Here’s Why Hedgeye’s CEO Sold All His Bitcoin

Keith McCullough, CEO of a large risk management firm, explains why he’s sold off all his Bitcoin. And why it’s your fault if you don’t agree with him.

In brief

  • Hedgeye CEO Keith McCullough has sold his Bitcoin.
  • This is because the crypto market is decelerating, he says.
  • But he’ll buy again if it picks back up.

This week, Keith McCullough, CEO of risk management firm Hedgeye sold off all of his Bitcoin. Today, he explained why. “It’s not personal,” he said in a blog post. It’s just “RoC Empirics.” Duh! (RoC means return on capital. Empirics mean math).

He said it’s a combination of…who knows. McCullough’s answer as to why he claims to have sold his Bitcoin—how much is unclear—is difficult to parse and appears as vague as any YouTube crypto trader who searches for “Bart Simpson haircuts” and “Golden Triangles” in price charts.

(McCullough’s firm, however, claims to advise risk managers with over $1 trillion of assets under management. It is unclear in what capacity and whether this simply refers to subscribers of his newsletter.)

But here’s a rough translation. He says he sold his Bitcoin for a combinations of “A bearish @Hedgeye TRADE breakdown” and “Rising probability of #Quad4 in Q4.” A breakdown is an explanation and Quad4 is a term invented by Hedgeye. It means that economic growth and inflation are slowing down. Quad4 is bad, and Bitcoin’s price is Quad 4.

Bitcoin in Quad 4!
Step one: Buy Bitcoin. Step two: Sell Bitcoin. Step three: Profit? Image: Hedgeye

This “makes it an easy A/B Tested decision,” or a decision, “to sell some, then sell all.” He says, “Other than Hedgeye Equity, my Real Estate, Wine, and Venture Capital investments, I am not a buy-and-HODLer.” This means that apart from the things Mccullough holds onto, McCullough doesn’t hold onto things. And Bitcoin isn’t on the list.

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McCullough continues, “If that empirical fact or my decision to de-gross and/or sell affects you emotionally, you should really consider why that’s happening to you. When I sell something for a big gain, the only feeling I have is that I am going to pay taxes.” This means that if McCullough has upset you, it’s your fault and he’s rich and doesn’t care.

 

Then, “if Gold and Bitcoin continue to correct in price (they’re already in motion on that since I made my sales), there are no rules in my Full Cycle Investing accounts that say I can’t buy them back.” This means that if Bitcoin’s price increases, McCullough will buy it again.

 

BTC

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BTC Price

 

Of course, only “when my dynamic rate-of-change model signals to do so in the right Quad.” We have no idea what this means, but it all sounds exciting. Meanwhile, Bitcoin’s price shot up by 3% today and is close to breaking $11,000 per coin again.

 

What Is Quad 4?

When inflation and GDP growth are slowing, the U.S. economy is in Quad 4, according to Hedgeye Risk Management

There is a term flying around Wall Street that should scare anyone with money in the market.

“Quad 4.” While it is used to describe the state of the economy, it also has implications for investing.

The term—originated by Darius Dale, co-head of macro strategy at investment-research firm Hedgeye Risk Management in Stamford, Conn.—comes from an investing framework that looks at the trend of two vital economic metrics: GDP growth and inflation. The former measures how fast the overall economy is growing. The latter tells us the rate at which the prices of goods and services are moving.

Keith McCullough, Hedgeye’s founder, says he and his team aren’t focused on whether GDP growth and inflation are good or bad, per se. Rather, they look at whether those metrics are heating up or cooling down.

At any point, inflation can be rising or falling. The same is true of economic growth. When the two get combined, you get a four-quadrant matrix that can be used to analyze where the economy is in the business cycle. That, in turn, can offer insights into which assets may perform best at that time.

When falling inflation coincides with slowing economic growth, the U.S. economy is in Quad 4. Hedgeye sees that commencing in the second quarter of the year. The consumer-price index measure of inflation has slowed over the past three months, according to Mr. McCullough. And the team sees weakness ahead in the U.S. economy, based partly on the component parts of a recent GDP report.

Avoid the 4

This chart grades the state of the economy through two metrics: GDP growth and inflation. Quad 4 is when both growth and inflation are slowing.

“Quad four is the lowest point of the economic cycle,” says Mr. McCullough. When both economic metrics are slowing, then the economy is headed for its cyclical bottom. The last two troughs were seen in 2008 and 2001.

When the economy is in Quad 4, stocks of technology companies and other growth-oriented businesses tend to perform poorly, Mr. McCullough says. U.S. Treasury bonds, gold bullion and utility stocks tend to be better bets.

“Our entire macro research business is based around the idea that you don’t get run over by Quad 4,” says Mr. McCullough.

Brazil, Russia, and about 7 other countries will build on Etherium

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altogether you also have the interest
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from many other countries around the
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world for those of you who have not been
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paying attention or have not seen my
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other channel Brazil Russia and about
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seven other countries have all announced
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that they are going to be building on
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top of a theorem which means that they
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these countries also believe that the
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etherium protocol has some type of it
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has legs it has longevity it’s going to
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be around for quite a bit of time and
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therefore this is why they are actively
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going to be building on it one can
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assume that if countries are going to be
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putting their laws put in their
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information putting their farming
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information and all this other stuff
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that people plan on using for aetherium
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on top of the etherium blockchain they
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are probably not expecting it to going
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away anytime soon
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another case whatever staking that’s
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everything that that basically
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encompasses a huge amount of what’s
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currently going on right now just to
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give you an idea and I needed to do this
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because if I simply said Oh
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like that those noises make no sense but
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what happens is that I say things and
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the people get annoyed so I make sure to
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explain the things as for my final
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answers everyone kind of gets it which
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would I choose the which do I think is
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better this is not clear cut and dry in
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any specific way the idea that Bitcoin
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will remain the number one
15:48
cryptocurrency forever and ever is a
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very popular idea no one knows if this
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is going to happen however there are
15:55
many people who believe that bitcoin is
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going to maintain its number one
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position forever or for the next 20 or
16:02
so years and at that point bitcoins
16:04
price will be high enough then nothing
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will be able to usurp it on the other
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side we have a lot of ideas as to how
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far a theorem could go especially with
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the the pre discussions of what etherium
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3.0 could be about potentially in the
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next five or six years we are currently
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in a situation where there are tons of
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companies there are tons of institutions
16:22
who are building on top of a theorem in
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an effort to whatever the actual case
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might be it depends on what you wanted
16:30
it depends on kind of what you believe
16:31
your long term goals are as far as sorry
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you can hear that noise I do apologize
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it’s just it’s life I can’t help it for
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Bitcoin there are currently not many
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ways to make passive income from Bitcoin
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outside of being able to lend it to
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other people on lending platforms you
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can make a pretty good return on it
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however you didn’t have the idea that
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you have to lend your money out to other
17:02
people in the hopes that they’re going
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to then pay your money back to them the
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other side is that with aetherium you
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simply have the 32 ether if not a little
17:10
bit more or a little bit less whatever
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the case might actually be and you’re
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kind of making your own money by
17:14
yourself the future prediction prices
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that I’ve seen for ether we previously
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before in the past
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hit 1,400 per ether the numbers that I’m
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seeing now with an actual idea that
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aetherium 2.0 is going to launch and we
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end up being able and capable of
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processing tens of thousands of
17:34
transactions per second I’ve seen prices
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anywhere between four to eight thousand
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US dollars per ether
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if you have 32 ether times 8,000 and
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you’re making a 12 percent return per
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year you’re making a fair chunk of money
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that can potentially allow you to live
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on your own without having to really
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work especially if you are minimalist
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and have figured out ways of not really
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having to output too much money the
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other portion of a simply being is that
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bitcoin is Bitcoin bitcoin is being
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adopted by banks institution stock
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exchanges hedge funds retirement funds
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everywhere you kind of look at it
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bitcoin kind of is the name of the
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cryptocurrency market if you kind of
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want to say that I’m sure we may have
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differentiating different ideas as to
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what is going to do what in the future I
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myself this is it’s not difficult to say
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but I can feel people like waiting in
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the comments section like to see what
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I’m going to say so they can like start
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typing I would choose Bitcoin simply
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because bitcoin is Bitcoin it has proven
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itself over the last 11 years the amount
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of times that people have recreated
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Bitcoin the copied Bitcoin made their
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own versions of Bitcoin talked about
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Bitcoin disappearing Bitcoin not being
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able to rise above $200 Bitcoin is never
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going to arrive above a thousand bit
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there’s no possible way the Bitcoin can
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rise above 10,000 and this simple amount
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of interest that we’ve been seeing if
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you don’t know any of this my other
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channel is on the interwebs look at a
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couple of episodes it’s fairly clear
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that Bitcoin is probably not going
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anywhere anytime soon I don’t expect
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Bitcoin to poof or disappear and I think
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it probably has mathematically the
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longest I think it will be around for
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the longest more than other coins that’s
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not to say that he theorem is going to
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disappear I think he theory am right now
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also has a very fair chance of being
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around for at least the next ten plus
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years this is also just me I’m one
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person I do not know the future however
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this is kind of how I feel however I do
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think that they will both do fairly well
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in the future it’s just more a matter of
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as far as if Bitcoin can hit 250,000 per
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coin or half a million per coin in the
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next 10 to 12 years I think that is my
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bet or what I would stick with but then
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again this isn’t an easy discussion or
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topic I’ve had this discussion before
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with a number of really close friends as
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to what they should buy and I’ve thrown
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my hands in the air because I can’t give
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them an answer I have my own ideas as to
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what things are how things are going to
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be it’s the same exact thing when people
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talk about the future of Tesla people
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think that Tesla stock is really going
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to 10x over the next 10 to 15 years well
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I have other people who think that Apple
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or Facebook or Amazon are going to also
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outperform them no one knows this is
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kind of this idea of what is currently
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happening and this is how we base the
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how we base the future I do hope you
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enjoyed I do hope you understood my
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answer I do think that both coins are
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great I think they’re also a trickle a
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trickle a trickle trickle of other
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cryptocurrencies that are fairly ok
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however I do think that these two are
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really at the front as far as adoption
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but that’s not to say that in the future
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we will not see more cryptocurrency
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projects that will also flourish in this
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space I do hope you all enjoyed hope you
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all are having a great day a great
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morning a great after I can feel the
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comments I can feel them I can feel the
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feel the reactions I hope you all are
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having a great day a great morning a
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great afternoon or good evening wherever
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you are wherever you might be I do hope
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it’s absolutely fantastic thank you all
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once again for watching and or listening
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and I will most certainly be talking to
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you all soon see you