Conviction
Sunday Ramble
Bananas in the jungle are exceptional, especially after almost a month without eating fruit — or anything else sweet. Thankfully, yesterday was the end of the fruit restriction as my post-dieta period came to a close. If you missed last week’s Ramble, this is likely not making much sense.
I sometimes wonder what I did to get hit with the lucky stick. Here I sit on the edge of the Amazon, writing to strangers across the globe, in one of the most food-secure locales in the world, while I observe the western world running amok like a scientist watching it through a telescope. It all seems so far and distant, yet knowing friends and families are wrapped up in the mess makes it impossible to put the telescope down.
What am I talking about? The Supreme Court’s decision on Roe v Wade; Germans hoarding firewood and stoves as Russia uses energy to wage economic warfare on Europe; civil unrest in the Netherlands over new COVID restrictions; and the mainstream media stoking fears of a monkeypox pandemic, to name just a few. I’m running to grab my 11-foot pole to push away these topics that shouldn’t be touched with a 10-foot stick. But the throughline underlying all of these things is societal upheaval. And there is a root cause driving societal unrest: inflation.
Historically, inflation precedes societal unrest. It’s generally not what gets people into the street — there’s typically something else to blame. But when people start struggling to cover the basics of food, water, and shelter in life, the frustration wick gets short enough that it doesn’t take much of a spark to set off the powder keg of societal upheaval. So I wouldn’t blame you if you didn’t see inflation as the link to these disparate global events. Unfortunately, we’re all pretty stunted in our understanding of money when the Oracle at Delphi, Jerome Powell, can’t even figure out that inflating the money supply causes inflation.
In multiple Rambles, I’ve harped on the point that centralized control of fiat currency has ALWAYS collapsed. It’s got a 0.00 batting average with a typical lifespan of around 40 years. The US dollar is on year 52. Fiat currency typically dies by inflation, leading to the debasement of the money and loss of trust in the government backing it. Historically, holding gold is touted as the best way to deal with the situation. But what isn’t mentioned is how emotionally painful the experience is to move out of the local currency and into gold with the conviction it’ll weather the storm. Can you imagine living in the Weimar Republic (Germany), between World Wars, being smart enough to move from the mark to gold, then having to weather month after month of 80% price swings in the value of your gold? Me either.
“But Kent, you’re not advocating gold as a Bitcoin evangelist, are you?” Nope. What I’m painting is the picture of what holding Bitcoin is like. History does not repeat, but it frequently rhymes, is an oft-quoted saying by Mark Twain, who died before having the chance to opine on the Weimar Republic fiasco. I can image Twain today, being a Bitcoin hodler, weathering the 80% whipsaw price movements, rocking in his porch armchair, pipe in hand, cracking jokes about the stupidity of fiat and the hubris of men thinking they can control money itself. Am I insane to think Mark would be a hodler? Probably, but I like the image.
There IS an odd serenity in the Bitcoiner camp about its price movements. It’s challenging to comprehend by those who don’t understand it: “How can you placidly watch your net worth erode by 50% and barely mutter more than an ‘eh, that sucks?’ ” they ask. Those asking that question have a fundamentally different time horizon and do not understand money and its history. Bitcoiners understand that over a long enough time horizon, all fiat currencies go to zero, that the transition is volatile, that humanity always gravitates to the best form of money, and that Bitcoin is the best form of money.
The conviction in the above is earned through the blood, sweat, and tears of 100s of hours of study, hodling through volatility, and watching the inevitable adoption of Bitcoin throughout society. The longer a Bitcoiner holds, the greater the conviction becomes — and it’s that conviction that continually sets the price floor, whenever that might be. It’s a rough road when a currency goes, but at least we all have an option to exit our local currencies gracefully.
Rad Things on the Interwebs
Bitcoin Price Prediction
Weekly Range: $16k - $22k
Last week has been about as expected, with the price of Bitcoin starting the week above $21k and looking to close around $19.5k. The fear of further contagion in the market from the LUNA/UST implosion has most everyone convinced we’re going lower, and while I think it’s possible, the contrarian in me is doubtful. Two big bearish shoes can fall, driving the price down: an equities meltdown and the other is Bitcoin miners forced to sell their Bitcoin to cover expenses. I’m less concerned about the equities meltdown since most folks who crossed over from the equities market have sold out, leaving stronger hands to accumulate. The Bitcoin miners forced to sell their inventory is a more significant threat.
That said, this week's prognosis is pretty much the same: close the week below $16k, and we’re very likely to head lower. Close the week over $22k, and we’ll either have a dead cat bounce or the possibility that the bottom is in. So my recommendation from last week remains the same: it’s a great area to begin accumulating a long-term position, but it wouldn’t be wise to blow all your dry powder either.
Bitcoin Q & A
Q: What is Bitcoin’s hashrate?
A: A metric measuring the security of the Bitcoin network.
On the Bitcoin network, a hash is an attempt by a Bitcoin miner to solve the computational puzzle necessary to win the block reward, currently at 6.25 BTC per block. The block reward is the incentive that encourages Bitcoin miners to invest capital in specialized hardware and energy to secure the Bitcoin network. The hashrate is a metric measuring all the hashrate securing the network. It is a proxy for the capital and energy expenditure necessary to secure the Bitcoin network, i.e., Proof of Work.
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