The New American Dream
Daily Ramble
Let’s take care of a bit of housekeeping while I melt in the midday jungle heat. Like, what the heck am I doing with this newsletter? Yeah, you’re not the only one questioning it. A couple of months ago, I solicited some feedback from you, and while I was astounded by the support I received for a paywall of some type, I’m electing not to. Why? Because I’ve got a full-time gig with Sazmining now. And the reality is that I enjoy writing my thoughts into the abyss of the internet for strangers I’ve never met to consume. Weird, huh?
It may be weird, but it also gives me the latitude to be as irregular as I’d like to be. What that means from now on is that the daily newsletter cadence will change to a couple of times each week — when it delights my fancy, in other words. That keeps my effort selfish, and you free to decide if you’d like to continue the journey with me. I like voluntary arrangements much better, as I’m sure you’ve gathered from my hand wringing over mandated covid vaccinations. BUT and this is a huge “but,” if you’d like to contribute to say thank you, and it seemed like several of you would like to, I will include a Bitcoin address/QR code at the bottom of my newsletter. Having exited the tipping culture of the US many, many moons ago, I’m not fond of the idea of calling it tips since tips in the US feel obligatory at this point. Let’s call it a donation bucket. More like how you’d drop a few notes in a street musician’s open instrument box if you dig the jam s/he’s playing. Now on to the jam — which is a cover.
Leo from Bitcoin Magazine recently published an article I found inspirational enough to quote in its entirety:
For decades, home ownership has been the vehicle through which the middle class prospered. Unfortunately, with institutional and foreign investors bidding up home prices and the money printer going brrr, the “American dream” is now out of reach for many. In fact, as of 2017, there were more U.S. households renting than at any point in the previous five decades.
It is for this reason that I propose bitcoin as an alternative to home equity. While the American dream may be dying, the Bitcoin dream is just beginning. Using lessons from history, I will outline eight reasons why bitcoin is far superior to residential real estate:
1. BITCOIN IS DIGITALLY SCARCE
There will never be more than 21 million bitcoin. While your grandfather may have told you, “Buy land, they aren’t making any more of it,” this isn’t exactly true anymore.
As technology advances and government regulations change, humans are able to “create” more land, thus increasing supply by building taller apartment complexes and developing areas that were previously uninhabitable. With Bitcoin, you are instead opting into a network with a predictable issuance and known money supply.
2. BITCOIN IS DIVISIBLE
Anybody can buy $1 or $1 billion of bitcoin. Divisibility makes bitcoin accessible to all and allows investors to dollar-cost average instead of having to time the market with one large investment. Instead of having to spend a decade saving a debasing currency in the hopes of accumulating enough for a down payment, investors can start stacking sats the moment they earn their first dollar. Moreover, by consistently buying small amounts of bitcoin, purchasers do not have to be afraid of buying the cycle top in the same way those who buy real estate do.
History lesson: In July 2006, tens of thousands of Las Vegas residents bought homes that now, 15 years later, have just broken even. These unfortunate residents took out loans at the absolute peak of the housing bubble and were subsequently forced to spend the next 15 years of their investable income servicing their mortgage.
3. BITCOIN IS FUNGIBLE
A bitcoin in Canada is no different than one in El Salvador. The non-fungibility of housing complicates the purchasing decision. Is the house close to a good school? Is it near the subway? Is it a good size? Is it in a growing city? These are just a few of the dozens of ever-shifting factors that impact the value of your home.
What happens if the subway is moved, the school closed or the zoning laws changed? Although real estate as a whole may be appreciating, your house may be losing value for reasons beyond your control.
History Lesson: In March 2020, the switch to work from home caused a sharp selloff in New York City real estate. While the owners of downtown apartments watched their life savings evaporate, less than 100 miles away, owners of Hamptons real estate experienced record appreciation and all-time price highs. In this case, a random set of homeowners were rewarded while others were crushed.
4. BITCOIN IS LOW MAINTENANCE
Bitcoin can be bought, stored and sold for virtually zero fees. For most American homes, it is estimated that maintenance, repair and depreciation costs amount to roughly 3% of the property value per year. Additionally, homeowners must pay significant transaction costs and property taxes. In contrast, bitcoin can be safely bought for fees as low as 20 basis points (bps) and can be stored for free with a paper wallet.
5. BITCOIN IS TRANSPARENT
All market data is available on-chain for anyone to see. As institutional investors such as Blackstone and technology companies like Zillow become increasingly important for buyers in the housing market, the market’s information asymmetry widens.
Now, in addition to very limited pricing data, everyday Americans are entering bidding wars with companies that have hundreds of billions of dollars under management and thousands of transactional data points from which to base their decisions. Unlike the obscure housing market, the Bitcoin network lets any participant access and analyze every historical transaction, dating all the way back to its inception.
6. BITCOIN IS LIQUID
Bitcoin can be bought and sold anywhere in the world, 24 hours a day, 365 days a year. This constant price discovery not only leads to fewer price anomalies but is also of incredible value in times of emergency.
History lesson: In 2013, when China established its first cryptocurrency ban, bitcoin owners were able to instantly sell or transfer their holdings. Conversely, in July 2021, when China seized the property of anti-communist protesters, homeowners were powerless as their life savings were confiscated.
7. BITCOIN IS FREEDOM
Bitcoin allows you to move whenever and wherever you want. Although often used tongue in cheek, the saying “the old ball and chain” is appropriate when talking about housing.
Locking yourself into a 30-year mortgage that eats half of your disposable income is a recipe for disaster. As the rate at which people switch careers and move geographies increases, having the ability to pack up and leave with minimal friction is increasingly valuable.
History Lesson: In the early part of the 20th century, over six million African-Americans relocated from the rural South Cities to the North to avoid strict segregation laws and seek out better opportunities. In order to relocate, these residents were forced to sell their homes and incur all of the associated transactional costs and inconveniences.
8. BITCOIN IS HOPE
Bitcoin gives you a call option on the future. Bitcoin is an open-source protocol that has a built in virtuous cycle: as the network grows, developers are incentivized to build on top of it which, in turn, further strengthens the network. If you believe that the future of payments, investments or even money itself could be built on top of the Bitcoin network, owning the asset gives you upside exposure.
THE AMERICAN DREAM IS THE BITCOIN DREAM
With the desire for home ownership so firmly entrenched in the American subconscious, swaying the public opinion is no easy task. By arguing from first principles and relying on lessons from history, I hope this article helps present bitcoin as a better, safer and more accessible alternative to home equity. While the American dream may be dying, the Bitcoin dream has just begun.
Why do I like this article so much? Hope. Since I’ve come of age, the jackboot of American history has been smashing down the poor and middle classes in service of the upper class who sail beyond the reach of all but the luckiest few who manage to vault the gap. With homeownership nearly beyond grasp at the exact moment that Bitcoin becomes available is either a lucky coincidence or divine providence, depending on your perspective. Either way, it’s still 1960s era homeownership for Bitcoin — not too late for anyone to join the party. And it’s going to be some party these next few months…
Rad Things on the Interwebs
Bitcoin Price Prediction
Today: $61.3k - $67k
Tomorrow: $58.8k - $70k
Today is a big day in the Bitcoin markets as the first publicly available ETF for US citizens becomes tradeable. Widely perceived as a bullish event that will drive prices higher, the most likely outcome is increased volatility for the first few days of its trading. However, the volume traded on it already makes it one of the most attractive ETF debuts of all time.
From a technical analysis standpoint, Bitcoin is poised to break its prior all-time high at $65k today. The critical question is if the price is claimed or if we see a solid rejection. I suspect we breakthrough, have some temporary volatility, but then proceed to rise rapidly. Once Bitcoin hits open waters of price discovery, magic tends to happen, and I don’t see how this will be different. The bearish take is that we know a price pullback first that could develop into something more significant. I don’t put much weight on the could as I see even the worst-case scenario is a few days of delay before the prior all-time high is breached.
Buckle up if you’re a Bitcoin holder. And remember, you’re not a genius; you’ve just managed to participate in the most fun part of the market cycle.
Bitcoin Q & A
Q: What is the new Bitcoin ETF?
A: An Exchange Traded Fund available to be traded on US public stock exchanges.
The first USA Bitcoin ETF went live today. It will provide an easier way for traditional investors to participate with Bitcoin. However, because the ETF is a derivative product based on the future price of Bitcoin and does not settle in actual Bitcoin, it has the potential to primarily be a tool for Wall Street speculators to capture the premium between the future and current spot price of Bitcoin. It also will provide a way for traditional Wall Street players to earn fees. In the below tweet, Raoul Pal does an excellent job explaining how the ease of access for investors will come at a cost.
Do you have questions or Ramble topics? Leave a comment or reply to the newsletter to reach me.
Me? I offer personal and corporate Bitcoin Implementation Strategies: custody, investing strategy, security, tax management, and inheritance. Contact me for a free initial consultation.
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