Welcome to another week in the crypto markets.
Current market conditions are not easy. Building true wealth is not easy. It is our responsibility to adapt to all challenges and remain resilient. That’s why today we share:
A market overview: ‘The Cycle Continues’
An exciting new addition to your portfolios: ‘Rental Property Investing Part 1’
Our Tweet of the Day (a tough selection process)
Some insight on Tether and stablecoins: ‘Tether: Weird or Wonderful?’
Our Monday ‘Scan The Week’ section which will alert you of any exciting crypto market opportunities or general market events
Read, enjoy and share with your network. Let’s all build wealth together.
💥 For 6 clear, concise and actionable newsletters a week, fundamental and technical analysis to compliment your trading/investing, trading education and self improvement, consider joining the free Market Meditations community 👇
🌊 The Cycle Continues
Once again we find ourselves oscillating between the lower and upper bounds of BTC (roughly between $30k and $40k). Currently, we are trading more towards the lower end of the range. This is being attributed to a series of bearish headlines:
The news came earlier today, increasing negative sentiment in the crypto markets. Notably, Ether has dropped below $2,000 for the first time since May 23.
Is this just more China FUD? Why does it matter? These would be fair questions. Whilst the bank’s anti-crypto bias is not new, the latest statement comes after consultation with the Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank, Postal Savings Bank, Industrial Bank and Alipay (China) Network Technology.
The Postal Savings Bank issued a statement saying it will take steps to prohibit virtual currency related business activities and according to journalist Colin Wu, payments platform Alipay and the Agricultural Bank of China also issued similar statements.
On Wednesday, Fed Chair Jerome Powell, indicated that rate hikes would come in 2023. Powell's comments triggered a sell-off across financial markets as the U.S. dollar gained strength.
The uniform sell-off across a variety of assets including stocks, gold and cryptocurrencies has further eaten away at the narrative that Bitcoin is an uncorrelated asset, as data shows that BTC's correlation with both gold and stocks has continued to increase throughout 2021.
We all know Elon Musk tweeted about this topic. Since then, many other notable and proponent figures have added to the narrative.
U.S. Senator Elizabeth Warren criticised energy consumption that Bitcoin and other proof-of-work (PoW) cryptocurrencies need to operate. She went on to call cryptocurrencies the “wild west” of investments and suggested a regulatory crackdown on the industry.
⛏ How much energy does mining actually consume?
⚡️ Is crypto worth the energy it is using?
We’ll share a more detailed analysis on this subject next week. For now, let us know what your answers to the above questions are in the comments section.
🏡 Rental Property Investing: Part 1
Have you ever considered investing in real estate? For many of us, buying our first home is the biggest financial decision of our life. Others may have considered how to invest in real estate; not to live there but in hopes of generating a strong cash flow that will speed up your process of Building Wealth.
Today’s Market Meditation will present the argument for investing in real estate by drawing on The Book on Rental Property Investing by Brandon Turner. This will be a 2 Part Series:
Part 1 (Today) ➡️ Advantages of Rental Property Investing
Part 2 (Wednesday) ➡️ Disadvantages of Rental Property Investing & Market Meditations’ Approach to Rental & Crypto Portfolios
To receive Part 2, make sure you’re part of the FREE Market Meditations Community 👇
🛖 Advantages of Rental Property Investing
Purchasing with leverage. You don’t need $200,000 in cash to buy a property that costs $200,000. When investing in real estate, it’s fairly simple to borrow someone else’s money so that you can get started earlier and so that you can increase the returns on your capital. Mortgages tend to be cheaper than other debt so it’s cheap leverage.
Hustle for greater returns. You can leverage your time and abilities to increase your success. For instance, by restoring and improving a property yourself (see ‘Forced Appreciation’ below), by networking to find better deals on mortgages or simply spending more time to find the greatest properties.
Insider trading is legal. In the stock market, it’s illegal to use knowledge that the rest of the investing community doesn’t have access to. When investing in real estate, you are encouraged to take advantage of such information. With stocks and shares everyone has the same information so it can be difficult to get an edge. There is no data in the same vein for property so if you put the time in you can gain an information advantage.
Multiple ways to profit. 4 different ways which we will discuss in the next section.
Not having to be present to make money. You’ll be generating passive income in so far as your property could increase in value while you are sleeping or searching the web for new pepe memes.
Inflation hedge. Housing has typically been a hedge against inflation and so it can be complimentary in a portfolio where other asset allocations are sensitive to inflation.
🏠 4 Ways to Profit
1️⃣ Appreciation. Increase in value of an asset over time. If you can sell your house for $200,000 today and you bought it for $100,000 back in 1992, your house has appreciated 100% in value. (Note the timeframe of the investment, this will be one of the topics of discussion in Part 2). There are two types of appreciation. Natural Appreciation comes from inflation and scarcity, and Forced Appreciation comes from your efforts to improve the property.
2️⃣ Cash flow. Cash flow = All Income - All Expenses. In this case, how much money you have left from tenant payments after paying all the expenses on the property (this includes any interest on your loan).
3️⃣ Tax Savings. All tax discussions and implications are country specific. In most places, there are tax benefits for being a rental property owner.
4️⃣ Loan Paydown. A conventional loan repayment consists of principal and interest. Money spent on principal increases your equity in the property (and therefore your stake in the property). Towards the final years of the mortgage repayment, almost 100% will go towards principal.
🏘 Finding Good Deals
A good rule of thumb is that you want your cash flow to be positive (see explanation of cash flow above). This requires a deeper understanding of the components:
Income is determined by the ‘fair market rent’ which is determined by factors such as location, number of bedrooms, quality and the size of the property. Establish fair market rent by finding evidence from similar properties from nearby letting agents (focusing on where you can see a transaction has been completed). Sources like Airbnb often have a premium over standard market rates.
Expenses include Operating Expenses (taxes, interest, insurance, vacancy, repairs, water, garbage, heat, electricity etc.) The best way to determine these expenses is to call people (such as the local electricity company). Then there are Capital Expenses for instance, getting a new paint job, roof, windows, appliances etc.
✅ Putting It Altogether
You’ve asked local agents and determined that your property generates $1,500 in income per month. You’ve made a few calls and established expenses are $1,200 per month. Cash flow = Income - Expenses = $1,500 - $1,200 = $300 per month or $3,600 per year. Don’t forget how much you paid for your property. Suppose your deposit was $60,000.
Your Cash on Cash Return on Investment (COCROI) is $3,600/$60,000 = 6% per year. The beauty of calculating your return per year is that it allows for comparisons. An index fund in the stock market could generate about 7-10% per year. And so, 6% doesn’t look great. You’ll want as high a COCROI as possible.
Finding the right property can be difficult. Beyond a high COCROI, there’s a few known tips and tricks:
Find problems that are easy to fix. Did you know a house with a bad smell is one of the easiest to fix but drives away 99% of the competition? If you’re willing to hustle, then the bad smell becomes the smell of money. The same is true for bad roofs, messy gardens or poor interior design (a wall between a kitchen and living room can be knocked down to create a more appealing open space plan).
Place competitive offers. Another rule of the road is that if more than 1 in 10 of your offers get accepted, you can know you are offering too much. With a bit of patience, you’ll likely get a better price for a property.
A hidden third bedroom. Turning a property from a two bedroom into a three bedroom can immediately increase its fair market rent. Look for large storage rooms or big bedrooms that can be split in two (for example).
Up and coming areas. Looking for "up and coming areas'' where young professionals are flocking / gentrification is occurring can be a good way to find an area where growth will outstrip the regional average.
⚠️ Next Steps
We cannot just consider the advantages. Join us for Part 2 on Wednesday, where we will discuss disadvantages and our approach here at Market Meditations to rental and crypto portfolios. Only then will you truly be ready to consider rental property investing.
To receive Part 2, make sure you are part of the FREE Market Meditations Community. 🧘 Free subscribers get full access to:
6 clear, concise and actionable newsletters a week
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Trading education and self improvement
📱 Tether: Weird or Wonderful?
The supply of the stablecoin Tether (USDT) has been flat since the beginning of this month, according to The Block's Data Dashboard. No growth in USDT suggests that there is currently no demand for the stablecoin in the market and there is no new money flowing in.
Tether CTO Paolo Ardoino told The Block that USDT's demand has been impacted because of a "significant decrease" in open interest for bitcoin futures in recent weeks.
The recent bearish trend of the crypto market appears to be the main reason for the lower amount of open interest in the bitcoin futures market.
Ardoino told The Block that stablecoins are issued pursuant to market conditions, and therefore the supply of them ebbs and flows.
Indeed, not only USDT but the supplies of other stablecoins have also been leveling off in June, as can be seen from the chart above.
Compared to fiat money, stablecoins allow crypto market participants to move faster between crypto exchanges as fiat money transfers can take days. Also, not all exchanges support fiat on-ramps, leaving stablecoins and other cryptocurrencies as the only ways to trade across all exchanges.
On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.
Tuesday, 22nd June
🏁 Kusama Parachain Auction
The first Kusama Parachain Auction, a market-efficient way of selecting which parachains will be added to the Kusama Relay-chain, ends on June 22. To learn more about what these auctions are and how you can get involved, please read this letter.
🇺🇸 Federal Reserve Talk
Chairman Jerome Powell will discuss the economic recovery on Capitol Hill. Expect many questions about their plan to raise interest rates in 2023.
🎧 MM Podcast Release #79 How to Trade Like a Pro with 20 Year Veteran Mr Anderson
Mr Anderson is a veteran trader on twitter who has been trading for over 20 years.
Wednesday, 23rd June
🔷 Daily Interest on NEXO Tokens
Until this day, all NEXO clients will have 1% cashback when buying the native token on the Nexo Exchange.
Thursday, 24th June
🎉 Binance NFT Marketplace Launch
On June 24, Binance NFT will launch with an inaugural “100 Creators” program that features content from local artists and creators from around the world.
💎 Crypto.com DOT Exclusive Campaign
Final day of the campaign. Users who deposit DOT before this day have a chance to win a share of the prize pool. Prize pool: USD 20,000 of DOT (Rank 1 winner will receive USD 1,000 of DOT).
Friday, 25th June
👽 Alien Report
Part of the $2.3 billion coronavirus relief package passed back in December included a requirement for the Pentagon to deliver an unclassified report on unidentified flying objects (UFOs) to Congress. The Alien report is due on Friday.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.