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Thinking bitcoin will not go exponentially higher is betting a $44 billion empire will fail.

For the last eight months of this crypto nuclear winter, I’ve watched this dance of the red candles on the chart and just grimly smiled.

Instead of continuing to build the $USD value of my portfolio, I’ve realized that’s not the important number. The portfolio value in bitcoin (BTC) is the key and that is still strong — this is a long war, be patient.

This was reinforced a month ago reading about Mr. Sprecher, the owner of the New York Stock Exchange (NYSE).

He went from buying his first exchange for $1 or $1,000 — he says he doesn’t remember which. He used his house as collateral, and built that into a $44 billion empire.

I’ve read the article five times.

A lot of people talk about winning, but few get in the arena. He’s not building Bakkt because he needs more money, he’s building it because he likes the challenge — the thrill of the win.

It’s a feeling that once you’ve experienced it, almost makes the rest of life means less without it. I get it.

Fortune article on NYSE Owner — bitcoin exchange startup

I then circled November 1st on the calendar, which is when the Bakkt exchange goes live with futures contract being physically backed with BTC.

The Fortune article was a call to arms, telling the other institutions they have three months to get into position.

Once Bakkt is live, betting BTC won’t go exponentially higher is betting a $44 billion empire that owns the NYSE and has been a silent partner with Coinbase since 2015, is going to fail at launching a crypto exchange aimed at institutional clients.

Doubt it.

Think about Bakkt having been a silent partner with Coinbase since 2015.

I thought I was brave the first time I hit send on a $10,000 buy order and vaporized money from my bank account into the matrix to buy bitcoin.

But nope, turns out I wasn’t that cool, cause here’s Mr. Sprecher, just quietly in the back of Coinbase xeroxing their entire operation and building Bakkt a year ahead of me in 2015. Just absolute respect for that move.

There are patterns to everything. Ian Fleming said it first – twice is a coincidence, three times is enemy action.

I started looking for other data points, to see if they lined up and if a pattern would start to form.

I didn’t have to wait long.

Three days later on August 6th, Business Insider reported Goldman Sachs was looking at offering a custody solution for investors.

Goldman Sachs crypto custody

I immediately searched for other institutions looking to offer custody solutions and saw an article I had missed.

On July 31st, Bloomberg had written the 129 year old bank, Northern Trust, was testing proof of concept for crypto custody.

Northern Trust crypto custody

I find it hard to overstate the importance of Northern Trust coming into this asset class.

Northern Trust is a private wealth bank who has never, in 129 years, had even a whiff of impropriety. Their average private wealth client is worth $900 million. They serve 25% of the Forbes 400 wealthiest families in America.

Think about that, have $900 million in your accounts at Northern Trust? Half the clients there have more money than you.

And now they are announcing a bitcoin custody solution.

There’s just no hiding what that means. Institutions are coming, and they’re bringing trillions with them. Get set.

Northern Trust Private Investment statistics

Probably the most talked about ETF proposal in the space is the CBOE ETF. Not really going to say much about this other than the link below is a great breakdown of the proposal. It goes into detail on what makes the CBOE’s proposal vastly superior to the other offerings to date which the SEC has not approved.

CBOE ETF breakdown

On September 8th, Coinbase announced it was joining the crypto ETF arms race and seeking help from BlackRock.

To be fair, BlackRock in the past has said they have no interest in crypto, but we’re talking about a $6 trillion dollar asset manager. They aren’t going to tell anyone what they’re doing before it’s done.

For an example of scale, the entire gross domestic product produced by Germany, the powerhouse of the European Union, is 3.467 trillion (2016).

BlackRock manages almost twice that at $6.3 trillion.

Coinbase exploring ETF

On September 9th, Citigroup, one of the big four banks in the U.S. (JPMorgan, Wells Fargo, Bank of America, and Citigroup) announced it had developed an instrument it was calling a DAR (Digital Asset Receipt).

The DAR would work similar to the American Depositary Receipt (ADR) most institutions currently offer for investing in foreign markets.

Citigroup is currently one of the largest issuers of ADR’s in the world. They have a long established track record at this practice, issuing ADR’s since 1928.

As one of the big four banks in the U.S., Citigroup holds over 8% of total U.S. deposits by itself ($893 billion out of $10.7 trillion).

So essentially Citigroup is going to use a similar strategy for offering bitcoin and other digital assets to their customers in a product which will look and feel very similar to an ADR — which customers are already familiar with and has been used for the last 90 years.

Business Insider — Citigroup Digital Asset Receipts

On September 13th, Mike Novogratz called the bottom of this bear market. He took a screenshot of his Bloomberg terminal and showed the BGCI chart on twitter…don’t read the comments on his post unless you want to lose faith in humanity…People who have no idea the BGCI is proprietary to a Bloomberg terminal, which has a yearly subscription cost of $24,000 were throwing shade at Mr. Novogratz for no other reason than they were just emotionally bearish.

Most people don’t realize that Mr. Novogratz was one of the original backers of his friend from Princeton, Dan Morehead.

Mr. Morehead launched Pantera Capital in 2013, making the call to buy bitcoin at $103.

The Pantera Bitcoin Fund is up over 10,000% now.

Point being, these are data driven, very successful gentlemen who have built fortunes. So when someone of Mr. Novogratz’s stature is taking a screenshot of his Bloomberg terminal and publicly calling a bottom, that’s another data point lining up with the pattern.

Mike Novogratz calling the bottom on the 13th

Also on September 13th, Mr. Tom Lee, from Fundstrat, was speaking at the ETC Summit 2018.

I found their livestream on Youtube and watched Tom Lee’s presentation three times. It begins at 5:05:38.

Tom Lee’s callsign should be SteelRain — always on station with no emotion and accurate data on rapid fire.

He drew some very interesting comparisons against other recessions, showing the important metric was the 100% retracement of the last parabolic move up, not the timeframe it takes to retrace.

The fact that Mr. Lee and Mr. Novogratz were essentially saying the same thing, on the same day, half a world apart. Whoa, we’re danger close now.

Tom Lee’s presentation

So if you’re like me, been in the market for a couple years, great. The best thing I can think to do now is nothing. Keep getting some gains in the gym, and get out and live life. There’s a lot more to it than candles on a chart, and this is a long war.

If you bought BTC at $18k last winter, stay calm. Yeah you’ve been hurt, but you aren’t going to bleed out. November is around the corner. Be proud that you’ve waited out a longer bear market than the Baby Boomers did in 2008. You’re a veteran now.

And if you don’t own crypto yet, but see the value in it, and are waiting for a cheaper point to get in…may your wifi connection be fast, and your exchange not go offline.

You’re going to be in a crowded knife fight with everyone and their mother at $5,000 and below. Look at the PBV (Price by Volume) chart.

Just something to consider. None of this is financial advice.

I’m betting a $44 billion empire doesn’t lose. See you in 2019 — Radigan

 

The 4,600 year old Meroe Pyramids from the Kingdom of Kush in the eastern Sahara desert, Sudan. A store of value hasn’t changed much since then in parts of Africa. Bitcoin is changing that. Picture is mine.

The unbanked is really just a polite word for the oppressed.

There is an important but overlooked difference in how a store of value is viewed from the perspective of the unbanked versus from the relative safety of a western republic.

This disparity in how a store of value is viewed will drive the value and demand of bitcoin going forward in the future as the oppressed will see the value in bitcoin — regardless of what regulatory bodies or investors decide in first world societies.

For the BILLIONS of people who are unbanked in the world, they have only another day of trying to survive to look forward to tomorrow.

Another day of trying to meet the two lowest levels in Maslow’s hierarchy of needs for themselves and their families.

Bitcoin provides the best way to store value in case they have to flee from armed conflict in their own country, their government hyperinflates their savings away, or criminals and corrupt government officials try to steal their wealth.

Those are the measurements the oppressed use when evaluating a store of value — not whether the price dropped against the US dollar for the last eight months.

The hard reality for the unbanked and oppressed

Two trucks raced by me into oncoming traffic, the Special Police insignia of the hand and all seeing eye unmistakably emblazoned on their doors as the midnight blue 2-ton trucks careened back into the lane ahead of me.

In the shadows of the back of the truck, hard men with grim faces in blue camouflage and full riot kit held on, swaying back and forth.

Brake lights suddenly at the next intersection.

Damn it. Another riot.

Braking hard and moving to the right as a wave of blue and black camouflage started pouring out of the trucks, getting online facing the protestors who were to the left down the side street.

I was just trying to get to the grocery store and pick up a whole beef tenderloin from Hamid, the butcher at my local supermarket. Was hosting a dinner party tonight at my villa.

Dodging a riot on the way to the grocery store. Just a normal Friday in Khartoum.

It didn’t even feel out of place anymore. The surreal part was living this way just felt normal now.

Through the intersection to the left, past the police line formed up now like Spartans at Thermopylae with their shields overlapping, I glimpsed a large crowd swirling around a gas station with a line of cars stretching further than I could see, at least 300 meters, dusty from waiting for days to get gas.

Fuel shortages, rising inflation, and basic food items increasing over 100% in price overnight had resulted in injuries, deaths, and mass arrests of people as the riots and protests continued the last few months.

Political opposition leaders had started being kidnapped off the street in broad daylight by the Secret Police.

The Secret Police would tell their families to never ask questions or talk about it. If they did, their loved ones would suffer even worse.

This wasn’t the west. Or even Dubai for that matter.

Shooting protestors in the head, firing indiscriminately into an unarmed crowd of protestors, even flooding protestors with 10,000 gallons of raw sewage to disperse the crowd.

Firing 40mm tear gas grenades directly into mosques while people were praying because the Imam was speaking out against the terrible effects on the poor of the city from the 100% inflation in bread prices.

Using 2-ton police trucks to plow through protestors, like a game of human demolition derby, as they crushed protestors to disperse crowds.

All of that was done here — and the people kept protesting.

Level 1,000 kind of courage.

The protests and social media were now calling for ousting President Bashir completely.

When that happened, the regime brought an entire battalion of the hated and feared Border Guards militia into the capital — over 1,000 men in 250 brown camouflaged hilux pickups with technicals (large anti-aircraft machine guns)mounted in the bed of the trucks.

A few of the Sudanese I worked with actually left the country with their families, fleeing to Egypt, after that long convoy drove in from the desert.

Khartoum Special Police. When they got on line, it’s about to go down — those sticks ain’t for walking.

The Border Guards militia used to be Janjaweed, responsible for almost half a million people killed in the Darfur genocide.

How in the middle of a fuel shortage and inflation crisis could the regime still have battalions of militia fully outfitted and loyal to the regime?

With the migration crisis in recent years, the EU has given over $200 million in migration-related funds to the regime in Khartoum to help stem the flow of migrants through Sudan to Libya and then onward to Europe.

The sad and terrible truth is the corrupt regime takes those funds intended to help refugees, takes their personal cut, and funnels the remaining funds to militias like the Border Guards for additional equipment, training, and money for them to stay loyal and continue torturing, extorting, raping, killing, and selling people to Libyan slave traders.

This policy by the regime also applies to ISIS.

As long as ISIS doesn’t do anything to attract any unnecessary attention from western powers to disrupt the flow of money from the EU or bring US sanctions back, they are left alone to freely transit Sudan to Libya or Egypt because terrorism and unrest in the region is good for business in the regime.

Why?

If the Sudanese regime actually stopped those who perpetrated the violence which led to migration in the first place of the oppressed and unbanked, then the money flowing in from the EU to the regime in Khartoum to help refugees and stem the flow of migrants to the EU would stop.

By ensuring the violence continues, the regime in Sudan insures they will always receive more money from the EU to stop the violence.

This isn’t unique to Africa or the Sudan. Very similar economics of violence in the governments of Afghanistan and even in Pakistan to an extent.

Pretty sickening seeing how this works first hand, isn’t it?

This is the world the unbanked and oppressed live in every day, and the environment which shapes how they view a store of value.

Rams guarding the temple of Amun in Naqa, one of the capital cities from the Kingdom of Kush in the 4th century BC. Take a right off the highway about an hour north of Khartoum, drive through the desert — no roads, just GPS coordinates for 40 minutes — and all of a sudden, these ruins are sitting there, in the middle of nowhere in the desert. Not another living soul out there. It’s an absolutely amazing site. Picture is mine.

4,600 Years Old and a Store of Value is the Same

Africa is amazing. From the hand carved churches in Lalibela, Ethiopia, and ruins of the Kingdom of Kush in Sudan, to the Skeleton Coast of Namibia.

Most Africans are incredibly kind people.

I had a flat tire on a dark street in Khartoum one night. Most of the street lights don’t work, so it’s usually pitch black, even in the middle of the capital.

A hilux pickup pulls up behind me shining their lights so I could see what I was doing. Turns out it was three Sudanese mechanics from the tire shop down the road. They saw me breakdown, stopped cooking their dinner, loaded up their shop jacks, and came to help.

Just a lot of good people, trying to do the best they can in pretty rough conditions under a totalitarian regime.

In Africa it is still common to use real estate and gold for a store of value.

Just like it was when the Black Pharaohs of the Kingdom of Kush set the first block in the picture above for the temple of Amun in Naqa, 400 BC.

Or as he was more commonly known in Egypt, Amun-Ra, the sun god.

Think about that.

From Pharaohs to Facebook. For 25 centuries — 2,500 years — a store of value has not changed in this part of the world.

The demand for gold is still significant on the continent, with nearly 28 metric tons of gold for jewelry in Egypt alone, and the South African Kruggerand is still one of the most popular and recognized gold bullion coins overseas.

Land is also still widely considered a store of value in Africa.

The unfinished buildings in the photo below where I’m talking to the Gulf War veterans were common throughout Khartoum.

Families would pool income for years, building houses as they could afford the construction.

The thought process behind it was the government could not inflate away construction like savings in a bank account, and soldiers or criminals couldn’t take the foundation of an unfinished house away at the barrel of a rifle like they could their car or other valuables.

Only problem, if a family had to flee armed conflict, they abandoned their life savings in their house, which now had little to no value in an unsafe conflict zone.

The oppressed firmly understand what a store of value is on a continent where inflation and corruption are real problems in every day life.

Talking with Sudanese veterans of the first Gulf War. Prime example for bitcoin and a blockchain store of value. They lost everything leaving Iraq and the government of Sudan will not help them. The Secret Police and Riot Police are out of frame but there. I was trying to convince them to leave — I didn’t want to see old veterans getting beat by the Police cause it embarrassed the Regime to have veterans begging America for help. Really felt bad for these guys. Picture is mine.

The people who need bitcoin the most don’t care about blockchain or peer to peer digital currency.

Wait, what?

Let me explain.

Sudan, and to a larger extent, Africa, desperately needs a store of value that is safer and more portable.

One that is harder to be stolen by criminals, inflated away by the government, or confiscated by corrupt officials in times of conflict.

Bitcoin fills these needs perfectly. Better than property, gold, or US dollars.

The people who need bitcoin the most — whether that is in Sudan, Zimbabwe, or the Democratic Republic of Congo (DRC) — spans a continent larger than the US, China, India, and most of the EU combined.

Expecting a person in one of these places that desperately needs a portable store of value to understand scarcity, proof of work mining, decentralized public ledgers, and the difference between a store of value, peer to peer digital currencies, security tokens, and utility tokens is absolutely ridiculous.

That is like expecting someone to understand the SWIFT banking network, fractional reserve banking, the treasury yield curve, and the last 70 years of geopolitical strategy which has ensured the US dollar as the world reserve currency before they trade Sudanese pounds for US dollars on the black market.

Great if they do, but most people don’t. They just know the dollar holds its value better in times of uncertainty in their country.

They know as they continue to try and just meet their families daily needs amidst chaos, or flee conflict, they stand a better chance of not being left destitute if they have US dollars.

Similarly, we are entering a time where bitcoin as an emerging asset class will start to be accepted as a store of value at face value just like the US dollar.

And just like the U.S. dollar was before it, for the people that need it most, they won’t be able to explain why the system works, they’ll just know it does work and they didn’t lose everything.

And there’ s nothing wrong with that.

Driving at 8am through a haboob (sandstorm) blowing in from the Sahara in Khartoum. Picture is mine.

For Africa, a lot of places are 100% cash based with the US dollar being dominant — especially where cut-off from SWIFT banking relationships and they only have the black market for buying US dollars.

But technology is changing this, unleashing a Pandora’s box on corrupt governments throughout the continent as people no longer have to rely solely on US dollars through the black market, gold, or property as stores of value.

Mobile payments was the first step. Governments can no longer marginalize and oppress people by shutting them out of traditional banking infrastructure or put restrictions on assets held in their accounts.

SWIFT recently noted the impact mobile payment has in African Payments: Insights into African transaction flow.

Since 2014, SWIFT notes the percentage of Sub-Saharan Africans using mobile payments has doubled to 21%, while the amount of traditional financial accounts in Sub-Saharan Africa has not changed.

The paper also noted 200,000 households emerged from extreme poverty in Kenya after the mobile money service M-Pesa became available to them.

Why is that significant?

Sub-Saharan Africa currently has the lowest savings rate in the developing world according to the UN at 18%.

Think about it this way, for all the decades of humanitarian aid to the continent in various forms through governments and the UN, the ability for people to save their earnings, start businesses, and accumulate wealth was still the lowest in the world at 18%.

Mobile payments started from zero, and in only four year has more than doubled, now beating traditional savings in Sub-Saharan Africa at 21%.

Mobile payments was the tool the oppressed and unbanked needed to directly surpass traditional banks in the region and regain some control over their own lives. They did this in only four years.

The Old Way — From African Payments: Insights into African transaction flow

The New Way — From CNN

Bitcoin — Starving Corrupt Regimes of Income

In the illustrations above, it is striking that currently utilizing traditional banking infrastructure, payments from Africa to China must still go from an African bank, through a US institution, then to a Chinese bank for business transactions.

Similarly, any aid which is sent to Africa from the US, EU, or other programs must go through a government and bank in Africa.

Bitcoin and blockchain changes all that.

In the future, nothing will prevent the UNHCR (UN High Commissioner on Refugees) from registering refugees with their own cryptocurrency wallet and aid organizations sending funds directly to refugees if they desire.

No more funding being redirected by corrupt officials.

No more feeding militias or terrorist organizations, enabling the very evil which aid organizations try to stop.

Just bitcoin and blockchain starving these evil organizations from their main source of funding — the exploitation of human beings.

Sure, sounds great, who doesn’t want to save the world, but can we really expect refugees to understand how this works?

They already do.

Mobile payment in Africa is not only paving the way for adoption, but already proves the model in the free market by overtaking traditional savings through banks in only four years.

M-Pesa already serves over 32 million customers in Africa with US$1.713 billion transferred on the network in 2017.

BitPesa, using the bitcoin blockchain, is another step beyond that entirely.

Now, an African business can transfer funds from their bank account to Bitcoin in BitPesa from the Democratic Republic of Congo to pay a Chinese supplier for parts.

BitPesa then convert the bitcoin to Chinese Yuan and deposit to the supplier’s account.

In addition, the UN is already seeing evidence of Africans turning to bitcoin for savings. Referencing Zimbabwe’s inflation in 2015, the UN estimates there will be 725 million mobile phone subscribers in Africa by 2020.

32 million customers at US $1.713 billion using M-Pesa to 725 million mobile subscribers in two years.

Saying that sentence out loud is the sound of freedom and self-determination for the oppressed.

What about Bitcoin price volatility?

As a store of value for the oppressed, bitcoin’s volatility is a non-issue.

Whoa, what?

It’s true. What they really value is portability and the ability to hide in plain sight when it comes transiting with their life savings.

BTC currently having a higher return (+35.70% BTCUSD for last year) than either gold or the US dollar is just a bonus.

Bitcoin is the best solution on the planet to meet the demand of portability and hiding in plain sight.

Before bitcoin, holding their savings in US dollars or gold was as good as it got for portable wealth.

Gold and US dollars still ran the risk of being stolen at checkpoints in transit, and is hard to disguise any serious amount of life savings.

But people still risked it.

Given the choice, people always choose what gives them the most value to protect their family, even if there is a risk.

What about property?

The other option for saving wealth is pouring a foundation of a house a person couldn’t afford to finish for another four years.

Just so the corrupt government couldn’t inflate their savings away through terrible and unstable monetary policy.

Knowing full well it was entirely possible they may have to flee from an armed conflict with their family before then, leaving the unfinished house and their entire life savings behind.

Which would you prefer if you were living in this situation?

The Final Reason — BTC Still Worth More Than Local Currency

The Sudanese pound inflated over 465% in less than a year to the US dollar on the black market when I was there, going from 8:1 to 52:1 in 2018.

The price of bread literally doubled overnight one weekend, from Thursday night to Friday morning.

They lost over 85% of their purchasing power in less than year. What cost 8 Sudanese pounds now costed 52 because all imports are priced in US dollars.

Then the government started restricting bank withdrawals and publicly beating currency exchangers who were dealing in US dollars.

People withdrew what savings they could and bought US dollars, holding them in secret at home.

Knowing the daily inflation rates, where to buy US dollars on the black market, the cost of cooking gas just to be able to eat — all just daily life in Khartoum.

And Khartoum was considered nice and safe by comparison to other places on the continent.

For the oppressed in the world, an 85% drop in price on BTC is going to be inline or even much less to the hyperinflation that will be happening around them in a country which is truly in trouble.

When the economy and country is in shambles, having a private key written down somewhere on their person to a BTC wallet will be the lightest, most secure method of traveling to get to safety with their life savings available to them — all while looking like they have nothing of value to steal.

For the people that live this everyday — they know that.

The corruption and friction points in banking that the oppressed and unbanked currently have to deal with are driving bitcoin adoption as a store of value faster than in western markets where people can depend on their currency being stable, peace, and prosperity.

After 4,600 years the world finally has a better store of value for the oppressed than property, gold, or a reserve fiat currency.

The oppressed are getting theirs. I got some as well. Hope you consider getting some, too.

Next up, Bitcoin Part 2: The Not So Distant Future

Until then, I’ll be grilling in the backyard, drinking bourbon, and missing the sound of gunfire in the distance. — Radigan