😱 Bitcoin's "Halvening" is upon us

Tuesday, May 12, 2020 by Robinhood Snacks | Disclosures

The Halvening

Dow Jones
24,222 (-0.45%)
S&P 500
2,930 (+0.01%)
Nasdaq
9,192 (+0.78%)
Bitcoin
$8,724 (-0.21%)
10-Yr US Treasury
0.702%

Hey Snackers,

After Netflix & Chill'd, Ben & Jerry's and Netflix are teaming up again for an aptly-timed new ice cream flavor: Chip Happens is a "cold mess of chocolate ice cream" with... wait for it ... potato chips. It has just been released in a "limited botch." Betcha can't eat just pun.

Markets were relatively still yesterday. The tech-heavy Nasdaq Composite outshone the S&P 500 and the Dow, gaining 0.78% to cap off a 6-day win streak (its longest this year).

Sue
1. Elon vs. California: if Tesla can't restart production, it might ditch the Golden State

Just got Elon'd... Tesla has officially filed a lawsuit against Alameda County, CA. The e-car hotshot says the county's order to keep Tesla's Fremont factory closed is unconstitutional, and threatened to leave California altogether:

  • The federal gov left reopening up to states — California allowed a phased opening of some businesses (including manufacturing) starting last Friday. But CA Gov. Gavin Newsom said local governments can keep stricter lockdown rules if they want.
  • Tesla argues Alameda's decision to keep closed is arbitrary — Tesla's distribution facility in nearby Lathrop has been allowed to operate. But Elon's beef with lockdown orders goes wayyy back to early March.

"Frankly, this is the final straw"... In a tweet-storm, a spurned Elon said Tesla will move its operations to Texas/Nevada immediately. But a Tesla exit would be a loss for California:

  • As one of the largest manufacturing employers in California and the only big CA-based car maker, Tesla created 51K jobs for the state (its Fremont factory alone employs 10K workers).
  • A Tes-xit would lose CA some serious tax $$$: In 2017, Tesla generated $4.1B in direct spending in CA — Elon could also save billions in taxes by moving Tesla HQ to Texas or Nevada (where state taxes are lower).
THE TAKEAWAY

Big biz has sway over local government... While local government officials might overlook Elon's child being named "X Æ A-12," they'll have a harder time ignoring the loss of an economic powerhouse. Also, other CA companies could follow Elon's lead. Tesla knows this, and Elon ordered a restart of production in defiance of the public health order on Monday. Tesla has economic incentives to ditch, but risks losing concentrated engineering talent of the Bay Area (and local love).

Acquire

Amazon and AMC sittin’ in a tree... M-E-R-G-I-N-G. Just as unconfirmed as that 2nd grade rumor about Billy and Sally, but more interesting. According to British tabloid Daily Mail (which we take with large grains of salt) Amazon is considering buying AMC. This potential melange piqued our acquisition fantasy (and made AMC stock soar 30%). Here's what Amazon could get:

  • (More) Influence: With 11K+ screens, AMC is the largest movie theater chain in the world — this would provide Amazon (even) more global reach. AMC also exerts significant influence over movie studios and execs (see: Trolls sequel drama).
  • (More) Prime benefits: Amazon could provide discounted movie tix for Prime members and/or free screenings for Amazon Studio-made films. Netflix bought movie theaters in NY and LA to screen its own films, but on a much smaller scale.
  • Also, Amazon is richer than ever on soaring sales, while AMC's stock value has collapsed 30% since late Feb — so it would be acquirin' at a discount.

Amazon wants it all... This reported acquisition can also be explained by Amazon's proclivity to world domination. It dominates ecommerce, it leads in cloud computing, it took on streaming, it birthed Alexa, and it even got into the grocery game. Now it would be coming for movie theaters.

THE TAKEAWAY

But maybe AMC isn't the best acquisition target... Amazon's other physical retail-acquisition (Whole Foods) hasn't yet achieved its "affordable for everyone" promise, and Amazon's grocery operation is still lagging behind major retailers. Also, AMC is saddled with almost $5B in debt and a loss-making biz — that would become Amazon's problem if Bezos snatched it up.

Cut

Not a horror movie title... The Halvening. Bitcoin’s long-awaited block reward halving — the 3rd ever since the cryptocurrency's creation — happened (halvened?) yesterday. The reward for verifying a block of Bitcoin transactions has been cut in half from 12.5 Bitcoins to 6.25 (at $8.7K/Bitcoin, that's a $54K reward). A little background...

  • When bitcoin was created by the mysterious "Satoshi Nakamoto," he/she wanted to make sure people wouldn't use it fraudulently (like using the same coin twice), because then it could become worthless. Enter Bitcoin miners...
  • People "mine" Bitcoin by using a massive amount of computer power to verify the legitimacy of transactions on the block. With Bitcoin, there's no central bank to validate transactions (no Chase updating your latte purchase in-app) — so miners are critical.
  • Miners get rewarded in Bitcoin for successfully adding a block of transactions to the chain (aka updating "ledger").
  • Every 210K blocks (around every 4 years) the block reward is cut in half — in 2009 it was 50 BTC, in 2012 it was 25 BTC, in 2016 it was 12.5 BTC — now it's 6.25 BTC.

Curb your crypt-thusiasm... In addition to verifying the legit-ness of transactions, mining also introduces new coins into the system (like a central bank controlling the printing of $$$, but decentralized). Enter Satoshi's halving rule...

  • Halving the reward is a way to prevent inflation and control this new supply of bitcoin — slowing the creation of coins helps stabilize price.
  • Today, about 18.4M bitcoins have been mined out of the 21M that will ever be created — in 2140, all 21M coins will have been mined.

THE TAKEAWAY

It's all about getting "priced in"... This event has been on calendars since 2016 and Halvenings have happened before. If all investors in the market know that same information (like they did), then they probably already reacted and planned for the Halvening beforehand. That means the event was “priced in” to the current price, so in theory the Halvening shouldn't move the price much — and it didn't. The price of a Bitcoin just inched down yesterday.

What else we’re Snackin’
  • Snacky: Pepsi launches a direct-to-consumer snacks website to cash in on online grocery demand (think Cheetos and Doritos delivery).
  • Test: The FDA grants emergency use authorization to Abbott Labs for its new coronavirus antibody test — Abbott plans to ship 30M tests this month.
  • DJ: Spotify launches a shared-queue feature called Group Sessions — now you don't have to fight for aux cord control at the (quarantine) party.
  • Drive: Online used car seller Vroom has reportedly filed for an IPO — it hopes to go public in June (though no one's really going for it right now).

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Snacks Daily Podcast

We dive deep into the spicy, Tweet-filled battle between Elon and the state of California. We have entered peak "Musks" season.

Listen to our 15-minute podcast on Apple or Spotify.

Tuesday

Disclosure: Authors of this Snacks own shares of Amazon, Tesla, Spotify, and a Bitcoin

ID: 1183237

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