Cryto – the marketing construct that meets a need. Perhaps no theme is as popular among the many macro investor subscription services available than hating fiat money. What’s not to hate? Inflation takes 1-2% away annually according to fuzzy government statistics, or 5-8% if tracking the amount of liquidity growing each year in the system through M2. This seems like more than enough to handle population growth and maybe is instead a way to quietly keep 401K holders content while gradually stealing the value of their savings.
The preferred way to address this seems to be gold for Gen X and older, and crypto for anyone younger.
Also, if we hate money then perhaps we hate companies that are composed of money, which are the banks?
The beauty of banks is that there are smart banks and dumb banks. In its hurry to dislike banks, the macro newsletters are thinking of banks such as Bank of America and Wells Fargo. We can all agree that Wells in its current form is closer to a “dumb bank” and has fallen 50% in 2020 as the market came to grips with this.
Colarion tends to focus its efforts away from these stale ponds and thinks of the sector in the context of Servisfirst, Esquire Financial, Live Oak and others like them.
The folks at MVB Financial in West Virginia are an example of a “smart” bank. CEO Mazza was interviewed for a recent fintech survey and shared that banks are “at risk of becoming taxis in an Uber world” (https://seekingalpha.com/article/4358901-what-gen-z-thinks-banks). He has launched a business to gather deposits and related fees from each Draftkings and Kraken, among other crypto and fintech ventures, and the table below shows the company’s growth in gambling deposits. MVB’s crypto strategy, among other ventures, is an example why the bank is thoughtful about where the world is headed.
Who else is like MVB on crypto?
Silvergate Bank (SI) gets it. They have created an “exchange” for institutional investors to dollar settle crypto transactions, and the market has noticed:
A few others including BankProv (PVBC) and Metropolitan (MCB) are active in crypto as well.
One last company is worth mentioning:
Who knows, we may even see bitcoin on some banks’ balance sheets in the years ahead?
For those of us whose job is to find the smart banks, the understanding and adoption of crypto is one more tool in that kit…