Stability + growth

By now you know I enjoy writing about Bitcoin. Within the blockchain/crypto ecosystem there exists another extremely important digital asset: Stablecoins.

Stablecoins are a “digital dollar” used to transact between parties or swap for another digital asset.

To discuss how a stablecoin works and its future growth potential I’ll use this rudimentary comparison…

If you’ve gone into a Vegas casino to gamble at blackjack the first thing you must do is exchange US dollars into that casino’s native chip. The $25 chip you hold in your hand is backed by US dollars sitting in the casino vault and doesn’t fluctuate in value. Stablecoins are similar in that they are digital versions of a US dollar backed by actual US dollars held in a wallet, or in other instances US Government treasuries. This wallet can be viewed by anyone on the blockchain to confirm the assets are there. Obviously we cannot look inside a casino’s vault, but the Nevada gaming regulators can…

More critically, the $25 casino chip you exchanged at The Bellagio cannot be used over at the Cosmopolitan or another casino. This is an annoying feature for gamblers who like to jump around to different casinos but those companies don’t want to risk accepting a counterfeit chip from another casino or the hassle of redeeming all of these other casino’s chips for US dollars at a later date.

However let’s say that when you arrived at the Vegas airport there was an “exchange” that let you swap your US dollars for a “Vegas Coin” (that couldn’t be counterfeited) that you could gamble with at all the casinos, then exchange back to USD when you were at the airport ready to return home.

In theory this would improve the liquidity within the gambling ecosystem and provide a valuable service…no more waiting in line at a casino’s cashier cage, etc. This liquidity could be a potential tailwind for the casino business.

Now let’s take it a step further and imagine you could use your Vegas Coin to purchase meals, hotel rooms, designer clothes, greens fees and bottles of Dom at a nightclub. This would increase the liquidity of the entire Vegas economy and provide secure, trusted, fast, low-cost transactions between individuals and businesses. You can now swap your US dollar backed coin for various goods and services within an ecosystem!

This is why Stablecoins are gaining such incredible traction. They provide liquidity to blockchain ecosystems where people, countries and corporations wish to send or receive value in US Dollar denomination.

It is my opinion that as more and more assets gravitate “on chain”, the potential use cases for stablecoins could be explosive.

I believe that it’s possible there will come a day when the majority of our financial transactions will be used with stablecoins. Credit card bills, insurance contracts, airline flights, payroll, internet service, stock market purchases, you name it.

Think I’m crazy? Well it wasn’t too long ago when people freaked out over the concept of paying with a credit card at Burger King.

One other benefit to a Vegas Coin? The coins you aren’t spending could earn interest, daily. Coinbase is currently paying around 4% annually** on USDC in your wallet when it’s not being used and it takes zero effort.

The technological evolution can move quickly. I’ll be expanding on this topic throughout the year.

Finally, here is what’s on my radar:

updates!

If you were wondering why the long hiatus from my Capital Gains writings, it was largely due to the ever-evolving regulatory landscape of how folks in my line of work can write about topics such as Bitcoin along with offering what are often clearly high-conviction opinions on an array of topics. What began as a casual quick-form writing style was quickly morphing into a disclosure-laden legal opinion…..and I honestly didn’t like the way that would be presented to you, the reader.

On top of that, we were in such a volatile investment cycle with news and narratives changing every day, it’s often hard to find interesting content w/o it becoming quickly outdated.

Therefore while I give more thought to the future game plan of “Capital Gains” I did want to share a few things with you in closing.

macro

Since the start of the year a LOT has transpired in the markets, and for many the temptation might be to try and find trades to make based on every piece of news that comes through. I believe that to be a losing method over the long term….our team prefers to keep risk low and wait for the fatter pitches…

Our CIO Kevin Harper is out with his latest piece that highlights Where do we go from here? and what he really drives home are 3 critical points to think about:

1: Remain patient

2: Remain disciplined

3: Be willing to consider asset classes beyond the US 60/40 construct.

Click here to read!

bitcoin

While I continue to fine tune what my future bitcoin writings will look like (I’m lookin at you, regulatory attorneys) there are certainly a handful of prominent people out there who are worth following on Twitter.

Michael Saylor

Joe Burnett

Jeff Park

** At the time of writing, Coinbase advertises up to 4% annual yield on USDC holdings, though rates are subject to change and may involve risk, including loss of principal. Past performance is not indicative of future results. Please consult with a qualified financial professional before making investment decisions.

Clark Gaines focuses on alternative investment strategies at Almanack Investment Partners, and is based in Charleston, SC.

Please refer to our disclaimers below!

This communication has been prepared solely for informational purposes and is not an offer, or a solicitation of an offer, to buy or sell any securities or products or to participate in any product or trading strategy. No sale of securities will be made in any jurisdiction in which the offer, solicitation, or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation, or sale. If any such offer of securities or products is made, it will be made pursuant to a definitive confidential offering document or other documentation which contains material information not contained herein and to which prospective investors will be referred. Any decision to invest in such securities or products should be made solely in reliance upon such documentation and not this communication. .Information contained herein is based on data obtained from statistical services, company reports or communications, or other sources, believed reliable. However, we have not verified this information, and we make no representations whatsoever as to its accuracy or completeness.  The views and opinions expressed in this communication represent those of Clark Gaines and should not be construed otherwise.Investment Advisory products and services are being offered through Almanack Investment Partners, LLC an SEC registered investment advisor. For additional information about Almanack Investment Partners, LLC, please visit www.adviserinfo.sec.gov.

No part of this material may be duplicated in any form by any means or redistributed without Clark Gaines’s prior written consent.