Most people think BTC is going to pump from a Zimbabwe esque hyperinflation.

But the opposite is going to happen

We're on the precipice of a deflationary crisis....and this is why BTC will pump

Here's why: Debt has peaked and is beginning to turn.

As people deleverage, this suppresses inflation bc income goes to debt servicing instead of goods & services.

This is why the fed can pump $4tn into the economy and CPI doesn't budge.

Early stage crypto has become completely incestuous: this is the CELR ICO page

- $30m spread out over > 48 firms
- At least 5 other ICOs investing. Those same VCs invested in those ICOs too...

This does two things: 1. Valuations of SAFTS overinflated compared to liquid tokens

Most funds don't have the sophistication to manage a long / short liquid book and are more comfortable with VC like deals

ICOs also need somewhere to put the $$ they raised and the easiest thing to do is buy more

The USD is going to turn into monopoly money faster than people realize

People are starting to say 'deficits don't matter' just as they matter more than ever

Owning a non fiat store of value is more important than ever

In 2022 the govt officially turns into a ponzi

Here's why Debt and deficits are rising faster than ever

Deficits just surpassed $1tn. They're not slowing down

The $20tn trillion Treasury market was the $10tn trillion Treasury market a decade ago

The state wasn't created to escape a "nasty, brutish life". The state grew bc it could tax and appropriate grains

Walls were to keep inhabitants in as much as they were to keep invaders out

Agriculture didn't necessitate the state. The state required agriculture Sedentism appeared 4000 years before the state. The conventional story of states arising as soon as agriculture was created is wrong

Sedentism itself was not necessarily forward progress

Pre state barbarians lived happier, healthier and freer lives than earliest state citizens

Cramer in 2000, days before the collapse:

"throw out all of the matrices and formulas that existed before the Web....they can't make money for you anymore, and that is all that matters. If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.” This is similar to "cryptonetwork valuation thinking

Null hypothesis should be that the status quo is unchanged: assets are worth discounted future cash flows

Errors with tech valuation weren't because of a lack of tools but bc of errors predicting cash flow and new biz models

i'm long web 3 if it means decentralizing trusted 3rd parties

but IMO every attempt on a b-chain is not close to what it'll ultimately look like

progress in crypto is just inertia --Iterating on existing b-chains just for innovations sake

nobody questioning the premise itself what if the right model to create a censorship resistant web isn't on a blockchain with a native token?

most goals can be accomplished with existing software. Do people forget the whole p2p wave?

governance of OSS already exists and so do distributed protocols (DHTs, IPFS)

People in crypto need more Sowell

His insight between constrained & unconstrained visions underlies the main differences between BTC and other cryptocurrencies

BTC represents ideas of the American Revolution. Other CC's represent the French revolution..

Constrained vision sees evils as derived from inherent limits to choices. The unconstrained sees evils as institutional failures

Inequality for ex:

Constrained vision sees hierarchies as inherent. Unconstrained posits better institutions would lead to equality of outcome

Vitalik has this backwards. A blockchain isn't inherently secure. It's only secure bc it has a network of miners devoting significant $$ to it

Theyre only doing it bc they want the monetary asset it supports

The better the money the larger it is and more secure the blockhain is

https://twitter.com/VitalikButerin/status/1072158957999771648

First, every resource should be dedicated to making the largest monetary asset possible

Then we can leverage that winning blockchain later on for some interesting tangentially related use cases -- once theres 99.99999% uptime and a secure globally distributed network

Your weekly dose of "I need to buy a bunker" Market Reflexivity:

Pensions account for their future liabilities by discounting them at an est. return.

Most are projecting +7%/yr, but if you drop to 4%, CA's liability, for instance, goes up by $200bn

https://twitter.com/HayekAndKeynes/status/1061643721861677056

They sure as hell can't get that from treasuries with rock bottom rates.

And GMO is predicting *negative* 7 year returns for most stocks

So what do they do?

We're going to see some more Central Bank cognitive dissonance: they ridicule BTC but own substantial amounts of gold.

Why? BTC is out of their control and gold isn't

This past month CB's purchased gold at their highest rate in 3 years The gold market is extremely opaque

@jkylebass took $1bn gold delivery and figured out that the COMEX was fractional. They had ~$80bn of open interest and $2.7bn in the warehouse

Some believe CBs manipulate gold price through these futures. No comment

Another "holy shit, everything is going to implode reflexivity" in the markets

Until 2015, our budget deficit was funded by foreigners -- meaning they bought our credit

Since 2015, it's been financed largely by domestic private investors like pensions & households Also in 2015, our deficit reversed trend and started increasing again -- now headed to $1tn

There's no sign that this will slow down. Trump likes big things. He's getting a big ass deficit

Many BTC-ers are living in a naive echochamber. The narrative needs to be refined for BTC to win.

We’re on the precipice of a monetary regime change where central bank confidence is eviscerated.

Theoretically, BTC should shine due to its scarcity. But as it stands it wont As it stands today, large financial institutions will not allocate to bitcoin in a crisis. The unfortunate truth is that gold is still the schelling point for global monetary instability

And the real monetary oracles will continue to beat the gold drum when this comes to bear

Early stage crypto is extremely crowded. There are 3 consequences:

(1) It’s a great time to be an early stage founder-not investor
(2) Builds a leveraging cycle that drives up valuations
(3) Creates a large dichotomy between early stage private and later stage liquid valuations Why is this happening?

(1) SAFTs are attractive to investors because they feel similar to SAFEs--which investors understand

(2) Recent LP capital has gone to funds that will largely focus on early stage.$300m to a16z + $400m to Paradigm (i know they'll hold some liquid assets)

1/ Central banks around the world are turning the markets into the DMV. Inefficient, slow, full of unqualified 16 year olds trying to get a license

CB asset purchases and interest rate manipulation have distorted the pricing and information function of markets 2/ Bc. the stock market is so critical to capitalism this has profound 2nd order effects

Mises: "A stock market is crucial to the existence of capitalism and private property. For it means that there is a functioning market in the exchange of titles to the means of production”

The best founders & companies solve their own problem

But when bubbles form people use the momentum to solve other peoples alleged problems with the new tech most dont understand

In crypto a high % of dapps are purportedly solving a big problem that they themselves dont have When you're decentralizing your taxes or Iced tea or supply chain and putting it on a blockchain, is it because you feel underserved from the centralized tax market or because TAM research led you to believe this was the best area to capitalize?

In most cases it's the latter

From the history of bearer instruments it couldnt be clearer that govt's will be hostile to cryptocurrencies. Bearer bonds were prohibited in 2010, Liberty dollar, e-gold, etc.

When you add a token to a crypto-protocol, it transforms it from "interesting tech" to govt nemesis

https://twitter.com/panekkkk/status/1035197562599428096

People who don't understand this optimize for "features".

People who do seek to optimize for resilience and the cost to run a full node, because they recognize that we're flirting with the boundaries of the law (if not today, we will be)

investopedia.com/articles/bonds…

Price declines are necessary & beneficial.A CC can only win with resolute buyers /holders. Dips test conviction and ingrain indispensable dip buying behavior

If the raison d'aitre of a CC is gains, it'll fail when price inevitably falls.The change in top10 since 2013 shows this Monetary assets have extremely strong reflexivity. The lower they go in mcap, the less useful they are. Holders and dip buyers are necessary to reverse this process

Assets without a strong ideological base disappear. There's not enough conviction to step in and buy the dip

A very shortsighted statement from Krugman — especially with CB balance sheets over $10tn. History has largely been a series of government driven inflations.

In fact, the only periods of restraint have ever been when the government was handcuffed through using a sound money Out of fear we’re persuaded into believing a govt monopoly on money is necessary to preserve financial markets.

Since the last ties to the gold standard were broken in 1971, governments have expanded precipitously by way of deficit spending, into almost all facets of life.

It's been a year since bcash launch. It has been an irredeemable failure.

Since then only 1,400 out of 62k blocks, or 2.2%, have been over 1mb

With Segwit, BTC blocks can be ~4mb. Only 193 BCH blocks have ever crossed this threshold

Only 1 month had > 10% of blocks over 1mb Despite the smaller block size and two of the largest institutions pushing BCH (ahem coinbase and bitcoin.com), BTC USD txn volume is 20x BCH's.

Analogies are dangerous b/c they displace explanatory theories - esp. b/c people are terrible at comparisons

When people can't think scientifically they substitute in analogies and are guided by bad comparisons instead of good explanations

And bad analogies created this bubble

https://twitter.com/spencernoon/status/1016713147036655616

Yes, many great apps had a bad UX at launch--but so did shitty ones. This does nothing to help explain or predict their success.

Instead of comparing the UX of Augur to the UX of FB, people should be trying to logically explain and predict why an app should work / accrue value

BTCers defend high fees as a sign of adoption. This same defense can't be used for ETH

BTC fees are a function of $$txn value and thus network value. ETH fees, OTOH, are based on smart contract calls, not necessarily $$ sent

ex/ Fees recently spiked without USD volume increase The recent avg % fee spike without accompanying USD volume increase, isn't a good sign for the sustainability of demand IMO.

As other platforms launch "dApp contract calls" will be much more commoditized and this demand will move to other platforms if the fees are too high