Corona & Crypto: Calculating the Community Costs

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 Quite a week last week with Corona ripping 99% of the headlines. Crypto didn't offer the stability that many bitcoin maximalists had expected. Rather, bitcoin took a tumble, to the tune of 35% in a day and more so over the course of the week. Everyone feels like the sky is falling due to equities doing a cliff-dive. And then the circuit breakers on the exchange are getting hit over and over, something that unprecedented. Each day we need to go back further and further to quantify the depths of the impact this is having relative to history.   	
  The market is an amplified barometer of public sentiment. Over the last few days, or at least a week and a half, it's been pretty abysmal. And people, I think rightly, are bearish on travel stocks when the leader of the CDC is telling you not to get on ships and high-ranking government officials saying that they never liked cruiseline travel! It's no wonder that Royal Caribbean and Norwegian Cruise Lines are getting slammed. Not just for one day but then over and over again, even when the market popped on Friday.                
  The Bitcoin that we thought was a stablecoin in many ways--not linked to the dollar, but just like it's really the bedrock behind the whole ecosystem--dropped 35% in a day. People ask asking how can we trust Bitcoin again? Others are boarding on the #ETHisMoney bandwagon, but they to are being negatively affected. Ethereum is flirting with being a two-digit priced crypto. So there's a lot of price fear. And people are exiting their crypto positions at the same time that they're seeing the market get slammed, possibly as a result of it. They're recognizing that on a lot of platforms, like FTX or Binance, that it's incredibly easy to short a basket of altcoins. Traders want minimal pips in either direction when they directional trade. They profit best when a market either rockets up or nosedives down. It's in their best interest to take a huge short position and crash it in as few a seconds as possible then take their profit and wipe the sweat from their brows. So the people that were lucky enough to be in a short position made out like bandits over the last few days.  
  With these short positions you're seeing Bitcoin but also many altcoins as well. All altoins are essentially pegged with bitcoin, because on most exchanges the trading crypto pair would be like BCH/BTC. When Bitcoin goes down it pulls BCH down right alongside. The systemic bearishness is the overarching sentiment in the markets and that narrative is being distributed back to crypto, despite the fact that the there's still a lot of use cases already haven been deemed sustainable and many more still fledgiling but with great promise.
  And when you look at an exchange like Binance, it clearly enjoys massive volume during a time such as this, generating fees used to burn the BNB utility token. Now that crypto prices are lower, there's a trade value that's deminished, but the opposite also applies that when the price arises and BNB will be more and more aggressively burned with high-value crypto dust be amassed. As the prominence of Binance increases, the price of crypto assets may also increase which would act as an accelleratant to this process. Burning utility tokens is a powerful model, because the quantity of BNB consticts through the burn, making it such that your 1 BNB constitutes a greater proprotional ownership of Binance each time a burn occurs. A position in an exchange like one covered by BNB is essential a bet on the health of the BTC/ETH/crypto market. If the future is one of sustained high volitility, that will bode well for Binance.  
  So many Bitcoin maximalists and Etherum maximalists were saying that Bitcoin is going to be the safe haven. The rules have changed. In this market you saw that gold, which was considered a safe haven the world over, even used to show the strength of the foundation of a currency, has seen a drop. We have Fort Knox, so the US very much believes in gold. But gold's taken a tumble, equities have taken a tumble as well as bonds so shrapnel is affecting most all market participants. Now the US government is injecting almost a trillion dollars into the economy in the hopes of leveling the instability. Depsite a one day pop in recognition of this, investors are still nervous about the stock market and overall valuation of an S&P 500 with a Price-to-Earnings of around 20. It's possible that some S&P 500 companies may need to file Chapter 11 if their revenue dries up while this situation is ironed out.
  Little things that happen now bring about consequences in the long term in a bit way. Hedges are made for summer or fall for a many commodities: corn, pork bellies, rice, or grains. If they're exiting their hedged positions because everything is tumultuous and uncertain, then that's going to affect the bottom line of several industries and potentially shoot themselves in the foot. So there's a lot of fallout from this that even if it's better in the next month, the ramifications are still seismic and will be long felt. 

  This is a good time to size-up your portfolio to best align your retirement fund with companies that are best able to economically weather the storm. If you feel that a particular industry is vulnerable or strong, you can amass equity option coverage to limit your losses or magnify your gains. You won't want to short them by borrowing shares on margin. It'll be extremely expensive to do so.  Unless your research tells you that a stock has is destined to crash-and-burn over a 6 month horizon then go for it and short away to profit from your forethought, Nostradamus.  But also keep an eye on individual businesses and the impact being felt, which is not 100% being covered.  Many individual businesses and properties were expecting Airbnb income in the short term, and certainly the summer, are seeing a tsunami of cancelled reservations. Now you have landowners, just like when they had those stated income loans that were so easy to get, that are going to say, wait a minute, I have a mortgage payment on this place by the ocean that's five grand and I'm trying to charge you know, 200-300 a night and if I'm only able to get a booking or two this month for a few weekend that I need to get out of this thing or face financial fallout. Whether that means a short sale, handing it off to a wholesaler, or trying to flood the market I don't know, but this summer may transition to an interesting time, because despite the fact that interest rates are low, so you can afford more home for a certain monthly payment, the inability to garner that AirBNB or vacation property income will still reflect potentially negatively on the cost of home.     
   There's a lot of question markets regarding the stabilization across the world's central banks using different currencies and how will this affect every facet of the market. Will the skirmishes in the Middle East, with Hezbollah and their proxy in Iran, lead to more military action and defense contracting resources going in that direction?         
  The reason question is: what's the implication for people running modest business operations?  Mark Cuban said that for small businesses, it's going to be devistating and steps must be taken to remedy these problems before it's too late. If a physical conference got canceled, and most all have been, and vendors are relying on that revenue to keep them afloat then that's a problem. Surveys of Americans show how poor historically they are at saving versus their Asian counterparts.  About half Americans can't scrape together $500 if they need to do so for an emergency. A pandemic constitutes an emergency, certainly, and it's going to be a sustained cash drain. 
  So what steps are being taken? The payroll tax is being eliminated or deferred to keep people working. Mark Cuban said that they should really loosen the strings on the SBA to keep people working and liquidity going for small businesses. If they don't have the resources then, in the California area in a lot of states, counties are creating a moratorium on residential evictions. They're also looking into how to do this for commercial evictions, which they don't have as many protections for versus residential property laws. Many landlords are operating with a thin financial cushion as it is, however. They're compelled to pay down their mortgage during a time period when they aren't getting rent, and they also have to shoulder the electricity, water, trash, property taxes, and the like. And, yes, it'll help that they're deferring or eliminating the interest on student loans, but at the same time, you have pay that mortgage payment, but they be granted some breathing room if a sweeping bank regulatory measure was adopted.  Perhaps they'll be carving out different laws for owner-occupied than income properties. So how this will apply to someone that has like 16 properties is yet to be seen.
  Everything is just getting figured out on the fly. All restaurants and even fast food places now only let you get your food and get out. I went to Starbucks Monday and they locked up all seating. So you really can't get in to get anything done. It's no longer a Starbucks “3rd space” that people often use as a co-working type environment, which may affect Starbucks' bottom line.          
  A buddy sent me a circulating report purported to be internal from someone from Goldman Sachs, who really runs things in many ways in the equity markets, who put words to how their management expects things to play out and the different approaches to battling the virus. They observed that in the UK that they've adopted more of exposure model where they're just resigned to the fact that everyone's going to get it and that people are better to get immune to it in its early stage rather than its mutated stage. So assumedly: get it, get better, move on with your life. And then during that time we'll figure out ways to get some vaccines going.        
  I saw in Seattle today that they're already doing some trial runs on the actual vaccine, what early stage 1.0 version they have of it. This is a good city to do it in. Seattle is one of the hot beds, at least in the United States, so we'll see what comes of that. This will not be over next week, despite what I'm hearing around the groceries stores. CDC already has advisements and suggested measures over the next eight weeks to not get together in numbers more than 50, and, only recently, it's being suggested to take that number down to 10. This means not going to church, mass, temple, sporting events, concerts, its runs the gamut. The mayor of Los Angeles said that while they can't compel non-profits to do this legally, they encourage them to disband these gatherings. Everyone's taking everything online with Zoom or whatever tools they can find. Catholic churches are having mass online! This is a fascinating time to be in tech.      
  While crypto prices are getting nuked, the fundamentals of the technology remain strong. I saw that an Ethereum testnet went down and the cost to send an ETH transactions hit 126 Gwei. Even bitcoin hit 76 satoshis per byte to send something and have it confirm in the next few blocks. This and the months that follow will be a real stress test for crypto. Can the ecosystem handle it? I believe in the technology and hope so!       
  Stay tuned this week for some interviews for people that are embracing the move from traditional media to media 2.0  e.g.  Twitch, YouTube, online platforms that embrace the kind of solopreneur type personality brand building that substack and all these platforms are embracing where, through Patreon and others, you're supporting someone that has “thought leadership” in a certain space. You then glean from that what you may, as opposed to a centralized news channel where it's an amalgam of different contributors under one brand, like the New York Times or New Yorker. Getting to know the individual person and supporting their work directly helps them build their brand, affords opportunities for engagement, and gives them the freedom to do what they want, whether it be in-depth, thoughtful investigative journalism, Fortnight, or whatever the market niche they're aiming to serve.