of economic activity.


Impact on the cryptocurrency market

For me as a trader, this means that furthermore political measures will inevitably follow. If the current policy is based on the belief that GDP will soon set new highs, then the measures taken are likely to be insufficient and the situation will require the adoption of additional packages of fiscal and monetary measures.

The inevitable conclusion seems to bethat this multiple and literally unlimited fiscal and monetary expansion should dramatically increase the amount of fiat money needed to buy goods or assets for which such quantitative easing is impossible - such as Bitcoin and other cryptocurrencies.


Company revenues are estimated to have decreased by approximatelyby -70%. And the fact that the S&amp;P 500 fell only 6% is clear evidence that additional money is being poured into the system with terrible force. The S&amp;P 500 is above its level nine months ago. But nine months ago the world looked much better than it does today.

As more and more stimulus packages are taken, the prices of crypto assets are likely to grow, and much more.


As a retreat, there is very goodA completed graph from the Atlanta Federal Reserve Bank showing a change in thinking among economists and compared with a real-time estimate of the Atlanta Fed GDP. This estimate is based on economic data such as consumer spending, net exports, and government spending. Economists rather slowly came to understand the magnitude of this crisis. However, the full range of economists' current forecasts is still above the point where the 10 most pessimistic economists relate to the Atlanta Fed forecast.

Their current forecast is -43% SAAR, and it is very close to ours.


Atlanta Fed Chart: https://www.frbatlanta.org/cqer/research/gdpnow.


Paul Jones goes to crypto; CME futures trading volume is growing

In the March letter to investors (the translation can be read here) we wrote:

&#171;My guess is thatInstitutional investors will need 2-3 months to evaluate the problems in their portfolios as they stand. Another 3-6 months will be spent exploring new strategies and opportunities such as distressed debt, special situations, crypto assets, etc. And then when they start deploying funds, the target markets will begin to grow in earnest.

And this is already beginning to be realized.For example, legendary macro investor Paul Jones announced his investment in Bitcoin. Here are excerpts from his letter to investors entitled "The Great Monetary Inflation":

&#171;COVID-19 is a one-of-a-kind virus that has provoked an unprecedented political response around the world&#8230;


One thing is for sure - this increase in the money supply will lead to a large movement of cash flows between assets&#8230;


I'm not a millennial investing in cryptocurrency,which is very popular in this generation, but the baby boomer who wants to take advantage of opportunities while protecting their capital in an ever-changing environment. One way to do this is to make sure that I invest in instruments that respond first to massive growth in the global money supply. And with Bitcoin posting positive returns over recent time periods, a deeper dive into it looks warranted&#8230;


After all, the best strategy is to maximizeprofit is to own the fastest horse. Just invest in the most profitable assets and don't get too carried away with the intellectual side, otherwise you risk being left behind and watching the show from the sidelines because you thought you were smarter than the market. If I were forced to make a prediction, I would bet on Bitcoin&#8230;

I'm not a fan of investing solely in Bitcoin.but I recognize its potential at a time when we have the most unorthodox economic policies in modern history. So we need to adapt our investment strategy to take this into account. We have updated our Tudor BVI Fund investor advisory to include the ability to trade Bitcoin futures for the benefit of the fund. We have limited the initial maximum risk level for purchasing Bitcoin futures to a small percentage (single digits) of Tudor BVI's net assets, which appears reasonable&#8230;


Bitcoin reminds me of gold when I first got into this business in 1976&#8230;&#187;

A simple rough calculation allows us to determine that we can talk about about 400 million dollars from $ 26 billion of assets under the control of Tudor BVI.

CME Bitcoin Futures Trading Volumes Mayserve as a substitute variable for the level of interest of institutional investors in Bitcoin, and this indicator is growing. Open interest in this market has recently grown to record levels.


At our online Bitcoin halving conference, co-founder and CEO of Kraken exchange, Jesse Powell, confirmed this change in mood:

&#171;In the last two months, we have seen a huge surge in new account registrations from institutional investors&#187;.

In this new era of unlimited quantitative easing, it would be imprudentnothave a position in Bitcoin.

One participant asked about the influx of global macro hedge funds. Dan Morehead of Pantera Capital replied:

&#171;Great question.I have a lot of old friends from global macro funds who are now very active in the blockchain space. I think this is because we are conditioned to look for opportunities for large asymmetric bets. There is always a chance that such a bet will not work and you may lose your money, but if successful, you can multiply your investment twenty times.


And such opportunities do not open up very often.This is why this industry is a magnet for global macro traders. Paul Jones is a super respected investor who has been at it since he made a name for himself by taking a massive short position in the S&amp;P right before the 1987 stock market crash. He is an excellent trader.


And this brings us back to the question of generations. When you see the best of this generation adopting Bitcoin, it's more than just a millennial fad, right?&#187;