June 9, 2021 Sign Up

By Overheard on Wall Street

"Enjoyment consists in action rather than in possession."

Good morning! Looks like investors are taking money from crypto and putting it into the safe haven assets of meme stocks. Yesterday was another day to remember for meme stocks. Clover Health ($CLOV) was up 86%, which meant Chamath Palihapitiya’s $16 million investment in $CLOV was worth $682 million (a 42x return). The OG, GameStop was up 7%, while Bed Bath & Beyond (+8%), Eastman Kodak (+27%) also made moves.

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1. Story of the Day: Bitcoin Blues

What has happened to Bitcoin? Just a few weeks ago, on April 15th, the cryptocurrency was trading at $63k. On Tuesday, it traded as low as $31k, more than a 50% fall from its peak. It has fallen nearly 8% over the last week and not even the Miami Bitcoin conference this past weekend could help its free fall. The latest pullback comes over concerns over security of Bitcoin, after the FBI managed to recover most of the ransom paid to hackers that targeted Colonial Pipeline. It is also a sign that regulators are stepping up efforts to battle Bitcoin ransomware attacks. Bitcoin is now up only 12% since the start of the year.

While Bitcoin makes payments easier across borders, it does have a security problem. Unlike credit-card purchases, crypto transfers generally can’t be reversed and just need a wallet address for the transfer. According to FTC, consumers have lost $82 million to crypto scams just in the last two quarters, more than 10x the same amount from the same period a year earlier. The FTC figures are based on self-reporting by victims and limited to the US so the actual number could be a lot higher.

The Bitcoin descent began when the decentralized world’s most centralized figure, Elon Musk tweeted on May 12 that Tesla would no longer accept Bitcoin over environmental concerns. That was followed by China cracking down on cryptocurrencies, banning financial institutions from accepting them. Trump also got in on the action on Monday, saying Bitcoin “seems like a scam” and competes with the US dollar, which instead should be the currency of the world.

Short Squeez Takeaway: Late last night, there was some good news for the Bitcoin faithful as El Salvador became the first country to pass a law to adopt Bitcoin as legal tender. There are no fundamentals we can rely on to gauge a fair value for Bitcoin, price largely depends on investor sentiment, which changes by the second. One thing is for sure, crypto investing is not for the faint-hearted (7 times more volatile than the stock market over the last month) so be careful where you put your money and sanity to work.

2. Markets Rundown

• S&P 500 ended slightly higher Tuesday, pushing it to its 3rd-highest close on record
• Crypto continued its slide, with BTC down 8% and DOGE down 17% over the last 7 days

Movers & Shakers

• (+) Wendy's ($WEN) +26% thanks to the meme stock pump. #tendies
• (+) Fastly ($FSLY) +11% after fixing the outage on Tuesday morning quickly.
• (–) Adaptive Biotechnologies ($ADPT) -7% after being downgraded by a research analyst.

3. Top Reads

4. Book of the Day: The Personal MBA: Master the Art of Business

The average cost of a full-time, 2 year MBA program in the US is over $100,000. Of course, there’s also the opportunity cost of not having a salary during those 2 years. In many cases, getting an MBA is just not a good investment. Even some of the best schools end up teaching you about unnecessary financial modeling and how to work the PowerPoint.

In the Personal MBA, the author (Josh Kaufman) uses mental models to teach about the most important business concepts such as finance, operations, productivity and entrepreneurship. We recommend the book to anyone who wants to master the fundamentals of business without getting an MBA.

5. Daily Visual: Cost of US Streaming Services

Source: Axios

6.  Tip of the Day: Bitcoin vs Ethereum

There’s an arms race happening in the world of crypto, and Bitcoin and Ether are leading the pack. They have a lot in common. They’re both open-source digital currencies used to make somewhat anonymous transactions and both have seen their share of crazy volatility. Back in mid-2017, Ether dropped from $319 to 10 cents on one exchange but quickly recovered its losses. Bitcoin’s highest drawdown was over 90%!

While they are both powered by a type of technology called blockchain, many people believe that Ether’s technology is better. Blockchain is basically an online ledger that records every single transaction ever made. Since cryptocurrency has no physical imprint, blockchain allows money to be tracked all over the web so it can’t be counterfeited.

Unlike Bitcoin’s blockchain, Ethereum features a key piece of technology called the smart contract. It doesn’t just track transactions, it programs them. Smart contracts let you exchange more than just money, such as property, stocks and really anything without having to go through a lawyer, a notary or some other service. It cuts out the middleman entirely.

Whereas Bitcoin is more about payment technology and a store of value since there will be a max of 21 million bitcoins created, Ethereum has other real world applications from gambling to banking. For example, Barclays bank uses Ethereum contracts to trade derivatives.

7. Memes of the Day

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