image description

The Big Short - Paramount Pictures

Short sellers make money when the price of the target financial instrument falls, but they are not always popular with business or government leaders. Those who bet against stocks or currencies are often portrayed as sharks who undermine people's efforts to build, grow and create value.

In fact, this is short-sighted.

Shorting is a necessary part of any properly functioning and efficient financial system. It provides liquidity, ensuring there is a seller on the other side of every bid. Taken together, those occasions where short sellers end up winning provide valuable signals about how society should better allocate resources."I say this because at a time when its price is surging again, Bitcoin should essentially be seen as a huge short against the entire financial system. even than"big short

Even bigger.

Bitcoin is not just a hedge against inflation. In fact, there is currently no clear correlation between Bitcoin’s price increases and mainstream measures of inflation amid a prolonged period of historically low consumer prices.

Instead, Bitcoin’s core value lies in its decentralized governance design that is divorced from the political system, a characteristic that no other asset of its size and liquidity can claim, save perhaps gold.

Its anti-inflationary positioning is its consequence, not its essence. If people lose confidence in the ability of governments to maintain the trust, the social contract upon which fiat currencies are built, then the value of fiat currencies will collapse, leading to hyperinflation. Due to Bitcoin’s depoliticized status, its value increases in this environment.

So, if you're long Bitcoin, you're positioned as a beneficiary if the governance system that the entire world depends on for its security and well-being collapses. Do you still feel good?

Instead, what I hope they will do is put pressure on policymakers to reform the system in a way that better serves their constituents and preserves the social contract of money.

secondary title

read signal"I don't know about you, but I like to think that the winning bet of being long Bitcoin can lie in driving constructive improvements to the existing system, rather than destroying it entirely. watching too many episodes"walking dead

Afterwards, I can safely say that Despair is not for me.

But let’s be clear: Bitcoin’s stellar gains do reflect growing fears that our century-old model of governing the global financial system is failing.

Reasons: unsustainable debt levels; anemic growth despite massive quantitative easing; economic inequality; the COVID-19 shock; A loss of agency is felt in their and their community life."Part of the problem is that the elite conversation around solutions is bogged down in the assumption that the old system of government will continue to work as it is. This fuels the expectation of failure, which, little by little, leads more and more people to believe that even if they don't"A bet on the system, one should also hold some bitcoins in case the worst happens.

image description

The Big Short - Paramount Pictures

secondary title

new reserve asset

new reserve asset

This is not an anti-establishment argument. This is definitely not an endorsement of the nihilistic spirit of Trumpism.

This is a call to recognize that bailouts (socialized corporate losses) and monetary stimulus (put options for stock market speculators) have masked deep problems in the economy and done little to improve the happiness of the world's citizens. It's saying we need a new approach to ensuring an efficient market economy, one that empowers everyone to seize opportunity on a level playing field.

If we achieve this, if the national government-managed system develops to the point where it regains popular support, what role does Bitcoin play in this modified system? What is its larger purpose other than being a hedge against systemic collapse? Where is the ongoing value of an asset if its sole purpose is to hedge against a worst-case outcome, which does not occur?

I think the purpose of Bitcoin is that it becomes a social reserve asset.

It’s a concept that transcends both the notion of a reserve currency held by governments and gold’s long-standing status as a citizen’s hedge against monetary collapse. Early elements of it can be seen in how bitcoin was incorporated into decentralized finance (DeFi) as an uber-like form of collateral.

While we probably won't be using bitcoin to buy a cup of coffee, for which a dollar or yen or something would suffice, it could become the fundamental store of digital value upon which the overall financial system is built.

Now, if you look at the global bond market, that role is taken by US Treasuries, notes and bonds. These U.S. government debt instruments provided the underlying collateral upon which Wall Street built a hierarchy through which financial institutions extended all other forms of credit to the outside world.

But in the future, once cryptocurrency ownership and market participation are broad enough, and digital asset markets become liquid and mature enough, and price volatility falls, Bitcoin could play a similar role. Its protocol-guaranteed scarcity, along with its programmable nature and future ability to interoperate with central bank digital currencies, stablecoins, and other digital assets, will ultimately be a superior underlying store of value than any trust-compromised government can provide.

Herein lies the post-crisis role of the world's most important cryptocurrency.

secondary title

Where are you Joe six-pack?"FOMO "The crowd, that is, those retail investors who don't want to miss out on other people's big profits, have been relatively absent. The figure below demonstrates this well. Unlike in 2017, around"bitcoin"Google search activity for the term -- a proxy for common folk curiosity -- has barely budged from levels seen over the past few years, even as prices have skyrocketed.

search"bitcoin"bitcoin

Compare with bitcoin price

"Rather than being embraced by retail investors, the news surrounding this upcycle this time around is being led by big-name, hidden investors. Michael Saylor of MicroStrategy, hedge fund veteran Stanley Druckenmiller, Citibank analyst Tom Fitzpatrick and others were involved. Earlier today, Blackstone Fixed Income Chief Information Officer Rick Rieder hinted on CNBC that the firm manages more than 70,000 The world's largest asset manager with $100 billion now believes bitcoin is a better hedge than gold. In other words, this is a Wall Street rally, not a Walk Street rally."Once bitten, twice shy

It may be the reason why retail investors sit back and watch this time. Too many people got in at the peak of the bubble in 2017 and lost their living expenses. Another possibility is that the buzz around cryptocurrency rallies in general wouldn’t be as loud without the initial coin offering (ICO) boom that sent hundreds of ERC-20 tokens surging alongside bitcoin.

But I think it's also worth recognizing that the logic of this rally is quite different. This time it came against a backdrop of concerns about inflation, fiscal debt and the prospect of political stability. These concerns are being addressed by professional investors who are taking a long-term look at Bitcoin’s potential as a hedge against all of this. This is less of a get-rich-quick rally and more of an insurance play."That's not to say those bigwigs don't want to make a fortune, too. Nor does it mean that at some point, this"A backlash won't spark another round of FOMO from the masses. While some investors are starting to keep themselves from being left behind, retail investors haven't jumped in in large numbers, which may suggest that Bitcoin still has room to rise.

secondary title

different kind."innovation"innovation"is a magical buzzword that conveys progress and boldness. This characteristic makes it ideal for confusing people. Case in point: An article on the Official Monetary and Financial Institutions Forum (OMFIF) website this week titled"。

If you're looking for descriptions of aggressive new digital currency projects in places like the Bahamas, Thailand, and China, you won't find them in this report. what is said here"innovation"Refers to various new means. The central bank is actually just extending the existing gameplay to new areas. Specifically, it is injecting funds into its financial system by purchasing a wider range of assets. This is the same new policy that emerged after the 2008 crisis when interest rates were pushed to near zero"tool"tool

A more extreme and riskier version of the 1990s: Quantitative Easing."non-stop"Quantitative easing"The problem is that the central bank has no government bonds to buy; the fiscal bond issuance cannot keep up. So, to sustain the monetary expansion, they spread their tentacles into riskier asset classes, including munis and corporate bonds. The U.S. Federal Reserve has set an example with its secondary market corporate credit facility, which it uses to buy corporate bonds, and has a separate program to buy municipal bonds. Now, we learn from OMFIF that following the March BoE"Launch of SME Term Financing Scheme

Later, central banks in Australia, Taiwan, New Zealand and other places adopted the same model.

Through these schemes, central banks, which are supposed to be politically independent, become creditors to entities whose interests can be politicized. If these new debtors face default in the post-pandemic debt settlement, they will be tempted to call on the support of politicians they support to pressure central banks to forgive or restructure those debts. This is what ultimately destroys fiat currencies. These bonds, now sitting flamboyantly on central bank balance sheets as private or political assets, will likely outweigh the main liability: the monetary base. Politicizing these assets can erode confidence in the currency by raising concerns about their future value."So while the OMFIF article says these efforts show", but you could equally argue that they have shown a continued willingness to double down on a 10-year-old bet that has reached the end of its usefulness.

image description

Bank of England (Shutterstock)

Elite factories: Biologists offer a unique perspective on complex systems like economies. In studying how ecosystems and species populations reach breaking points caused by resource supply and consumption dynamics, they found patterns that human societies tend to emulate over time. In this context, the latest observations of pine beetle expert turned cultural theorist Peter Turchin are somewhat shocking."As Graeme Wood expounds in The Atlantic, Turchin argues that due to"elite overproduction

, the hierarchy in Western societies such as the United States is exacerbating tensions. Societies that have oriented their education and career systems toward rewarding a privileged but relatively large minority are struggling to find constructive uses for them, leaving the majority outside the elite bubble with no upside.

Turchin believes that this is the root cause of the unease that is playing out in events such as the 2020 election and remains unresolved. It leads to a breakdown of trust and a failure of institutions.

What does this have to do with cryptocurrencies and blockchain? Well, at least in theory, these systems should encourage people to participate in open source, collaborative development, and, in their purest form, not require any identification to participate. Cryptography-based bug bounties, for example, can reward any developer who finds a bug in software code, regardless of their identity or educational background.

However, it would be naive to think that the blockchain development community is utopian. The privilege of environment and upbringing rewards some people and not others in various ways. It is no accident that the vast majority of cryptographic engineers are white males. It is a product of the superstructure that society has formed—what Turchin calls the hierarchy—working toward its own oblivion. The trick is how to take the best of these open development models while proactively seeding new talent from outside the existing elite production facilities at leading universities.

The tip of the iceberg: The debt crisis sparked by the COVID-19 event remains on hold. Once stopgap measures like off-rents and mortgage forbearance run out over the next year, things will get worse as hard-pressed creditors start demanding what is theirs."In fact, as this Wall Street Journal examination of the U.S. government's aggressive efforts to provide small businesses with Paycheck Protection Program loans shows, the fallout may have already begun. The reporter found that"。

About 300 companies that took up to $500 million in pandemic-related government loans have filed for bankruptcy

Those numbers are sure to rise. And any student of debt crises knows that bankruptcy begets more bankruptcy. Every default by a debtor leaves their creditors with less money to pay their debts. A self-perpetuating cycle is thus formed.