A TALE OF TWO CURRENCIES

A TALE OF TWO CURRENCIES

COMING SOON…

Check back for chapters as they are released, linked below.

Table of Contents

Introduction to Money

I. The Separation of Money and State

i. The Call to Capitalist Money

ii. Escaping the “Novus Ordo Seclorum”

iii. Satoshi Nakamoto

iv. A Need for Immutable Money

v. The Internet of Money and Value

II. The Great Flood of Fiat Currency

vi. Bitcoin vs. Gold vs. Fiat

vii. Taking Back Your Sovereignty

viii. The Flight of Magical Internet Money

ix. Coming Straight from the Underground

x. Taking Shelter from the Storm

III. Unification of CeFi and DeFi

xi. The Serum to Monetary Slavery & Time Theft

xii. Becoming A Master of Two Worlds

xiii. Sources & Works Cited

xiv. Glossary

xv. More Insights & Information

Systemic Bliss © MMXX

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DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

It Was Not Priced In…

One year ago today was Bitcoin’s third block reward halving event in its history, since that time the point has been made crystal clear that it was not priced in…

Bitcoin back then was trading for less than $10,000 a pop. During the halving event on May 11, 2020 around 2:30PM CST, it was trading just over $8,500. In the days prior, Paul Tudor Jones made headlines announcing his bitcoin investment that premiere asset managers saw as career risk before him laying out his thesis in The Great Monetary Inflation. As unemployment was seeing records not seen since the Great Depression, the smart money was becoming bullish on hard assets as protection against the money printing machines around the world.

It was a bumpy year leading up to the event, bitcoin crashed in March with the coronavirus panic. In only two months, BTC found its footing again and saw gains over 100% off its 52 week lows. What a recovery! Not to mention, one year later after arguably the largest monetary expansion in our recorded history BTC is now worth more than $58,000.

If you had the conviction to buy BTC with strong hands during the washout in March 2020 and held onto your bitcoin, that means you have seen somewhere between 10X and 15X your original investment. Not bad when you think about everything else, except maybe perhaps bitcoin’s long lost cousin dogecoin or its closest competitor ethereum or plain old lumber possibly which are proving to make a good case for why it may help to have other eggs in your basket to optimize your portfolio’s returns.

Since May 11 last year, it has not been a straight line to the sky on the chart with bitcoin trading sideways for months as volatility dwindled into the Fall of 2020.

With the talk of a second wave, social unrest, and v-shaped recovery coming from every direction in the news cycle, the efforts being made to ensure there was not a fallout financially were unprecedented with trillions of dollars being created out of thin air to fight against an invisible enemy. The powers at be around the world through their massive efforts unfortunately were creating another invisible beast that the public would need to battle against, inflation. Cases of COVID-19 rose as the stock market rallied back towards new record highs despite week after week of very elevated unemployment numbers. This also coincided with one of the most contentious and controversial US presidential elections of all-time with social media companies going so far as fact-checking candidates and their stances plus statements online as well as escalated into them removing the sitting president, Donald Trump, from their platforms one after another.

To sustain a recovery in the US economy that would spill over into the rest of the world, US leaders pushed for lower interest rates on top of more loan as well as spending programs. Americans in lockdown receiving stimulus checks were quick to invest most of that money rather than actually spending it in the economy as intended. This created downward pressure on the dollar as its issuance grew enormously as the velocity of its use fell off the table quickly with the growing trend of trading “stimmies” in the hopes of making “tendies.” The Federal Reserve folks at the Marriner Eccles building in Washington, D.C. got bitcoin investor’s attention when they then began to openly discuss them possibly using digital dollars to essentially unleash inflation, universal basic income, and debt forgiveness.

Fed chairman Powell mentioned central bank digital currencies and their role in the future in October, and it was off to the races for bitcoin starting that month around $10,000. As election day played out and Americans were uncertain of the results for weeks, bitcoin began ticking up. As the GOP’s grip over control was loosening, the Senate failed to secure Judy Shelton a board seat on the Federal Reserve. She was arguably the last bastion of sound money as many viewed her as an awkward pick that wanted to put the US back on the gold standard during a time when the Fed’s balance sheet’s growth outpaced that of almost every asset and index on Earth besides a handful of exceptions, including bitcoin.

By December 15, the Senate majority leader Mitch McConnell congratulated Joe Biden and Kamala Harris on their victory while in the same 24 hours bitcoin’s price crossed over its previous all-time-high at $20,000.

The “Save America” rally on January 6, 2021 turned into an insurrection as many disgruntled Trump supporters stormed the United States Capitol building. They distrusted the election results and the media reporting them, so many of his fringe supporters sought to attack the building with the hopes of overturning the results of the 2020 US presidential election. It was unsuccessful and unfortunately claimed the lives of five people before, during, or after the mob attack with over a hundred people injured too. Sadly, it serves as an example of the rapid degradation of trust in our society and the demoralization of American citizens in their existing centralized systems.

The systems in which we participate and rely on are not fully transparent, so trust is necessary. If there was a blockchain or timechain-based voting system that could be audited by anonymized voters as well as pollsters privately and in real-time, it is possible that events like that never happen again. Around the world, governments in unison almost are eagerly taking on more and more debt near or at zero percent interest while printing more and more money to flood into the system. As Democrats regained control of the US Senate from the Georgia state runoff election and protesters took to storm the capitol, bitcoin was sailing above $30,000 and heading into $40,000 territory.

In the wake of the capitol event, Donald Trump was put through the process of being impeached again for the second time for now “inciting violence against the government of the United States.” Banks cut ties to Trump and his associates by closing their accounts. BTC held its head above $30,000 in January this year even while the newly confirmed Secretary of the Treasury, Janet Yellen, bashed bitcoin and crypto during her first official day on the job. Remember when Trump famously denounced bitcoin and crypto in 2019, saying the were highly volatile and based on thin air?

I wonder if his outlook and stance towards bitcoin have changed…

By the end of January, a peaceful transition of power to President Biden’s administration took place and the Senate Republicans were able to successfully vote against Trump’s impeachment to quash it for good. Simultaneously, as Biden went on a tear making news for signing one executive order after another, redditors on WallStreetBets were on the verge of blowing out major Wall Street hedge funds with some of the largest titans in the capital markets backing them. Amid the Reddit-fueled trading frenzy in the stock market with names like AMC, Bed Bath & Beyond, and GameStop up more than 100% in a single session, the Senate quickly motioned to hold a hearing on the state of the stock market. A rush of retail day traders bid up these names creating a fiasco on Wall Street where the major firms and players in the market were shorting them to bet against their value going up, which caused one of the worst weeks since October with major indexes falling more than 3%.

As everyone became consumed with the revolt of redditors in the stock market against the hedge fund insiders and market wizards, bitcoin was benefiting as it rose from $30,000 to over $50,000 in February. Tesla on the 8th announced they had invested $1.5B into BTC, and by the 16th MicroStrategy announced it was buying $900M more bitcoin in addition to their first $250M purchase back in August of 2020. On February 19, 2021, bitcoin went over $53,688 to reach a $1T market capitalization for the first time in history. By the 23rd, Square announced that they had bought 3,318 BTC for an aggregate purchase of $170M.

Bitcoin began March 2021 just below $50,000. Then, a jump in bond yields sent gold and stocks lower while bitcoin saw itself climbing on the news of Biden’s $1.9T stimulus plan getting passed. The new president’s pick for chairman of the SEC, Gary Gensler, was confirmed and went on the record saying that he thinks bitcoin and crypto are a catalyst for change. By the middle of the month, the Fed decided to leave rates unchanged and said they would until 2022 at the earliest or 2023 at the latest with Powell also noting that bitcoin and crypto are more of a gold substitute than the dollar.

Bitcoin just does what it needs to do, and that should always be priced in…

Come April, Democrats are pushing Biden harder for even larger infrastructure spending as well as more stimulus checks going directly to Americans in the next spending bill. The Fed’s Kashkari during an interview mentioned he would not panic if he saw a 4% inflation rate. Accordingly, BTC flew back above $60,000 in the days prior to Wall Street turning all eyes to Coinbase for their direct listing on the NASDAQ. Batching all of this news with the Fed’s dovish minutes looking out into 2022+ timeline being released, the markets all were going bananas and setting fresh record highs.

As the stock market was showing signs of major strength with strong earnings and positive jobs numbers, the streak was snapped with Biden’s proposal of raising capital gains taxes. Bitcoin had a wild ride down into the $50,000 range after the hyped-up Coinbase listing with a massive wave of leveraged long positions being liquidated in a span of only 20 minutes over the weekend. By the end of the month, BTC made a valiant recovery in the face of the news of Tesla’s earnings call citing they saw a quarterly profit while also selling $272M of their BTC holdings leaving them with a remaining $1.33B of bitcoin on their balance sheet. Tesla’s CFO, or “Master of Coin” as they call him now, said that the company plans on accumulating and acquiring more bitcoin in the future easing fears they may dump the rest.

Founder and CEO, Elon Musk, quickly shot down Dave Portnoy’s criticisms over Twitter that claimed that he was just buying BTC to pump and dump it all along by clarifying that he has not sold any of his personal bitcoin holdings and Tesla’s move to sell was to “prove liquidity of Bitcoin as an alternative to holding cash on [its] balance sheet.” It did not derail the rally though, as bitcoin closed the month above $50,000. Many talking heads on Wall Street were gleefully make jokes that the 14 year old electric vehicle company makes more money selling bitcoin than making cars. The Fed left rates unchanged again while keeping an eye on the very hot real estate market, and Powell again mentioned the central bank’s need to understand how digital currencies work.

The Fed has taken a change in tune to letting inflation “run hot” with Powell mentioning that if inflation above 2% is persistent they have and will use all their tools to lower it…

Central banks are playing a dangerous game of chicken with bitcoin and inflation. If they do anything to tighten their monetary policy in the hopes of taming soaring inflation, the risk is pulling the rug out from beneath the rest of the market with all of the easy money that is currently propping its value up. Interest rates must remain sticky near or at zero because raising them also risks taking the wind out of the sails of the market. Acting more as bureaucrats and politicians than bankers, the Fed has been put in a position that’s “damned if they do, damned if they don’t.” If they continue to let inflation rise unabated with increased amounts of money printing, the Fed might weigh on low to mid-income earners and younger generations in the United States who disproportionately own far less of the QE-assets that benefit from their actions like the higher earners.

This month has been a head scratcher with the former Fed chairman Janet Yellen’s statements regarding interest rates that triggered a broad-based pullback on the news that she expressed some feelings that raising rates may be necessary to prevent the economy from “over-heating” with all of the government stimulus. Following that news, Wall Street was sent into a tizzy with all of the banks and her favorite speaking engagements going into turmoil thinking that she was suggesting or predicting some rate hikes in the future. Very quickly, Yellen flip flopped before the end of the day and started walking back her comments to ease tensions on Wall Street saying she was not making any recommendations while falling in line with the current Fed chariman by saying any inflation or price increases are “transitory.”

“If anybody appreciates the independence of the Fed, I think that person is me,” Yellen stated. “I don’t think there’s going to be an inflationary problem. But if there is the Fed will be counted on to address them.” It is leaving many wondering if her statements were a Freudian slip with an admission that tightening may be needed in response to stimulus spending that causes inflation due to her firsthand knowledge of the Fed’s inability quell it. Talking down these expectations seems almost reminiscent to Bernanke’s just before the Global Financial Crisis when he was telling members of Congress, “We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

They always want you to think the economy and financial markets are better than they are in reality, and the situation they’re facing looks unmanageable without inflicting pain on the QE-asset holders (possibly bitcoin and crypto too).

At the time of this writing, all-time-highs are being seen everywhere you look whether its bitcoin, crypto, defi, commodities, debt prices, home prices, income, savings, or stocks. US inflation expectations have also never been higher since 2008, and the Federal Reserve, Treasury, and White House are the three blind mice that cannot see it. There is no one market that looks as if it is so financially and systemically important that if it waivered the entire market risks going with it. It almost seems as if we are not in a bitcoin bubble or another housing bubble for that matter, but more so of an “everything bubble.”

The truth may be that all of the assets and indexes that have seen record highs following March 2020 are not going up as much as the US Dollar’s value is going down. More than a decade after the GFC’s bailouts and easy money coming from the Fed, it is almost hard to find an asset or index that has not outperformed the dollar. If you look at it from another lens in terms of the total assets on the Federal Reserve’s balance sheet, then you may be able to paint a different picture. Price it all in bitcoin and then zoom out, the picture becomes clear: almost everything is trending towards zero in terms of BTC.

“Stocks only go up,” has been the mantra of not only Barstool’s DDTG but an entire generation of new investors with discretionary funds. Taking a long-term view of the stock market and zooming out like we did with bitcoin, it basically does just that with a handful of dips occurring over the decades that appear as wonderful buying opportunities in retrospect. Having the conviction to hold onto these positions historically have made people lots of money, but not everyone knows what “diamond hands” are or what “hodling” really means usually until they have sold and start doing the coulda, shoulda, woulda math. There is a key distinction between an investor and a trader, having the courage to let your winners run until they reach the logical conclusion of your investing thesis that prompted it.

Applying this to the “everything bubble” in the current bull market, many people do not even know what made them buy whatever it is they have invested in the first place besides emotion and fear of missing out that limits their ability to discern if they should ever step off the ride.

In America, the wealthiest 1% of Americans own more than 50% of all equities and the wealthiest 10% owns almost 90%. As the Fed insists on continuing trillions of dollars worth of asset purchases and bond buying programs as part of their QE scheme, the central bank is inflating asset prices in markets only accessible and desirable to the elite and wealthy that benefits from inflation more than it is a detriment to them. Before Robinhood and GameStop, far less kids and lower to middle class people were trading stocks and risking their hard earned money.

Artificially low interest rates and money printing have pushed more people with capital further out on the risk curve in search of higher returns, while making the lazy assumption that if the floor were to fallout beneath them that the Fed will catch them with a flood of liquidity. Traditionally, the Fed has only been looking to bailout the systemically important financial institutions and not the unsophisticated subprime borrowers and unwashed retail gamblers. As inflation looms and legendary investors saying that “cash is trash,” bitcoin as a decentralized and digital alternative to fiat currency that’s global, immutable, and non-sovereign maybe the best solution given its provably scarce supply of 21,000,000 versus the infinite dollar. Buying and holding bitcoin in the past twelve years as well as in the past twelve months compared to its legacy competition has been the best profit-maximizing strategy as the fastest horse.

A store of value is anything that holds its purchasing power in the future, and it is entirely based on a function of people’s perception of its worth or what they deem to be its intrinsic value. Liquidity, portability, purchasing power, and trustworthiness are the core characteristics to a store of value. Satoshi Nakamoto stated, “the root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currency is full of breaches of that trust.” Given the Fed authorized inflation over 2% and oversaw the US Dollar’s monetary base increase by over 20% in 2020, bitcoin is the superior store of value because its inflation rate currently at 1.84% is on a fixed schedule that decreases until it terminally reaches 0%.

As Paul Tudor Jones put it in The Great Monetary Inflation, “The goal, of course, is to be invested in the fastest horses over the duration of the ride.”

DISCLAIMER

An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written herein may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed herein are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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Systemic Bliss Anniversary & Pi Day

Thank You for Reading!
On this day six years ago, the systemic bliss website was born out of a curiosity and thirst for knowledge in finance as well as technology and their role in society as a bridge to both perilous or promising outcomes. I am immensely grateful for all of the readers around the world, followers online, and supporters over the years. It cannot be left unsaid that the critics and skeptics haven’t served me well for motivation too that helped me craft my arguments and shape my thinking for the better. It has been a wild ride through it all, especially as bitcoin has just flown past $60,000 making new highs after first calling that price target out here back in January 2019! Our twitter handle is now 7 years old today as well, showing how long I’ve been keeping tabs on this fast moving space to keep a living record of the daily happenings in the world of bitcoin and crypto assets. If social media is not really your cup of tea these days, the newsletter maybe better suited to follow along for news, market commentary, and occasionally some memes on a more periodic basis than the blog and less frequent than all of the daily tweets with the benefit of being able to get it in a neat message directly sent to your inbox.

Where We’ve Been
On the inception day March 14, 2014, bitcoin was trading in the $600 range and tumbled over the next year to trading in the $200 range for that same day 2015. Pi day in 2016 was not much higher with BTC was in the $400 range. In 2017 on March 14, bitcoin was trading higher in the $1,200 range. The fourth anniversary was eventful with BTC above $9,000 in 2018 after having gone parabolic its first time in the months leading up to it. March 14, 2019 bitcoin was trading just below $4,000. On pi day in 2020, BTC was just above $5,000 after seeing a selloff sparked by the Corona Correction. The photo above was from bitcoin pizza day on May 22, 2020 when it was worth about $9,000. Today, bitcoin at the time of this writing is over $60,000!

Where We’re Going
Inflation is coming. If that can’t be tamed though, the Fed may need to avoid disastrous hyper-inflation by raising interest rates at the cost of ending the bull market that could possibly leach selling pressures into the bitcoin and crypto markets. Either route though still appears to present BTC as the strongest candidate for an asset that can effectively take the whipsaw and still make it as a store-of-value in the financial universe of infinite debt and money. Given the adoption of bitcoin by savvy Ivy League endowments, sophisticated investors as well as institutions, and the distinguished Wall Street banks, it has the greatest chance of repricing the world as the digital and global reserve currency. Ethereum and its competitors have been rewarded with outsized returns over the past year and their performance is rational given the greater risk of being regulated possibly being deemed as securities or failing to launch and/or scale at the rate they hope. All in all, together they will likely be critical components of a optimally diversified portfolio that continues to be the best performing asset class in the past decade as well as this next one.

What You Can Do
Stack satoshis! Earn bitcoin back through the Fold app and their credit card or BlockFi’s, who also can help you generate interest on your existing bitcoin or crypto holdings. Dollar-cost-averaging with money that you are willing to lose has always been the most recommended entry into BTC by the bitcoin community generally. River Financial and Swan Bitcoin are both great venues that have wonderful features as well as slick user interfaces that make it easy to securely buy and sell BTC-only without high fees or agile orderbooks. Nothing compares to taking bitcoin offline into cold storage, so to give yourself the most control and security over your funds it may be wise to look into hardware wallets or custody solutions to securely hold your own private keys. I have no interest or relationship in any of the companies mentioned, they are just solid businesses that are reputable and widely used in the bitcoin community.

Why You Should Stack
Its time to “get off zero,” the oppurtunity has not past you by for your chance to buy bitcoin. “Unit bias” is a common misconception that keeps most people from owning the best and leading crypto asset, bitcoin. Just because the current price of a bitcoin may be greater than you have to invest, it doesn’t mean that it’s not possible to start with smaller units like satoshis to start getting your stack up to that full bitcoin or the number that suits you. Remember, the bitcoin pizza will always only have 21 million slices and each one of those contains 100 million satoshis. Not all crypto assets are built the same, the size of the pie may not be fixed and the chefs (developers) may not always have your interest or satisfaction in mind. Don’t be fooled into thinking that because you can buy more slices of another crypto asset it will make that just as good, successful, or valuable as bitcoin.

Happy Pi Day! Grab a slice ASAP and enjoy the ride with systemic bliss.

DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

FED MADNESS: Return of the Retail Traders (Episode Six)

A long time ago in a financial crisis far, far away. . . .

Episode VI

RETURN OF THE RETAIL TRADERS

The Retail Traders have remained locked down in their homes during the pandemic while staging a rebellion in the markets from their basements with their stimulus checks in an attempt to rescue their beloved businesses of their childhood’s and lives that they cherished pre-pandemic from the vile short-selling gangsters on Wall Street.

Little do the Retail Traders know that the EMPIRE OF BLUE CHECKMARKS & PIN-STRIPPED SUITS have secretly been conspiring to squeeze the life out of the small businesses and publicly traded companies that stand in their way of concentrating their own control, influence, power, and wealth.

If they are successful, it will mean a certain doom for the small band of rebels struggling to restore freedom to the financial markets . . .

Global Financial Crisis

Unchartered Waters
The world entered uncharted waters in 2008 and 2009 as the banks and insurance companies saw themselves lose big only to have the central banks with their government’s backing bail them out by simply creating and printing money from nothing under the leadership of the Federal Reserve chairman at the time, Ben Bernanke. They fractured the fractional banking system in a way that corrupted its integrity fundamentally to the point of no return. Bitcoin was born as direct result of this bankrupt behavior from the top down as the younger generations would start to become disillusioned with their systems of trust as well as centralization.

In the wake of the Global Financial Crisis, many hardworking Americans as well as people around the globe were forced into making due with what they had left if there was even anything to be salvaged. While those at the bottom of economic ladder struggled to get by and picked themselves up by the bootstraps, there was a party being thrown by fat cat investment bankers, insurance companies, and investment firms on Wall Street who received their bailouts from the governments as they secured the funds necessary to keep their lucrative bonus checks. This left a bitter taste in the mouths of all Americans who did not see any of that stimulus money and watched their ideals about democracy, economics, and free market capitalism fly out the window.

The actions taken by bureaucrats, elected officials, and politicians back then set the tone for what was coming down the pike. It was telling that the foundation had been corrupted, and those who were willing to pay close enough attention could see that money spilling out of every crack at the Federal Reserve meant it was starting to lose its meaning as the purchasing power was being printed away without any regard for its consequences. “Gradually then suddenly” as described by Ernest Hemingway in The Sun Also Rises, it looks like people are waking up to the reality that they are not powerless against those highly connected insiders who seem to be changing the rules as they go as they continually bankrupt the economy.

The culmination of events brewed a perfect storm for an alternative system, such as Bitcoin.

“The idea that growth will remedy our debts is so addictive for politicians, but the citizens end up paying the price.”

— Michael Burry

The Corona Crash

Inflating the “Everything Bubble”
Fast forward twelve or so years, and you will see pretty much any asset’s price chart go up and to the right. Luxury items whose demand is relatively inelastic to common goods have seen their values rise exponentially as the markets for art, bourbon, cigars, designer handbags, wine are subject to doing so because of the limited scarcity of their supply. This phenomenon is also largely fueled by inflation, not to mention, the low interest rate environment of the past decade in addition to society’s everchanging tastes and preferences that has only been exacerbated with the growth of social media.

In the face of a global pandemic spurring national emergencies and lockdowns, we saw grocery stores have their shelves emptied as they had been picked over by nervous consumers hoarding everything they can get their hands on, even the toilet paper. Investors acted similarly, although it seemed instead of buying everything they can get their hands on they were selling it for cold, hard cash. Financial markets had not seen selling and volumes like they did since the Global Financial Crisis, and alike the last crash it was another great opportunity to “buy the dip” if you had any free capital to deploy.

The black swan-like selling went across the board and even knocked safe haven assets like gold and silver that are risk-off relative to the emerging risk-on safe haven in bitcoin. They bounced back stronger than ever though, especially bitcoin as more “smart money” and institutional investors came out the woodwork announcing their interest or proudly declaring a freshly laid position in bitcoin like Michael Saylor did. Gradually and then suddenly it seemed that these sorts of headlines and news were being made on a more frequent basis, and the legacy banks and financial institutions seeing the demand as well as interest caved on their bashing bitcoin to reverse their stance completely that purported that it was dead, failing, never going to happen, or manipulated as they actually issued price targets well into the hundred thousands after witnessing bitcoin’s price reach all-time highs above $20,000 as it began skyrocketing up past $40,000 in recent months.

Bitcoin is on a trip to the Moon and does not show any signs of stopping there, so onwards to Mars!

“I believe Bitcoin is one hell of an invention… Bitcoin looks like a long-duration option on a highly unknown future.”

— Ray Dalio, What I Think of Bitcoin

Rigged Games

GameStop & Wall Street Bets
This past week saw one of the greatest underdog trading stories of all-time that revealed the absurdity of the Federal Reserve’s policies and how influential and interconnected the big-money insiders really are when the push comes to shove. The low-brow reddit forum of self-described “degenerate” day traders that are essentially glorified gamblers known as r/WallStreetBets coordinated themselves for a “gamma-squeeze” on some of the most infamous and notorious players on Wall Street. In the Global Financial Crisis of 2008, the “big short” was made by a group of insiders who identified a market dislocation and exploited it but this time around a it was a bunch of ragtag retail traders banding together after pointing out another dislocation in the market and exploiting it to see magnificent profits in return for their risk.

The Rise of the Daytrader led us to this moment, and the little guys saw their opportunity to stick it to the same people that stuck it to them in the last financial crisis, so they took their shot. In spectacular fashion they stood strong holding their calls and buying shares pushing up the price of their favorite video game store GameStop, and it paid off as the founder and CEO of Social Capital, Chamath Palihapitiya, and the world’s richest man, Elon Musk, cheered them on as well as joined in on the action over CNBC and on Twitter. The recipients of the retail smackdown in the markets and on social media were the firms Citadel, Citron Research, Melvin Capital, Point72, and Robinhood.

Interventions came down swiftly as the retail traders saw that they were no longer able to buy or trade their shares in the companies of GameStop as well as AMC, American Airlines, Bed Bath & Beyond, BlackBerry, Castor Maritime, Express, Koss, Naked Brand Group, Nokia, Sundial, Tootsie Roll Industries, and Trivago. These restrictions took place mostly on Robinhood, but also were seen on other major brokerage applications and platforms used by other retail traders. As these small investors were locked out from buying shares in companies they believe in by their own service providers, they were only allowed to close or sell their positions to push the price down during a period of time when it was critical that the hedge funds on the losing side of the bet suppress the price of the shares to limit the losses being accrued on their short bets.

This was sparked the awakening of the retail traders, and they saw just how badly the market is rigged with greater than 100% of GameStop’s public float being shorted (62M shares short and only 50M shares available) by some of the most sophisticated hedge funds in the game that literally made it impossible for them cover.

“HEDGE FUNDS LOOK FOR RESCUE FINANCING IN GAMESTOP TRADE”

CNBC Headline, January 27th, 2021

Trojan Horse

Big Bets Backfire on Hedge Funds
The corporate raiders and cut-throat hedge fund managers from the golden age of Wall Street in the 1980’s lived by a fairly crass credo that best summed up how they would do business by putting it plainly that they would, “Pick on a cripple.” They loved seeing companies that were in dire straits or desperate for a good turnaround because it meant they also could profit from them sucking the wind out the sail’s of the share price to gain control of the company buying it cheap as well as make healthy gains on the way back up after they worked their magic. Many of the names of companies that were being mentioned on r/WallStreetBets were ones that had been particularly effected adversely by the pandemic and its restrictions that were stemming from the rise of COVID-19.

Melvin Capital and Citron Capital suffered an epic short-squeeze by retail investors piling into the most unloved names on the street. Dave Portnoy along with some of the biggest names in finance, pop culture, and technology with millions of followers began fanning the flames from across the Internet as well as mainstream financial media outlets that propelled the shares even higher. According to Andrew Left of Citron Capital in a YouTube video, the firm closed its position at “a loss of 100%” after needing to repositioning other parts of their portfolios to cover the losses on GameStop as the gaming retail surged even higher in the after and pre-market trading.

Hedge fund titans Ken Griffin and Steve Cohen together injected $2.75 billion into Gabe Plotkin’s Melvin Capital as the firm lost about 30% this year after starting it with about $12.5 billion in assets under management. The hedge funders came under intense scrutiny in the court of public opinion as it seemed that Cohen was bailing out his old employee with a friend in return for a “non-controlling revenue share in the six-year-old hedge fund.” It also does not look good that some of these names mentioned who were being squeezed and bailed out their buddies are either investors in Robinhood or customers of the app’s order flow.

This will forever be an interesting study throughout history of how the “smartest guys in the room” with tens of billions of dollars got fooled by a bunch of unsophisticated retail traders with $600 stimulus checks who presented them a Trojan Horse from the depths of social media, giving a new meaning to F-You Money.

“We can stay retarded for longer than they can stay solvent.”

u/blunt_person on r/WallStreetBets (mocking a famous quote by the economist John Maynard Keynes)

Time for a New System

Centralization is Losing, Decentralization is Winning
This last week was proof that the system is vulnerable from being controlled by a few insiders with the resources and connections to get themselves bailed out, even from the White House if need be. After all 80% of the stock market volume is automated trading between machines, not humans, by high-frequency-trading firms like Citadel, Ken Griffin’s firm. That firm alone spent over $200,000 in government lobbyists while also paying over $800,000 to Janet Yellen (the former Federal Reserve chairman appointed by Barack Obama and the sitting Secretary of the Treasury under Joe Biden), so it seems that the return on their investment may already be looking to pay off.

Currently, the best analogy that can be used to explain the GameStop debacle is that it’s been an intense back-and-forth video game between a little brother and big brother. After of taking loss after loss for years, even when the big brother would bully and cheat to win, the little brother kept grinding and mastering his game. Then, out of absolutely nowhere, the little brother entered the game with a wealth of knowledge and an edge that he gleaned from information over the internet, which he then used to wipe the floor with big brother.

Now, it looks like the big brother is crying foul and trying to change the rules and even turn the game off as they are playing without admitting any defeat or wrongdoing. This is a shining example of why it is so important to have a censorship-resistant and decentralized networks as well as money like bitcoin that cannot be altered or adulterated. It has become increasingly urgent that the word spreads about the benefits of bitcoin because if you use it properly nobody can prevent you from buying it or transacting with it to “protect you from yourself,” only you can do that now.

In 2008 they said they were “Too Big to Fail,” and now they are telling us that we are “Too Small to Win.”

“In light of current market volatility, we are restricting transactions for certain securities to position closing only, including $AMC and $GME.”

— @RobinhoodApp, Official Twitter Account of Robinhood (January 28th, 2021)

“Dapitalism” – Decentralized Capitalism

Younger Generations Picking Up and Leaving for New Systems
Revelations over the past decade have shown us the dirty tricks of the business in Silicon Valley with the likes of Facebook as well as Robinhood that recently highlighted the fact that if the application is free or brokerage has no fees that you are the real product, therefore your data is their asset that they sell. These assets are sold in the open market to their real clients who pay them in exchange for your information so they can profit at your expense. Younger generations are seeing bitcoin and crypto assets and their networks as viable alternatives that enables them to engage privately or at the very least get some remuneration for their data.

The markets are clearly not acting efficiently, and the powerful stock market operators are censoring investors from acting efficiently as well as making decisions out of their own free will. It is so purely un-American that it is making millions of people sick to think that they can be shutdown and shutout in broad daylight from exercising their own transactions while behind the scenes there is another VIP fast lane allowing those who can afford to pay the tolls to do what the otherwise normal person cannot as an ordinary user. Selling the order flow of millions of retail traders to further enrich the billionaires and their own investment companies as well as their other hedge fund buddies is the antithesis to the namesake Robinhood, and bitcoin is truly the only way to seize back your freedom and sovereignty.

Free enterprise is an economic system in which private business operates in competition that is largely free of state control, but our current form of capitalism that we are seeing again and again is cronyism at its finest. Levels of disgust in the current system are so high that it has become a bipartisan issue to prevent these Wall Street insiders and institutions from manipulating the market as well as ensure they are not bailed out after gambling at the casino. It is crazy to think hedge fund billionaires are complaining about the fiasco after getting caught with their pants down by a group of small investors who would never get bailed out if the trade went as those insiders had planned and they all lost their shirts.

We need decentralized capitalism that allows private citizens as well as companies say and transact as they please, letting us all decide for ourselves whether it is worth facing the consequences for better or worse.

“I love how @RobinhoodApp is like we’ll go back to normal tomorrow. What changed? Oh right? They crashed the market and let the hedge funds get out. Now suddenly there are no issues with it.”

@stoolpresidente, Dave Portnoy via Twitter on January 28th, 2021 in response to Robinhood blocking customer’s buy orders

Changing of the Guards

The “Big Short-Squeeze”
As the news of the retail traders victory spread like wildfire across the variety media outlets, the entire stock market suffered slipping about 3% over the span of the week because the so-called “masters of the universe” did not surrender their reckless short positions. It wasn’t just Robinhood either that forced the retail traders into only selling and barring them from buying more calls or shares as clearing house firms caused brokerages to restrict trading after deposit requirements grew on those Wall Street Bets company shares, which threw a wrench in the works for Robinhood who was “democratizing finance” and now possibly impaired the entire system for a younger generation learning what it all means that the market is rigged for insiders and not outsiders. Censorship has been a major theme this year as the sitting president of the United States of America, Donald Trump, lost bank accounts in addition to his social media accounts that put on display just how the Big Banks as well as Big Tech are untouchable.

Steve Cohen tried to downplay his role over social media after tweeting, “Rough crowd on Twitter tonight. Hey stock jockeys keep bringing it,” which caught a lot of criticism to say the least. Dave Portnoy of Barstool Sports and DDTG who has been one of the most prominent leaders in the day trading and degenerate gambling movements this past year with his live streams discussing news and market moves sparred with Cohen online replying to the fund manager’s request to take their public beef offline only to call him “shady” before firmly stating, “I think you had a strong hand in todays criminal events to save hedge funds at the cost of ordinary people.” At the time of this writing, Steve Cohen has since deleted his account after denying any involvement in the events.

It should be noted that hedge funds currently have greater than a billion dollars of short interest in bitcoin futures on the Chicago Mercantile Exchange (CME) relative to other asset managers and other financial institutions. Ray Dalio, who runs the largest hedge fund in the world, was not the only one changing their stance on bitcoin since Elon Musk and Jack Dorsey both changed their biography sections on their Twitter profiles to simply say one word, “#bitcoin.” Now that we are seeing memes on social media starting to move financial markets and recognizing that those two people in particular are deeply entrenched in the Internet’s culture, not to mention have about 50 million followers between them, it might be an indicator that they know something that the people following them do not all see or understand, yet.

This could mark the beginning of a beautiful relationship if the Wall Street Bets community embraces BTC.

“They can only control us because we use their currency.”

@WSBChairman via Twitter on January 28th, 2021

Beating Them at Their Own Game

GameStop Shows Us the Flaws in Hedge Funds, Bitcoin Reveals the Same for Central Banks
Manipulation is a dirty trick that Wall Street professionals like to play on amateur investors, and they thought they had it mastered until recently getting schooled by people they used to bully and shakedown regularly. Price distortions happen for myriad reasons, but the main culprit is the Federal Reserve who steals value from the low and middle-classes by printing money that debases and devalues the purchasing power of their savings and wages through inflation. It is not that hard to see that the policies that our central bank and government employs does not really serve those who need it most, but rather are just more methods for the wealthy upper-class to become richer without actually doing anything productive other than simply owning assets whose value benefit them from Cantillon Effects.

The fractional banking system under our central banks is failing, and it appears to be losing its luster in these modern times. Issuing free money and limiting free markets is not a sustainable or wise path to be taking for any functioning democracy that aspires to call itself “free.” Yet, here we are in the 21st century with a Federal Reserve that many founding fathers objected to for the reason being that too much power was going to be held in the hands of too few people.

The levels of opacity in Bitcoin compared to the Fed is night and day. You can determine exactly how many bitcoins will be created on any given basis but when it comes to our infinity dollar, who really knows? Seeing the close ties that the Federal Reserve along with the Treasury Department have with the business moguls and hedge funds makes you wonder just how much they are looking out for the common man rather than being two-faced politicians who only protect all of their friends in high places that they hope to work for once they finish their work in “public service.”

We must decide to opt into a new economic system that is designed to benefit its participants and not be detrimental to their livelihoods or future generations that are going to be footing the bill.

“The bold effort the present bank has made to control the government, the distress it had wantonly produced…are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.”

— President Andrew Jackson, The Federal Reserve SystemThe New American, p. 31.
(His warning to the American people after abolishing the privately controlled central bank, the Bank of the United States. We now have another privately controlled central bank known as the Federal Reserve.)

A Better Way Forward

They May Take Your Dollars Away, But They May Never Take Your Bitcoin
It is time for the world to embrace a new Bretton Woods system having seen the amount of counterparty risk in our interconnected global economy that is being run into the ground by central bankers around the world. The collapse of the Bretton Woods system put into place after World War II caused a major shift in the value of major currencies after abandoning the gold standard and instead opting for floating exchange rates tied to the American dollar, the Euro, the Chinese renminbi, the Japanese yen, and British sterling pound. Bitcoin has the best shot at becoming the new replacement for a global reserve asset that becomes the standard for all of these currencies to be tied to at a fixed rate, so they may create a basket of them whose value can be used as Special Drawing Right (SDR) by the International Monetary Fund and their member countries while maintaining the relative importance of their fiat currencies trading in the world’s financial system.

Bitcoin is not a private currency. It is an open, decentralized currency that cannot be shut down. It might be worth getting some or learning more about it before the entire world starts coming around on their opinions against bitcoin. According to a survey by Finder, 14.4% of Americans own bitcoin or some form of crypto asset in 2019 doubling from 7.95% in 2018, so keep in mind that it is still early and the hedge funds are shorting it to a considerable degree.

Having some bitcoin might be good too in case the retail crowd keeps deciding on flattening the hedge funds that are betting against innovation like Citron and Melvin Capital who also tried to kill Tesla once upon a time only to see those shares skyrocket higher too. Do not let them try to destroy our best entrepreneurs, innovations, and technology that are trying to bring a higher quality to humanity as well as restore liberty and sovereignty inherent to all individuals. Buying bitcoin today is simply investing in a brighter future and should be your right to exercise as a peaceful protest against the tyranny of central banks and governments.

If we all HODL and everyone wants it (even all of the millionaires and billionaires), there will be a buy-side liquidity crisis due to the limited supply that can shoot the price of bitcoin to the moon, maybe even mars.

“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.”

Satoshi Nakamoto on the Bitcoin Talk forum on July 29th, 2010

DISCLAIMER
An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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CHAMATH for California Governor

r/wallstreetbets is now the largest hedge fund in the world.

Excepts [sic] it’s completely decentralized and entirely democratic.”

@chamath via Twitter on January 30th, 2021

Crypto Facts & Fantasies (2021 Thesis)

Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”

– Ferris Bueller’s Day Off

Having 2020 in the rear view mirror feels both comforting and disturbing with the rise of a global pandemic that still is looming over the year ahead. Central banks in tandem with their governments made swift financial interventions by printing record amounts of money through emergency lending powers as well as stimulus programs, which is only pushing the wealth gap further while contributing to the largest government deficit in the history of the United States of America. Thanks to Obama and Trump!

A new president of the United States was elected in the same year that the sitting one was impeached only to be acquitted later with the support of his party. Politics within the country has many Americans divided for years but most recently boiling over as the deadly events on Capitol Hill unraveled with protesters storming into the federal building standing as a sacred ground of democracy to completely blow up the legacy of the 45th Commander in Chief in the final hour of his presidency, which also may have fractured the Republican party irreparably. It cost him his social media accounts, where like a wizard he could cast spells to rally loyal his troops of followers sparking a heated debate over censorship in the 21st century as well as just how far we can allow companies and corporations go in opposition to leaders of the free world.

Efforts to delegitimize the office of the president may have pulled back the veil of illusion over the all powerful position of Commander in Chief, especially when trust in the government and its leadership needs it most. This is sending ripple effects that may have consequences going forward that leads more citizens and people around the world to experience a loss of faith as well as trust in the president’s competency and legitimacy. It’s beginning to look like people are beginning to believe more in algorithms, applications, and software more than they are in each other.

In a country already so divided any erosion of the public trust in the government as well as its systemically important financial institution’s ability to appropriately and responsibly manage themselves, the collective populace may reach a tipping point that rallies them around a third party that is socially progressive yet fiscally conservative who will open the discussion towards adopting new standards and systems. These candidates are only just beginning to enter the arena, but the dominant two party politics in America as it stands will continue to take the country deeper into debt and push the wealth gap further until the pressures become so extreme that it causes a dramatic paradigm shift towards one side of the spectrum to either tighten controls and surveillance while enhancing their own power or loosens the amount of interference in free markets while restoring privacy, not to mention, security to the United States of America’s interests in the short and long-terms.

It is apparent that the fabric of our society has become frayed. Seeing that our leaders haven proven themselves to be unreliable and untrustworthy, it has created an environment that has rapidly increased the need and practicality for strong decentralization as well as peer-to-peer technology. Bitcoin has been the beneficiary of many disillusioned investors and institutions with large cash positions viewing it a hedge against the current legacy financial infrastructure as well as as “schmuck insurance” for the inflation induced by bureaucrats and politicians willing to let those cash positions and savings melt in value over time.

The levels of money printing in 2020 have dwarfed the efforts made to save the entire financial system from collapsing in 2008 and 2009. Its effects will likely not be instant, but seeing that bitcoin alongside the stock market has rocketed to record highs may be an indication of Cantillon Effects and inflation. Trends are pointing to rising interest in bitcoin, which have historically been higher according to Google Trends and may be leading many people to speculate a larger parabolic move upward in price may still be coming.

Last year’s edition included my price call saying, “Although it may not carry as much weight as it did at in the first edition, my price call with a time horizon ending 2020 (maybe being a year or so too soon) for bitcoin to reach $60,000 – $100,000 still presents an opportunity with tremendous upside down the line and may need to take some time before doing so with new all-time-highs as the main focus this year.” It was awesome to see that it was not completely wrong with bitcoin closing last year at record highs before opening this year crushing above $30,000 and $40,000! I am confident in that original call still and believe it may even be too conservative given the coverage and reports coming from prominent individuals and institutions such as JPMorgan valuing its long-term potential over $146,000, Tim Draper projecting it could hit $250,000 by 2023, Chamath Palihapitiya declaring on CNBC that it is likely going to $300,000 eventually, Guggenheim Partners’ Scott Minerd predicting a $400,000 long-term price target, the Winklevoss twins saying it could be worth more than $500,000, and Hal Finney prophesizing practically a decade ago that it could reach $10,000,000 one day.

In a continued effort to publish more often and help demystify the crypto space to present more meaningful content that helps transparency as well as decision-making, I am publishing the third edition of Crypto Facts & Fantasies. (Click to read the first and second editions, respectively, here and here.)

Without further ado…

FactsFantasies
1. Bitcoin was the single greatest performing asset over the past decade versus bonds, stocks, and gold1. Asset prices are rising broadly because of sound fundamentals and not stimulus induced inflation
2. The crytpo and decentralized finance market share is growing relative to their competitors2. Bitcoin is entering a bear market, thus proving the digital gold thesis wrong finally once and for all
3. If you do not have the ability or availability to hold your own bitcoin or crypto, they are IOU’s3. Holding your own private keys is a danger to society and they need to be trusted with a custodian
4. You can now stake bitcoin with regulated custodians and on exchanges who offer annual interest and rewards4. Legacy banking institutions do not offer bitcoin and crypto asset custody solutions this year to lose out on the potential streams
5. Exchange and OTC Desk volumes are up huge in the past year with serious corporate as well as institutional interest growing for bitcoin 5. Corporate treasuries, hedge funds, private equity, and venture capitalists ignore the growth and interest by investing less in 2021 than 2020
6. The United States M2 money supply, accounting for all the coins and currency in circulation, rose by +25.2% meaning that more than a quarter of all USD that has ever existed was created and printed in 20206. There will be the creation of more than the 21,000,000 total supply cap of BTC put into circulation that is fixed and hard-coded into its software to issue limit inflation overtime until it is terminally zero
7. Government censorship is not possible with Bitcoin because it is not routed through a central bank, financial institution, or third-party7. Central-bank-crypto-currencies (CBDCs) will allow non-reversible payments for goods or services, thus making their permission and trust mandatory
8. As the bitcoin and crypto critic Warren Buffet once wisely said, “the best holding period is forever” and bitcoin offering decreasing inflation rates makes it a great savings account8. Spending and trading your bitcoin and crypto assets is better and easier than simply just hodl-ing (unless you are using any excess cash to add or buy more bitcoin to stack yourself)
9. Bitcoin, Ethereum, and DeFi are emerging investment assets solidifying into a full fledged crypto asset class that is growing due to their enhancing infrastructure, oversight, and ubiquity 9. Bitcoin and other investment grade crypto assets do not get a respective exchange-traded-fund (ETF) for investors based in the United States as demand and interest grows for gaining exposure to BTC, etc.
10. It’d be more costly and difficult for any single government or group of nation-states to try and kill bitcoin or make it become worthless than it would to cause it to multiply more than it is trading worth10. Bitcoin collapses, falls to zero, fails, shuts down, or vulnerable to a network hack that results in the miners and users to stop all together and give up on their collective dream of financial freedom

Similar to last year, I am excited to see how this round of facts and fantasies materialize, or don’t, eventually and how they impact my own theories, views, and strategies.

Last year I said it felt like something “BIG” was coming, and oh boy was that right! The markets got rocked viscously from the spreading news of the coronavirus and COVID-19 that shook out many investors believing the end times were near just before bottoming out. Seeing asset prices on discount and the flood of money coming from the emergency lending powers employed by the Federal Reserve, a very large and powerful move developed for all of the markets to the upside. Bitcoin was born out of the banks printing money to take themselves off the brink and created in a direct response to them doing so by Satoshi Nakamoto. This past year proved that bitcoin was a worthy asset to own during and through any liquidity crisis or recession.

Due to market developments over the past year as well as global pandemic still on the horizon over the next year, the price of a bitcoin has moved north of $35,000 per coin at the time of this writing. It looks to be testing a major resistance around $32,000 for more downside if it breaks south of that point, but bitcoin could also very simply bounce off its 30-day moving average again to rally back towards the $42,000 highs. I would not be surprised to see bitcoin back in price discovery mode if it extends past $43,000. Passing that point could potentially accelerate it towards exit velocity in the $48,000 to $50,000 range range as it coils in another attempt by the bulls to shakeout weak hands before rocketing towards $60,000 and possibly beyond. Then again, it could also see a mean reversion that nobody saw coming going as low as the $18,000 to $26,000 range, but it does feel improbable with as much positive momentum and sentiment trending currently.

Either way, we will have to wait and see how it all works out as these are still the early innings.

There may come a future when you can no longer buy bitcoin, but can only work for it so keep it mind the quote at the top, “Life moves pretty fast. If you don’t stop to look around once in awhile, you could miss it.”

Have a safe and successful 2021, TO THE MOON!

– JH

DISCLAIMER

An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written herein may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed herein are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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Every day that goes by and Bitcoin hasn’t collapsed due to legal or technical problems, that brings new information to the market. It increases the chances of Bitcoin’s eventual success and justifies a higher price.

– Hal Finney, 2011