This is a really distressing, massively confusing time. I have no idea what’s going to happen in 99% of things right now. However, I believe it’s close to inevitable that  it will be very positive for cryptocurrency prices. Despite the Covid-19 crisis and global meltdown.

My kids used to count to 100, “One, two, skip a few, a hundred.” It feels like we’re doing that on Quantitative Easing. QE1, QE2, skip a few, a hundred.

As Quantitative Easing approaches infinity, it simply has to have an impact on things whose quantity can’t be eased.

Government often increases the quantity of paper money. It takes more pieces of paper money to buy things that have fixed quantities, like stocks and real estate. They settle above where they would absent an increase in the amount of money.

The policy is already achieving its goal: the S&P500 is actually above its May 31, 2019 level. There is no chance that would be true without trillions of new dollars. Like hydrostatic pressure, that flood of new money will float all boats. It will inflate the price of other fixed-quantity assets. Assets like gold, bitcoin, and other types of cryptocurrency.

Since our March 25th Letter, bitcoin has rallied 32%. Bitcoin is now up on the year (+23% Year-To-Date).

One of our principal arguments for bitcoin in a portfolio is that it has had a 209% 9-year compound annual growth rate with essentially zero long-term correlation to stocks, bonds, oil, and other asset classes. From a Portfolio Theory perspective: If you can find something that goes up in the biggest crisis in a century, you should have some of that in your portfolio.

I think this is only the beginning. Why?


It is clear that this recession won’t be V-shaped.

In the 2007–2009 recession, US real GDP fell $650 billion (4.3%) and did not recover its $15 trillion pre-recession level for three years. That recession didn’t have the psychological impacts unique to this pandemic. When we look back, I’m afraid this recession will more likely resemble an L.

  • Most American families have had their finances seriously damaged.
  • Every day we read about small businesses such as restaurants, bars, etc. permanently closing.
  • The economy has to recover in steps; e.g., Detroit can’t assemble cars until their suppliers can build parts, and many of the suppliers’ suppliers will have gone bankrupt or will be unable to restart for other reasons.
  • When will people trust mass transit, airlines, trains, etc. again?
  • Many people can’t go back to work until schools and daycare facilities reopen.
Just taking one of those topics:

According to the Bureau of Labor Statistics, 40% of American families have children under the age of 18. Almost everybody with a child under 18 was in the labor force. The labor force participation rate (the percentage of the population working or looking for work) for all women with children under age 18 is 72.3%. The rate for all fathers with children under age 18 is 93.4%. Even in married households, both parents work in 64.2%. Now they/we are in the largest homeschooling army ever assembled!

You can’t start the economy before you start the schools.

If employers tell their employees to come back — and they look at the doleful eyes of their young homeschooler sitting next to them — they aren’t coming back. Schools and daycare have to be functional before the economy can begin the long normalization process.

The clock on that process starts the day school is back in session.

A special shout out to Purdue — one of the first universities to set a goal of confronting the challenges of the virus:

“We have every intention of being on campus this fall. Also, we remain sober about the challenges that will bring. We believe in the value of the on-campus experience, and we’re determined, if we’re permitted to do so by the public authorities and medical circumstances.”

Purdue President Mitch Daniels, April 26, 2020


“I feel like the 2008 financial crisis was just a dry run for this,” said Ken Rogoff, a Harvard economist and co-author of the famous history of financial crises, This Time Is Different: Eight Centuries of Financial Folly. “This is already shaping up as the deepest dive on record for the global economy for over 100 years,” he said. “Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.”

Diane Swonk, the chief economist for the accounting firm Grant Thornton, said it well:

“It is going to take much more time to thaw the economy than it took to freeze it.”

These impacts will likely persist for a much longer time than many policy-makers seem to think. The virus is thought by experts to be 20–50 times more prevalent than statistics based solely on the very limited testing.

There are only a few populations to have been tested in their entirety. Several fascinating statistics come from the USS THEODORE ROOSEVELT (on which my cousin serves):

  • 50 times as many crew members were infected as officials originally thought — 840 (out of 4,938) crew members have been infected
  • The majority of crew members infected with the SARS-Cov-2 Virus did not develop any symptoms of the disease COVID-19
  • In their young, healthy population, it has been 100 times less fatal than the official stats from some countries
  • Dozens of sailors who initially tested negative later tested positive

I believe it will take society a long time to come to grips with the reality that we need to learn to co-exist with the virus. Until that time, the economy — and all the complexity of life on so many levels — will flatline.


Here we update our market views from the March Letter:

“ Foe several months, we believe that tokens will out-perform venture for a several-month period. Tokens reprice instantaneously, and so they have much more volatility, on both the upside and the downside. Venture pricing is typically lagged. The number of deals dries up quickly. Many months later, when both sides finally agree where the supply and demand curves meet, you’ll see the number of deals pick back up, but at lower prices.”

This has happened. Tokens are up 32% since we last wrote. In the meantime we have been buying venture deals — either directly or in the secondary markets — at discounts of 20–36% from where they were trading just before the crisis.

“ token risk is reduced about 15% for about a week. We now believe that the short-term high correlation with general markets is over and that crypto will trade independently.”

Also covered our risk reduction on March 24th. We’re limit long. Crypto is beginning to trade independently of other assets. Crypto is up while most asset classes are down.

“In the five major S&P downdrafts since 2012, bitcoin’s correlation with stocks spiked sharply positive for 32 days in the initial movement, but tapered off to neutrality over an average of 71 days.”

Correlation has stayed high for 30-ish days. We expect it to drop off now.

“ As a firm, we believe bitcoin will probably out-perform other tokens for a while….The increase in dominance historically lasted an average of approximately 4 months and an average gain of 7.8%. We believe that is likely to happen again.”

Bitcoin dominance was 64.60% in mid-March. It is now 66.40%.It will continue to gain — but probably not as much or for as long as in past cycles.

“the share of Digital Asset Fund in our algorithmic strategy is increased to 30% of the fund.”

We believe the markets are no longer range-bound so long-biased strategies are now best. We have reduced Quant to 20% of the fund and set it in a long-only mode.


There’s little good news in the world today.  We want to highlight where our companies are playing a positive role in helping people . Since the crisis began, we have seen a surge in blockchain-enabled money transfer. Usually driven by increased demand for digital payments and cross-border remittance services. For example, USDC stablecoin adoption is up 60+% and other companies have posted similar increases in volume through March and April.

To help share a real-time index of the results of private companies, we surveyed our portfolio companies in these sectors, then aggregated and normalized their metrics. The chart below depicts the average growth in blockchain payments through the crisis, using November as the benchmark.

The constituent companies in the index are:

  • BitAccess: global provider of bitcoin ATM solutions
  • Bitso: Mexico-based cryptocurrency exchange and remittance provider
  • Circle/USDC: business banking and payments infrastructure, powered by USDC (USD Coin), a stablecoin backed by US dollars and founded by Circle and Coinbase
  • Veem: global B2B payments platform — “real-time wires at half the price”
  • Wyre: payments and compliance infrastructure enabling fiat on-/off-ramps
  • A soon-to-be-announced remittance investment in Venture Fund III

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