Bitcoin & Markets

This episode is a recording of my telegram live stream today. In it I discuss a recent video sent to me by a member on bitcoinandmarkets.com. I took the opportunity to describe how power difference appear in the geopolitical chess board. We get into the history of power, the geopolitics of Athens and Sparta, Britain vs France, why some areas have different cultures and economics versus other places, and finally, where is it all going. Original video: (give it a watch and a like) https://youtu.be/x0Iay1Kp9Vk Full show notes: https://bitcoinandmarkets.com/e249/

This episode is a read through and reaction to Arthur Hayes' recent post about Ethereum's merge from a reflexivity perspective. A summary of my major gripes can be found in full show notes: https://bitcoinandmarkets.com/e248/

Full write up here: https://bitcoinandmarkets.com/e247 In this episode, I react to another Jeff Snider interview, this time on the Mark Moss podcast. In the interview, Jeff response to Mark's questions about why QE doesn't work and is not money printing. I expand on Jeff's points by describing how QE actually handicaps future growth, and in a credit-based system, it also effects growth. I wanted to tackle the specific arguments Jeff makes about elasticity next. Jeff claims that the problem with the current system is the lack of elasticity in economic slowdowns. I think he'd also argue that the response to these slowdowns has an effect of ever getting back to a good economy, where credit is expanding, and where elasticity is high. He claims that lack of elasticity is the main problems we face today. My analysis is nearly opposite.

Member access to the shared Drive with all live streams can be found here. Website show notes: https://bitcoinandmarkets.com/e246 This is day #10 in my 30 in 30 live streams on Telegram. If you aren't in there, you should be. In this episode, I discuss the bitcoin price, stocks, the catalyst for a bullish rally, Ukraine situation, Taiwan and China threat or not?, and Richard Werner on credit-based money. I do expect the bitcoin price to rally along with stocks over the next 6 month back to ATHs. I walk through the below chart for the immediate term. Then I say we need a catalyst to really explode higher, and what could that be? Ukraine update The situation in Ukraine is coming to a head. Back on July 16th in Telegram I wrote about Ukraine developments, in part I said: So, what we have is a coalescing of factors on around a date roughly 3 weeks from now. 1) completion of Special Military Operation goals in Donbas, 2) failure of major Ukrainian southern offensive, 3) diplomatic contact through proxies, 4) energy crisis and civil unrest in Europe, already toppling governments in the UK and Italy, maybe more soon.If there is going to be a ceasefire/conclusion to this conflict it will take place then in my estimation.Wildcard: US deep state has promised to fight in Ukraine until the last Ukrainian. They won't give up easily. This map was floated by Medvedev this week. Taiwan threat? Next, I talk about the Taiwan threat. My basic understanding on Taiwan and China remains the same. China is in a credit crisis and is facing the end of the US-led liberal order that enabled them to grow in the first place. They do not have the ability to project power, period. They can perhaps stop Pelosi from landing on Taiwan, but will not respond. In an unusually aggressive warning from Beijing, the CCP told the US to not let Pelosi visit Taiwan, even as equal EU politicians have recently visited with no problem. I say this is the Art of War, looking strong where they are weak. Why am I confident that China will not invade Taiwan or start a war? They have only a handful of amphibious vehicles, and it would take them 5 hours to reach Taiwan over the open ocean of the Taiwan Strait, with hundreds of precision guided missiles trained on them. Once they land, they'd be alone as the vehicles went back to pick up another group. They'd have to assault a fortified beach defended by people fighting for the home. Last but not least, all the US would have to do to choke out China would be to close the Strait of Malacca to their trade. Bottom line, China does not have the tactical or strategic ability to take Taiwan by force, or take on the US militarily directly. Richard Werner The last segment of this live stream is me discussion Richard Werner's credit-based money theories. I agree with him on a couple things, 1) money is created in the process of making a loan, and 2) a healthy banking system will have more small banks than large banks. Where I disagree with Werner is that he is a Chartalist, meaning he thinks money is created by the State. His prescription for the financial system is to have more centrally directed credit creation. It's as simple as telling the banks to lend to production uses instead of financialization. What he doesn't understand is the financialization is a direct consequence of not having a commodity backing. It is a way of simulating a commodity backing by interconnecting counterparty risk throughout the system. He also doesn't accept that credit-based money does not allow for creative destruction, so the monster continues to grow and runs into diminishing marginal returns on debt. The monster must keep swimming or it will suffocate, but where it can swim becomes more and more restricted. Like a game of snake, where eating the dots makes your body grow. As you get toward the end of the game, there is little choice of where to turn. Your freedom of movement is restricted, you must continue down a now predetermined path. This is credit-based money.

Member video https://bitcoinandmarkets.com/e245-video/ Full show notes https://bitcoinandmarkets.com/e245/ Article read from http://btcm.co/fear-hustlers/ This is a discussion and read through of a recent article that I adapted from last week's rant on the Fundamentals Report newsletter. The main ideas are that we should not abide catastrophism. Cries about the end of Western Civilization are overblown to sell books, get clicks and sell subscriptions for more alarmist macro content. It's not different this time. Economic fundamentals keep the world from spiraling out of control.

Member video https://bitcoinandmarkets.com/e244-video/ Full show notes https://bitcoinandmarkets.com/e244/ As listeners to this podcast know, I've been pretty well convinced of the Eurodollar system framework. Jeff Snider is the primary expert on this field today, and his popularity has started to spread rapidly. Though Jeff is an expert in the current system, his critique of bitcoin leaves room for improvement. In this episode, I breakdown part of a recent podcast he was on where he tried to summarize his opposition to a bitcoin-based system as a replacement for our current credit-based system. Here is the original video. The interesting bit starts around the 54:00 mark. https://youtu.be/fFJK9HwSJ94?t=3295

Full show notes: https://bitcoinandmarkets.com/e243 In this reaction video, I listen to a Chris Martenson from Peak Prosperity in a recent video titled I Give Up. I have the utmost respect for Chris due to his sound money views and priceless expert opinion during the early days of the Corona Virus, but his economic claims about energy and the economy required a response. I cover a lot of ground in this episode, including basic economics of complex systems, the central planning fallacy, US oil production, the peak oil fallacy, and contrast a pessimistic macro outlook and an optimistic outlook. Where, How, and By How Much? A problem with most people's macro analysis is the lack of specificity. They use oversimplified terms and claims that would fall apart upon deeper examination. They would find out the affects of a coming recession on different areas of the world will be different, and they'd have to determine that the US is not in that bad of shape relative to other major economies and blocks. However, they have already determined the US is on the road to massive social upheaval and the end of some perceived unusual period of unfairness. Examining relative economic conditions, and the reasons behind those deep historical differences in economic advancement by geographic region, will not support their predetermined outcome. We must ask anyone preaching a coming global manmade catastrophe, some simple questions. 1) Where exactly will the economic stress by most acute? 2) How will that country or region deal with these acute economic conditions? 3) How bad will it get for them relative to other places? Independent Variables To reach a catastrophic conclusion, one must start by introducing an independent variable into the economic mix. Of course, this is impossible, there are no independent variables in nature or economics. When we compare nature with the market, let us compare individuals to species and the market to the larger ecological system. There are certainly cases where individual species may become endangered or even extinct. And in a market, individuals will rise or fall, even die. However, the entire system is not so fragile to begin a downward feedback loop to zero. So, economic variables will change, but that will have been induced by previous changes, and in turn cause future changes. There are no independent variables in the market. This is important when evaluating Chris' arguments about energy. He claims the energy supply will independently be reduced. He uses charts showing a very close relationship to energy usage and GDP. But instead of inferring that GDP causes energy usage, he concludes that energy usage causes GDP. I hope you see the backward inference. One way supposes energy usage is an independent variable, while the other way views it as a dependent variable. US Shale Oil One of the premises that Chris uses for his argument is a belief in peak oil. The theory is carefully crafted to exclude new sources of oil. It claims that we are running out of easily accessible oil, and production from that easily accessible oil will slowly taper for the next 50 years until we are out of it. As I said though, this theory excludes new sources of oil, like oil sands and very importantly oil shale. In the last 15 years, new technology has come around that has enabled US shale oil producers to economically extract shale oil. This is a very big deal because shale oil reserves dwarf conventional reserves by at least 3.5:1 as of current estimates. The US is home to 80% of extractible shale, estimated to be roughly 4-5 trillion barrels, compared to all of the world's conventional reserves of 1.6 trillion barrels. The problem is also, not nearly as bad as peak oil promoters will have you believe, because conventional oil reserves still tend to increase every year, despite extracting approximately 75 million barrels a day. The above chart stops in 2015, so I'll add the last data point from another source. In 2020, global conventional oil reserves were 1.732 trillion barrels, that is more than 100 billion barrels more than 2015 on this chart. Here is shale's contribution to production. US production had a bad time in covid but is already coming back, despite the administration's attempt to humble US production. Conclusion Chris' community and aims of his content are noble. He mainly tries to steer people toward sustainable living and long term planning for your family. I admire that in him, and admire what he has accomplished with his homestead and his community. However, his ideas on peak oil, which he has professed for over a decade now, are simply wrong. Oil production is a dependent variable, just like all other economic variables. Economic activity does not grow into the available energy, because that energy would not be extracted if it wasn't the result of economic planning and activity. Oil production is the result of economic activity, not the other way around. That is why when Chris looks at relationships between energy usage and GDP they are highly correlated. It's because they are measuring the same thing. I know the market is smarter than I am at all times and in everything. I attempt to understand what the market is telling me, not try to figure out how the market is wrong. Until next time.

Full show notes: https://bitcoinandmarkets.com/e242 Member video version: https://bitcoinandmarkets.com/e242-video/ In this reaction video I listen to a segment of a Lance Roberts morning show available on YouTube. It's a radio show out of Texas that discusses investing and personal finance. I'm a fan of the show, and think they usually do a good job evaluating the stock market and basic market sentiment. However, in this particular segment, Lance attacks Bitcoin from a very naïve angle and I had to set the record straight. Cryptocurrency or Bitcoin? First, I take on his use of the term "cryptocurrency" right out of the gate. I don't think he could define it other than to say, bitcoin and things like bitcoin. But, Bitcoin is not crypto, and crypto is not Bitcoin. Almost all criticism leveled at Bitcoin is intended for crypto scams, not Bitcoin. Lance is guilty of that here. Next, I discuss one of my pet peeves that Lance propagates here. He calls the dollar and bitcoin "fiat" currency. Fiat is very specific thing, it is a currency that is not backed by anything making its supply completely dependent on a ruler/government. The dollar is not a fiat currency. For one, the dollar is backed by credit and low, stable counterparty risk. Secondly, its supply is not dictated by the government (or the Fed). Reserves printed by the Federal Reserve are not a medium of exchange like a dollar bill. Fiscal spending is not printing money either, it is simply borrowing, or pulling demand forward to stimulate the economy today at the expensive of the economy tomorrow. Therefore, the dollar is not pure fiat, and neither is bitcoin. Bitcoin is the thing that is the money. These perverted definitions of fiat can be used to twist gold into being a fiat currency. They'll argue that only gold backs gold, and hence its value is "unbacked". Total lunacy. Bitcoin backs bitcoin, like gold backs gold. Nothing can back the value of money, even the government. They don't back the purchasing power of the dollar. When someone says that, "the dollar is backed by the full faith and credit of the US government", I say, "Okay, what does that mean? What are they backing? Are they backing the purchasing power of the dollars?" The truth is they only back the nominal value of the dollar. $1 = $1. Lance makes an interesting comment that money in your money market fund doesn't just disappear, while bitcoin can just disappear from your coinbase account. Okay, well, coinbase is more like a bank, and dollars disappear and get seized everyday from bank accounts. Dollar bills aren't even safe from civil asset forfeiture. Explaining Stablecoins Next, Lance's associate Michael Lebowitz, whom I have interviewed for Fed Watch and is a sharp guy, explains stablecoins in a pretty good summary. However, he ends by saying that the algorithmic stablecoins have crashed for the first time, making the market volatile. That is not the case, of course. All algorithmic stablecoins have had major issues with their pegs, and most have ceased to function. This particular episode recently with Terra, was such a big deal because it owned a lot of bitcoin and was heavily entwined in the multi-layered scam space. Conclusion Lance Roberts concludes that "cryptocurrency" has not delivered on its promises due to a mistaken analysis by crypto bros. He says "crypto" has promised to be like gold, and be money, when it's not. This is common misdirection, because only bitcoin claims to be digital gold, yet because altcoins fail, bitcoin has not lived up to its promises. Very cringe. Links Original Video (segment starts at 43:15) https://youtu.be/efklhOarIxg

The second of two episodes this week is on Clown World topics like Ripple's Garlinghouse complaining that Bitcoin Maximalism is working in DC, and the implosion of the NFT delusion. You can see the original content in the newsletter, issue #188 of the Bitcoin Fundamentals Report. Clown World Brad Garlinghouse of Ripple infamy, claimed that tribalism in crypto is muddying the messaging in DC. Well, good. He's making the argument that Bitcoin's expert technical and monetary arguments, and our insistence on showing empirical evidence of the past 10 years in the industry of scam after scam properly diagnosed by these arguments, is turning regulators against altcoins. Ukraine bans bitcoin 2 months after making it completely legal. Yet another example of Ukraine's government exposing its true nature. NFTs are Silly I use the recent event of the failed auction of Jack Dorsey's first tweet, the first tweet ever made, to demonstrate the delusion of NFTs. The owner of this NFT bought the token for $2.9 million last year and thought he'd be able to get $48 million now. LMAO you can't make this stuff up. NFTs are nothing more than a digital signature in pseudo-control of a token. A token that is not the object in question, in this case, Jack's tweet. That tweet lives on Twitter's database (and the database of many archive sites), it does not belong to the digital signature or the token. They are two completely separate things. What the token owner has is pseudo-control over a made up concept, a delusion if you will, that the token represents that outside object. I say "pseudo-control" because it can be revoked by the system admins, and has on many occasions in the history of NFTs. A

Discussed in this episode of #Bitcoin and Markets is the concept that the inflation-based investment thesis for bitcoin is dangerous and offering an alternative group of points that form a better more sustainable thesis. You can see the original version in issue #188 of the Bitcoin Fundamentals Report, or the edited and more complete version at BTCM.co. Dangers of the Inflation Narrative There are a couple reasons that the inflation-based narrative is dangerous for bitcoin: 1) It doesn't respect recessions. We currently are experiencing high CPI but are heading headlong into lower CPI, recession and a credit crisis that threatens to be as big or bigger than 2009's GFC. A deflationary crisis, like any recession with credit-based money, destroys the inflation reason to hold bitcoin. 2) The CPI argument is empirically wrong. Bitcoin has not gone up as consumer prices are going up. In fact, it is quite the opposite. All you have to look at is the last two years. In April 2021, CPI broke 3% for the first time in 10 years, and that is exactly when bitcoin peaked at $65k. When CPI slowed to flat in July - September 2021 bitcoin's price began to rally again. Finally, most recently, as CPI has once again accelerated on its way up to 8.5% in March 2022, the bitcoin price fell or has been flat. 3) The end result of this wrong and simplistic investment thesis is that the new marginal investor on Wall St or in the upper-middle class or higher, has bought in with that inflation narrative in mind. Now, as the market tips into lower inflation and recession, they will likely sell. This won't harm bitcoin, but it can hurt investors and isn't a vote of confidence for the bitcoin space. Better Points to Stress My alternative is to stress 3 specific characteristics of bitcoin that will benefit in the real situation in which we find ourselves in. 1) Bitcoin has thrived in flat to falling CPI as a counterparty free safe haven. Bitcoin is better gold, and not a dollar denominated asset with 100% pure counterparty risk. 2) Bitcoin's ecosystem is relatively insulated from a credit crisis because it is based around a different currency. The ecosystem is booming and will likely continue to boom because it doesn't have pure dollar risk like all other industries. 3) Bitcoin is a technology with network effects in its early stages of adoption. This gives it extreme asymmetric risk/reward profile. It might be an accident of history that bitcoin is the technology at this point in its adoption at this perfectly suited moment. Stand by for Part 2 coming out later today!! Links Issue #188: https://bitcoinandmarkets.com/r188/ Edited and complete version: https://btcm.co/the-danger-of-an-inflationary-thesis-for-bitcoin/ A