💰 Bitcoin's big $40K

Friday, January 8, 2021 by Robinhood Snacks | Disclosures

Roblox's non-target audience

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Hey Snackers,

We're still reeling from Wednesday's appalling attack on the US Capitol. But White House resignations and calls to remove President Trump from office via the 25th amendment didn't fluster investors, who were looking ahead.

Stocks notched record highs yesterday, as Congress confirmed Joe Biden's election. The Nasdaq soared past $13K for the first time. And Bitcoin deserves a full story...

BTC
1. Bitcoin's Big $40K: we're breaking down possible reasons for the epic rally

Off the (block)chain... Yesterday, bitcoin topped $40K for the first time, more than doubling in value in the span of a month. The record price pushed the total value of the cryptocurrency market above $1T (also a first) — bitcoin makes up around $700B of that, and has nearly 5X'd over the past year.

Call it institutional FOMO... Bitcoin was launched by the mysterious "Satoshi Nakamoto" in 2009. But it really took off in late 2017, when it tripled from September to December — but then fell back down to earth. That rally was mainly driven by individual retail investors (and their FOMO). This time around...

  • Big institutional investors like banks and hedge funds got the FOMO bug, too. MassMutual Life Insurance invested $100M in bitcoin just last month. But that's not all...
  • Mainstream investors have more access to bitcoin than ever, with fintechs like Robinhood (aka: us), Coinbase, Square, and now even Venmo-owner Paypal offering crypto trading. Paypal also announced plans to let users shop/pay at 26M merchants with crypto.
  • Well-known investors like Paul Tudor Jones have come out as "bitcoin believers," inspiring bit-confidence in retail and institutional investors alike.
THE TAKEAWAY

Bitcoin's superpower = anti-inflation... While bitcoin tends to be volatile and crash-prone, some investors see it as a hedge in case the US dollar loses too much value and prices soar (aka: inflation). ICYMI: The Fed’s money printers have been blasting out dollars to inject back into the economy. More dollars = less demand for dollars = less valuable dollars = potential inflation — oh, and the national debt is at $27.7T. Meanwhile, bitcoin's supply is capped: today, about 18.5M bitcoins have been mined out of the 21M that will ever be created (by 2140). But in theory, cash can be printed endlessly, increasing the risk of inflation.

Play(date)

Diamonds on my Roblox... Online gaming company Roblox just raised $520M from private investors ahead of its public debut, leveling it up to a $29.5B valuation — that's more than 7X its February 2020 valuation. If you haven't heard of Roblox, that's probably because you're over the age of 15. It's basically the YouTube of user-created games, except it also lets you play/chat with friends. Roblox launched in 2006, but exploded in 2020:

  • ~75% of American kids ages 9 through 12 now play Roblox. Homebound tweens flocked to the platform for virtual playdates and b-days.
  • Roblox now has more than 31M daily users, up from 18M in September 2019. It's still losing money, but sales grew 68% in the first three quarters of 2020 (from the same period in 2019).

But how does it make those Ro-bucks?... With Robux. While games are free, kids pay for virtual currency to upgrade their avatars or get super powers. When someone spends in-game, Roblox gives a 24.5% cut to the game's developer. In exchange for all of that content, Roblox shoulders the app store and cloud hosting costs, providing a free (popular) platform to develop games.

THE TAKEAWAY

IPOs are losing points... Roblox was planning to go public through a traditional IPO. Then it watched Airbnb and DoorDash shares open on the stock market at roughly double their IPO prices, and said "no thanks." Companies that are going public only raise money when they sell to VIP investors in the IPO — so Airbnb and DoorDash didn't benefit directly when their shares soared post-IPO (if anything, they lost out). So Roblox has chosen to use a rare Direct Listing, where no new shares are created. This cheaper, faster option is becoming more common as IPOs lose favor.

What else we’re Snackin’
  • Blocked: Facebook's Zuck says Trump will be blocked from FB and Insta for at least the next two weeks (aka: Biden's inauguration day).
  • Shots: NY's Governor Cuomo revealed plans to back mobile sports gambling in the state, sending DraftKings stock higher.
  • Max: Boeing agrees to pay $2.5B to the Department of Justice to settle a two-year criminal conspiracy probe on the 737 Max crashes.
  • Battle: Yum Brands' KFC enters Chicken Sandwich War II by launching a new premium sando nationwide (yes, another one).
  • Vaxed: Moderna's Covid-19 vaccine was approved for use in the EU, making it the second vax to be authorized there after Pfizer's.
Snacks Daily Podcast

Victoria’s Secret's parent L Brands' stock is at an all-time high thanks to... scented soap.

While Vicky's struggles with falling sales, Bath & Body Works is cleaning up the L Brands name with extra-strong holiday sales growth. Just don't call it "Bed Bath & Body Works."

Friday
  • US unemployment rate released

Authors of this Snacks own shares of: Moderna

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