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Something out of Left Field


BostonCoin news pup*date Nov-Dec 2019

Something Out of Left Field

A month is a long time in cryptopia, and a lot can change. Last month we reported that the Chinese government had welcomed crypto and blockchain with open arms, and bitcoin rocketed up around 40% in a single day. A few more ticks of the clock, and other news out of China sees bitcoin plumbing new lows. Bitcoin going from AU$11k to AU$14k over the last weekend of October was a lovely ride, and it took many altcoins with it. It was a ride which very few people saw in advance (unless the chartists were privy to the thoughts of the Chinese president).

When bitcoin dropped back down to AU$10k, and many altcoins followed, it was a rude shock. Despite the tendency for bitcoin to head south every single Christmas season, every single year since it was born, investors and traders were again taken by surprise. It seemed that China may have been the elephant in the swimming pool which ejected many of the smaller swimmers. How much sway do a billion people put on the crypto market? It turns out that whilst one or two large whales can sometimes manipulate a market, a billion people will really change the tides. As the Chinese government have flip-flopped literally thousands of times on cryptocurrency regulation (over 2200 times and counting, in a single decade), one would think that diehard investors would be immune to their vacillations. Aside from China pushing and pulling the market on a whim, tradition still dictates a likely bitcoin dive in December and rebirth at Easter (the opposite of the Jesus mythos). As it turns out, the market does not seem to have a backup memory chip installed. Too many forget the lessons of the past and try to swim against the whales, at the whim of market forces which they cannot predict and cannot control.

Where do elephants come from?

We are using the analogy of elephants with purpose. Many crypto traders speak of “whales”: investors who hold vast amounts of cryptocurrency, sometimes millions or hundreds of millions of dollars’ worth, and when the crypto whales buy or sell, the “smaller fish” feel the impact of the move. Like their namesakes, whale investors can be found almost anywhere in the world, however, elephants are famous in only a couple of regions: Asia and Africa. Coincidentally, these two regions are also epicentres of massive human population, and under-utilised banking, two perfect conditions for the adoption of cryptocurrency. Whilst the broad market is monitoring China, wiser and more insightful investors are looking toward Africa, for a market impact which will seem “totally out of left field” for those who have not been paying attention.

A tsunami of wealth for early adopters

China was an investment opportunity long before you heard it on the nightly news. A 2006 book which predicted the GFC two years before it occurred, also predicted that in future, wealthy Chinese would be hiring poor Americans as house-servants (understandably, this was not a popular view in pre-GFC days, but the other predictions in the book have all occurred, or are occurring). The author had visited China for a month in 2000, and saw what was going on: workers who used to farm fields were entering factories and office buildings. An unprecedented amount of construction was occurring as the agrarian age gave way to a new industrial revolution. Large corporations were outsourcing and offshoring and the tides of money were changing; away from the West and toward the East. Those who followed the author's blogs and newsletters were made aware of the early signs back in 2000 -2006; those who acted were able to catch stock market gains of 450% or higher. Those who ignored or dismissed the early signs, well… there may be another boom on somewhere another time which you can catch. When the same author visited Africa for a month in 2010, there were similar early signs of a change in tides which could soon become a tsunami of wealth. The Chinese had been drilling for oil in Africa as early as 2000, and a decade later, the first Chinese factories had started to appear in Africa.

China had attracted western money because they would work in factories for a fraction of what a westerner would be paid, and fairly soon, almost every product purchased in the west was “Made in China”. After a few years, the Chinese realised that there were others who were paid less than themselves. They realised that they could copy the large corporations which had originally outsourced and offshored to China, by outsourcing and offshoring to Africa: a land similar in opportunity to China, where a billion people could potentially work for $2 a day.

Necessity is the mother of ingenuity

In poorer countries, some things which the Westerners take for granted are not available, and some things may be available, yet unreliable or unpredictable. This has led to some heartbreak for tourists (“what? No wifi?”) and some amazing inventions and breakthroughs. If you have ever seen an older documentary on Africa, you would have seen the ubiquitous image of African women carrying water in pots on their heads, as there was no running water in the village. Fast forward a few years, and Africans want to be connected to the internet and to each other, so mobile phones have become more ubiquitous than water pots. In a land where electricity is either absent or unreliable, many Africans use fuel-powered generators for electricity. This comes with its own costs, for purchase, fuel, and pollution. Some bright spark realised that, by giving the African women a round barrel with a handle, they could “roll” the water all the way home, and by attaching a bicycle-type rotating generator, the rolling water barrel could also charge a mobile phone. Some governments had tried to connect remote African villages to the national power grids, but thieves would often loot the copper wires for resale, risking their lives for a few dollars and plunging the villages back to the dark ages. A clever person created mobile phones where the entire back of the device was a solar panel, and another problem was solved with African ingenuity. These solar-powered phones were sold in supermarkets in Africa a decade ago, but those in the West have probably never seen one.

Cool story bro, but what about the crypto?

Technology is supposed to solve problems and make life easier. If a new invention or a new cryptocurrency is not solving a problem, it will be short-lived (crypto-kitty, anyone?) Aside from being a veritable goldmine of cheap labour (as China was to the West), Africa is also a goldmine opportunity for the underbanked. Aside from the stories of government corruption, hyperinflation and other financial crimes committed against the population, Africa is also filled with people who find it hard to use a bank account. Many citizens do not have the requisite identity documents such as a birth certificate or drivers license with which to open a bank account. The nearest bank branch may be literally 500 miles away. Monthly account keeping fees could be higher than a day’s wages, and due to government corruption or intervention, bank funds may be seized or frozen, even if you only have the equivalent of a week’s income in there. Ingenious Africans worked around this (again, a decade ago) by storing and swapping phone credit amongst themselves. Rather than using cash, which was not readily available in remote areas, residents would text each other a few pennies or a few dollars in phone credit, in exchange for goods and services. If someone in the remote village actually did require cash, they worked around the dearth of ATM’s and electricity by going into one of the few cash-based shops, texting a few dollars to the owner’s phone, and receiving an equivalent amount in fiat currency.

Africans are already wired for crypto

Just as China shifted from agriculture to factories and highways inside of one generation, we expect similar things in Africa. There are also many reasons why we believe the African crypto elephant will be larger than its Asian cousin.

  1. The Chinese government is far more dictatorial. Yes, Africa has dictators as well, however, they do not have the Chinese stranglehold over citizens hearts and minds. When China banned religion during the 1949 Cultural Revolution, political leaders became the new gods and statism was the new belief system. Although “freedom of religion” has been in place since the 1980’s, over 75% of Chinese identify as “no religion” and the majority still believe whatever the government tells them. When the government says “no Tianamen, no Tibet, no crypto”, Chinese mostly toe the line. Africans are more rebellious: likely to listen to leaders and then do their own thing.

  2. Africans are already innovative. Faced with a shortage of water, electricity, shelter, food or cash, Africans find a way or they make one. Despite some countries in Africa having up to 95% unemployment and zero social welfare systems, residents still get by on their labour and their smarts. Equipped with a smartphone, Africans can not only transfer wealth from one to another, they can also participate in the global “gig economy” even when there is no local industry.

  3. Africans are used to sidestepping cash. Fiat currency and currency exchange has been problematic in a land with over 50 countries which you can literally walk into by accident whilst sightseeing or looking for food. Many African countries have, at times, resorted to using food, fuel, phone credit or other means of exchange, particularly in remote areas, or when government officials messed up the currency or the economy (100 trillion-dollar Zimbabwe note, anyone?)

Crouching dragon, sleeping lion

According to historians, Napoleon Bonaparte mentioned China during his years of exile (1815-1821) and famously stated, “China is a sleeping giant. Let her sleep, for when she wakes she will move the world.” Early Christian missionaries of the 19th Century loved the Napoleonic prophecy and thought they would see a massive resurgence of Christianity when the missionaries reached China. This did not happen, and China’s awakening has been predominantly economic rather than religious. In the twenty-teens, when China moved in and out of blockchain, the entire world felt their presence. Beyond 2020, we feel that, to paraphrase the words of Shakira, “It’s time for Africa”. Another billion people will soon wake up and enter the technological age of smartphones and cryptocurrency. Mark these words, as this will never happen again. We have already seen vast fortunes created from the techno-emergence of a billion people in India and in China. Are you ready for Africa? Jack Dorsey is.

A visionary walks into a bar in Kenya

Jack Dorsey, multi-billionaire, investor, innovator and early adopter is going on African safari, and you should be watching closely. When SMS or text messages were in their infancy, Jack wondered if people would like to send a short message to ‘everyone’, not just those people in their immediate contact list.

He then co-founded a company called Twitter, while most of us were still carrying Nokias, not smartphones. He also founded Square, the mobile payments company which revolutionised income for tradespeople and market stall holders, among a million other users. Jack is not just lucky; he is a visionary, famous for seeing a problem and its solution. He is an early adopter and a free-thinker. Eschewing the limousine his billionaire status seems to demand, Jack walks five miles to work every day, as it gives him time to think and unwind. He discovered Vipassna meditation in 2017 and has completed a few ten-day silent meditation retreats. This kind of mental and physical discipline is common among self-made billionaires, and is also of interest to those who like to follow billionaires and do what they do (or at least invest where they invest. I am not walking five miles a day!). Jack has spent a month in Africa and has seen the potential of a billion people first-hand. He has announced he will be living in Africa for “three to six months” during 2020, and his aim is to bring cryptocurrency to over a billion people on the continent. Even if all Jack did was to add crypto-capabilities to Square and Twitter, that would be revolutionary enough. Bringing another billion people to the crypto-market? That is visionary indeed. Whilst we are waiting for Africa, what’s happening?

It has been a very quiet month in cryptopia, with the fall in bitcoin dragging most altcoins down with it. We anticipate the ‘sea of red’ may continue throughout December and January (if history can be used as an indication), with rising tides after the new year. Two factors will be at play in early 2020:

  1. the historical pattern of a boom after the Christmas / Chinese New Year crypto-lull

  2. the “halvening” in May 2020

Long-term investors will know that the bitcoin mining reward halves every four years, meaning that miners will receive less bitcoin for their efforts. This inbuilt fractal pattern has seen bitcoin prices boom after each previous halvening, due to bitcoin becoming more scarce every four years. There may also be a shakeout of miners, as smaller operators will be priced out of the market. The above two factors should see bitcoin prices increase for the first half of 2020, and possibly beyond mid-year, as the halvening often precedes a bull run, and markets tend to react after the event, whereas smarter investors plan ahead. BostonCoin has not been immune to the sea of red, however we continue to HODL the coins which we think will perform the best over the next 6-12 months. A few outperformers this month have been:

  • Binance coin up 141%

  • Basic Attention Token up 113%

  • SnagRide up 111%

  • ChainLink up 211%

  • Celsius up 128%

Honorary mention to BudBo and WANchain who only dropped 5-10% even as bitcoin dived by 20-30%.

As always, the Boston team are monitoring markets and sniffing out opportunities which we believe will enrich our investors, as well as enriching the lives of others who have problems which need solving. Take care out there in crypto-land. Watch out for scams, “fool’s gold” and solutions for which there is no underlying problem. Cryptopia can be paradise, or it can be a jungle, just make sure that you have a faithful companion by your side (or even a pack of Boston puppies!) BOS price at 31/11/2019 25.5602 NAV 23.2365 Have a safe CryptoMas and we will see you in 2020 love, licks and belly rubs from the BostonCoin team

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