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In early 2022, VanEck’s prediction of a Bitcoin price drop to $10K-$12K by the first quarter of 2023 sent shockwaves throughout the crypto community. Matthew Sigel, the head of digital assets research at VanEck, cited a wave of miner bankruptcies as the primary catalyst for this potential price plunge.
Fast forward to 2023, and while some miners did indeed go bankrupt, others are currently busy with litigation. To further compound the industry’s woes, mining-friendly Texas has recently passed legislation that limits benefits available to the crypto mining industry.
Despite these setbacks, Bitcoin has managed to perform exceptionally well in 2023, a fact that stands in stark contrast to VanEck’s earlier prediction. The world’s largest cryptocurrency is up by about 80% year-to-date, currently hovering just above $30K. This dramatic increase in value has confounded many experts who had predicted a continuation of the crypto winter that gripped the market in early 2022.
Some have attributed Bitcoin’s resilience to its growing mainstream adoption, which has increased its legitimacy as a viable investment option. Others point to the rise of new use cases, such as decentralized finance (DeFi), which have captured the imagination of investors and developers alike.
Regardless of the reasons behind Bitcoin’s resurgence, it is clear that VanEck’s earlier prediction failed to account for the resilience and adaptability of the cryptocurrency ecosystem. While there may be challenges ahead, it is becoming increasingly apparent that Bitcoin is here to stay, and that its value may continue to surprise even the most experienced investors.
Arthur Hayes Comments on The “Balkanization of Finance”
Arthur Hayes, co-founder and former CEO of BitMEX, attributes the current success of Bitcoin to the collapsing Western banking system. In a recent interview, he stated that the world is recognizing the entire Western banking system is bankrupt, and this realization is driving Bitcoin’s value up.
He argues that Bitcoin’s correlation with traditional assets is breaking as it serves as an asset outside the traditional fiat banking system. For instance, the S&P 500 has only gained 7% year-to-date, while Bitcoin has increased by more than 80%.
Hayes has adjusted his investment strategy accordingly. He is going for assets outside the banking system, such as Bitcoin, gold, property, and possibly some assets in RMB. He predicts that the next decade will see the balkanization of currencies, with the dollar making up 40-50% of trade.
Hayes also suggests that people will become more like FX speculators in the future as they use different currencies in different places.
Despite these predictions, the market might not see Bitcoin hit $1 million anytime soon, according to Hayes. While he is a vocal supporter of Balaji Srinivasan, who bet that Bitcoin would be $1 million by June 17 on the back of hyperinflation and a failing banking system, Hayes thinks it’s unlikely that Bitcoin will reach $70,000 this year. He predicts that by 2024, the market will know it needs to be in Bitcoin, gold, ether, or other assets rather than stocks and government bonds.
Bitcoin has proven to be a successful asset in 2023, despite VanEck’s initial prediction. Hayes suggests that Bitcoin’s value will continue to increase as the Western banking system continues to collapse. However, he warns that we might not see Bitcoin hit $1 million anytime soon.
BitMEX Executives Launch Maelstrom Family Office for Crypto Infrastructure Investment
Arthur Hayes and Akshat Vaidya, who used to hold executive positions at BitMEX, have established a family office called Maelstrom. This office is dedicated to investing in infrastructure companies operating in the crypto industry. The reason behind the focus on infrastructure is that the current market cycle lacks sufficient infrastructure to support consumer scaling.
Maelstrom has access to a pool to both crypto and fiat money belonging to Hayes, which allows the firm to take a patient approach in identifying high-quality projects without feeling pressured to deploy capital to earn management fees.
According to Hayes and Vaidya, the projects they invest in are expected to reach a turning point around 2024, as the market begins to scrutinize whether they have delivered on their promises, developed their products, gained clients, and proven the functionality of their technology. This will be a critical juncture where investors can distinguish the authentic, valuable companies from the imitators.
The two executives acknowledge that investing in infrastructure projects at this stage of the market cycle comes with the advantage of not being in the crosshairs of regulators to the same extent as other types of projects.
Maelstrom’s portfolio companies, with the exception of one, have been domiciled outside of the US, and even when a project does involve US founders, it is domiciled in a friendly jurisdiction like Switzerland.
Maelstrom’s investment strategy is focused on identifying companies with strong technological moats that are addressing a large market, and with simple and easy-to-understand business models. In the current market, it is important to not only make money but to have done the work during the bear market to identify which companies are genuinely valuable and which are just imitations.
While the focus is on quality projects, Hayes and Vaidya acknowledge that investing in a complete piece of excrement may be necessary to earn crypto-tier returns.
Maelstrom’s patient and quality-focused approach to investing in crypto infrastructure companies seems to be a prudent strategy in a market that is still in its early stages of development. With the right investments, Maelstrom may be able to beat the returns of Bitcoin and Ethereum in the long term.
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