Thread by @IIICapital

1/ #Bitcoin is certainty in an uncertain world.

This thread contrasts the certainty of Bitcoin’s immutable scarcity with the macroeconomic uncertainty associated with record-high inflation.

2/ Bitcoin is different from all other assets (crypto and traditional) due to its unique property of immutable scarcity.

Unlike other commodities, Bitcoin has a predetermined algorithmic supply schedule that cannot be changed.

3/ The 2015 - 2017 Blocksize War revealed just how immutable the Bitcoin protocol really is.

A large number of corporations and miners supported a Bitcoin hard fork that would have changed key consensus rules (block size).

4/ Bitcoin users (node operators) were able to resist consensus-altering changes and upgrade the network in a backward-compatible way.

5/ This battle set the precedent that Bitcoin is highly resistant to any changes that could alter its value proposition of being perfectly scarce, portable, durable, divisible, and fungible.

Bitcoin is a Schelling point on a set of rules with no rulers.

6/ There is no second best when it comes to money.

This has become abundantly clear as trillions of US dollars continue to be added to the money supply, driving inflation to historic highs.

7/ Bitcoin’s new supply issuance, by contrast, continues to be Halved every 4 years, as expected, with the most recent Halving taking place in May 2020.

8/ Not only is M2 growing at a rapid rate, but on April 12th, the CPI came in at an elevated 8.5% annual increase.

Prices in the Consumer Price Index have not risen this fast since 1981, over 40 years ago.

9/ Even more concerning is the level of inflation being seen by producers. Below we can see the Producer Price Index (PPI) over the last 40 years.

PPI is currently at 15.2%, and the only time it has ever been higher was for two quarters in 1974.

10/ Progressively lower interest rates since the early 1980s have enabled consumers, corporations, and governments to borrow more and more.

Over the long run, this creates a highly fragile financial system.

11/ You can see the relationship between CPI (white) and the price of WTI crude oil (red).

When oil prices rise, the cost of transporting and manufacturing goods rises. This only exacerbates the ongoing supply chain issues.

12/ Amidst such massive uncertainty, consumer confidence continues to take a hit.

The metric, calculated by the University of Michigan, currently sits below the local low in March 2020, and it is approaching a level not seen since the 2008 financial crisis.

13/ On top of high inflation, the yield curve is inverting.

Investors expect the Fed to increase interest rates in the short term so much (to fight inflation) that it ends up squeezing credit, causing a recession and ultimately leading to lower interest rates in the future.

14/ Last, US Public Debt to GDP is at record highs.

Historically when this occurs as the global reserve currency, governments don’t actually default on their debt, but they end up paying bondholders back in printed, less valuable currency.

15/ Bitcoin, like gold, is a hard, scarce commodity with no counterparty risk, meaning if you hold it yourself, you do not have to trust any other entity to custody (like gold), pay you back (like fixed income), or successfully run a company (like equities).

16/ Not only does Bitcoin have superior monetary properties compared to gold, but it is also disruptive new technology. This tech is starting to gain traction at the same time as incoming supply is exponentially decreasing.

By 2030, ~ 97% of all Bitcoin will be in circulation.

17/ If you want to dive deeper into this Blockware Intelligence Report, look here.

Special thanks to @blakedavis50, @WClementeIII, @MitchellHODL, @warrenroge, @s_chwarzynski, and @Mason_Jappa for co-authoring and supporting the team on this piece.

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