Why Anthropologists Are More Interested In Bitcoin Than Economists

Why Anthropologists Are More Interested In Bitcoin Than Economists
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Mainstream economists are renowned for bashing on Bitcoin. Anthropologists, on the other hand, are becoming more interested in it. Why?

I am an anthropologist and economist who went down the Bitcoin rabbit hole. I wrote this paper to clarify my thoughts about why these two disciplines respond so differently to Bitcoin.

What Is Anthropology?

Anthropology is a social science that is concerned with understanding culture through participatory observation, or ethnography: cultural immersion in the social worlds being studied. This research method is at the heart of the discipline, and it forces practitioners to “get out there,” to expose themselves, and to experience the culture being studied as a local.

This might explain why anthropologists often end up in heated debates with economists, who instead understand the world through numeric aggregates and abstract models. Mainstream economists take a top-down view of the world based on deductive reasoning stemming from their models and assumptions, which are heavily influenced by classical Newtonian physics and its notion of “equilibrium of the heavenly bodies” and lack the “systems perspective” that emerged from thermodynamics and influenced engineering (Alizart, 2020).

In contrast, anthropology, which involves both deductive and inductive logic, is mostly focused on the latter. Observed and experienced real-life evidence leads to the formation (and recalibration) of theoretical frameworks: first comes the evidence, then comes theory, and so forth (more on this in the Limitations section).

Another key element of anthropology is its concern for the “emic” (people’s subjective beliefs and experiences of the world) above the “etic” (objective truth). So, anthropology takes the view that objective measures such as various economic growth parameters can mean very little when abstracted away from people’s experiences and lived realities. Looking at the emic gives anthropology a superpower: the ability and need to be open to alternative belief systems, challenge its own mental models, take in additional insights, and craft a more nuanced and holistic view of the world as a result.

Anthropologists are not scared of dealing with people’s belief systems because it relativizes them. That means that each culture must be viewed as “a truth” that must be understood as a rational system on its own terms, which is why judging a culture from an external point of view often leads one to miss the point.

In anthropology, emic truth is multiplicitous and relative rather than universal and absolute. What does this mean? “Cultural relativism” doesn’t mean that “2 plus 2 does not equal 4” (these claims by self-proclaimed anthropologists are bogus). It just means that a particular belief system may have come to that conclusion, and that in itself may reveal something about that culture. Anthropologists recognize that math and physics have more adequate tools, languages and frameworks to assess the etic (and to establish that 2 plus 2 does equal 4 — for that we need mathematicians).

Why Are Anthropologists Interested In Bitcoin (And Many Economists Aren’t)?

Anthropology has a long tradition of writing about the alien “other,” and bitcoin certainly represents a new type of exotic “other” for the majority of the world’s population. So, anthropologists have approached the culture of Bitcoin as it would approach any other: with no judgment and with openness to challenge its own preconceptions of it.

Anthropologists have ventured to study the world of bitcoin miners, holders, speculators, and local bitcoin merchants, among others. This has allowed them to understand the communities’ beliefs and points of view by going beyond their own perspectives. Many anthropologists have come out of the studies inspired by the ethos and beliefs of these communities, as I will explain in more depth in the next section.

Source: „The Simpsons“

In contrast, mainstream economists continue looking at Bitcoin from the comfort of their ivory towers. Nobel Prize-winning economist Paul Krugman, Nouriel Rubini, Steve Hanke, and many others have systematically dismissed bitcoin as a bubble, tulip, or speculative asset with little regard to how people actually use and view it today.

Economics as a discipline is locking itself in an echo chamber, siloed from other perspectives and receiving little feedback from the outside. It also lacks the methodological tools to make sense of cultures. No wonder it mistakenly reduces Bitcoin’s meme culture to an irrelevant tribal phenomenon.

But the core of economist’s fallacy is epistemological: what is recognized as truth, and where does truth come from? Does it come from the “top” (meaning the state or god), or the “bottom” (the local popular beliefs)? When it comes to money, who decides what is money (the truth of money)? Mainstream economics lives off the assumption that money is money by “fiat,” meaning that its value is determined by the state’s ultimate judgment and formal decree. In contrast, anthropology, being interested in people’s views and beliefs, has no problem accepting bitcoin as money because ultimately, people believe that it is, and that is how they use it.

Source

At the core of economists’ fallacy is the belief that money is money by decree (because the state and its expert economists say so), which means they don’t fully recognise the power held by people’s collective decisions.

Anthropologists are also interested in Bitcoin because it is not a threat to the discipline’s status quo. Anthropology is mostly a descriptive discipline, concerned with making sense of things as they are rather than “messing with things.” In contrast, economics is all about prescribing and “intervening” in the economy: the economy needs to be “stimulated” and then “stabilized,” and employment needs to be “maximized.” As a result, Bitcoin, which cannot be controlled in terms of monetary policy, massively limits the scope of economics to act on the economy. Bitcoin may well be challenging economists’ core beliefs, and perhaps, their relevance (ouch!). Having said that, this is not true of all of economics. For example, there are heterodox approaches that take more of a systems perspective, such as the Austrian school, which flips the episteme around: truth and economic activity come from the economic actions of the individual rather than the state, the latter of which are not seen as fundamental to economic life.

So, What Are Anthropologists Saying About Bitcoin?

After looking at anthropologists’ foundational methods, theories, and epistemologies, it is worth checking what anthropologists are saying about Bitcoin.

1. Bitcoin is money

Anthropologists have no problems admitting that bitcoin is money, first and foremost “because people call it so, [and] many use it as money” (Kavanagh et al.).

2. Bitcoin leverages people’s ethos

Research on Bitcoin miners has revealed the degree of excitement and creative energy that surrounds the Bitcoin space (Calvão), and it is this ethos and ethic of the Bitcoin community that may infect the world.

3. The values and rituals of the Bitcoin community are important for Bitcoin’s success

A study by Kinney demonstrated that Bitcoin adoption by individuals follows a distinct process: first, adopters discover the value of Bitcoin on their own terms. Next, they reflexively overcome challenges to these initial perceptions of its value. Finally, they reaffirm their embeddedness in the system through rituals of commitment (Kinney), such as today’s “Laser rays to $100,000!” phenomena on Crypto Twitter. This reaffirms the importance of group identity to the social construction of Bitcoin as money.

Thus, the Bitcoin community’s value systems and rituals make bitcoin mature and have helped to establish it as money. As the Bitcoin community has also clarified, Bitcoin is backed not only by technology and numbers, but also by memes.

4. Bitcoin is not just speculation

Anthropologists reject the notion that Bitcoin is just about speculation. Bitcoin is an asset for owners to hold for the long term.

Bitcoin is sustained not only by greed, but also by community, beliefs, and a sense of belonging (Morucci).

„Balinese Cockfights & Bitcoins“

5. Bitcoin is a mirror

The meaning of Bitcoin is “loose enough to mean many things to the members of the community, but specific enough to bind that community together.” The facts that this community is a new type of organism (Quittem) and that bitcoin’s valuation is difficult to establish mean that each person can project the meanings and desires of their choice on them. Bitcoin tells us all what we want to believe, and that is true of both lovers and critics (Kavanagh et al.).

6. Bitcoin is highly political

So, Bitcoin has the ability to create political bodies. It has the ability to project our primitive human passions, even in ways that are destructive to the current political, economic, and social systems (Caldararo).

For example, to the Bitcoin community in cyberspace and offline, hodling is a way of countering state-controlled debasement of the value of money (Morucci). Furthermore, a study of a Bitcoin coffee shop in Slovakia showed how the staff supported the initiation of Bitcoin “newbies.” Bitcoin provided a great degree of power and freedom from the state’s “Big Brother techniques” of control to the coffee shop (Tremcinsky).

Interestingly, others have come to the conclusion that Bitcoin can help us to overcome corporate power entrenchment caused by the centralisation of new technologies, which is currently in the hands of a few tech corporations (Caldararo).

7. Bitcoin is not just dependent on the math and is not entirely “trustless”—its social layer is essential to maintaining it and giving it value

Anthropologists have criticized the Bitcoin community’s belief that Bitcoin is totally trustless and entirely “run by numbers.” According to anthropologists, this would be impossible because we are social creatures, which means that Bitcoin’s sociocultural layer plays an important role in determining whether it has value, and what that value is. The formation of democratic communities in the digital economy remains embedded in social relations. So, the idea that Bitcoin is not mediated by any institution is seen as an illusion (Tylor and Bill Maurer).

A similar stance has been echoed by Giacomo Zucco, who proclaimed the importance of maintaining a puritan Bitcoin-only stance whereby all cryptocurrencies besides Bitcoin are declared “shitcoins” and not worthy of holding.

This further highlights that the “social layer” of the Bitcoin protocol is just as important as the technical one.

8. The nature of money is changing, and Bitcoin will play a critical role in the future

Anthropologists have noticed that, thanks to Bitcoin, serious questions are being raised about the nature of money, which has important implications about society and humanity at large. Even if it fails, Bitcoin is a fascinating “‘breaching experiment’ that helps to reveal how money is implicated in the social order and how particular values and practices come to emerge” (Kavanagh et al.).

In his book “The Social Life of Money,” Dodd wrote that what is considered money has changed through time, and that we are on track to see it change again. Money is becoming increasingly fragmented, and Bitcoin is likely to play a role in the future of money.

Anthropology’s Limitations In Understanding Bitcoin

Anthropology is far from perfect, and it has some challenges as a framework for understanding Bitcoin:

  • Anthropology lacks the quantitative toolkits needed to be able to understand and research on-chain activity, from which one can gain many behavioral insights. We need to push anthropology to be able to understand the technological backbones of our digital world so that it can remain relevant and engage in broader discussions with other disciplines.
  • Anthropology has always been a highly diverse discipline, welcoming perspectives, theories, and approaches from very different viewpoints and other disciplines. However, in the last few decades, it has been undergoing increasing homogenization towards hyper-reflexive, highly theoretical, and overly philosophical schools of thought, which often lose touch with people’s everyday lives.
  • Anthropology lacks a systems view of macroeconomics and does not do enough to understand the basics of the current monetary paradigm. This leads many anthropologists today to view the market as simply dysfunctional and the system as simplistically capitalistic or neoliberal with little awareness of the extensive role that central banks play in economies.

Like the rest of academia, anthropology has no (or little) skin in the game, so not only can it afford to be wrong, but it can continue being wrong and pretending that it is right. Anthropology does not need to be scared to become more applied in praxis, and by doing so, it can grow its methods and frameworks. This is what the hybrid discipline of design anthropology is doing today.

Conclusion

The key takeaway here is that anthropologists have many interesting things to say about Bitcoin. In contrast, economists’ commentaries are often very stale and uninformed.

Anthropologists recognize the important role that Bitcoin is playing in leading us to rethink what money is, which in turn has many consequences for social life. At the same time, anthropologists also recognize that the social dynamics and community surrounding Bitcoin, its memes and the socio-cultural elements of the Bitcoin phenomenon are critical to its success.

Anthropology may not be the best discipline to understand Bitcoin as a whole, but the same can be said about every other discipline on its own. Bitcoin is complex, and to fully understand it would require an understanding of engineering, cryptography, incentives, culture, social psychology, network systems and much more. In other words, it is not a one-discipline job.

The cultural and social aspects of the Bitcoin phenomenon cannot be understated and overlooked, as therein lie answers to many questions (such as the why). Why do people care about Bitcoin? Why should we care about Bitcoin? Well, for many anthropologists, this technology may well be brings money back in the hands of the people.

Notes:

  • I am aware that the disciplines of anthropology and economics are highly varied and complex, more so than I am picturing here. I am therefore guilty of making generalizations. I do not purport to speak for all economists or anthropologists out there.
  • That said, this article does not aim to be a criticism of economics as a whole, but of its current state: it has lost touch with reality because of its command-and-control approach, top-down methods, models, assumptions, and the lack of a systems perspective.

Acknowledgements:

Thanks to the following thinkers and writers for the invaluable feedback: Martin Tremcinsky, Emil Sandstedt and Paula Magal.

This is a guest post by Michele Morucci. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Market Analysis Demonstrates Bitcoin Price Is Nowhere Near Top Of Run

Market Analysis Demonstrates Bitcoin Price Is Nowhere Near Top Of Run
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A deeper dive into bitcoin’s fundamentals and recent market trends shows that the price bull run is nowhere near its top.

Bitcoin has been consolidating around the $1 trillion market capitalization threshold for almost three months, which is a very healthy development during a bitcoin bull market. So, what’s happening behind the scenes, and how should investors be thinking about the recent price action of bitcoin?

Let’s dig in.

BTC price action over the last three months 

Long-Term Trend Still Clear: Bull Market Far From Over

While it is true that at the time of writing BTC is trading at a price it first saw 75 days ago, there is absolutely nothing to be concerned about in terms of the fundamentals and long-term outlook of the monetary asset. Many market spectators have been quick to call it a “top” because of the speculation occurring in the illiquid altcoin markets, but this is a shortsighted take that does not take into account the empirical data. New entrants and capital are entering the market every single day, and the fixed monetary policy of Bitcoin remains consistent.

Long-Term HODLers Are Accumulating

Long-term HODLer net position change in 2021 

The long-term HODLer net position change, which measures the 30-day change in supply held by long-term bitcoin holders, recently flipped positive, and the data from Glassnode shows that over the last 30 days, HODLers have accumulated 93,638 BTC more than they have sold. This shows that the conviction of bitcoiners is not the least bit shaken in regards to the choppy price action, and they are viewing the period of consolidation as a buying opportunity.

Miners Are Accumulating

Not only have long-term HODLers been net accumulating over the last month, but miners are as well. Over the last 30-day period, miners have accumulated a net position of 5,459 BTC, a bullish development as miners are the only natural sellers in the market, since capital expenditure and operational expenses force operations to occasionally liquidate a proportion of their treasuries.

With hash rate lagging far behind price action over the past year, and a global semiconductor shortage occurring simultaneously, expect miners to continue to be net accumulators of BTC, as profit margins remain wide across the industry.

Miner net position change since the May 2020 Halving 

Another fascinating metric to look at is the Puell Multiple, which measures the dollar value of bitcoin issued to miners in relation to its 365-day moving average. The Puell Multiple measures when the market has run too far, too fast.

Obviously, the market value of new bitcoin issued greatly increases in a bull market, and this can be seen not only during the recent run up but also past bull market cycles following the halving. Currently, the Puell Multiple is at 2.5, following the healthy 75-day consolidation. When compared to previous bull markets, a similar pattern occurred around the $100 mark in 2012 and the $3,000 to $4,000 level during 2017. 

Puell Multiple over the history of Bitcoin 

Another promising metric which puts into context the exponential growth occurring around bitcoin and the Bitcoin network is realized market capitalization. Realized market capitalization shows the total market cap of bitcoin, but accounts for the time each UTXO was last moved in the calculation.

This measure can be thought of as a more reliable way to measure the true economic value of the Bitcoin network. Realized cap at the time of writing is sitting at $370 billion, increasing approximately $250 billion since November. To put this move into context, the realized capitalization of bitcoin at the height of the previous bull market was $90 billion. The recent parabolic rise in realized capitalization can be seen as an immense amount of capital flowing onto the network.

Realized capitalization of bitcoin 

A very telling metric when determining how “overheated” the bitcoin price is, MVRV is the ratio between the market capitalization to the realized capitalization. Short-term price fluctuations occur on bitcoin as price is set on the margin, and especially with the growing prevalence of derivatives and leverage in the ecosystem, total market capitalization can see explosive growth when actual capital inflows and economic activity remain somewhat muted. This is not what we are seeing, at all and is a key reason to be bullish at this moment in time.

MVRV Z-Score (market cap minus realized cap) divided by std. (market cap).
MVRV Z-Score, five-month view

The recent pullback in MVRV, or rather the rise in realized cap as market cap consolidates, is a very bullish sign, and should give investors confidence that this bull market has a long way to run.

The Macroeconomic Backdrop Remains Extremely Favorable For Bitcoin 

Total assets of major central banks 
Total assets of major central banks (stacked) 

One of the primary reasons for the surge in interest in Bitcoin over the past 12 months, the macroeconomic backdrop remains extremely favorable, and you shouldn’t expect that to change anytime soon.

Debt loads across the global economic system are at all-time highs, and central banks have painted themselves into a corner in terms of policy optionality. The only thing that markets know is ever-increasing liquidity injections, in what has become almost a competition between nation states and their respective central banks as to which can devalue against all of the others at a faster pace.

While it is true that rates being raised is not out of the question, it would be crippling for a global economy that has become accustomed to negative real rates over the past decade. In a very basic sense, investors should have two distinct intentions in regards to growing and preserving their capital in this macroeconomic environment:

  1. How do I protect against debasement/dilution risk?
  2. How do I protect against counterparty/contagion risk?

The market outcomes that can occur at this point is somewhat binary. Either central banks continue to inject liquidity into financial markets and the risk on everything rally continues, as debt continues to become cheaper in real terms, and the discounted valuations of every asset class skyrocket, or they collectively take away the punchbowl, credit contracts and markets witness a deflationary event similar to what was witnessed in March 2020. While this second possibility may not happen immediately, it is just reality that collectively, the domestic economy (in the U.S.) and the global economy are far too indebted.

In this deflationary scenario, anything with counterparty risk (any asset in the extremely leveraged banking system) is something you should hold with extreme caution. The interconnectedness of financial markets ensures that contagion spreads fast, and the default/credit risk of one market participant is something that should worry everyone.

Without going too much deeper on this matter, bitcoin is the solution to both of these market outcomes. With bitcoin, you are insulated from the record monetary debasement that is occurring in legacy financial markets, but you are also protected from a deflationary scenario in which systematic risk in the banking system does not affect you because of the network’s native self-custody attributes.

Conclusion: Stay Bullish

The fundamentals of bitcoin and the Bitcoin network remain as strong as ever, and in hindsight the shortsightedness of many prominent bitcoin skeptics will prove to again be pure folly. The reasons to be bullish are greater than ever, and one should expect that once bitcoin breaks out of the recent range, the monetary asset will once again be off to the races as global FOMO picks up in ways that have never been witnessed before. 


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You Need To Withdraw Your Bitcoin

You Need To Withdraw Your Bitcoin
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There are various reasons why you should withdraw your bitcoin and utilize self-custody.

A Bitcoin ETF is coming, whether you like it or not.

You might be excited at the stamp of approval this gives bitcoin from the old guard. It will also allow many investors to much more easily gain exposure to bitcoin through current accounts at big banks. These are huge positives for a new commodity that’s rapidly gaining recognition as a revolutionary instrument for storing value over time.

However, as with many financial products on Wall Street, the people of Main Street should tread with caution. Big banks are not known for having the interests of the average Joe in mind.

The biggest hidden danger of a bitcoin ETF, though, goes deeper than the big banks. It goes all the way to the most powerful governments and the source of the world’s current reserve currency.

We all need to ask ourselves before we buy any bitcoin ETF: At the end of each day, who actually holds your bitcoin?

This question may seem innocent today, but history tells us it could be very important in the near future.

Where Are Your Assets Held?

For all the evolution in “fintech” over the last decade to make investing easier — from robo-advisors to gamified trading apps — the underlying structure has not changed.

Why? Mostly because regulation stipulates who can hold what assets and how that ownership is proven and governed, leading to a lack of innovation in old, paper-based processes. The banking industry does not have much incentive to upgrade the back end of their systems. Most of the supposed innovation in fintech just hides the old world behind a digital veneer.

The assets you buy and check in your brokerage apps — stocks, bonds, ETFs — are held by regulated custodians for you. Most of the time, this is not a problem; it’s actually more convenient for you. Can you imagine if you had to bring a stock certificate to a bank branch every time you wanted to sell a share? Using regulated custodians in the back with a digital interface on top makes trading much more convenient for everyone, but it does mean someone else holds your assets. We’ll get back to why that’s so important later.

Bitcoin, as a digitally native asset, is a bit different. Most places where you can buy bitcoin also allow you to withdraw that bitcoin to your own wallet. Since everything is digital, the whole process of buying and withdrawing to your wallet can take mere seconds. Bitcoin on an exchange is a bit like cash in the bank, except without the physical part where you have to go to the ATM or branch to withdraw the cash then cut a hole in your mattress to tuck it away. Whenever we withdraw bitcoin (or any asset) from the exchange or custodian that holds it for us, we call that taking “self-custody.”

Bitcoin’s purely digital nature makes it vastly easier to self-custody bitcoin than it is to self-custody dollar bills or stocks. Holding bitcoin yourself takes a few taps on your phone, not a trip to the bank or a gargantuan fight to change the regulated custodial model of most investment assets.

So most investment assets are held by a custodian, but in many cases, it’s very easy to self-custody bitcoin. So, why would you want to hold bitcoin, or any other asset, yourself?

Why Does It Matter Who Holds My Assets?

In a first world country where institutions work well, it’s hard to see why this question matters. If you live in one of these countries, you’ve probably never had a problem selling an asset or withdrawing cash from a bank.

However, if you work in an industry that’s “on the margin” of acceptability for banks and the governments that govern them — think adult entertainment or gambling — you may be familiar with the hassle and anguish of frozen bank accounts or seized funds. If you live outside the first world bubble, you may know the importance of self-custody through experience: bank failures, government seizures or corrupt institutions causing your assets to vanish.

Unfortunately, there’s a much deeper danger at play here; one that affects everyone equally, especially those in first world countries carrying heavy debts in both the public and private sectors.

To understand that danger, we need to walk through how it played out in the past, in the richest country on Earth.

When Governments Steal The Savings Of Citizens

In the early 1930s, the U.S. government was in deep trouble. The Great Depression drove the government to print money, but their ability to flood the market with cash and prop up prices was reaching its limit. At that time, every dollar in circulation (Federal Reserve note) needed to be backed by at least 40 cents worth of gold at the Fed. The Fed had maxed out the dollars they could print against the gold they had, so they needed more gold to print more dollars.

However, the Fed’s money printing created another problem: By debasing the value of cash, they destroyed existing savings and made holding cash a bad way to save up for the future. American citizens struggling to make it through the Great Depression now faced a threat to the value of their savings and wages. They needed an asset that could not be debased. Back then, all they had was gold.

Both the American government and American citizens chased after gold. What happened next?

The American government seized the gold of its citizens.

President Roosevelt signed Executive Order 6102 on April 5, 1933, using wartime powers still in effect to order all persons to deliver their gold coins and bullion to the Federal Reserve on or before May 1 of the same year and to bar any further purchasing of gold by private citizens.

Of course, the Federal Reserve would give everyone dollars in return for their gold, at the current market rate of $20.67 per ounce of gold. Feels fair, right? Well, less than a year later the dollar was revalued at $35 per ounce of gold through the Gold Reserve Act of 1934, devaluing those dollars by almost 50% against the gold everyone traded in.

The Federal Reserve was thus able to continue devaluing the dollar, but private citizens were barred from holding the very asset that could protect their savings from that devaluation.

Those Americans who held gold coins under the floorboards of their house had some chance of protecting them from seizure. Gold kept in banks, however, was far easier for the government to seize — the authorities knew exactly where to go to get it.

Who had custody of your gold mattered a lot during this period.

Still, this was a very strained and extreme time in American and world history. What indications, if any, do we have that this little bit of history might repeat? How might bitcoin be involved?

Do Governments Have Any Reason To Want To Seize Bitcoin Today?

First, it’s important to understand that bitcoin was designed purposefully to combat the inflationary tendencies of governments and central banks. When economic downturns occur, governments are always tempted to print more cash, saying they are “satisfying demand for cash.” In reality, they are debasing the value of cash for all who hold it and reallocating value to whoever the government pays with that newly printed cash.

From Satoshi Nakamoto’s thread unveiling the Bitcoin white paper:

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 currencies is full of breaches of that trust.

[Bitcoin is] more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes.

This is why bitcoin has come to be known as “digital gold.” It provides the same protections for savers that gold provided in past inflationary periods, with vastly improved accessibility and portability. This is due to bitcoin’s supply not responding whatsoever to changes in demand. Precious metals are the only other assets on Earth with a total supply that acts similarly, though not as predictably, as bitcoin.

When governments decide to spin up the printing presses for their fiat currencies, store-of-value assets like bitcoin and gold serve as exits from fiat debasement.

The Conditions For Seizure

For governments to have any reason to seize Bitcoin — or any other store-of-value asset — there would need to be a major crisis at the end of a long accumulation of debts, like in the 1930s. Governments would need to respond to the crisis by devaluing their currencies through money printing — just like in the 1930s.

This would punish those who hold or receive salaries in fiat currencies by debasing their savings and earnings. In turn, people (everyone!) would run for the exit, selling their sinking fiat currency for other assets that cannot be debased.

Governments can either watch their currency — and the power that comes with it — evaporate faster and faster as a result of their own debasement and the selling it caused, or they can use the power they have left to do what Roosevelt did in 1933. They can seize store-of-value assets and stop further purchases by force, essentially blocking the exit and keeping individuals from protecting their savings.

Do The Conditions For Seizure Exist Today?

Do we have a major crisis on our hands at a time of record debt levels, causing unprecedented money printing? Are we seeing rising prices for store-of-value assets?

Major crisis: check. Thanks, COVID.

Record debt levels: check.

Unprecedented money printing: check.

Rising prices for assets: check.

During a year when most of the world was in a recession, stock prices grew in value tremendously. This is a classic marker of “running for the exit” — anyone with cash is looking to buy anything else that’s a better store of value than cash. From January 1, 2020, to the time of writing, the S&P 500 is up almost 40% and bitcoin is up almost 500%. Even lumber is up 230%.

Still not convinced? Ray Dalio studies markets and economic cycles for a living — and he’s damn good at it, as the founder and CEO of the world’s largest hedge fund. In a recent piece covering the current financial climate, Dalio compares today to the 1930–1945 period, stating:

“If history and logic are to be a guide, policy makers who are short of money will raise taxes and won’t like these capital movements out of debt assets and into other store-of-wealth assets and other tax domains so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected.”

In times of crisis, who has custody of your assets matters most. Will you leave your bitcoin on an exchange or with a custodian, or will you hold it yourself?

Withdraw Your Bitcoin

We are living in unprecedented times, in a situation that the vast majority of us have never experienced before in our lives. History and logic point to a repeat of events at the end of the last major debt cycle, where governments seized assets from citizens to solve a problem they created and save a system they benefit from.

This time, the people have a far more powerful tool to escape this seizure. However, that tool needs to be used correctly. Owning bitcoin but failing to hold it yourself is like buying a helmet but refusing to wear it when you ride. It’s not there to protect you when you need it most.

Storing your bitcoin on an exchange or owning it through an ETF product exposes your coins to seizure in the very scenario where bitcoin is most valuable and necessary: an unwinding of the current monetary system.

Thankfully, it’s still simple today to purchase and securely store your bitcoin. You might want to get on the lifeboat now before the captain cuts it away.

This is a guest post by Captain Sidd. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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How Many Bitcoin Wallets Hold More Than $1 Million?

How Many Bitcoin Wallets Hold More Than $1 Million?
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The number of “bitcoin millionaires” is booming, but there’s still a lot of room for growth, which will propel the bitcoin price as well.

Bitcoin has come a long way since its inception in 2009. With bitcoin’s market capitalization at just over $1 trillion, new on-chain data reveals that the number of millionaire members of the bitcoin rich list have ballooned.

But what is the “bitcoin rich list” and why should you care?

The bitcoin rich list refers to the list of bitcoin addresses that hold over $1 million worth of BTC. Since January 2021, over 100,000 wallets have met the qualification. Notably, the number swelled by 400% from just 25,000 millionaires five months ago.

Source

However, the list is not as large as it is often portrayed to be. And it looks like the upside has a long way to go because of two simple facts.

First: There are approximately 46.8 million millionaires in the world holding at least $158.3 trillion of wealth — a number of fiat millionaires that clearly dwarfs the 100,000 bitcoin millionaire wallets.

In comparison, there are little more than 100,000 addresses with over $1 million worth of BTC and only 9,370 with over $10 million as of March 2021. 

Source

Second: The number of around 100,000 accounts holding over $1 million doesn’t mean each account is owned by a unique person. Why? Of course, individuals can own multiple bitcoin addresses.

After all, you can use on-chain analysis to find out how many bitcoin accounts exist and how much is in each account. But you can’t see who owns those accounts.

So, the actual number of bitcoin millionaires is almost certainly lower than 100,000 if you assume some of these addresses are held by the same individuals.

The small number of bitcoin millionaires (just 0.2% of the 46.8 millionaires in the world) offers a perspective that we are still in the early innings with bitcoin’s adoption rate. As more millionaires diversify a percentage of their wealth from fiat to bitcoin, the asset’s price can go even higher.

Another Catalyst For More Millionaires Owning Bitcoin In The Future

Banks are the key catalyst that can drive up the total net worth held in bitcoin. Namely, more banks are offering institutional services for bitcoin that would allow high-net-worth clients to easily own bitcoin within their current bank accounts.

Hundreds of smaller banks have already signed on to offer regulated funds for bitcoin. As a result, giants like JPMorgan Chase & Co. and Bank of America could face pressure to offer bitcoin to their retail banking customers.

Bitcoin is also gaining traction in the private wealth management industry, which handles trillions of dollars for high-net-worth clients.

In March, Morgan Stanley, a giant in wealth management with $4 trillion in client assets, told its financial advisors that it is launching access to three funds that enable exposure to bitcoin. A few weeks later, Goldman Sachs and JPMorgan followed with their own statements about launching bitcoin services for their private clients.

Moreover, U.S. Bank, which is part of U.S. Bancorp, the fifth-largest bank in the United States, announced it would offer a cryptocurrency custody product with the engagement of a sub-custodian for fund servicing.

Bottom line: With a growing number of banks making it easier for high-net-worth individuals to buy and sell bitcoin, the number of their private client millionaires investing in bitcoin could skyrocket in the future. Bitcoin’s price may follow, as well. 

This is a guest post by Portfolio Insider. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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If You Don’t Buy Bitcoin, You Can’t Be Rich

If You Don’t Buy Bitcoin, You Can’t Be Rich

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Rich is a subjective term, yet it is apparent that those with no bitcoin unknowingly lack the freedom necessary for true wealth.

Undoubtedly, fiat millionaires will read the title of this article and laugh. Languishing in mansions with foundations of debt, materialism and the physical world of fiat rich people is deceptively luxurious. Assuredly, the great empires of Rome, Venice and Constantinople also had many rich people enjoying the various splendors of wealth.

Indeed, turkeys live happy lives — until Thanksgiving.

If we can consider the fiat ice cube melting, it would be wise to conceptualize that, until the ice is fully melted, the water feels cold. It isn’t until this ice is melted that the water left behind rapidly warms relative to the temperature of the space the water is in.

This describes the stuffed bank accounts of wealthy Americans across the country. Many believe that they are keeping themselves safe by investing their money into various assets, such as equities and real estate. The problem with these markets is that they fundamentally rely on the currency system that bitcoin works to fix.

The stock market continuously reaches all-time highs because the Federal Reserve maintains low enough interest rates and a liquid enough credit market to keep it afloat. Without this third party injection of funds, the current market conditions would rapidly evaporate.

A stock market crash would eliminate much of the wealth that upper-class Americans enjoy. The difference between poverty and opulence for many is FAANG stocks that carry with them the responsibility of keeping America “rich.”

If You Do Not Buy Bitcoin, You Cannot Be Rich

Rich, as I will define it, is the freedom and ability, as enabled by one’s wealth, to do as one wishes. Perhaps there are people who feel they have enough fiat currency stored to fit in this definition. I wager that if they simply witnessed the shifting sands beneath their castle, they would immediately retract their feeling of freedom and ability.

How can one have freedom with a looming stock market cycle permanently on the horizon? Credit cycles have forced Americans into being okay with programmatic recessions in the economy, despite the drastic ramifications these busts and booms have. How come people continuously pursue real estate as a store of value despite the previous market crash of 2008?

Buying real estate as a store of value right now is like jumping at the end of an elevator falling down its shaft.

You will still be subject to the same crash and burn that all fiat is destined to experience, albeit with the extra padding your 12-inch vertical provided.

The only way to assuredly be rich, to enable one’s freedom and ability to do as one pleases, is to have an immutable noncontrolled computer program as the basis of their money. Only through the decentralized nature of the Bitcoin network can one feel secure in the maintaining of their wealth. Rich, it must be, to entrust one’s entire net worth in the only financial settlement system incapable of liquidity injection.

Inflationary monetary keeps rich people happy, but only in the same sense that alcohol keeps a college student with a paper due that night happy. The deflationary monetary policy of bitcoin is the choice to stay in and study — the safest choice, the secure choice and the smart choice.

It is with the regret of a hangover that wealthy Americans will come to realize their mistakes in ignoring this path of stability. 


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How Bitcoin Changes Our Perception Of Money

How Bitcoin Changes Our Perception Of Money
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The way we traditionally perceive money is, at its root, misguided, as money is what allows humans to experience value.

The Root Of All Evil

For my entire life, to the best of my memory, I can recall one persistent narrative:

“For the love of money is the root of all evil, therefore selfishness must be the seed.” — M. D. Birmingham (which is a take on the quote from 1 Timothy 6:10).

In the most recent decade of my time among the living, I have learned how this belief is wildly misguided. Allow me to defend my reasonings why.

The Ultimate Currency

In the grand scheme of things, money has played a massively important role in the development and progress of history. From the use of seashells as a “money” to the gold coins of Rome or the first fiat currency — the jiaozi of the Song Dynasty in China — to the U.S. dollar today, money has played a pivotal role for humanity.

Photo by Morgan Housel on Unsplash

What money has done, what made it so revolutionary, was that it allowed our species to give physical form to our time and our energy.

Please, take the time to consider that thought.

Time.

The passage of time is one thing that we can never get back. Once it has been spent, there’s no refund. Time is the ultimate currency, forever passing without the ability to return to a prior moment: ever passing, ever spent, ultimately and unequivocally finite.

Whether you go to work every day or you have a hobby that allows you to make a profit from your efforts , you are monetizing your time and your effort that was invested into that job or hobby. That’s precisely what a wage or salary represents — the opportunity cost for your time. Every hour that you sacrifice to a job, you make a decision that the time you sacrifice is worth the monetary exchange you earn in return.

Let me make this clear: A wage is a trade, where you determine that your time is worth the amount you are being compensated for. Whether that amount seems low or high, that’s something you have to tackle as an individual. But, typically, individuals earn what their time is worth in accordance with multiple factors: skill/capability, specific knowledge, expertise, network connections, wisdom, and so on. All of those qualifications represent an amount of time that was invested by the individual. Time, again, is the actual currency.

By giving our time an exchangeable vehicle in the form of money, or purchasing power, we made it possible for our species to exchange our own time for the time of another’s. Where you may spend hours of your day to produce a tool to be used, let’s say an axe, you may then sell this axe to another for money, where you then go and use that money to purchase bread — which would have required effort on your part to produce yourself (not to mention the time and energy required to spend learning, failing and refining the process to produce said good).

Photo by Bermix Studio on Unsplash

Love For Money

So, I propose a … philosophical, maybe even spiritual question:

If money is “the root of all evil,” but money is simply a representation of our time, what does that make of us and our use of time?

Money is not the root of all evil. Money is a tool just like the axe. A tool is purely neutral; it has no philosophical or moral allegiance.

Therefore, if money is neutral, then the root of evil has to lie elsewhere, not within the vehicle with which we give our desires physical realization.

Appreciating money is to appreciate time or rather, the appreciation of efficient time expenditure. Saving money is to park your expended time for a larger purchase at a later date or to allocate funds in case of an unforeseeable expenditure or emergency. Whereas investing money is to sacrifice immediate gratification of a purchase and to risk providing funds to another individual/group, allowing them to use your money (ergo, time) to act out their plans or business, in exchange for a greater return on your initial investment in the future.

Money is not evil. Money is time. What matters is how we choose to spend it.

Trust

Whether you choose to spend your time, save it or invest it … one variable is necessary.

Trust.

You have to trust that your time is in good hands, ergo, the money that you choose to measure your time in must be free from risk of debasement, seizure, censorship or fraudulence.

Otherwise, a large portion of your precious time must be sacrificed to protecting your funds — your precious accumulated time. Those that rather not spend that time, spend the funds to compensate another for strategies and vehicles that protect their purchasing power from the forces of inflation and/or debasement.

Enter bitcoin, stage left.

A force of human ingenuity, bitcoin protects hodlerstime by providing a vehicle that is censorship resistant, unseizable, easily transportable, liquid and tradeable globally 24 hours a day, 7 days per week, 365 days per year. No breaks. No CEO. Maintained by the People.

Maintained by a flotilla of free-agent developers that work night and day, sacrificing their precious time to ensure the open-source network continues to provide services that so many across the globe have come to trust and compensated by the community (donations made by individuals, organizations and corporations that consider themselves members of the Bitcoin Legion).

It is of my opinion that if you truly value your time, then you must measure your time in a money worthy of trust. Bitcoin is the most logical vehicle to protect time value.

I trust Bitcoin.

*P.S. Big thanks to Orville, for your input, for being one of my most avid readers, and for being a good friend.

This is a guest post by Mike Hobart. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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How The HODL Meme Reveals The Truth About Bitcoin

How The HODL Meme Reveals The Truth About Bitcoin
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Just as evolution is determined by survival of the fittest, the enduring Bitcoin memes reinforce the best qualities of the network.

Memes are plentiful in the Bitcoin community, acting at once as sources of amusement, beacons of solidarity and resources for edification. Many prominent Bitcoiners before me have recognized this, and I would encourage those interested to consult the fantastic articles written by Bob Simon, SEANSTACKIN and Jameson Lopp for more information. In this article, I hope to contribute to this discussion by highlighting the evolutionary dynamics undergirding the existence of memes in the Bitcoin community.

To begin with, the word “meme” was popularized by Richard Dawkins in the 1970s, although it originates from the Greek word “mimeme,” meaning “an imitated thing.” Dawkins, being an evolutionary biologist, realized that in the same way that genes mutate, replicate and are selected for over time, due to evolutionary pressures, so too are cultural ideas.

Memes Represent The Fittest Of Our Culture

In the domain of biology, genes modify the adaptive fitness of an organism given the environmental constraints that the organism is exposed to. Those genes that enhance the adaptive fitness of an organism increase the likelihood that it will reproduce, thereby increasing the likelihood that the gene itself will proliferate among a population. However, the replication of genes across successive generations is imperfect, and it is via replication errors, along with random mutations, that new genes emerge.

There is a sense in which genes compete against other genes for their own survival and inclusion in the genetic makeup of the host organism. Those genes that enhance the adaptive fitness of an organism can be expected to outcompete rival genes that fail to do so over time. This process of replication, mutation and selection was famously described by Charles Darwin (although Darwin was unaware of genes at the time) and is known as evolution through natural selection.

Importantly, those genes that survive and thrive in a population can be thought to reveal truths about the selective pressures of the environment that the organism exists in. Consider, for instance, that after observing a unique Madagascan orchid with an extremely long spur, Darwin predicted that there would exist a moth with a proboscis long enough to extract the nectar located at the base of the flower. A moth with such an appendage was not known to exist when Darwin made this prediction. Lo and behold, 21 years after Darwin’s death, a moth fitting this precise description was discovered in Madagascar.

Thus, not only can genes reveal heretofore unknown truths about organisms and the environments they exist within, but it is also possible that a co-evolutionary process can occur between the genes of distinct organisms. All of this is relevant when considering the memes that exist in the Bitcoin community. As already stated above, memes, as cultural ideas, may also be thought to evolve through a process of cultural evolution via natural selection.

HODL Is Proscriptive

To help see this, consider the “HODL” meme, which is perhaps one of the most well-known and long-standing memes in the Bitcoin community. The meme originates from a bitcointalk.org post from December 2013, entitled “I AM HODLING.” In the post, the author, GameKyuubi, acknowledges and embraces the misspelling of the word “holding.” In the same way that genetic variation occurs through replication failures and random mutation, GameKyuubi unwittingly created a meme by failing to perfectly replicate the word “holding,” likely due to the whiskey they consumed.

Furthermore, in the post, GameKyuubi asserts that they will not sell their bitcoin despite the dramatic decline in price. This is because they didn’t consider themselves to be a competent trader. Others on the forum immediately seized upon the misspelling, clearly finding it humorous, and echoed the underlying sentiment by proudly responding with “HODL!”. Put differently, the meme was immediately embraced, imitated and proliferated among the relevant cultural population.

Importantly, the meme can be construed as a proscriptive moral rule and social strategy. It describes an acceptable mode of behavior for oneself and others in the community. Which is, obviously, that one should refrain from trading or selling their bitcoin. Any individual who saw GameKyuubi’s post and adhered to this rule has experienced a 10,000% increase in their purchasing power since that date.

The meme, and its persistence in the community, is not arbitrary, despite having an arbitrary origin. To see this, suppose that another individual made a similar post to GameKyuubi, although they advocated for others to trade their bitcoin with the aim of acquiring more bitcoin at a later date. Like GameKyuubi, we can stipulate that they made a similar replication mistake when they titled their post “I AM TRAEDING.” Suppose, further, that some community members embraced the HODL meme, with the associated strategy, while others embraced the TRAED meme and strategy.

To begin with, the tax implications, transaction and opportunity costs immediately disadvantage those embracing the TRAED meme when compared with those adopting the HODL meme. After all, it is a well established fact that the overwhelming majority of traders lose money. These realities alone suggest that the HODL meme will outcompete the TRAED meme.

More importantly, however, is the fact that the HODL meme more closely aligns with the fundamental features of the Bitcoin network when compared with the TRAED meme. Because there is a fixed and capped supply of bitcoins, any meme that implicitly recognizes this fact, which the HODL meme does, can be expected to outcompete alternative memes that fail to cohere with this environmental constraint that the Bitcoin network imposes.

This is because those memes that fail to align with the fundamental features of the Bitcoin network will not enhance the adaptive fitness of cultural carriers to the same extent that rival memes, which do align with the fundamental features of the Bitcoin network, can be expected to. Cultural carriers adopting the fitness-enhancing memes will outcompete rival carriers adopting memes that confer less of a fitness enhancement; meaning that the fitness-enhancing memes can be expected to proliferate among a population while those that fail to achieve this will perish.

Taking this analysis one step further, it may even be argued that the Bitcoin consensus rules that are upheld and replicated by the distributed network of nodes can be conceived of as a set of memes; they are, after all, a set of cultural rules all independently adopted by full-node-running Bitcoiners. In the same way that a biological organism is constructed with, and is the result of, a set of genes, the Bitcoin network may be defined as a cultural organism that is constructed with, and is the result of, a set of memes.

Memes And Bitcoin Are Co-Evolving

Examining this conception in greater depth is beyond the scope of this article, however, I raise this notion to highlight how memes in the Bitcoin community can be thought to co-evolve. As was the case with the co-evolving genes of the Madagascan orchid and moth, it may be thought that there is a symbiotic and co-evolutionary process occurring between the HODL meme and the capped supply consensus rule. Each meme enhances and reflexively reinforces the other; as more cultural carriers embrace the HODL meme, those same carriers are more likely to embrace and support the capped supply consensus rule, which in turn strengthens and helps to proliferate the HODL meme.

It is, for all of these reasons, why memes can be thought to reveal truths about the Bitcoin network and community; it is only those memes that in some way reflect, or reinforce, fundamental truths about the Bitcoin network that will survive and thrive over time. When viewed through a lens of cultural evolution, the HODL meme is highly adaptive and fitness enhancing when compared with competitor memes, such as the hypothetical TRAED meme. I posit that this is why the HODL meme exists, and will continue to exist, in this community.

This is a guest post by William Ridge. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Mara Pool And Bitcoin Mining Censorship

Mara Pool And Bitcoin Mining Censorship
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The hosts of „The Van Wirdum Sjorsnado“ discussed Mara Pool, bitcoin mining pools that censor blocks and what Bitcoiners could do about this.

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In this episode of “The Van Wirdum Sjorsnado,” hosts Aaron van Wirdum and Sjors Provoost discussed the emergence of Mara Pool, the American Bitcoin mining pool operated by Marathon Digital Holdings, which claims to be fully compliant with U.S. regulations. More generally, van Wirdum and Provoost discussed the prospects of mining censorship, what that would mean for Bitcoin and what can be done about it.

Mara Pool claims to be fully compliant with U.S. regulations, which means it applies anti-money laundering (AML) checks and adheres to the sanction list of the Office of Foreign Asset Control (OFAC). While details have not been made explicit, this presumably means that this pool will not include transactions in its blocks if these transactions send coins to or from Bitcoin addresses that have been included on an OFAC blacklist.

Van Wirdum and Provoost discussed what it means that a mining pool is now censoring certain transactions, and they went on to expand on what it could look like if this practice gets adopted more widely. They considered what censoring mining pools could accomplish if they ever get close to controlling a majority of hash power, and what Bitcoin users could potentially do in such a scenario (if anything).


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State Street Launches Bitcoin Indicator To Quantify Media Sentiment

State Street Launches Bitcoin Indicator To Quantify Media Sentiment
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State Street has added a Bitcoin sentiment tool to its series, which will analyze and quantify Bitcoin media coverage for investors.

Investment services company State Street Corporation has announced the launch of its Bitcoin Thematic Indicator series, a tool that quantifies the prevalence and sentiment of media coverage around Bitcoin.

“Over the last few months, media coverage around Bitcoin has grown significantly relative to corporate, financial and economic media markets and continues to trend higher,” Rajeev Bhargava, head of the Investor Behavior Research Team at State Street Associates, said in the announcement. “Our newest Bitcoin series provides a quantitative and timely measure of the tone and intensity of media discussion and reveals additional transparency into this highly sentiment driven market, enabling our clients to make more informed investment decisions.”

State Street launched its MediaStats Thematic Indicators platform in November 2020. The platforms indicators comb through hundreds of thousands of digital information sources and generate daily sentiment indicators on a wide selection of assets to paint a more accurate picture of the markets for interested investors.

The Bitcoin indicator will focus on collecting and collating data about Bitcoin, its connections to traditional currencies and emerging trends. And with the recent surge in Bitcoin popularity and adoption, there is no shortage of investors who seek the information to be supplied by such an indicator.

The addition of this indicator by State Street reveals another financial firm that is interested in capitalizing on Bitcoin’s growing popularity and adoption, and one that wants to help its clients do so as well. 


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SEC Chairman: Bitcoin Is Store Of Value But Needs Greater Investor Protection

SEC Chairman: Bitcoin Is Store Of Value But Needs Greater Investor Protection
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SEC Chairman Gary Gensler recently recognized bitcoin’s value but called for greater investor protection through increased regulation.

Gary Gensler, the new head of the U.S. Securities and Exchange Commission (SEC), told CNBC that he recognizes bitcoin as a “scarce store of value,” distinct from other “crypto tokens” which “are indeed securities.” But he also alluded to a perceived need for additional regulations around its investment and use.

“It’s a digital, scarce store of value, but highly volatile,” Gensler told CNBC. “And there’s investors that want to trade that, and trade that for its volatility, in some cases just because it is lower correlation with other markets. I think that we need greater investor protection there.”

According to Gensler, such investor protection would be similar to what is currently in place in stock and futures exchanges. In addition, he believes there needs to be an authority that brings “anti-fraud and anti-manipulation authority … to the crypto exchanges.”

Gensler, who has taught blockchain and cryptocurrency classes at the Massachusetts Institute of Technology (MIT), later added that he believes the SEC should be “technology neutral” when it comes to market innovations.

“We need to update and freshen our rules to ensure that, while retail investors and any individual has First Amendment rights to speak and so forth, that they’re not misleading the public, they’re not manipulating the public, manipulating the markets,” he said.

The extent of the regulation that Gensler is calling for is unclear. However, the typically-skeptical Bitcoin community could see this as a sign that increased governmental intervention in bitcoin is forthcoming, which could hurt bitcoin adoption and ultimately be detrimental to the U.S. economy and its technological innovation ethos.


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Iran Reportedly Bans Trading Of Bitcoin Mined Abroad

Iran Reportedly Bans Trading Of Bitcoin Mined Abroad
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The Central Bank of Iran has reportedly banned its citizens from trading bitcoin mined outside of the country in an attempt to stop capital flight.

According to an announcement shared by Iran International, the Central Bank of Iran (CBI) has banned its citizens from trading bitcoin and other cryptocurrencies mined in foreign countries.

Fatemeh Fannizadeh, a Swiss qualified independent lawyer and advisor on blockchain technology and cryptocurrencies, believes this move by the CBI is an attempt to stop capital flight from Iran.

“Crypto is already regulated in Iran … this just means that Iran wants to export Iranian produced coins more aggressively, encourage mining, and counter capital flight in the face of a depreciating Rial,” Fannizadeh shared on Twitter.

The rial, Iran’s fiat currency, has experienced severe depreciation recently, hitting a record low against the dollar in 2020. Therefore, it seems reasonable that the CBI would act with protectionism on its currency and economy from a monetary standpoint.

Interestingly, the move makes it seems as if the CBI is treating bitcoin mining and trading as regular commodity activities. As a result, the central bank is attempting to maximize exports and minimize imports to favor Iran’s balance of trade, which has been suffering since the pandemic broke out.

Bitcoin, and bitcoin mining in particular, hold unique status in Iran compared to any other country on earth. Access to subsidized power would theoretically make it a great location to mine BTC, but local officials have offered mixed regulations that encourage and discourage the practice. Most recently, Iran has attempted to control the bitcoin mining industry, requiring that mining operations be officially sanctioned and then allowing these miners to use the resulting bitcoin to pay for imports. Cryptocurrencies like bitcoin can be powerful tools to help Iran circumvent international economic sanctions.

But such protectionism, like this reported ban, doesn’t seem very enforceable for Bitcoin users. Given that Bitcoin emission is decentralized and uncensorable, it is unclear how the central bank would enforce these restrictions.


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Crypto20 Shows Relentless Growth, Breakneck Pace Of Bitcoin

Crypto20 Shows Relentless Growth, Breakneck Pace Of Bitcoin
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Promoted: As bitcoin has skyrocketed, Invictus Capital’s Crypto20 fund has seen its investors reap significant rewards.

As the value of bitcoin has skyrocketed in the first months of 2021, Invictus Capital’s Crypto20 (C20) fund has seen its savvy investors reap astronomical rewards. The fund’s token has gone parabolic with 221% appreciation over the quarter, outpacing even bitcoin’s breakneck performance.

In mid-April, Invictus Capital released its first quarterly report for 2021, describing the performance shown by the company’s suite of seven innovative investment funds offered to clients, as well as providing commentary on a number of topics of relevance to the company. These include global financial market commentary (covering both traditional and crypto markets) as well as a discussion of the company’s recent achievements, which include the launch of the community token ICAP, and the roadmap for future products and platform features. Although the crypto rally has been kind to all of Invictus Capital’s investors in recent months, a definite highlight of the quarter was the rise of C20, with the fund having achieved a 221% gain in the first three months of the year.

C20 is Invictus Capital’s flagship index fund, composed of the 20 most successful crypto assets measured by market cap (and excluding stablecoins). This means that, in addition to bitcoin, it is also host to a number of other prominent assets — including tokens with incredible growth potential in the burgeoning decentralized finance (DeFi) space. Holdings are rebalanced every week in accordance with new market data. Additionally, no more than 10% of the fund can be tied to one individual coin at a time, making the fund an attractive vehicle for broader altcoin exposure where future gains can arguably be expected to outperform the current market leaders as they gain in prominence — an attribute exhibited last quarter as the fund outperformed both Bitcoin and Ethereum.

The recent bull run has vindicated the decision of the earliest C20 investors, who as a result of the fund’s launch coinciding with the later stage of the 2017 rally, have had to endure years of their investment showing a negative return. The current token price, in excess of $4, now represents over 300% appreciation over the fund’s life, and this performance is likely to continue as the fund continues to benefit from relatively small cap coins continuing to break powerfully into the mainstream, as witnessed by assets with strong fundamentals like Filecoin and Solana entering the C20 index decisively without showing any signs of looking back.

The rise of crypto interest platforms like Celsius and BlockFi have helped educate the market on the importance of letting your assets work for you, and C20 is no stranger to generating yield, having earned about 3% APY over the last quarter through margin lending and the implementation of yield generating techniques enabled by getting crypto exposure via derivatives markets. This easily outstrips the small management fee (0.5% p.a.) that the fund charges, and yields are set to continue climbing as these strategies are refined and scaled up.

In short, C20 has something for everyone in the fast new world of cryptocurrency, presenting investors with an opportunity to see returns beyond even the value of bitcoin, while also being carefully protected from some of the volatility that cryptocurrencies are infamous for.


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Turkish Government Requiring Exchanges To Report Bitcoin Trades Over $1,200

Turkish Government Requiring Exchanges To Report Bitcoin Trades Over $1,200
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Turkey is instituting a reporting requirement for large trades, including bitcoin, from cryptocurrency exchanges.

Adding to its recent moves to close in on what it sees as cryptocurrency’s potential to facilitate criminal activity,the Turkish government has announced that cryptocurrency exchanges in the country must report any transactions that exceeds 10,000 Turkish lira (equivalent to $1,200) to the government’s financial crime agency, according to a report from Decrypt.

Announcing the decision on the national channel CNN Türk, Turkey’s treasury and finance minister Lütfi Elvan noted that exchanges would have a timeframe of ten days to report customers who carry out transactions that exceed this benchmark.

The minister maintained that the government doesn’t think that cryptocurrency traders have malicious intent, but that its anti-money laundering (AML) rules are modelled after those of the Financial Action Task Force (FATF), an international standard-setter for AML regulations.

“People must educate themselves about crypto,” Elvan said, adding that „I often hear from citizens who invest in crypto, and when I ask them what crypto is, they often have no idea.”

However, the minister didn’t reveal when the new rule would take effect.

The new rule is just one part of Turkey’s quickly-evolving regulatory environment regarding the use of bitcoin and other cryptocurrencies. In April, it banned the use of cryptocurrency payment services, citing a lack of mechanisms for central authority supervision of such payments. Later that month, reports surfaced indicating that the country would establish a central bank custodian for cryptocurrency exchanges, following apparent exit scams by the operators of two local exchanges.

Meanwhile, the lira has lost significant value in the last year, making bitcoin an attractive option to citizens in the face of these increased regulatory barriers to using it.


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CFO Of World’s Largest Hedge Fund Joins NYDIG To Focus On Bitcoin

CFO Of World’s Largest Hedge Fund Joins NYDIG To Focus On Bitcoin
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CFO of Bridgewater Associates, the world’s largest hedge fund, John Dalby has joined NYDIG to work on Bitcoin services.

Earlier today, NYDIG announced that John Dalby, CFO of Bridgewater Associates, the world’s largest hedge fund, is joining its team and bringing more than two decades of experience in capital markets, asset management and financial services to its bitcoin services.

Before joining Bridgewater, Dalby was CFO and COO at D.E. Shaw Renewables Investments, and the CFO of UBS Americas before that.

„The NYDIG team and I are extremely excited to welcome John,” CEO of NYDIG, Robert Gutmann, said in the announcement. “Working on Bitcoin is increasingly what many of the best and brightest employees seek — including industry leaders like John — and NYDIG is uniquely positioned to offer them the platform, resources, and culture to shine, in pursuit of our collective mission to bring Bitcoin safely to everyone.“

The announcement emphasized the growing interest that institutional leaders have in working on Bitcoin throughout.

“John’s move to NYDIG showcases an increasing trend of top talent voting with their feet to propel Bitcoin’s inclusionary role as the De(Central) Bank, and its dual mandate as ultimate risk-on asset and the ultimate risk-off asset,” Ross Stevens, founder and executive chairman of NYDIG, said.

The news comes just two days after NYDIG announced that it was partnering with FIS to enable hundreds of banks to offer their customers the ability to buy, sell and hold bitcoin via their accounts in the coming months.

It seems that with every coming day, another major development is announced out of Wall Street, as more big players from the legacy system come to understand the immense opportunity presenting itself with the ascent of the Bitcoin network. NYDIG continues to lead by example in this sense, and it will be exciting to see what moves it makes next. 


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Goldman Sachs Offers Bitcoin Derivatives, Unveils Cryptocurrency Trading Team

Goldman Sachs Offers Bitcoin Derivatives, Unveils Cryptocurrency Trading Team
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Goldman Sachs is offering non-deliverable forwards based on bitcoin’s price and unveiled a new desk that’s trading bitcoin derivatives.

Goldman Sachs launched a derivatives product based on the price of bitcoin for its clients last month, though it did not announce the move at the time.

“The investment bank has opened up trading with non-deliverable forwards, a derivative tied to bitcoin’s price that pays out in cash,” Bloomberg reported. “The firm then protects itself from the digital currency’s famous volatility by buying and selling bitcoin futures in block trades on CME Group Inc., using Cumberland DRW as its trading partner.”

Non-deliverable forwards entail contracts between two parties that will settle the difference between the spot price and the contracted price at a certain date in the future. The product essentially gives Goldman clients the ability to speculate on bitcoin’s future price, an increasingly popular offering.

“Institutional demand continues to grow significantly in this space, and being able to work with partners like Cumberland will help us expand our capabilities,” Goldman’s Asia-Pacific head of digital assets, Max Minton, told Bloomberg. “The new offering is ‘paving the way for us to evolve our nascent cash-settled cryptocurrency capabilities.’”

Goldman also just informed its markets personnel that a newly-formed cryptocurrency trading desk at the firm had successfully traded the non-deliverable forwards, as well as another bitcoin-tied derivative, CNBC reported.

“The derivatives it traded, bitcoin futures and non-deliverable forwards, are ways to wager on the price of bitcoin,” per the CNBC report. “The contracts are settled in cash and don’t require that Goldman deals with actual bitcoin … because the bank isn’t yet in a position to do so.”

Goldman’s increasing adoption of bitcoin-tied financial products is a bellwether for the asset’s growing reputation on Wall Street and among institutional investors. In March, the investment bank announced that it would soon be offering bitcoin investment vehicles for its private wealth clients.


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Interview: Foundry’s Mike Colyer On Bitcoin Mining In North America

Interview: Foundry’s Mike Colyer On Bitcoin Mining In North America
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Mike Colyer, CEO of Foundry, joined the “Bitcoin Magazine Podcast,” to discuss distributing the Bitcoin mining hash rate.

Watch This Episode On YouTube

Listen To This Episode:

On this episode of the “Bitcoin Magazine Podcast,” host Christian Keroles sat down with Mike Colyer, the CEO of Foundry, a wholly-owned subsidiary of Digital Currency Group that’s focused on bitcoin mining in the U.S. Foundry is making a massive effort to bring hash rate to North America, both with physical hardware as well as by building the Foundry USA mining pool.

Colyer is extremely proud of how much hash rate is flowing into the U.S. and the fact that Foundry’s pool has peeked into the top-five BTC mining pools of the world, as well as the fact that Foundry was one of the very first mining pools to signal for the Taproot upgrade of Bitcoin.

One of the key ways that Foundry is building out a competitive mining environment in the U.S. is by financing other operations to acquire energy contracts and mining equipment. Foundry understands that nation states will have to build a strategy around Bitcoin mining and he wants to make sure that the hash rate is as evenly distributed around the globe as possible.

Additional topics discussed include:

  • Mining in North America
  • The cost of mining per kilowatt in the best geographies
  • The role of mining in geopolitics
  • Volatility in Bitcoin’s hash rate and what that means
  • The players in the ASIC game and the nature of the ASIC market
  • Foundry financing self-mining or equipment in North America
  • How the mining ecosystem is evolving over the course of this year


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Bitcoin: Solving The Elusive Monetary Problem

Bitcoin: Solving The Elusive Monetary Problem
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This deep dive explores what problems plague our modern monies, and how bitcoin cures these issues.

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” -Abraham Lincoln

To understand the implications of a paradigm changing technology, one must intimately understand the problem that is being addressed. If we do not understand the problem at a granular level, how can we ever determine what may be a suitable solution? Bitcoin has been obtuse to many, the reason being that most simply do not understand the problem of money; if you are one of these people, don’t be hard on yourself — very few do understand. With this writing, the aim is to help the novice learner become familiar with our current problem of money. Once the problem is understood, the solution becomes obvious. When speaking to radical disruption, humans have a hard time adapting to a new reality. This is not only due to fear of change, but more so, we are psychologically conditioned to our environment — we cannot see that something is broken when it is all we have ever known.

“If I had asked people what they wanted, they would have said faster horses.” — Henry Ford

Everyone that is now a Bitcoin evangelist was once a Bitcoin skeptic — this rule applies with very few exceptions. Bitcoin is an excruciatingly complex system that requires a working knowledge of economics, computer science, open-source software, game theory, the global political landscape and investment strategy. Bitcoin is an open-source, globally distributed protocol for transferring and storing value; but, just as important, it has a vast technology stack being built out on top of the base protocol — drastically expanding Bitcoin use cases. Bitcoin can mean a wide variety of things to different people with different motivations and has a near infinite number of potential use cases. From this worldview, Bitcoin dominates without rival on three core applications:

  • Finite and programmatic money supply issuance with no risk of debasement (inflation) — in essence, the wealth you own will not degrade over time.
  • Nearly unconfiscatable wealth. Globally, 4.2 billion people live under oppressive regimes and dictatorships that confiscate wealth from citizens either through force or capital controls — these citizens do not have the option to leave as their bank accounts will be frozen.
  • Uncensorable speech in the form of money. Around the world, authoritarians use banking and money as a primary tool to silence their opposition through freezing accounts and prohibiting funding. This inability to fund an oppositional voice can lead to drastic imbalances of power, in which the prevailing regimes can commit unilateral atrocities against their citizenry.

In my view, these three applications are critical to Bitcoin’s success, and the expanding universe of subsequent applications are icing on the proverbial cake. Many newcomers to Bitcoin, believe these three use cases of Bitcoin to be unimportant or a “solution in search of a problem.” Which is understandable as it is common to look at things through the lens of Western democracy. Economics, central banking and money are very boring concepts to most. People are busy raising families, advancing careers and trying to make ends meet — we trust that “experts” have these things figured out. We don’t have time in our busy lives to dig into quantitative easing, interest rate policy, RePo markets, currency game theory among competing nations, the rationale for negative yielding bonds, why economic inequality has become so staggering, and how everything has become “so damn expensive?” Bitcoin can and is a solution to many of these topics; however, we will never understand why Bitcoin until we understand the underlying problem it solves. As Abraham Lincoln said, “If you give me six hours to chop down a tree, I will spend the first four sharpening the axe.” Just as sharpening the axe is key to chopping down the tree, understanding the problem is key to Bitcoin enlightenment. Let’s work to understand the problem, time to sharpen the axe.

What Is Money

It could be argued that money is the most important technology of any society. It quite literally represents half of every transaction that occurs within a society. Despite our daily use of money and how it controls our lives in many ways, we collectively have a very poor understanding of what gives money value. In short, money should simply be an abstraction of value that frees us from the inconvenience of barter — or easier said, a ledger of who owns what.

The below list are the defining characteristics that make up for a stable and dependable monetary good:

I will spare the reader the laborious task of going through each of these characteristics in great detail; but I will instead focus on the key deficits in our current monetary system and how the Bitcoin protocol fixes them. We must first have an elementary understanding of monetary history and how we got to the precarious precipice we find ourselves in today.

A common resounding artifact of any culture is the type of money that each culture utilized. Money, in many cultures, started out as beads, feathers and other rare artifacts. These systems of money didn’t work well primarily due to the fact the monetary good was not fungible. To illustrate this lack of fungibility would be the example of seashells used in many cultures. No seashell is exactly the same as any other seashell in terms of size, shape, aesthetic appeal and condition. With these disparities, it led to a lack of fungibility and the buyer and seller had to resort to negotiation of the value of the particular seashell in question — making pricing difficult. Another key component, and arguably the most important of all currencies, is scarcity. We cannot use rocks as currency evidenced by supply being near infinite; no rational economic person will trade finite goods and services for an infinite amount of money. As Andreas Antonopoulous points out, “One can look at archaeological dig sites, in which mountain civilizations used seashells as currency because it comes from the coast, and coastal communities utilized quartz as currency because it comes from the mountains — as long as this resource is not naturally occurring where you live, it has the potential to be a good money.”

In 600 BC, a major breakthrough was reached to solve this issue of fungibility, scarcity and, in many instances, portability. Portability is the ease at which a monetary good is transacted throughout space. The minting of rare metal coins became the solution to a lot of challenges plaguing early monetary systems.

Gold and silver have served as sound money for millennia and their track record is undeniable. If you had one Roman denarius coin, it was exactly equal in value to any other Roman denarius coin, solving the fungibility issue. Coins were small enough that they were fairly portable (albeit with risk of theft), but it did drastically improve upon the portability of previous barter systems; one didn’t have to bring a flock of chickens or a cow with you wherever you went to settle a transaction. Lastly, precious metal-minted coins solved the fundamental problem of scarcity. Gold and silver are a finite resource on our planet, despite our most ardent attempts to extract more, it remains a finite quantity. The entire quantity of all gold mined in human history would only fill four Olympic-sized swimming pools; it is one of the rarest resources on our planet. Gold being so scarce by nature gives it outstanding salability through time. Salability through time refers to the ability of a monetary good to retain its value through time. The above Roman coins have a higher value today than they did when they were first minted — gold and silver have outstanding salability through time.

Gold and Silver drastically improved early economic systems but were not without their own limitations. In respect to gold,the yellow metal is not easily divisible, if you were to pay for lunch with gold it would be cumbersome to break off a piece of a gold bar that would be commensurate with any low value transaction. Divisibility is a major drawback to any precious metal. The biggest drawback to gold, however, is that it is a physical bearer asset which can be easily stolen or confiscated. A bearer asset means that if a gold “token” is in your possession, you, by default, own it. These shortcomings of theft, portability and divisibility led to our global societies moving from physical bearer tokens (gold coins) to ledgers.

Physical Bearer Tokens
Centralized Ledgers

Centralized ledgers (banking) have the benefit of mitigating theft (storing wealth in a bank is more secure than your home), and it helps rectify the divisibility issue of gold coins. To solve these two issues, governments created gold certificate dollars (essentially an IOU). The idea was to keep gold in a central vault and issue the depositor a certificate that is directly redeemable for gold in direct proportion to the certificate (or dollar). If you were to deposit one ounce of gold, you would receive gold certificate “dollars” in direct proportion to your gold deposit. These paper certificates could be used to easily spend, as they were more divisible and exhibited less risk of theft — the best of both worlds! We now had money that was divisible (came in a wide variety of denominations), fungible and backed by a scarce resource (gold). This became a centralized ledger system, as we now relied on the banks to keep a ledger of what is owned. There is one glaring problem with centralized ledgers: You place all your trust in that party maintaining that ledger not to debase the “certificates” (dollars) and to keep the scarce resource (gold) that is backing the currency in direct proportion to the certificates outstanding. Sadly, this trust has been catastrophically compromised in every single example of central banking.

The above picture on the top is an early American five dollar bill. It very clearly states “Redeemable for 5 dollars of Gold Coin.” Do you notice anything different from our current $5 dollar bill? It now says “Federal Reserve Note” — this is no longer redeemable for gold. Our money is now just a piece of paper and has been since 1971 when the United States diverged from the gold standard. Scarcity, the most important characteristic of money, is now directly in control of the United States Federal Reserve (which is neither federal nor has any reserves — a conversation for another day). Gold has maintained a 2,500-year track record of keeping money valuable due to its strictly limited supply in the earth. No one, regardless of how powerful or influential, can create more. By moving to paper money, backed by nothing, we now trust one body of bureaucrats to keep our money scarce — to say they are failing at that may be the understatement of the century.

“Your ATM is safe. Your banks are safe. There’s enough cash in the financial system and there’s an infinite amount of cash in the Federal Reserve.” — Neel Kashkari, Minneapolis Federal Reserve President

“Paper money eventually returns to its intrinsic value: zero.” — Voltaire

Inflation and Wealth Destruction

It has become increasingly common to hear statements along this line of thinking: “$24 for lunch? Everything is getting so expensive! Health care, housing, insurance, education for my kids, I can barely afford to live!” To this end, it begs one very simple question: What is more likely, every good and service you are consuming is inexplicably becoming more expensive; or, is the one common denominator in all these things (money) becoming worth less? Think on this question for a moment. How could it be that nearly every good or service is becoming less affordable? Given the massive advancements in computing, engineering, automation and manufacturing throughout the last 30 years, shouldn’t things become less expensive, not more expensive?

The truth is the wealth you’ve accrued in state-issued currency is losing its value every single year. Every single year. A baseline definition of inflation may be a phenomena in which general price levels rise, and each unit of currency buys fewer goods and services. Inflation is a monetary phenomenon, not a price phenomenon. Prices go up because inflation is happening, not the other way around. If you have $1,000 today and let it sit in a checking account, next year you may only be able to purchase $950 worth of goods and services, and this loss is compounding every single year. The even more unfortunate news is that this devaluation is rapidly accelerating (losing value faster and faster). To give a simple analogy, let’s say you are a wheat farmer and the wheat market has been very profitable for you. Last season, all competing wheat farmers’ crops were destroyed by a flood; but, you alone had no losses and had a great harvest. You made a fortune due to the fact you could charge such a high price being the only game in town for wheat — we chubby Americans are willing to pay a lot more to make sure we get some wheat for our cakes. Let’s say the next year, for some inexplicable reason, wheat starts growing naturally, everywhere. Wheat is growing in people’s yards, to the point it becomes a noxious weed — wheat “ery’where.” The wheat market becomes saturated, as the supply is now ubiquitous. Your wheat now becomes worth nothing as the supply has exploded. This same phenomena is happening with our money, its paper — with infinite quantity.

It doesn’t require a PhD statistician to look at the above graph to recognize the inflection point that set off accelerating inflation. When we removed the scarce component (gold) from the dollar, it enabled printing of “infinite paper” and massive inflation ensued. This is a perpetual “get out of jail free card” for governments, as they can now just print money to meet expenditures without having to collect revenue through the arduous and contentious task of raising people’s taxes. You are being taxed, just in a different way; you are being taxed through the loss of your savings. As you can see below, this money printing trend is accelerating:

As you can see from the graph on the left, if you are holding your wealth in dollars or any other paper currency, your lifelong accrued “monetary energy” is getting diluted away and quickly. Bigger problems begin to occur when the velocity of money slows down. Velocity refers to the number of times that a unit of currency is used to purchase goods or services within a given time period. To maintain purchasing power, informed individuals have been putting their dollars into scarce assets to protect themselves. To name a few of these “flight to safety assets,” fine art, equities, real estate, precious metals and bitcoin have become favorites. A rational human has no choice; you must move your assets into a vehicle that cannot be diluted through the *theft* of time. In other words, we need a monetary good that is salable through time and that requires scarcity.

Memes can speak a thousand words:

A Critique Of CPI

The Bureau of Labor reports inflation statistics to the public using a metric called CPI — or the consumer price index. To arrive at a monthly CPI, the U.S. Department of Labor takes a weighted average of prices of various things that consumers purchase and claims to find the various proportions of different items in a typical household budget. In essence, they get to handpick what they include in this market basket of goods. A common criticism lies in the weighted average of goods they include in this basket. What is arguably underrepresented are assets. Home prices, education, equities, health care, vehicles and services to name a few. In many ways, this is analogous to a teacher telling a student to go home every month, study, take the test and just report back with the results. How do you think that report will come back? Perhaps they may come back with the yearly report of achieving 2% inflation? If you look at home prices in your area, your education expenses, how many hours needed to work to buy one share in the S&P 500 index, would you say this has been appreciating at more or less than 2%? You don’t have to know anything about economics to understand this fallacy.

Common consumer goods are, for the most part, inherently deflationary (the price naturally comes down over time); the advancements in manufacturing, automation, software, machine learning and efficiencies in supply chains make this a reality. Digital goods (Netflix subscriptions, software, etc.) are also inherently deflationary as the variable cost to produce more is essentially zero. If a company creates software, the cost to create additional copies is near zero. The only marginal cost of additional copies is the customer service aspect.

In short, electronic, technological and digital goods are inherently deflationary. It is commonly argued these things are far overweight when calculating CPI, leaving for a distorted view of reality, and, to this end, I very much agree.

A germane topic to address is that inflation is a global problem. There are seven billion people living with inflation that is even more pernicious than the United States, with hundreds of millions of global citizens experiencing hyperinflation. In 2018, for example, Venezuela experienced inflation of 130,060% — this is a population of 28 million people who have lost everything. Inflation is a humanitarian crisis.

The amount Venezuelan bolivars needed to purchase a single chicken.

Publicly traded companies like Tesla, Microstrategy and Square, to name but a few, have been converting cash on their corporate balance sheets to bitcoin in an effort to preserve their “economic battery.” In the background of this, bitcoin reached $1 trillion dollar market capitalization, making it the fastest moving asset in the history of humankind to reach $1 trillion.

“Cash is no longer an asset for any company, it’s a liability — it is a melting ice cube.” — Michael Saylor, CEO of Microstrategy

In retrospect, it was inevitable.” — Elon Musk, after moving a portion of the Tesla balance sheet to bitcoin

I know the inflation issue can seem dreary and dark, but the good news is we have brilliant sunlight in the form of Bitcoin. A global, voluntary system of money that no one controls — that no one can ever control. There will only ever be 21 million bitcoin, this is mathematically imposed — no one can change it. Currency units in this system are programmatically brought into existence, and the supply is easily auditable by every person in the world. Transparency in money, at last.

Wealth Inequality In The Fiat System

Wealth inequality is one of the most destabilizing factors in any society. This can be witnessed in the French Revolution where the bourgeoisie were met with guillotines in the street. If one were to look at our current distribution of wealth, it is demoralizing at best, along with modern U.S. politics. Our politicians and citizenry seem to talk past each other, finding common ground is a radical exception. It could be posited that part of the reason we cannot find common ground in our political sphere is that we cannot agree on a common problem. Using vague, commonly perceived generalities in addressing our national financial problems, one prevailing ideology tends to cast blame at immigrants and the welfare state, while the opposing ideology aims to blame anyone with financial success and is seen as demonizing productive citizens.

If we all worked to understand one of our most destabilizing issues (money) a little better, we may realize that we have more in common than we want to believe. Our current economic system creates perverse incentives and misallocation of capital; both sides of the argument are simply trying to navigate this broken economic system. The Titanic is sinking, team red and team blue are arguing how to best arrange the chairs on the deck. A very strong argument could be made that wealth inequality has more to do with a broken economic system than any policy issue. It would be naïve to contend that a broken system of money is the only factor contributing to inequality; however, this writing will go on to show it does contribute enormously to the problem. In Bitcoin, there is a very common ethos, “Don’t trust, Verify.” Please verify this hypothesis and data for yourself:

As you can see from the above graph (top), there was a violent divergence between gains in productivity and hourly wage earner’s share of that productivity growth after 1971. The graph on the right highlights the gains of the U.S. economy realized by the top 1% since moving to limitless paper money. This highlights the fact that capital markets have drastically outpaced wage earners. Simply put, wages do not keep up with inflation. Another way to look at it is, because you are a wage earner, you haven’t had excess capital to keep in the stock market and because of this you’ve missed out on all the inflation gains that have occurred in the stock market. Now, you have to pay for other inflated assets: housing, cars, health care, and so on, and your wages have been dismal in keeping up with the rising prices. Anyone in America feeling this? Hundreds of millions of Americans. Those who can afford to invest in assets see their wealth keep pace with inflation, with those who cannot afford to invest being left behind. The reality has led to the near complete eradication of the middle class, leaving us with two economic classes: the wealthy and the poor.

Income gains for the median and lower percentile have clearly been outpaced by the upper class since moving to strictly paper money. The graph on the right is a very compelling representation of the impressive growth in real GDP per citizen but also sadly depicting those gains are not being shared by a large part of the population. To explain the wealth gap, this idea can be further supported by the below graph demonstrating the decline in wages share of the economy’s total income.

You may ask, “How does paper money contribute to this problem?” To answer that, we need to understand how the government injects liquidity (money) into the market. Economists use all kinds of esoteric terms: quantitative easing, rehypothecation, interest rate targeting, and a universe of convoluted terms and concepts the average person doesn’t have time to concern themselves with (I don’t blame you). In short, the problem lies in using money as a political tool. I subscribe to the belief that neither central bankers nor politicians have a nefarious agenda when it comes to economic management, they simply want to appear successful during their time in office. We all know the most commonly referred to indicator of U.S. financial success in a given year — the performance of the stock market, albeit to be painfully naïve. No single variable has a stronger influence on the American stock markets than the Central Bank policy and this is not even up for debate. If you are skeptical about this point, that is to be expected; however, I implore you to ask yourself one question: In 2020, during the greatest public health crisis we have seen in three generations, with nearly the highest unemployment rate in the history of the United States, how was the stock market still reaching all-time highs? Ponder that for a moment; take your time.

As you can see, unemployment reached levels just below the Great Depression, with the stock market (S&P 500 index) reaching all-time highs, or a 16% return during one of the highest periods of unemployment. In the entire history of the United States, it is estimated that 22% of the circulating US dollar was printed in 2020 — from 1776 to 2020, 22% of the money was printed in a single year.

“Stocks only go up.” — Dave Portnoy, Barstool Sports

The skinny: Our markets are not free or even close to it, and they haven’t been for some time. Inequality happens as the government uses printed money to artificially stabilize stocks and other assets without allowing the free market to adjust them to a fair valuation based on economic circumstances. People with excess capital get wealthier as “stocks only go up”; however, this is being subsidized through rising asset prices at the real cost of the poor and middle class which, sadly now, may never afford a home.

“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”— F.A. Hayek

We have reason to remain optimistic: Bitcoin is the sly roundabout way.

Money As A Tool Of Control: Censorship

“This is a world where you have billions of people whose bank accounts can potentially be frozen based on their opinions or ideas.” – Alex Gladstein

Cash has served as a primary means of peer-to-peer economic exchange for decades. Cash has advantages and disadvantages depending on your motivations. In many areas of the world, cash acts as a lifeline, as it can be used without surveillance, and transactions can be conducted privately. Cash can provide privacy and freedom of speech. Cash can also be used for illegal activity, and this is a universal favorite for illicit activity. One man’s privacy is another man’s illicit activity.

It has become very evident that the vast majority of transactions taking place are now digital, either through cards or web-based applications, with all of these digital applications of money being controlled by a central authority. Having a central ledger (banking) has given authoritarian governments the ability to surveil and censor money they don’t agree with. Governments around the world are working to eliminate cash from circulation and are moving to a purely digital concept. Before the conspiracy accusations are thrown around, below are a few of the thousands of headlines that have been taking place — this is no secret.

View the 3 images of this gallery on the original article

If you are a Russian dissident and maintain an opinion that is in opposition to Putin, you would prefer to support the opposition party anonymously out of fear of reprisal from the ruling regime. Putin’s regime has effectively silenced any challengers to his power through the use of several coercive tactics, including wealth confiscation. With opposition parties depleted of resources, Putin enjoys his nearly 17-year reign over Russia in a cozy echo chamber.

The Hong Kongese citizens have lived their entire lives espousing western ideals of individual freedom and democracy. Many are trying to flee the country with the impending tyrannical communist rule taking place, or at the very least, support the pro-democracy movement. In this scenario, with complete governmental control over banking, relocation becomes but a dream and democracy an idle prayer.

View the 3 images of this gallery on the original article

The list of instances in which money is being used as a tool for oppression globally is endless: Burma, Myanmar, Venezuela, North Korea and broad swathes of the Middle East. It is estimated that 4.2 billion human beings live under oppressive authoritarian governments.

Bitcoin is a censorship-resistant technology that enables human rights globally. Anyone with an internet connection can use Bitcoin. Bitcoin doesn’t care about your color, religion, political persuasion, sexual preference or value to society; Bitcoin recognizes human value. Bitcoin objectively facilitates the human-to-human exchange of value, purely independent of any other variables or factors.

Monopolies of any kind destroy societal value. Monopolies in industry stifle innovation and crush consumers. Monopolies in government stifle innovation and crush citizens. Bitcoin provides citizens a tool to exit a nation state that no longer services them. With Bitcoin, one becomes a global citizen, able to access their wealth anywhere in the world with an internet connection. The idea is that Bitcoin creates competition to monopolized money, so governments will have to treat their citizens like a valued customer again.

Bitcoin Fixes This

A common phrase in Bitcoin circles you’ll often hear is “Bitcoin Fixes this,” which is applied to a myriad of issues. For the scope of this writing, I would like to describe how Bitcoin fixes the problem of centralized ledgers that have led to inflation, wealth inequality and censorship, as previously discussed.

Centralized Ledgers
Bitcoin Decentralized Ledger

We’ve discussed the benefits of money being managed by a centralized ledger to that of a physical money being improved in fungibility, divisibility and security from theft, albeit with the enormous drawback of trusting that this central party will not debase the currency you’ve chosen as the battery to store your life’s energy. Bitcoin fixes this.

Bitcoin is radically scarce. The Bitcoin protocol will only ever mine 21 million bitcoin into existence — this is mathematically imposed. This also cannot be changed, as Bitcoin relies on a globally distributed system of consensus in which no one can change the rules, including you. With Bitcoin, you can independently and authoritatively validate and verify that the monetary supply is adhering to the agreed-upon protocol rules; this is called running a node. A common lexicon of speech in Bitcoin circles is “Don’t Trust, Verify.” With Bitcoin, we verify the monetary system and ensure that regulations of the protocol are being enforced.

Bitcoin is infinitesimally divisible. One bitcoin is divisible into 100 million units, these units are called satoshis, or sats for short. As it stands right now, $1 dollar can purchase around 1,700 sats. The number of sats one dollar can buy you is coming down nearly every day, demonstrating the increasing purchasing power of bitcoin and the decreasing purchasing power of dollars. I fully envision a future $1 = 1 sat; I view that as inevitable.

Bitcoin is fungible. One bitcoin is the exact same quality as any other bitcoin in existence, the software you run can independently verify that it is real and is not a counterfeit. When I say “software you run” I am referring to a Bitcoin app you use on your phone. Don’t stress; this software will only become easier to run over time — you boomers. Nothing but love for my boomers.

Bitcoin is perfectly portable. Bitcoin is data, and you can move anywhere in the world simply by carrying a thumb drive or a memorized phrase of words to access your wealth.

Bitcoin is censorship resistant and confiscation resistant. If you take possession of your private Bitcoin keys, no one can access that wealth unless you give them permission. Bitcoin guarantees the scripts you run; if you choose to send money to someone no one can stop that transaction from happening. This enables cross border commerce with low friction and low latency.

Bitcoin is programmable money. The applications that can be built out on top of Bitcoin are endless; smart contracts, escrow, streaming money and immutable messaging applications are able to be built on top of this technology stack. Bitcoin is a decentralized immutable (unchangeable) database. If you paid attention to the most recent election, shouldn’t everyone be in favor of an immutable database no one can manipulate or be accused of manipulating? There would need to be no more accusation and no more defense. Bitcoin data cannot be tampered with. Most databases are a computational “etch a sketch, Bitcoin is computational amber” (Szabo). We will vote on Bitcoin someday.

Bitcoin is global money. The human rights issues we’ve analyzed from inflation, confiscation and censorship are a global phenomenon. Bitcoin is fighting to solve some of humanity’s biggest problems (whether everyone knows it or not) — join the fight.

“The internet is uncontrollable. And if the internet is uncontrollable, freedom will win. It’s as simple as that.” — Ai Weiwei, Chinese Dissident

JPK

For more resources on Bitcoin, I would urge you to visit this website.

I would like to thank Andreas Antonopoulous, Dan Held, WTF Happened in 1971, and the United States Federal Reserve for making it easy to dunk.

This is a guest post by John Paul Klaboe. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Square Bought 3,318 BTC, Made $3.51 Billion In Bitcoin Revenue In Q1 2021

Square Bought 3,318 BTC, Made $3.51 Billion In Bitcoin Revenue In Q1 2021
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Per an earnings report, Bitcoin-focused payments company Square has purchased 3,318 more BTC and earned $3.51 billion in bitcoin revenue.

Today, Square (NASDAQ: SQ) reported its 2021 first quarter earnings. The company remained committed to holding bitcoin as an “instrument of global economic empowerment,” seeing tremendous gains from its $220 million in bitcoin purchases.

“In February 2021, we invested $170 million in bitcoin as we believe cryptocurrencies are an instrument of economic empowerment, which aligns with the company’s purpose” per the earnings report.

With this $170 million purchase, the company bought an additional 3,318 bitcoin at an average price of $51,235.68 per bitcoin. This supplemented Square’s initial purchase of 4,709 bitcoin for $50 million that the company announced in October 2020, which are now worth approximately $263.2 million at the time of writing. The company currently holds 8,027 bitcoin, worth approximately $448 million, giving it the third-largest bitcoin holdings of any publicly-traded company.

“We see bitcoin as the internet’s potential to have a native currency, and we want to further that as much as we can,” Jack Dorsey, Square’s CEO, said during an earnings call. “Our focus is enabling bitcoin to be the native currency, it removes a bunch of friction for our business and we believe fully that it creates more opportunities for economic empowerment around the world.“

Square generated a staggering $3.51 billion in bitcoin revenue during the first quarter of 2021, along with $75 million of bitcoin gross profit, each up approximately 1,000% year over year. The company’s gross profit was $964 million, up 79% year over year.

Cash App, Square’s payments app and bitcoin sales portal, also had phenomenal growth this quarter, finishing with $495 million in gross profit, up 171% year over year.

 At the end of the quarter, Square had $4.8 billion in available liquidity, with $4.3 billion in cash and cash equivalents, paired with $500 million available to withdraw from the company’s revolving credit facility.

In the future, Square will continue to provide bitcoin services to customers and hold bitcoin as an instrument for economic empowerment, putting itself ahead of competitors. 


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The Inconvenient Truth Of Bitcoin

The Inconvenient Truth Of Bitcoin
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Bitcoin promotes a better society that depends upon personal responsibility more than anything else.

A better society depends upon personal responsibility more than anything else. Without personal responsibility, we cannot expect anything other than what we’ve already got.

Bitcoin is not a political manifesto. And it’s certainly not a self-help book. It’s a computer protocol designed to perform a specific function. But Bitcoin does offer commentary on our current situation, because it did not emerge within a vacuum. It emerged as a result of the global mess we currently find ourselves in. If all was well in the world, Bitcoin likely wouldn’t exist, because it wouldn’t need to. Instead, Bitcoin exists precisely because everything is not well.

The world faces serious problems. Because societies begin as constructs of the human mind (albeit very complex ones), the problems we face today are ultimately rooted in our thinking. For those willing to look, Bitcoin points to a simple but inconvenient solution: What matters most in the pursuit of a better world is personal responsibility. Everything else is secondary.

Human beings are social creatures. We’ve organized ourselves in communities since time immemorial and it’s undeniable that we can achieve more when we cooperate rather than go at it alone. The effects of solitary confinement prove beyond any doubt that we need other people around us to remain functional. Something as simple as friendship, family and parenthood illustrates just how often (and without a second thought) we put the well-being of others first. That being said, if we cannot take responsibility for ourselves, we’re the ones in need of help.

If we extrapolate that idea from the microcosm of a family to the macrocosm of entire societies, what sort of world can we expect when millions of government officials (governing billions of people) are unable to take responsibility for their own lives? Addiction, depression, schizophrenia and everything else that ordinary people struggle with are problems also faced (but not easily acknowledged) by even the most powerful people. In many ways, we live in a world where the blind are leading the blind.

I do not believe that Bitcoin is the solution here. The solution is personal responsibility. Bitcoin simply points in that direction, just like a Google Maps listing for a mechanic isn’t going to fix my broken car until I find the actual repair shop. Bitcoin solves a very specific problem. It provides us with a better form of money. I’m not trying to define Bitcoin in absolute terms, instead I’m simply pointing out that its simplicity is a good thing. We shouldn’t over complicate it and attribute to it things that aren’t directly connected to it.

But it is useful to consider Bitcoin’s commentary on society to see how it might change society as a result of what it’s proved. Pete Rizzo’s recent article on the last days of Satoshi illustrates just how unique Bitcoin is in terms of its leaderless nature, by highlighting the fact that its move toward leaderlessness happened organically, rather than being preordained by its creator. I struggle to think of any other complex structure that’s as widely distributed as the Bitcoin network and yet entirely voluntary in terms of its governance. Let alone a structure that’s accrued over a trillion dollars in value.

Bitcoin has already changed the way we think about and use money. But indirectly it will change so much more than just that, because it proves that decentralized self-governance is possible across a global network. Not only that but decentralized governance holds many significant advantages (and very few disadvantages) over centralized alternatives. Bitcoin points to a possible future of decentralized societal governance that is superior in fairness, transparency, efficiency and resilience.

The ideal of democracy is a noble cause, no doubt, but the decay of liberal western democratic societies, with spiraling debt levels and increasingly polarized proletariats, combined with the rise to power of more authoritarian states like China, points to the fact that our natural concern for others descends into flailing pedagogy unless it’s built upon a strong foundation of personal responsibility. The intensified spread of more extremist forms of socialism in countries where the idea of freedom for the individual has served as a cornerstone of society, but is now increasingly considered only as an afterthought, illustrates this well. People are no longer free to choose how to behave, instead we’re told how to behave — and not for our own sake but for the sake of everyone else.

Don’t get me wrong. I very much support the idea of helping those in need. Over the last decade, I’ve dedicated a massive amount of my own personal time, energy and resources toward building a nonprofit social development initiative in my community. The mission still lies very close to my heart, but what that experience has given me is that I’ve witnessed first hand, again and again, that one simply cannot help a person that’s uninterested in helping themselves. No amount of effort from outside will change anything unless a person takes ownership of whatever problems they face.

As intuitively obvious as this may seem, I’ve watched in frustration as the government in my country seeks to solve all problems on behalf of everyone, taking everything away from individual ownership and moving it toward state ownership. Despite their questionable track record and despite the fact that only 6% of the population in South Africa carries 97% of its tax burden.

The current president is following through on his policy of land redistribution based on expropriation without compensation. This is despite the fact that it goes against the South African constitution and the fact that the same policies failed miserably in neighboring Zimbabwe, whose government warned ours not to go down the same road. Redistributing land isn’t as easy as it sounds, especially not if it’s done to appease an angry population by diverting attention away from government failures. In the case of Zimbabwe, this policy led directly to one of the highest hyperinflationary periods in history, with the national currency being completely abandoned after inflation peaked at an unbelievable 89.7 sextillion percent year-on-year in mid-November 2009.

In theory, these socialist policies are based on noble ideals. I do believe that we should take care of one another. If I didn’t, I wouldn’t have made the immense personal sacrifice needed to build and sustain a decade-long social development initiative. However, I believe it’s far more efficient and effective for individuals (and not governments) to assume that responsibility. Anyone who digs just a little bit deeper will find that very seldomly and in very few countries do these policies have the intended consequences and, time and again, it leads not only to chronic mismanagement and record debt levels but also to populism driven by intolerance and sentiments of entitlement. Politicians eager to shift the blame for past failures can easily play into this and exploit the human tendency to avoid change at all costs, knowing full well that people will jump at the opportunity to get something in return for doing very little, while happily ignoring the failures behind the hand that feeds them.

There is a solution. But the solution isn’t Bitcoin. Not in and of itself. There is no societal panacea. In my experience, the solution is individual and personal responsibility. That’s an incredibly inconvenient truth for people who have become as dependent on government for their survival as governments have become dependent on the people’s dependency for its own survival. The crux of the inconvenience lies within the fact that some people learn personal responsibility and some don’t.

For those that don’t, there’s very little that can be done, other than trusting that life itself will eventually lead them to a situation where they have no other choice, a moment which many never come. Not until they’re on their deathbed and must face the fact that no one else can take that final step on their behalf.

Bitcoin doesn’t fix that. What Bitcoin does is point toward the solution. It’s there for those that are prepared to look: Given the proper tools, people can govern themselves. When they do it, it can (counterintuitively for most) deliver better results. Bitcoin proves that we don’t need to comply for the sake of compliance if a voluntary governance structure works better.

Everybody knows you cannot build a house starting with the roof. What then makes us believe that society can be built that way? If, as I suspect, it’s because most people assume that self-governance will result in chaos, then there’s never been a more incisive question posed in response to that assumption: What does a completely decentralized and leaderless network, worth more than a trillion dollars, say about that near-universal assumption? And make no mistake, it is an assumption. There has never been a truly free, self-governing society in recorded history. While the idea is nothing new, a concrete example of what that might look like did not exist until Bitcoin came around.

This is a guest post by Hermann Vivier. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Ten31 Announces Grants For Open Sats, Bitcoin Q+A

Ten31 Announces Grants For Open Sats, Bitcoin Q+A
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Investment firm Ten31 has announced it will be supporting Open Sats and Bitcoin Q+A with grant funds sourced from its management fees.

Ten31, an investment firm focused on Bitcoin-native companies, has announced its first Bitcoin developer and community grants, which are sourced from its fund’s management fees.

It will be supporting Open Sats, a nonprofit that funds Bitcoin contributors, as well as Bitcoin Q+A, a provider of accessible Bitcoin education content, with donations of undisclosed amounts.

“We formed our first fund, the Low Time Preference Fund, with the express intention of investing in great Bitcoin companies we believe would form the future foundation of the global economic and monetary infrastructure,” according to a Ten31 press release shared with Bitcoin Magazine. “We did not set out to create another traditional venture capital firm. Instead, we wanted to create a fund backed by bitcoiners, supporting bitcoiners.“

In the release, Ten31 said it was inspired by similar grants distributed by groups like the Human Rights Foundation, Square and Brink. But its funding model appears to be novel for the space.

„We had not seen any other funds leveraging this model, and part of our hope was that other funds would see what we were doing and consider doing the same,” per the release. Fund management fees are typically charged annually and used to cover overhead, compensation, administrative, compliance and other expenses. We thought it would be great to carve out a large allocation of our management fees for purposes of recurring grants to developers and open-source contributors.“


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