Not Investment Advice

This is for the benefit of all my friends, family, and loved ones in search of order in chaos.

Life is all about being at the right place at the right time. Sometimes the bus leaves the station without you and your whole day is fucked. If you’re lucky, your plans remain intact and you simply catch the next ride. Life often feels like it conspires against us. Especially when we think we have it all figured out.

A good example is my reluctance to push into the stock market as COVID was spreading in early 2020. Logic screamed “stay away” as stocks plunged -20% in many cases. Reported revenues would inevitably get smashed leaving no way around recession. Then the unexpected happened: a bull market within an economic recession. The Fed flooded the system with newly minted money and stocks took off in a way that defied gravity. I missed that ride. I believed it would all end in tears. It felt eerily similar to my pain in cryptocurrency in 2016 — that period of jubilation when no one could lose. Until I did. A tough pill to swallow and that was during “good times”. Stocks rising was sidestepping inevitability considering these are “bad times”.

Growth comes through progress. And suffering is the process.

In certain circles I am known as Mr. BTC or Bitcoin Jesus. These past 5 years in the Bitcoin space have been a marathon in pain and suffering. May my pain translate to your yield. The following is an smorgasbord of traditional market trends, sticky situations, and key differentiators. Bitcoin is just a dessert.

Like Elon Musk’s “not a flamethrower”: this is “not investment advice”

Trends

• Stocks are overweight. No shit, Sherlock. PE ratios are through the roof for any “hot stock”. Early in the pandemic it seemed insane to invest in stocks. I was ignorant to the power of the Fed. It has staved off a recession by printing obscene amounts of money. The Fed has turned into a one trick pony (it’s a hell of a trick) and there’s no reason they can’t rinse and repeat several more times. That said, the further stock valuations detach from financial reality is equivalent to the snap back. TLDR; get it while it’s hot but when that band pops it will be the freefall from hell.
• Real Estate will not rise and fall homogeneously. There will be pockets of hotter markets rising in equilibrium with people fleeing urban centers turned dumpsters — long overvalued or hard hit by COVID. The irony is that home prices have remained flat or increased despite rent dropping. This is a huge market distortion driven by wealth inequality. TLDR; generous printing of money has gone straight to wealthy pockets, who coincidentally already own property thus driving prices up. Rental prices have dropped as people take pay cuts or job loss. This paradox makes a potential buyer think twice as many layers of ownership become treacherous (high property tax, lower rental rate, COVID non-eviction laws).
• Bonds are irrelevant as they carry no yield. And news flash if you haven’t already seen the writing on the wall — every country will turn to negative interest rates (NIRP) over time. The US being the last domino to fall holding the line at zero interest rates (ZIRP) for as long as possible. TLDR; setting bonds to zero flushes trillions out of safe fixed income and puts many fiduciaries at odds with their covenants forcing them to take increasingly “risk-on” positions to keep their head above water.
• Taxes will inevitably increase. Biden is already calling his shot raising the top bracket in California to eye watering 62%. When you threaten rich people’s finances, they have the accountants and lawyers to squirm out of it. Our President’s $750 tax returns are a prime example. Offshore accounts, shell companies, tax loopholes there is no tax scheme the rich cannot outmaneuver. Rich people always find a way out. TLDR; Americans are broke and America will squeeze the fat from the rich to drip on the poor. Isn’t that chapter 1 of socialism? When big money gets squeezed, I won’t be surprised when a chunk finds its way into Bitcoin. The greater the threat of taxation the greater Bitcoin becomes the beneficiary.
• No one can differentiate a lie from the truth. The media is so biased and news has become too easy to print. It takes one second to create a lie and a year to unwind it. What’s the truth worth? Nobody has to energy to chase the truth down. This thought to be continued under “Bitcoin Differentiation”.
• Systems of government by and large have evolved into a worser version. That includes gross inefficiency, purposeless jobs, and an ever growing need to use more money to support its cause. Democracy may be the best that we have but it is a broken system. It isn’t difficult to make the argument that China’s system of capitalism wrapped in communism outperforms America’s balancing act of capitalism paired with democracy. At least on a purely GDP performance basis.

Sticky Situations

• It’s getting harder and harder to find places to put money. Safe asset classes (bonds) have been systemically neutered. High risk assets (stocks) are becoming less attractive with each green candle. The Fed created a monster with all this easy money. Stocks are now perched like a wobbly tower of Jenga without any foundation. Housing valuations versus rental prices have become an oxymoron. This is what the predecessor to chaos looks like. The worst part? They can’t put the monster back in the closet, in fact they need to continue feeding that beast. What’s the silver lining? Suddenly, Bitcoin is starting to look attractive to a new subset.
• Pension funds, 401K’s, CFO’s are starting to look at Bitcoin in a new light. It’s not that Bitcoin is new and improved. It’s that everything around it is in systemic decay. Pension fund managers rely on bonds to return a few percentage points — that option is gone. Pension funds have been behind the eight ball for years. Now their problems are accelerating and fear turns to desperation. $19 trillion is the sum of US pension and retirement funds. Where will they reallocate that money to yield returns? CFO’s who are lucky enough to have healthy cash reserves face a similarly disturbing conundrum: “The inflation pacman is going to eat me alive. How can I protect my treasury reserve?” Companies like Square and MicroStrategy have been the first to take the plunge into Bitcoin. Like cracking the 4 minute mile, these pioneers have now made it an appropriate boardroom conversation across America.
• Inflation is the invisible tax. It will also dictate the playing field for the remainder of the decade as governments will need more debt to feed existing debt obligations. Taxation is unpopular, inflation is other side of the same coin and it’s invisible. What we call stimulus money today is UBI (universal basic income) tomorrow. This leads directly into Fed Accounts and CBDC (central bank digital currency) as alluded to in the Banking for All Act.
• CPI is bullshit. Old school fund manager insist on looking at CPI (consumer price index) but for anyone with any common sense, CPI makes no sense — at all. The goals posts keep moving, the basket of goods changes to make the number look right. It’s the worst type of peg. Based on the amount of money we’ve added to the system, inflation has risen around 20–25% in 2020. This was the key realization Michael Saylor arrived at when he decided to allocate the majority of MicroStrategy’s treasury fund to Bitcoin: “I arrived at that sinking feeling when I realized I was sitting on a $500M ice cube.” Money in the bank stops feeling stable when you know it’s losing 20–25% of it’s value here in 2020, and onward.

Differentiation

• Trust is not discussed because it only exists in tight personal quarters. Institutions and media have systematically destroyed our trust in them along with their reputations. In ancient society, trust was held as intangible virtue above money. This is what makes Bitcoin special. You don’t have to trust “them”. With Bitcoin you own the trust. You are the trust. That’s what it means to run your own node. The Bitcoin you buy and earn can be traced on the blockchain. And it benefits from network effects. That’s where Bitcoin’s power lives… in it’s users who decide to take ownership of their money via node. This level of trust is power to the people. All it takes is an internet connection. Money’s value is directly correlated to trust. Bitcoin’s blockchain has been churning out unwavering truth with a 99.9857119343% uptime as of this writing and is accessible 24/7/365 worldwide. For anyone who has traveled internationally, attempting to go through currency exchange, paying insane fees, this becomes a no brainer.
• The value of scarcity has never been more pronounced. We are printing money into oblivion. That means the money in your pocket is worth significantly less with each trillion dollar round of stimulus. You know your net worth (numerator). The problem is you have no clue how much money actually exists (denominator). For all the techies out there, it’s a lot like knowing how many stock options your startup grants you but having no clue how many shares are outstanding. It’s a gaping blindspot. Hard money is a store of value. Dollars as of 2020 have entirely lost that characteristic. Bitcoin’s hallmark is a 21 million hard cap. It’s the greatest store of value ever created. That’s not hyperbole. If you own 1 Bitcoin, congrats. That’s 1/21,000,000. That math you can calculate all day. In Bitcoin we say “play stupid games, win stupid prizes.” What payment rails are you investments riding on? Bitcoin gives a holder firm grounding in predictable math. Contrast that against a world where currency and investment numbers make no sense and goal posts slide. We all work hard to make money. Put it somewhere that derives confidence over speculation.
• Inflation got you down? Bitcoin is the world’s first deterministic inflation system. That means you can calculate with exact precision past, present, or future the exact inflation rate. The world is spinning out of control because money is losing its grip on reality with concepts like zero and negative interest rates. That in turn creates chaos in bonds, real estate, and stocks. The government has no choice but to continue fighting a medusa of debt monsters and the only answer they have left is to feed the beast more debt. That debt is paid for by you and I. It’s an inescapable sinkhole. Bitcoin’s inflation rate challenges gold at the present moment. When Bitcoin’s inflation rate drops beneath gold’s, gold bugs will shit their pants.
• Money as you know it is an IOU based system. Debt begets more debt. Gold has been recognized for decades because it in and of itself is value. And any IOU on gold is not gold. If the world becomes increasingly unpredictable so does your IOU. The person who “promised” you gold is far more likely to renege. Either you have it or you don’t. In Bitcoin parlance that’s called “not your keys, not your Bitcoin.” Bitcoin is unique because it meets all the criteria of hard money, much like gold. Dollars are debt, it is not the same.
• Bitcoin is also the only digital asset you can personally custody. All those stocks and bonds held in Robinhood, Fidelity, Schwab, and Etrade accounts simply grant you access. Same goes for banks. You don’t own those assets, you own the right to access. The institutions control everything. If fiat systems begin to falter and your access to your “portfolio” suddenly changes don’t be shocked. It seems unfathomable but tap anyone on the shoulder from Turkey, Iran, Venezuela, and the list goes on and on. One day things were going well then suddenly life changed. Run on the bank. Assets not accessible. Flights out the country pat you down to see if you are trying to take gold out of the country. Ray Dalio has detailed the “Great Reset” and privacy and freedom will be restricted to restore order from chaos. How many assets do you own that are truly yours? Sovereign ownership is vastly different from 3rd party custody. It comes across as a behavior of paranoia but that would be missing the point. In our era of convenience people have completely forgotten what true ownership and responsibility mean. That’s a tough pill to swallow. But that’s what separates the men from the boys. Men understand what they are entitled to within their domain because it is earned through blood, sweat, and tears.
• “Run the numbers.” Let’s revisit that 21M number. It’s on record how much Bitcoin is being gobbled up by whales, institutions, and corporations. There are more millionaires on earth than there are Bitcoin. That means if you own 1 Bitcoin you are well ahead of the game. If corporations begin allocating percentages of their cash reserves to Bitcoin, that alone will shift the entire game board.
• Supply and Demand: Bitcoins are available via exchanges. As trust erodes in our institutions and government, Bitcoiners are taking coins off exchange and taking necessary steps to custody their own coins. This means circulating supply on exchange decreases. Pair that with a growing demand from institutions, pensions, corporations, etc. and you get the perfect storm for a patented Bitcoin moon event, aka “NGU (number go up) technology”.
• Systems and Architecture: humans have always organized in tribes. That means pyramid shaped hierarchies. When I mentioned our systems of government being broken, that isn’t an insult as I wish it weren’t the case. These systems in their modern form trend toward power coalescing at the top: societies’ infamous 1%. When 26 billionaires net wealth equates to 4 billion humans at the bottom of society, it’s broken. Yet that is the very structure of the system by design. It is literally the outcome of the structure we exist in so it cannot be completely unexpected.
• Bitcoin is an entirely new form factor for humans but older than dirt in nature. The most common decentralized network in nature is mycelium: the root system underground that produces mushrooms. Mycelium have been found dating back 800 million years. The first land mammal on record is around 200 million years old. Mycelium survived every major extinction event. It is a headless, intelligent, single celled complex network running via decentralized command. Decentralized networks like mycelium are extraordinarily resilient in a way centralized networks only dream to be. It’s not a tech thing, it’s a nature thing. Bitcoin’s decentralized architecture mirrors that mushroom mycelium structure. It’s the same reason the Internet has crept into every crevice of our lives. That’s what mycelium does. It grows rapidly and thrives through developing symbiotic relationships with the elements surrounding it. It has the power to break down rocks to soil and exchange nutrients with trees. The Internet was the first digital mycelium network focused on communication. Bitcoin is the second digital mycelium network focused on value (money).

Mushrooms can feed you, kill you, or heal you. Don’t bet against mycelium, it’ll be here long after we are gone.

Conclusion: “Don’t Buy Bitcoin”, DYOR

I’ve learned NOT to say “Buy Bitcoin”, because it doesn’t work and it’s a huge turnoff. My hope here is to paint a larger canvas about politics and money in the most traditional sense. Bitcoin only exists here to contrast our traditional markets to create conversation.

I personally view Bitcoin as a wonderful palette cleanser to a difficult present and an ugly future. As stated at the top, this is not investment advice. I find investment advice more likely to destroy than aid families and friendships. I don’t want any part in that.

I do want to share my vision with the intent it might spark a dialogue between us. I used to believe I had a strong handle on reality. As I mature I realize it is the collection of opinions that has value. I’m trying to tap into my human mycelium network to source new insights and opinions to broaden my own sense of state. I’d love to hear yours. Please don’t hesitate to comment or share below.