12 November 2021.

“The restaurant is shut because we can not hire staff” apologised the manager of a smart hotel in Porto. This piqued my interest as I have never in my life heard this before. She explained that the minimum wage is only slightly higher than the welfare cheque and so young people do not want to work in the F&B industry. The same story is now prevalent in the US and the UK and even China. Millions of young Chinese believe the best form of passive resistance against China’s extreme work culture, high taxes and an income to house price ratio of 27x in the larger cities is Tangping or ‘lying flat.’ Perhaps too much welfare has made people lazy in the West. Perhaps the monastic experience of the Covid lockdowns has caused people to renounce the rat race. Certainly, the demise of the ponzi scheme debt-plus-interest-fiat monetary system will be accelerated if young people start to think like this. And what is it that these young people spend their day doing?

Enjin

The superb quality of today’s games and over a billion regular players explains why the computer game industry is larger than film and music industries combined. A superb essay by Piers Kicks entitled ‘Into the Void’ projects the likely course of the ‘Metaverse.’ Kicks argues that Nakamoto’s invention of Bitcoin and with it the concept of digital scarcity unlocked the vast investment potential of the gaming universe. Non Fungible Tokens means that players can own the items in their game worlds and trade them. After much research into the investable surface of blockchain based gaming universe, SCF invested ~5% of NAV into Enjin in early October due to its promising fundamentals, meeting the SCF liquidity requirements and an excellent technical analysis set up. We believe that ENJ/USD specifically will continue to  outperform in the near term and the crypto gaming industry generally will dramatically grow for the foreseeable future. Many young people may be ‘lying flat’ but they are creating and populating new universes where they are writing the rules in their own favour and to their own liking. 

The Mayor of New York

Eric Adams, the mayor elect of New York City has promised to take his first three paychecks in BTC and claims that “NYC is going to be the center of the cryptocurrency industry.” Presumably, he wishes to compete for business with the Mayor of Miami, Suarez, who has created Miamicoin. This legitimacy of association adds fuel to the current crypto bull market. It also makes the future government crackdown more complex. To reiterate, the current financial system is so  incredibly favourable to governments and financial elites, it seems unlikely that they will simply let it be replaced. We continue to believe that the current cryptocurrency bull market will crescendo in the spring of 2022 and yet it will attract the ire of powerful governmental forces, eager to demonstrate their control and extract their tribute.   

October’s Price Action

October was generally positive for cryptocurrencies and SCF. As stated in the previous newsletter, we were confident that the Bitcoin Dominance Index (BDI) would increase for the first few weeks of October and was ~70% long BTC. SCF had a target of 47% for BDI and then partially rotated in favour of  ETH and a selection of alt coins. On the 20th October, BTC and ETH both broke their all time high’s causing SCF to go leverage long on both, only to be stopped out a few days later. SCF’s trading system is designed to catch the breakout moves and being whipsawed like this is the cost of doing business. This took a little bit of shine off an otherwise well traded month and we remain bullish for the month of November.