Bitcoin
Daily Ramble
Below is what I wrote to a journalist this morning in response to what I initially dubbed as a Bitcoin hit piece. With deeper reflection, I realized it was less a hit piece and more a lack of Bitcoin understanding. Many thanks to John Schaeffer for providing the opportunity to dialogue with the journalist. I’m intentionally keeping both the journalist and the article hidden as I have not asked their permission, though I felt my readers would appreciate my response. And it saves me from writing a Ramble…who doesn’t like to cut a corner or two?
I represent the infinitesimally small group of people that come from renewable energy and believe that Bitcoin is the solution to global warming. I’ve dedicated my career to protecting the planet. My perspective is in the minority, and I get that. But I have no problem standing in uncomfortable places while I wait for the majority to catch up. I started in solar energy in 2005 and adopted Bitcoin in 2015. Thankfully, I didn’t have to stay in that uncomfortable place as long as John did carrying the banner for renewable energy.
That’s probably more on me than you’d cared to hear, but I thought providing some background might allow a more open dialogue. I live in Portugal these days and gratefully don’t have to experience the tribalism of red v blue any longer — but I am sensitive to it. Unfortunately it seems Bitcoin has landed in team red. The reality is that it’s landed in team humanity.
It’s important to separate Bitcoin from the idea of server farms. While Bitcoin is a subset of server farms, its unique properties make it like trying to say that photos are videos. Sure they’re all 1s and 0s, but that doesn’t make photos and videos the same. Now, having separated Bitcoin from servers, it’s also important to know that Bitcoin uses a lot of energy, and it will use more in the future. You’ve got to hold on to that uncomfortable reality while going deeper to understand why its valuable and more importantly, what to compare it’s energy consumption to.
Now we get to the real difficulty of Bitcoin. It makes no sense without an understanding of money itself. Just saying that triggers a knee-jerk “how dare you suggest I don’t know what money is with my life experience?!” for most people. You’ve got to stay curious despite that knock to the ego or you won’t make it to the part where Bitcoin makes sense.
I’m sure you’ve heard the anecdote of the two fish swimming along when an older fish swims by and asks “how’s the water today fellas?” The two fish look at each other after a bit and one says “what’s water?”. Money is the water our society swims in but doesn’t really “see”. Despite the fact that it was put in the US constitution that money should take the form of gold and silver, we haven’t heeded our founders advice. As a result, our money is disconnected from the laws of physics. Quite literally, our money has no tie to reality. Bitcoin on the other hand is generated directly from energy, thereby obeying the laws of physics and transmuting the analog world to digital in the process. Pulling a society back to planet earth after its unmoored itself on financial fiction is of course going to be a rough go, but how long do we want to stay in orbit?
The fair comparison is to the US dollar, backed by the full faith and credit of the US government. It’s what underpins the global financial system. If Bitcoin represents a new money, outside the control of governments, then it’s only fair to compare it to the current money driving the global society. So how much energy does the US dollar take? Great question….last I checked the US military was the 2nd largest consumer of oil on the planet. To enforce the supremacy of the dollar, wars have been fought, so we’d need to put the lives lost in the last few Middle East wars on the dollar side of the balance to truly be fair. As a settlement layer, Bitcoin is more akin to Central Banks and how they settle payments between each other. Visa is a few layers above the dollar itself since it’s built on top of commercial banks who are built on top of the Federal Reserve. To fairly compare Visa energy consumption per transaction, you’d need to include these other layers in the calculation. That’s harder to do, and so is often omitted which leads to a photos v videos comparison.
That’s not to say anything of the dynamics of how human consumption changes after individuals adopt a Bitcoin standard. I know no one that doesn’t start trying to accumulate more Bitcoin once they “get it”. Quite literally, they sacrifice current consumption for future consumption. Since inconspicuous consumption is the root evil in our carbon emission problems, individuals self-opting into reduced consumption seems like the Paris Accord on steriods to me.
Anyhow, those are my off the cuff thoughts in reaction to the article. Just like electricity was feared out of concerns for fire safety, and the internet would never supersede the fax machine, and the airplane was popularly thought to be a dud, it takes a good bit for society to understand a completely unique invention. Heck, it took hundreds of years to understand the impact of the printing press on society — and that’s not an unfair comparison to Bitcoin. The printing press led to the separation of church and state — humanity flourished. It’s quite likely that Bitcoin will lead the separation of money and state — and humanity will flourish.
Favorite Things on the Interwebs Today
In honor of Number Go Up technology doing what it does best today, this is an incredible explanation of Bitcoin by two titans of Wallstreet. Bitcoin’s never been explained more eloquently.
Bitcoin Price Prediction
Weekend: $45k - $52k
Today: $48.8k - $55.6k
Tomorrow: $50.1k - $56.5k
It’s an Up Only day. Bitcoin has rounded its bottom and is showing its Number Go Up technology. I jest, but it’s a good time to be bullish again. The weekend closed with a sharp sell off to shake out the last of the weak hands holding Bitcoin only to rocket up 15% from $47k to $54k. I do not anticipate we go straight up from here, but I am no longer concerned with further downside. Not at this stage in the cycle. We could still get it of course, this is a game of probabilities after all, but everything I see points to the bottoming being in. The worst case scenario would be sideways for some time before we challenge the $65k peak. The worst case scenario is the most likely at this point. The next most likely would be run up to the $65k peak this week.
Bitcoin Q & A
Q: Bitcoin is performing better than the last cycle, correct?
A: Nope.
The absolute numbers may be astounding, but on a percentage basis the current Bitcoin bull cycle is eerily similar to the last two cycles.
Here’s a great chart if you want to get into the specifics. The red circle shows where we are in the current cycle and the black vertical lines estimate when the peak will occur if the current cycle continues to hop scotch to the same beat.
Thanks for reading,
Kent
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