Charts >> my thoughts
But one of the under appreciated use cases of this godforsaken app is as a tool to gather, condense & bring clarity to what is a tangle of thoughts
Something especially true for crypto, since noise so often overwhelms signal
So here goes
What’s next BTC?
Musings of the Day, 11/20/22:
I wonder if all this handwringing about $BTC / Crypto as an escape from the fiat system is looking in the rear-view mirror, as Structural Inflation ushers in a new age of interest-bearing FIAT as the best store of value.
Some themes to untangle:
-bitcoin’s utility function
-the liquidity lottery (as coined by Michael)
-inflation & the price of money
-the types of liquidity (hello fiscal)
-tech & the concentration power
-the reach & magnitude of said power
Bitcoin’s utility function:
Top of the list because it is key.
Zero cash flows -> supply & demand reign supreme
Given the below, it seems sensible to focus on demand. Why would people buy?
Put another way: from where is it’s utility derived?
Musing 2 of the Day:
What do $BTC, Oil, and Single Family RE all have in common?
They all currently have INELASTIC SUPPLY CURVES (which tends to dominate bullish discussions), but folks somehow forget about DEMAND.
The Sword of Inelastic Supply cuts BOTH ways.
In my mind, as:
-a hedge against CB liquidity creation
-a hedge against government money creation
-a vehicle for speculation
-a tool to fight against the centralisation of power & the protection of freedom
This process of sorting the signal from the noise is extremely reminiscent of a Fourier transform
Each factor represented by a wave function
Combined: the messy, incoherent output of a complex world
Transformed: a few defined peaks revealed in a sea of noise
I highlight it as important because otherwise it’s almost impossible to articulate what is going through my head
Many sinusoidal waves, coming together in such a way so that peaks & troughs sometimes coincide, sometimes they don’t
Oh, & each of those waveforms fluctuate
It is this dynamic that makes markets so difficult (coupled with emotion: nigh on impossible)
*TIMING IS EVERYTHING*
So many waveforms, with the waveforms themselves fluctuating… Getting timing right is extremely hard
(Just ask Cathie)
With that in mind, and returning to the below utilities (which are a result of such a transform)
It’s worth pointing out that another Fourier transform can be performed, generating two distinct peaks:
-philosophical/hygiene (‘forced’ buying) factors
Our job here is to try to figure out how the given macro waveforms coincide with the philosophical ones
To do this, we must take each component at a time
In terms of the macroeconomic factors, I think the waveforms are pretty clear (certainly in a high timeframe sense):
The state encouraged, QE era malinvestment (exhibit 1 below) leaves governments & CB’s with a choice between:
-very unhappy citizens
-further money printing & malinvestment (‘kicking the can’)
Bulls bank on the latter.
Inflation was *the* risk to that thesis.
Bottom doom posting?
Or is it actually different this time?
Boy do I hope for the former… While suspecting the latter
The house of cards is at its most precarious state in *decades*
If the inflation genie is not successfully put back in the bottle
If the geopolitical setup does not undertake a remarkable transformation
It is, indeed, different this time.
It should be noted that I am no macro expert
But ‘the price of money’ seems likely to be of some importance…
And I do know some things about trends
(This one is a doozy… And it’s why inflation is a *game changer*)
A quick note on the secular trend & @Howard Marks ‘s masteringthemarketcycle.com
I don’t want to go into detail here, but I see the below chart as absolutely crucial
Long term (secular) trends rarely have inflection points, but when they do…
Some times really are different
One interesting & unpredictable dynamic:
I see this as a sort of wildcard for the bulls
*BUT* I think it’s ultimately a weak one. Inflationary impact -> pressure for real yields to remain high -> outweighs the fiat devaluation benefit
The only scenario where I see a benefit for $BTC (in terms of price vs USD) is in the event of a harsh recession
Where the second down leg of the oscillations is unprotected by the CB’s
And governments step in *after things have gone to shit*
Ie I suspect price *falls first*
The reason I’m biased towards the view of recession + curtailed inflation is the relationship between the pandemic, gdp & the below chart
Complex systems tend to oscillate due to a series of over & under corrections, & these oscillations could be viewed as ‘ripple effects’
Ie, bullish *at some point*
Likely after the majority are nursing their wounds
Nb on CB’s and the widely touted ‘pivot’
‘Pivot’ is a broad term
But to add to my likely controversial thoughts that the Fed are not clowns
A factor behind the misuse of QE: the fact that everyone else was doing it
Inflation -> everyone stops -> misuse far more likely to end
Anyway, back to this aforementioned misconception
-The Fed want inflation/don’t want to step in the way of it
-they are (very likely) not clowns who are just ‘behind the curve’
Ie they don’t ‘want to reduce it at all costs’. They want 2). And they certainly don’t want 1) & 2)!
As long as the casino is open: gamblers are gonna gamble
But I think this is more ‘crypto doesn’t die’
Vs a driver of demand signif. enough to outweigh the above
Nb the propensity to gamble is highly correlated to the above. More liquidity -> more degens
it's too expensive for the average man to fly to Macau or Vegas
decentralized casino and/or decentralized ponzi is always fastest horse when we have easy money and macro is risk on
i'm long humans being desperate, greedy, degenerate, lonely, and trapped in the metaverse
*Macroeconomic factors are in a relative trough*
And the inflection in the *long term* trend in yields suggests we have some way to go in this trough
There are people that believe in the need for decentralised money
And there are people that *need* decentralised money
Most of the former already bought
The latter are currently a signif. minority
Demand wise: will a peak outweigh above trough?
Not even close.
Which is why I split the factors into
Many *always* have their philosophical hat on. So far they have not had to worry about the macroeconomic hat.
But they are different and *MUST BE SEPARATED*.
Inflation -> now they must worry
Nb my thoughts are largely condensed into the below thread
Some things that I do not mention:
-for most people this is not a concern *now* (inflation is)
-reversing the concentration of power will be *exponentially harder* than preventing it
Kicking the can is not an option
We live in an era of unprecedented governmental overreach
Tech has altered power structures so that:
- they are more centralised
- their reach is no longer confined to physical borders
And CBDC’s, AI, AR, VR… herald an era where that reach is paired with frightening magnitude
Apt for this period of infl.:
A must read. Milton’s thoughts on *freedom* are as crucial as ever. In fact, even more so.
Re capitalism, a quote that springs to mind:
‘Democracy is the worst form of government… except for all the others we have tried’
I live in a relatively low risk country (certainly for the short/mid term) and yet the below sends shivers down my spine
But, as mentioned… I have to separate what I *want* vs what I think is *likely*
And my prognosis for $BTC price: ‘not great’
The only tech related utility I put forward is in regards to decentralisation
Some very smart people appear to like to point out how crypto is akin to a relatively dysfunctional spreadsheet
They are shouting out the great big, noisy, bloated ball of *noise*
Note: *likely* synonymous because pain is not a *necessary* condition for true adoption
True adoption can also arise because the experience is *notably* better (ask Peter Thiel)
This is, I think, why 6529 is so infatuated by nft’s.
But step 1: solve the scalability trilemma…
See the charts for comments
Ceteris paribus is important: as above, there are many factors at play.
But as of right now… HODLers should probably take note
Things can get a lot worse before they get better
Prior market cycles: people genuinely did not know if crypto would succeed. Another cycle was uncertain. Fear spread easily
Now: web3 narrative, the arrival of institutions & prior revivals (incl 18) -> nobody doubts it is here to stay
A decade ago, I sang this song on Broadway. Today I sing this song, surrounded by new friends, as a rallying cry for the women of web3. Together, we can accomplish anything. And have fun doing it! #WAGMI
PS Look for some fun cameos!
PPS Sorry for *language* at the end
We started from Wall Str guys & family funds licking their wounds in 2008
All the way to Robinhooders on TikTok talking about easy money can sustain a lifetime of travel peak 2022, if you just buy a stock you see go up and sell when it stops going up