Welcome to The Weekly Axis.

Certainly in interesting week. We had an ETF, then we didn’t. A question about the Bitcoin supply cap, and more Real World Assets in the Deep Dive

Let’s go!

Axis Updates

The big story of the week was around the possibly ETF approval that didn’t happen.

BlackRock had an approved BTC spot ETF…and then they didn’t

Summary: On Monday, my X timeline was flooded with posts about the the approval for the BlackRock Bitcoin spot ETF. Apparently it even showed up on Bloomberg terminals. Even without confirmation, the price jumped to $30,000.

Only a few minutes later we learned that the story was not accurate. Cointelegraph, a crypto media company, had published a post on X, and everyone took it as the truth. However, BlackRock quickly stated that their application was still in process, and had not yet been approved. Predictably, the price retreated quickly. In the process, we saw over $100 million in liquidations from the quick moves up and down.

Impact on Financial Professionals: While this incident shows there is a demand and hope for a Bitcoin spot ETF, and we completely believe it will happen, it’s not a good look for crypto to have a false story permeate so quickly. I’m sure the SEC will use this incident to show how easily the price can be manipulated to someone’s benefit with one false tweet.

We still think the approval of a Bitcoin spot ETF is imminent, but may be pushed the limit in January. When it happens, and is CONFIRMED, the price will rise much more quickly.

Later in the week, the price started moving up to approach $30,000 again, as Macro factors like interest rates started making bitcoin look like a safe investment.

But don’t just take my word for it…Larry Fink, CEO of BlackRock agrees.

Advisor Questions

Advisor question of the week:

Can the Bitcoin supply cap of 21 Million ever be changed?

This week I had the opportunity to discuss the investment theses for Bitcoin and Ethereum at the CBOE Risk Management conference. One of the questions that came up was about the supply cap on Bitcoin, and whether it can be changed or not.

Now, this is a crucial question because the supply cap of 21 million is what makes Bitcoin unique as a store of value and an inflation hedge. Unlike fiat currencies, Bitcoin has a limited supply, which adds to its investment appeal. So, can this supply cap be altered?

Technically speaking, yes,

It is possible to change the supply cap. The Bitcoin core developers would need to propose a Bitcoin Improvement Proposal (BIP) to modify the supply of Bitcoin. However, this process would involve extensive discussions and would require at least 51% of the miners worldwide to adopt the change.

A Question of Incentives

But here's the interesting part. While it may seem like the supply cap isn't set in stone, the incentive structure of Bitcoin discourages miners from voting to raise the supply cap. Why? Because doing so would significantly devalue Bitcoin and potentially even drive its price to zero. The value of Bitcoin is deeply tied to its limited supply, and changing it once would open the door to further alterations, eroding its store of value proposition.

Trust in Capitalism

So, what does this mean for you as a financial advisor? It reinforces the trust we have in the 21 million supply cap. The decentralized nature of Bitcoin ensures that miners, who have a financial stake in the cryptocurrency, are unlikely to vote for a change that would harm their own interests. This understanding allows us to confidently incorporate Bitcoin into client portfolios as a long-term store of value and inflation hedge.

Keep an eye on future developments, but rest assured that the supply cap of Bitcoin remains a fundamental aspect of its investment thesis. As financial advisors and CPAs, it's crucial to stay informed about these technical nuances to effectively guide your clients in navigating the world of crypto.

Deep Dive

Exploring Private Investments: Real-World Assets on Chain

Summary: In the world of blockchain and crypto, we're seeing a game-changing development: the tokenization of private investments. Now, I know this might sound technical, but let me break it down for you in a way that's easy to understand.

Tokenization refers to the process of representing real-world assets, like real estate or private company investments, as digital tokens on a blockchain. These tokens act as a digital representation of ownership and are stored in a wallet. So instead of dealing with stacks of paperwork and cumbersome processes, you can now hold your investments in the form of tokens in your wallet.

Impact on Financial Professionals: But why is this important for financial professionals like you? Well, let's think about the traditional way of investing in private assets. It's often a complex and illiquid process. You invest your money, sign piles of paperwork, and hope for regular income and potential growth. But selling your investment or accessing liquidity can be a real challenge.

With tokenization, things become much more efficient and transparent. Imagine being able to trade your tokens with other accredited investors on a marketplace, all while maintaining compliance with regulations. This opens up new possibilities for liquidity and allows for collateralization, where you can use your tokens as collateral to secure loans.

As an advisor, this means you can offer your clients a more streamlined and accessible investment experience. You can track their tokenized assets on the blockchain, facilitate distributions in a hassle-free manner, and even help them explore opportunities for collateralized loans.

So, embrace the power of tokenization and blockchain technology. It's not about getting rich quick in crypto, but rather about leveraging the efficiencies and transparency it brings to the world of private investments.

This isn’t something I just came up with either. Reports from companies like JP Morgan, Boston Consulting Group, KPMG, and BlackRock estimate anywhere between $16 and $50 trillion in assets will be tokenized by 2030.

Thanks for reading.

— Adam