2021.24 - Inverted
TLDR:
The world according to Bitcoin seems upside down right now. The case for Bitcoin has never looked stronger but you wouldn’t know it from looking at the price or the behavior of some players.
THE STANCE
My personal opinion on where the ball might be heading.
If you’ve learned everything you know about Bitcoin from the mainstream media, you may think Bitcoin is mined by boiling polar bears in China.
The reality is less grim and a lot more nuanced.
By encouraging Bitcoin miners to leave, the Chinese government may have made the decisive geopolitical blunder of the century.
If Bitcoin doesn’t fail, it will become a new source of power analogous to having abundant natural resources, a powerful military or intellectual capital.
To voluntary relinquish the global lead in mining seems a colossal mistake for them and a huge win for Bitcoin. The resiliency of the network will increase as mining becomes more distributed and one of the preferred sources of Bitcoin FUD (China mining bad) will be gone.
Energy usage is a complex topic and if you are concerned about Bitcoin’s energy footprint, there’s a lot of material that you can wade through including this excellent article: Bitcoin Mining and the Case for More Energy.
TLDR: Channeling energy is synonymous with human flourishing and Bitcoin —through the introduction of new economic dynamics into the production and consumption of energy— may trigger a new era of prosperity.
Why?
While no one knows for sure, the purported reasons seems to be a combination of tamping down on corruption and a desire to impose their surveillance coin CBDC on the Chinese population, but it seems uncanny that they would be so short sighted. Other motives may well be lurking beneath the surface, we will have to wait and watch to find out.
LONG BITCOIN
Recent news that keeps me bullish on Bitcoin —"long / bullish" means you have the expectation something will rise in value.
A Billion Reasons
On the heels of announcing it would buy an additional $500M in Bitcoin through the emission of a bond, Microstrategy decided to give itself the option of issuing up to a Billion dollars’ worth of new shares in the future.
@Macroscope offers an interesting perspective on what this could mean:
Tale of Two Banks
Two supranational banks had very different reaction to El Salvador’s plans to incorporate Bitcoin as legal tender
BCIE Plays Ball
The Banco Centroamericano de Integración Económica —whose charter is to promote the economic development and integration of its fifteen members— signaled its support for El Salvdor’s decision to adopt Bitcoin
World Bank Clutches Pearls
The World Bank —an ill-functioning and opaque organism suspected of being complicit in all manner of global problems— claims they are too holy for Bitcoin.
It seems the joke may be on the World Bank however, as their charter may mandate them to comply with the request.
BBVBTC
In another bit of mixed news, BBVA is starting to roll out Bitcoin for some private banking clients in Switzerland. This is, in general terms, positive news but as Caitlin Long hints at below, traditional banks are used to working with fractional reserves and rehypothecation (loaning out more than they hold in reserve).
One hopes they are clear that it would be suicidal to do this with Bitcoin, if they are not, things could get ugly for them.
CRYPTO WARS
crypto- | ˈˌkrɪpˌtoʊ | concealed; secret.
The monopoly over fiat money will not be given up without a fight.
China Fumbles
Without a doubt, one biggest news items this week was the exodus of Bitcoin miners out of China after the government vowed to impose much stricter regulations on several aspects of the cryptocurrency.
While these actions may prove a minor inconvenience (slower blocks, higher fees) over the next few weeks, this is such a gift for Bitcoin in the long term that it’s hard to comprehend
Goldman Enters Chat
Goldman has once again changed its mind on Bitcoin and decided that it is an asset class after all and will begin trading Bitcoin futures (Galaxy Digital to provide liquidity).
Apparently two commonly held belief are :
Where Goldman goes, the rest of the financial markets follow
Goldman entering an asset class is rarely good news for the asset
So, we’ll have to wait to see where this one lands.
Ironic
This one was just too apt not to share
SHORT FIAT
Recent news that makes me bearish on the legacy financial system —"short / bearish" means betting it will go down in value.
Bass Ackwards
Seems Jamie Dimon has a sense of humor, and the punchline is that people actually listen to him.
If you are new to the concept of inflation, the central point is this:
Your money is worth less as time passes.
In an inflationary scenario you want to trade your cash for assets —which usually appreciate in price— because your cash will be worth-less tomorrow. So Jamie is basically telling you something like: “you should buy fidget spinners because they’re going out of style”.
It. makes. no. sense.
Repo Man
The repo markets are acting up again (they started in 2019)
Look, I’m not going to try to explain the Repo markets here. And I’m definitely not going to try to explain the reverse repo markets (if you are very curious this article describes the situation a little).
What you need to know is that this is part of the financial plumbing and it’s making weird noises. We all know that when plumbing is working it is invisible and out of sight. It doesn’t take a rocket scientist to imagine what’s about to shoot out from the wrong end of a pipe if something goes wrong.
More Weird Noises
Rating agency Fitch says all is well in Canada.
The markets beg to differ.
Greg Foss should be on your radar. Doubly so if you are learning about Bitcoin. He does a great job explaining how the bond markets and Credit Default Swaps (CDS’) in particular can give us a new perspective on the state of the economy. TLDR: The “risk free rate” is not risk free and if sovereigns start defaulting —which they can and do— the potential domino effect would be huge. Bitcoin is the best insurance against this scenario.
happy?
It seems Bloomberg is beating the WEF drum trying to sell you on serfdom.
To the extent you’d rather pass on serfdom, you should be stacking sats.
PRICE DISCOVERY
This is the section where I talk about price with an updated weekly price chart. If this is your first time here, there’s a “how to interpret” guide below the chart.
Price was swimming for the surface but got pulled down again last week. The board is now slightly below the surface of the water. We’ll see if price manages to hop back on.
How to interpret the Bitcoin Surfing chart:
Think of Bitcoin's price-action as a kite-surfer:
Bitcoin uses its board to stay above water and wants to catch some air.
When it catches air, it tends to keep rising but if it rises too fast (it's feet no longer touch the board) it can stumble.
If it falls off the board, it tends to keep falling until it regains its footing (may need to touch water or sand for that).
Water and sand arrest the fall and help it push itself back up.
If it goes up so much that it gets close to (or into) the Stratosphere, it will probably crash down all the way into the sand and may need to tap the bedrock level before pushing up again.
Dip Fishing
The dip fishing chart shows nothing new. We’ve been trawling the “Surprising” levels for over a month:
Could we go under $30k? Sure, the next “hard stop” is at $14.5k
Do I think that’s going to happen? I really don’t but I could be wrong.
Should I wait for a bigger dip to get fully allocated? I wouldn’t.
But what about the “Death Cross”? Previous history clearly indicates price will go up, down or sideways after the cross (if you’ve never heard about the “Death Cross” keep it that way).
Who?
So WHY is the price not rising?
I don’t know and (really) neither does anyone else.
The tweet below, however offers an interesting perspective though. It turns out You can buy Bitcoin “at a discount” right now by buying shares of Bitcoin’s Grayscale trust.
I won’t dive into the details of Grayscale (it’s like a buying a complicated Bitcoin IOU) but the point is that Grayscale owns a ton of Bitcoin, they are one of the few vehicle available for some institutions, and they are currently selling BTC at discount for reasons beyond the scope.
Don’t Chase Price
It seems we will be hanging below $60k for a while, you know what would be a great thing to do while we are here?
Stack Hard, Study harder
If you study Bitcoin hard, you may get to switch from thinking in fiat to thinking in Bitcoin.
Instead of measuring your wealth by calculating the fiat value of your holdings you measure it by how much you own of the new monetary network.
More sats = wealthier, price just takes time to catch up sometimes.
Strong hands are best built TOGETHER.
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