Bitcoin and cryptocurrency price predictions have been coming thick and fast in recent months—with Tesla TSLA bull Cathie Wood making a big call this week.
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The bitcoin price rally that catapulted the world’s largest cryptocurrency to a value of over $1 trillion has stalled in recent months, however, with the bitcoin price slipping under $50,000 and giving bitcoin a market capitalization of around $900 billion.
Now, celebrity investor and Shark Tank star Kevin O’Leary has said he expects “another trillion dollars worth of buying” into bitcoin and plans to raise his exposure to crypto to 7% by the end of 2021, up from 3% currently.
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Shark Tank investor Kevin O’Leary has said he expects a lot more money to flow into bitcoin and … [+]cryptocurrency even after the bitcoin price exploded this year.
John Nacion/STAR MAX/IPx
“This is not going away, this is the new asset class,” O’Leary told CNBC this week, prediting there will be “trillions of dollars of interest waiting to come on board” to cryptocurrencies with a “another trillion dollars worth of [bitcoin] buying” when regulators ultimately name bitcoin and crypto an institutional asset class.
However, O’Leary did warn that though he expects regulators to recognize cryptocurrencies as an institutional asset class, he’s not sure when it will happen.
“I don’t want to get involved in crypto if the regulator says it’s not okay,” O’Leary said. “I can’t afford to be offside, I cannot afford to be non-compliant.”
This week, U.S. Securities and Exchange Commission (SEC) chair Gary Gensler has called for more resources to better manage the nasent crypto industry and markets that he’s compared to the “Wild West” after suggestions the regulator is failing to protect investors.
But O’Leary is confident he will be putting more money into bitcoin and crypto. “I want to raise my exposure to crypto—currently at 3%—to 7% by the end of the year,” he added.
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O’Leary, who said as recently as 2019 that bitcoin is “garbage” and “worthless,” joins fellow Shark Tank investor Mark Cuban in changing his tune on bitcoin and crypto this past year.
In August, Cuban warned shutting off the bitcoin and crypto “growth engine” would be like “stopping e-commerce in 1995” after U.S. lawmakers proposed a crypto tax provision in its $1 trillion infrastructure bill.
The American financier Anthony Scaramucci believes that bitcoin is a monetary standard that could one day become a global reserve currency. He explained the volatile nature of the digital asset with the fact that it is still in its early adoption days.
BTC Is Effective as a Monetary Network
During an interview with Natalie Brunell, the Founder and Managing Partner of SkyBridge Capital – Anthony Scaramucci – shared his stance on bitcoin’s merits and its future development.
The top executive scratched the topic of BTC’s volatility, saying that this is something normal for a relatively new asset class and compared it to Amazon. SkyBridge Capital’s CEO reminded that the e-commerce giant is now one of the leading companies, hinting that the primary cryptocurrency is also heading towards that direction:
“Bitcoin is volatile because it is in its early adoption stage. Amazon had the same volatile curve 24 years ago. But if you have put $10,000 on Amazon at its IPO, you would have $21 million today.”
Interestingly, this is not the first time when Scaramucci has made such a comparison. In March, he compared the asset’s performance to Amazon’s stock and doubled down on his belief that bitcoin is better than gold.
Scaramucci further added that bitcoin is not only a currency. It is actually an effective financial network and a monetary standard. According to him, the asset’s most significant advantage is its decentralization:
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“Bitcoin is decentralized. And financial instruments work better when you put power in peoples’ hands rather than when the government is in charge.”
Anthony Scaramucci. Source: CNBC
Do Your Own Research
Despite praising the primary digital currency as a highly successful financial instrument, Scaramucci said his support is not only for it. He sees merit in other digital assets, including the second-largest – Ethereum.
He also urged people to learn more about the cryptocurrency space. Even if they are skeptical about the market, they should know the reason for it:
“Understand why you don’t want to own bitcoin, don’t just automatically say: ‘Oh, this is rat poison.’”
Speaking of initial investments in the field, Scaramucci advised the public to allocate not more than 5% of their total savings in it. Thus, in case of a price expansion, they would still enjoy solid profits. On the other hand, if bitcoin’s value starts declining (which he doubts), the loss would be insignificant.
Subsequently, he opined that bitcoin had reached a level where the US government has no power to ban it. Instead, the officials could only tax or regulate it, which they have been striving for in the past year or so.
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One of the familiar themes seen in previous crypto market cycles is the shifting market caps, popularity and ranking of the top 10 projects that see significant gains during bull phases, only to fade into obscurity during the bear markets. For many of these projects, they follow a recognizable boom-to-bust cycle and never return to their previous glory.
During the 2017–2018 bull market and initial coin offering (ICO) boom, which was driven by Ethereum network-based projects, all manner of small smart contract-oriented projects rallied thousands of percentage to unexpected highs.
During this time, projects like Bitcoin Cash (BCH), Litecoin (LTC), Monero (XMR) and ZCash (ZEC) also rotated in and out of the top 10 ranking, but to this day, investors still argue about which project actually presents a “useful” use case.
While all of these tokens are still unicorn-level projects with billion-dollar valuations, these large-cap megaliths have fallen far from their previous glory and now struggle to stay relevant in the current ecosystem.
Let’s take a look at a few of the current projects that threaten to unseat these dinosaur tokens from their perch.
Dollar-pegged stablecoins take the stage as the most “transactable” currency
Bitcoin’s (BTC) original use case stipulated that it would simplify the process of conducting transactions, but the network’s “slow” transaction time and the cost associated with sending funds makes it a better store of value than a medium of exchange when the other blockchain networks are considered as options.
Terra (LUNA), a protocol focused on creating a global payment structure through the use of fiat-pegged stablecoins, has emerged as a possible solution to the issues faced when trying to use the top proof-of-work (PoW) projects as payment currencies.
The main token used for transacting value on Terra aside from LUNA is TerraUSD (UST), a U.S. dollar-pegged algorithmic stablecoin that forms the basis of Terra’s decentralized finance (DeFi) ecosystem. The market cap of UST has steadily been increasing throughout 2021 as activity and the number of users in the ecosystem increased.
UST supply changes. Source: SmartStake
The recent addition of Ether (ETH) as a collateral choice for minting UST on Anchor protocol has given token holders a way of accessing the value in their Ether without having to sell and create a taxable event.
This opens the possibility for other tokens such as BTC to be utilized as collateral to mint UST that can be used in everyday purchases.
As it stands, the borrowing APR for UST on Anchor stands at 25.85%, while the distribution APR is at 40.67%, meaning users who borrow UST against their LUNA or Ether actually earn a yield while borrowing against their tokens.
From privacy coins to privacy protocols
Privacy is also a cornerstone characteristic of the cryptocurrency sector and privacy-focused projects like XMR and ZEC offer obfuscation technologies that support covert or what, for a time, were thought to be untraceable transactions.
Unfortunately, regulatory concerns have made it more challenging for users to access these tokens, as many exchanges have delisted them for fear of drawing the ire of regulators and the overall demand among crypto users has declined alongside their availability.
Their lack of smart contract capabilities has also limited what these protocols are capable of and, so far, users do not appear to be too excited about utilizing Wrapped Monero (WXMR) for use in DeFi, as the token loses its privacy capabilities in the process.
These limitations have led to the development of privacy-focused protocols such as the Secret Network, which allows users to create and use decentralized applications (DApps) in a privacy-preserving environment.
Privacy features are not common among smart contract capable platforms in the crypto ecosystem, which makes Secret something of an experimental case in the ever-evolving Web 3.0 landscape.
Decentralized applications on the Secret Network. Source: Secret
Secret is also part of the Cosmos ecosystem which means it can utilize the Inter-blockchain Communication (IBC) protocol to seamlessly interact with other protocols in the ecosystem.
The network’s native SCRT can be used as the value transfer medium on the platform as well as to interact with protocols that operate on the network, including Secret DeFi applications and the network’s NFT offering, Secret Heroes.
New enterprise solutions aren’t better but they come without controversy
One of the ways cryptocurrency projects sought to differentiate themselves from the “medium of exchange” label was to offer enterprise solutions as a way to help corporations navigate the transition to a blockchain-based infrastructure.
XRP and Stellar (XLM) are two of the veteran protocols that fit this bill, but continual controversy and slow development has resulted in these early movers now playing catch up with newer networks that also don’t have the legal controversy that has followed Ripple for years.
Hedera Hashgraph has emerged as a competitor in this field and data shows that the network is capable of processing more than 10,000 transactions per second (TPS), with an average transaction fee of $0.0001 and a time to finality of 3-5 seconds.
These statistics are comparable to both XRP and XLM, which have indicated that their ledgers reach consensus on all outstanding transactions every 3-5 seconds with an average transaction cost of 0.00001 XRP/XLM.
Hedera is also smart contract capable, meaning users can create both fungible and nonfungible tokens, and developers can build decentralized applications to accompany the network’s decentralized file storage services.
For each sector (stablecoins, privacy and enterprise solutions), the main difference between the old-school and next-generation projects has been the introduction of smart contract capabilities and plans to develop within the side-chain and DeFi sectors where the top protocols exist. This gives newer projects additional utility, allowing them to meet the demand of investors and developers, thus increasing their token values and market caps as a result.
With smart contracts, the ability to interact with the growing DeFi landscape comes built-in, whereas the legacy tokens like LTC, XMR and BCH require special wrapping services which insert middlemen and thus insert additional fees, rigor and risk into the process.
Newer protocols have also embraced the more eco-friendly proof-of-stake consensus model that aligns with the larger global shift toward environmental awareness and sustainability. A plus is that holders can also stake their tokens directly on the network for a yield.
It remains to be seen if the slow march of time will eventually lead to a capital migration from older large cap projects to the newer generation protocols or if these legacy blue-chips will find a way to evolve and survive into the future.
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Bitcoin, likewise other cryptos, have had a hard seven days. So investors across the crypto have understandably been wary of the market and any investments at this point. This has played out in the way the digital assets have done in the market. Various dips have put the market into what looks like a long-suffering form. But while most investors hold their breaths in wait for what happens next, whales are on the move with their bitcoin investments.
Whales Gearing Up For Next Bitcoin Rally
Whales have been known to move large amounts of cryptocurrencies across wallets. These happen both in times of bull and bear markets. One thing that metrics have shown recently is that whales are using the current price crashes as a buying opportunity. Movements from BTC wallets holding around 100 to 10,000 bitcoins, otherwise known as whales, show that these investors are completely unfazed by current market trends.
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Data shows that wallets with at least 100 to 10,000 BTC have been increasing their holdings in the last couple of days. These whales have now accumulated over $2.9 billion worth of bitcoin since the week began. Following the price crash that happened on September 7th, the market entered into a period of low momentum. Price remained around the $45K to $47K, with not much in the way of movements either way. Presenting a perfect opportunity for big-time investors to fill up their bags.
BTC price trading in the mid-$47K range | Source: BTCUSD on TradingView.com
Another interesting metric is the spending rate of the whale wallets. On-chain analysis shows that these wallets are not doing much in the way of spending their bitcoins. Rather, the assets held in the wallets have remained in their position. Usually only moving in what looks to be the investors or entities moving their coins to other personal wallets. In short, the whales are accumulating and they do not plan to sell anytime soon.
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Market Sentiment Turns To Neutral
The market crash last week saw market sentiment do a complete 180. The Fear & Greed Index the week before had shown increasing positive sentiment amongst investors, when the index had moved from greed into extreme greed. This put the market under immense buy pressure the week leading up to one of the biggest news of bitcoin adoption; the sovereign nation of El Salvador making BTC a legal tender.
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The market, however, did not respond the way it was expected to on the day the law became official. Instead of triggering a continuation of the bull run the market had been in, BTC had lost over 17% of its value in a flash crash. The Fear & Greed Index promptly moved into the fear region after the crash, where it stayed for the rest of the week.
Fear & Greed Index moves into neutral | Source: Fear & Greed Index on Alternative.me
Now, though, the index has moved into neutral. Gaining 7 points from last week’s Fear 46 to put it in a neutral spot. Although the index shows a drop of five points between yesterday and today. Showing that the index is slowing sliding back into neutral, given that market sentiment is still greatly skewed towards the negative.
Featured image from Pinterest, charts from TradingView.com and alternative.me
Throughout history, there has been a cyclical phenomenon characterized by Neill Howe and William Strauss as the four turnings.1 The basic premise of the theory is that civil unrest and major war is cyclical and occurs about every four generations. This is due to the fact that, by the time we reach the fourth generation post-war, society is simultaneously in a state of desiring change yet far enough removed from the atrocities of war that they end up repeating the mistakes of those four generations before them.
As it stands, we are in the fourth turning, the final saeculum before the cycle resets. What’s unique about the fourth turning is that it has historically been an era of destruction, often involving war and revolutions. Based on this theory, it is no wonder we are seeing social unrest. It doesn’t take much browsing of social media or news to see that people want change. People are starting to speak out about the issues within our society: wealth inequality, rising house prices, increasing cost of living, systemic malinvestment and the great concentration of monopolies.
However, as with anything, it can be difficult to decipher the root cause of the issues we face. The millennial generation feels disconnected as it will be the first generation in history to be poorer than its parents.2 The middle class is fed up as it slowly erodes away while asset prices become more unobtainable.3 This unrest is resulting in people voicing their opinions and looking for a way out of this mess. As it stands, capitalism and its lack of governance appears to take the brunt of the blame. As a result, in recent years, people have been more drawn to regimes such as communism or socialism to promote liberation and equality within society (40% of Americans have a favorable view of socialism, up from 36% in 20194). But, this begs the question, is a shift in regime really the best course of action? And is capitalism really to blame?
Before we can answer these questions, let’s first define the various economic systems:5
– Capitalism: “An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.”
– Democracy: “A system of government by the whole population or all the eligible members of a state, typically through elected representatives.”
– Socialism: “A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.”
– Communism: “A political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.”
From the outset, one could easily conclude that capitalism is incredibly flawed in relation to communism, socialism and democracy as it appears to be focused on private enterprise and profit. On the contrary, communism, socialism and democracy seemingly value the people, liberation and equality. However, if we remove democracy from the equation and take what we have learned from history, we realize that the communist and socialist facade of liberation, equality and a focus on the people could not be farther from the truth. Here are a few historical examples:6
– Mao Zedong, China, 1943–1976 (Socialism): 70,000,000 died by mass murder and government policies (largest death count in history).
– Joseph Stalin, Soviet Union, 1922–1952 (Communism): 28,000,000 died by war genocide and famine (second largest death count in history).
– Adolf Hitler, Germany, 1933–1945 (Socialism): 12,000,000 died by war and genocide (third largest death count in history).
– Kim Jong-il, North Korea, 1993–2011 (Socialism): 2,500,000–3,500,000 (10–19% of the population) died during 1990s famine in part caused by government policies.7
– Pol Pot, Cambodia, 1975–1979 (Communism): 1,700,000–1,900,000 (21–24% of the population) died by government policies and famine.8
– Provisional Military Administrative Council(Communism), Ethiopia, 1974–1987: 1,200,000 died from famine in part caused by government policies.9
It quickly becomes apparent that many of the major genocides, famines and deaths caused by war were all under communist and socialist regimes. Are these regimes really creating a happier and high quality of life economy?
Let’s look at the chart below (sorted by the happiness index, with the happiest nations at the top). There is clearly a correlation between democracies, happiness, freedom, quality of life and currency purchasing power.
2020 Countries Sorted By Happiness Rating Chart10 11 12 13
What is it about communism and socialism that leads to such atrocities, and why do they tend to fail?
Supply and demand: One of the major pitfalls of communism and socialism is that creating a centrally planned economy with the goal of equality, influences the labor force and destroys the natural forces of competition. Inadvertently, this distorts supply and demand. What is forgotten is that through supply and demand, we gain valuable economic insight that allows our economy to error correct, grow and innovate.
Inadequate knowledge and a concentration of power: Within communist and socialist regimes, society tends to rely on the knowledge and experience of an individual or select group of individuals. The central planners believe they understand what is needed to move a country forward. The fallacy in this belief is that humans have many natural biases, such as the need to maintain and secure power, wealth and safety for themselves, their offspring and those closest to them. The result of these biases is that both communism and socialism are prone to authoritarian and totalitarian rule. Once the central planners start to accrue power, they don’t tend to let it go easily. Ultimately, this has led to some of the worst inequality, human rights abuses and social unrest in history. Instead of centralizing power, we should be taking advantage of the population’s collective knowledge.
Suppression of innovation: Communism is built on the belief that we should have a classless society. Although this may appear to be a step forward, diversity among our population prohibits this from playing out as intended. Our society is composed of family-oriented, entrepreneurial, sport-focused and business-minded individuals and we must allow them to explore interests that resonate with them. People are motivated by the belief that they will benefit from the fruits of their labor and this is what creates the perfect breeding ground for creativity and innovation to flourish. When we centrally plan, remove private property rights, and dictate individuals’ careers based on their skills and knowledge, we disincentivize individuals to think outside the box in an entrepreneurial and innovative manner.
Furthermore, innovation doesn’t tend to come from large centralized powers but rather it emerges on the fringe. It is through the free flow of information that creativity and innovation thrive. When we restrict competition and silence people, we end up severely inhibiting innovation and creativity, as this prevents factual, non-mainstream data from percolating to those who can use this information meaningfully. Humanity should promote creativity and innovation as this is how we will solve poverty, climate change, pollution and more.
For these reasons, in the long run, communist and socialist regimes have tended to break down and have led to some of humanity’s worst atrocities. However, no economic system is entirely flawed; otherwise, we wouldn’t see communism and socialism initially implemented. On paper, communism and socialism have many benefits, as both aim to promote security and equality. Socialism, in particular, has given the world universal healthcare, education and welfare. While communism, when effectively implemented, assures that you will have employment when you finish school and eliminates food insecurity. Every economic system has its pros and cons. Thus, we must implement what works, while admitting to ourselves what doesn’t and adapting accordingly.
Where Do Democracy And Capitalism Fall In All Of This?
It can be easy to pin capitalism as the cause for the issues we face due to the fact that all of these issues revolve around the monetary system, and is it not money that drives wealth inequality and capitalist monopolies? However, if we objectively dig a little deeper, capitalism has unfairly been the scapegoat for everything the government doesn’t want to be held accountable for. The reality is that the victims of so-called capitalism are, in fact, the people who have lost capitalism due to increasing governance, regulation and control. In other words, the more control government is given, the more these issues are exacerbated.
The Misdirection Narrative
The notion that our societal and economic issues stem from the government may initially be difficult to believe. The mainstream narrative consistently frames capitalism for the corruption, greed among private corporations, and detrimental monopolies within our economy. However, this is all just a narrative pushed as a form of misdirection. This narrative gives the general population something to blame for the issues we are facing.
Why is this anti-capitalist narrative pushed? The government doesn’t like to relinquish control. You don’t have to spend much time looking through history books to conclude that governments have a lust for control and rarely, if ever, give it up. Therefore, it is not in the government’s best interest to attribute the issues within our economy to its own decision-making. It would only further destroy its population’s faith in government. To better understand this, let’s delve into the various issues we are facing.
Rising House Prices And Cost Of Living
Many tend to attribute increased cost of living to the big corporations raising prices and the escalating house prices to the benefactors of capitalism buying up property. However, the reality is that these are issues with our monetary system. The problem is that the government controls the monetary system via the Federal Reserve and the U.S. Treasury. This gives them some significant benefits, such as regulating who can and can’t use the currency, hidden taxation via inflation and financial repression, and the ability to self-fund without having to offer value (such as it would in a free market capitalist economy). We see this abuse of the monetary system in plain sight. In the last 18 months, 37%14 of all dollars in existence have been created, and the Federal Reserve has purchased 76.4%15 of federal debt. They no longer need to rely on income generated through taxation but rather to just purchase their own government debt.
Ultimately, this allows the government to act in its own self-interest, directing capital to where it feels necessary, which seems to be toward growth at the expense of the economy. It does this via inflation, which is the suppression of interest rates and the injection of capital into our economy to stimulate growth, spending and consumption. The by-product of this tactic is an increase in the money supply, which leads to a rise in consumer prices, cost of living, house and asset prices, and inequality.
Monopolies
Monopolies, in a general sense, are not detrimental to society. They become harmful when they stifle growth and innovation by suppressing competitors in an attempt to maintain their monopolistic position. In a free market, a monopoly is in its position because it adds value to society. Individuals have chosen to purchase their products and services, which allows them to grow and expand. When they stop offering value and/or a superior product or service comes to market, these monopolies are naturally replaced with the newest technology and services.
Unfortunately, this is not the case in our current system. Due to the lobbying environment among most democratic nations, monopolies have the ability to donate large sums of money to politicians and those in power to sway regulation to their benefit. This regulation aids these monopolies by increasing entry barriers and thus reducing competition. Harmful monopolies are not an issue of capitalism, but rather an issue of giving the government too much control and allowing private corporations to influence regulation.
Malinvestment
As people become overly comfortable that the Federal Reserve will intervene during times of stress, we see a rise in excess borrowing and speculative leverage in an attempt to maximize returns. This excess borrowing has two main negative side effects:
1. Excess borrowing creates a surplus of capital in the system. In an attempt to find a home, this capital finds its way into higher risk malinvestments, which leads to amplified fragility in our economy. What would generally be considered a benign market event instead triggers much greater volatility and systemic problems.
2. A zombie company is one that is unable to support itself financially.16 This signifies that the product or service the business offers either does not have enough demand or that the business has been fiscally irresponsible and unable to service its debt. This business should, therefore, restructure or dissolve. With the Federal Reserve backstopping the economy and making it cheaper and easier to access capital, you increase the number of zombie companies in the economy. We should allow the natural life cycle to play out rather than propping up unsustainable companies. When a new business has to compete with an ever-increasing number of zombie companies, it becomes ever more challenging for that business to succeed and prosper. Instead of focusing on innovation, the business must use a portion of its resources to compete. As of July 2020, 19% of listed companies in the U.S. are zombie companies, and this number is rising.17
It should now be evident that the issues we face within our economy today are not to do with capitalism but rather the opposite. They are a by-product of government intervention and control.
What Needs To Change?
No economic system is perfect. Therefore, it is important to avoid getting bogged down analyzing which system is best. Instead, we should focus on what’s within our control to create an economy that prioritizes its people, promotes innovation and encourages creativity. To do so, we must first look at what must change in our current part-democratic, part-capitalistic system:
Monetary system: As should now be apparent, to reduce the centralization of power, the negative by-products of inflation and systemic malinvestment, we must separate the monetary system and the government. Doing so removes the government’s controlling capabilities, ensuring they act as a service provider with the population’s interests at heart. If the government is not acting in the best interest of the population, it will not receive capital in the form of taxes and will be unable to fund itself. Additionally, removing the monetary system from the clutches of government would allow a monetary system chosen by the people to emerge, one that is not corrupted by those in power and allows the true deflationary state of the world to surface.18 As Aaron Segal concisely states, “deflation is a measure of success in creating economic value as innovation creates more for less.”19
Transparency: Nations fail when there is a lack of trust in government, resulting in coups and revolutions. The fastest way to break trust within a nation is to remove transparency. One of the major flaws we face today is a lack of transparency. If we promote transparency within our economic system, we can rebuild trust amongst the population and the government. This will help drive the economy forward by reducing our wasted productive energy spent fighting amongst ourselves.
A Potential Solution
It can be difficult to separate democracy and capitalism, as they have generally been intertwined throughout history. One could go as far as to say that we have never seen a true capitalism-based economy. This makes it challenging to pinpoint the benefits democracy has brought to the table and likewise for capitalism. However, if we want to promote innovation, productivity, sustainable growth and freedom moving forward, it is in our best interest to adapt as an economy and take on benefits from the various regimes:
Socialist welfare/healthcare/education: We live in a world of inequality. Individuals enter this world disadvantaged, and we have unforeseeable events that take a toll on our lives. Whether this is on a monetary, health or educational level, it is a fact of life. Thus, we must have access to resources that allow us to feel a part of society and obtain the necessary assistance to grow and thrive. With this in mind, the best option would be to adopt the socialist welfare, healthcare and education system, ensuring everyone has access to these core amenities.
Decentralized democratic decision-making: Democracy is essential to ensuring that the general population has a say in political decision-making. However, we must ensure that this doesn’t result in a concentration of power, lack of transparency or the potential for bad actors. To promote transparency and take advantage of the collective knowledge, we should focus on the decentralization and dispersion of centralized government power down to the lower state, municipal and individual levels. This would ensure that more people would have a say in how our country is run and that regulation is upheld.
Capitalist free market: The capitalistic free market is an incredible source of creativity and innovation. It rewards individuals for putting themselves on the line and bringing their ideas to life. Additionally, free market capitalism promotes natural supply and demand, allowing us to extract crucial economic information, error correct more effectively and thrive as a nation.
Bitcoin
How can Bitcoin play a role in all this? Bitcoin offers a way to bridge democracy and free market capitalism by providing a true decentralized currency that is:
– Permissionless: No one is excluded from using bitcoin. There is no gatekeeper deciding who can and can’t use it.
– Open-Source: Bitcoin’s source code is open-source, allowing anyone the ability to read, propose a modification, copy or share.
– Pseudonymous: Since no ID is required to own and use bitcoin, this ensures privacy for individuals.
– Fungible: All coins are treated as equal and should be equally spendable.
– Immutable: Confirmed blocks/transactions are set in stone and, therefore, cannot be changed at a future date.
– Fixed Supply: With a fixed supply of 21 million coins, bitcoin is proving to be one of the best stores of value due to its inability to be devalued through supply expansion. This is key to providing accurate supply and demand data.
Bitcoin has the potential to remove the monetary system from the clutches of the government, allowing us to operate a true capitalistic free market. This would enable us to obtain accurate supply and demand information, allowing our economy to grow, innovate efficiently and error correct. Bitcoin would also give the general population security, knowing that their hard-earned savings will not fall victim to inflation.
Additionally, Bitcoin gives us a great example of the power of decentralization. If we can take what we know from Bitcoin’s decentralized blockchain, we can greatly increase transparency within our economy. Two areas which may benefit the most are:
Government: By implementing a decentralized blockchain within the government, we can increase transparency and remove the potential for self-interested bad actors. Furthermore, promoting decentralized transparency would allow everybody access to accurate, immutable consensus data, decision-making and economic information. That way, individuals and the government could better use this information to innovate and progress.
Decentralized Autonomous Organizations (DAOs): Just like other economic systems, free market capitalism still has the potential for bad actors. By using blockchain technology, we can build the next generation of organizations using the DAO framework based on open-source code. Furthermore, without a typical management structure or board of directors, we are able to operate decentralized organizations. This gives investors a real say in the direction of the organization and gives the public transparency regarding the organization’s goals and motives.
Conclusion
It should now be clear that many of the reasons individuals are pushing for communism and socialism are not due to flaws in capitalism but rather increasing governance, regulation and control. Looking back throughout history, if we give way to these propositions, the consequences may be detrimental — the fallacy to consolidate and centralize power has led to some of mankind’s darkest days.
Instead, we should step back and look at capitalism and the other economic systems from a more holistic viewpoint. Let’s take the welfare/healthcare/educational support system from socialism, implement democratic decision-making, and give more power back to the people to let free market capitalism run its course. By doing so, we may be able to resolve many of the issues we currently face.
Lastly, instead of pointing fingers at capitalism, we should be educating people about the benefits that it has brought to our economy in the form of increased innovation, private property, privacy and human rights.20 Furthermore, we should be trying to better integrate new technology such as Bitcoin into our ever-evolving economy.
Humanity is in the middle of a turning point where it is shedding much of the old inefficient technology and practices and making room for the new era. With this in mind, we should be focusing on what matters. Let’s come together and build the economy we want to see tomorrow instead of directing our energy toward each other in the form of aggression and criticism. As Thomas Jefferson once said, “I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”
This is a guest post by Sebastian Bunney. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Endnotes
1 Howe, Neill, and William Strauss. “The Fourth Turning.” Crown Publishing Group, 1996.
2 Lowrey, Annie. “Millennials Don’t Stand a Chance.” The Atlantic, 2020,
3 PEW Research Center. “Trends in Income and Wealth Inequality.” PEW Research, 2020,
https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/. A
4 YouGov. “Fifth Annual Report On U.S. Attitudes Toward Socialism, Communism, and Collectivism.” Victims of Communism, 2020, https://victimsofcommunism.org/annual-poll/2020-annual-poll/.
8 Kiernan, Ben. “The Demography of Genocide in Southeast Asia: The Death Tolls in Cambodia, 1975-79, and East Timor, 1975-80.” Taylor & Francis Online, 2010,
The $1 trillion infrastructure bill, whichpassedin the Senate in early August and is expected to be approved by the House, is the gift that keeps on giving.
At first, it was about roads, bridges, and clean water. Then a pay-for provision promised to give American crypto users new tax reporting requirements. And now there’s a new twist.
Areportpublished today by the Proof of Stake Alliance (POSA), an advocacy group that counts Coinbase Custody and Solana as members, details an “overlooked” amendment to the tax code within the 2,700-page bill that will make it a felony to incorrectly report receiving cryptocurrencies, NFTs, or other digital assets.
The infrastructure bill passed by the Senate and now pending in the House contains an overlooked “digital assets” provision that would be a disaster if it becomes law.
— Abraham Sutherland (@abesutherland) September 17, 2021
Writing in his role as an advisor to the POSA, law professor Abraham Sutherland details how the infrastructure bill amends Section 6050I of the tax code. The amended section 6045 that caused so much consternation when it made it through the Senate changed the definition of “broker” to cover those handling cryptocurrencies.
Industry lobbyists and cryptocurrency advocates such as the think tank Coin Center argued that the bill as written would force Bitcoin miners and validators on other networks to file 1099 forms for the people whose transactions they were processing—even though they lacked the personal information needed to do so.
Section 6050I, on the other hand, deals with the tax reporting requirements of those who ultimatelyreceivethe cryptocurrencies.While Americans must already report their crypto gains to the IRS just as they would with other investments, Sutherland says the amended provision goes much further: They must tell the government who sent it, including reporting social security numbers, when the value of the digital assets is more than $10,000. Not doing so within 15 days constitutes a felony.
This raises at least two issues. First, as Sutherland notes, it’s just as unwieldy as the section 6045 amendment: “This provision demands the impossible because the digital assets might not be ‘received’ from a person whose personally identifiable information can be verified and reported—including cases where the digital assets are not ‘received’ from a person or entity with a tax ID number, period.”
Second, as Sutherland alludes to and as Coin Center Research Director Peter Van Valkenburgh hammered home in ablog post, it might just be unconstitutional. The tax code currently mandates that people report such information to the IRS when they receive $10,000 in cash. That passes Constitutional muster because the bank acts as a third party; otherwise, authorities would need a warrant under the Fourth Amendment. But in cryptocurrency, a peer-to-peer transactiondoesn’t have a third party.
Writes Van Valkenburgh: “One person to a two person transaction is obligated to collect a load of sensitive information from her counterparty and hand that to government officials without any warrant or reasonable suspicion of wrongdoing.”
Though he writes that Coin Center usually doesn’t “object to equal treatment of cash and cryptocurrencies,” in this case the “provision is a draconian surveillance rule that should have been ruled unconstitutional long ago. Extending it to cryptocurrency transactions would further erode the privacy of law-abiding Americans.”
Sutherland also calls into question the process by which the amended IRS code will become law—via a bill on completely unrelated topics. “A statute creating felony crimes for users of digital assets should be debated openly, not quietly inserted into a spending bill,” he wrote.
Coinbase CEO Brian Armstrong is detailing a new list of predictions for Bitcoin and the cryptocurrency industry at large.
Armstrong says he believes a billionaire Bitcoin “flippening” is coming that will boost science, tech, and charitable causes in the years ahead.
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Writing in the Coinbase Blog, Armstrong says,
“Olaf Carlson-Wee and Balaji Srinivasan estimate that at a price of $200,000 per Bitcoin, more than half the world’s billionaires will be from cryptocurrency. Whether you think this is a good thing or a bad thing, it means there will be more pro-technology people with access to large amounts of capital in the 2020s.
Presumably, this will increase the amount of investment made in science and technology, and I think we’ll see more crypto folks turn to philanthropy.”
The crypto exchange head also makes several other predictions about where he sees the digital asset space going in the coming years. Key insights include:
“Governments and institutions will move into the cryptocurrency space in a big way” by creating central bank digital currencies (CBDCs).
Privacy concerns will mirror how the internet moved from HTTP to secure HTTPS gateway protocols.
Marketplaces will mature while decentralized finance (DeFi) grows independently.
Armstrong notes an important pivot away from speculation toward useful applications in people’s everyday lives.
“By shifting cryptocurrency from being primarily about trading and speculation to being about real-world utility, the 2020s will see a huge increase in the number of people holding and using cryptocurrency, and start to really move the needle on global economic freedom.”
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Average year-to-date returns for the top-four North American bitcoin miners are up to 140%, versus bitcoin price returns of 49%.
The below is from a recent edition of the Deep Dive, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox,subscribe now.
For those looking for indirect bitcoin exposure or value investment bitcoin opportunities in the public markets, holding North American bitcoin miner equity is where to get it.
Of the top-four publicly-traded North American miners (Marathon Digital Holdings, HUT 8 Mining, Riot Blockchain, Inc and HIVE Blockchain Technologies), average YTD returns are up to 140%, versus bitcoin returns of 49%. HODLing bitcoin still remains the best long-term option for most, but we’re clearly seeing a trend of effective bitcoin miners outperforming bitcoin returns over the last two years.As the Bitcoin network bootstraps around the world, miner revenue (in USD terms) continues to rise.
Source: TradingView
Zooming out to include the start of 2020, average returns across these miners are 5.2 times above bitcoin’s returns of 464%. Collectively they hold a $9.18 billion market cap.
Source: TradingView
When we take a deeper look at quarterly and monthly miner updates, we see a broader narrative forming with the most successful miners trying to do two things — rapidly scale up production, and increase their HODLing supply.
Looking at Marathon, its monthly bitcoin production increased 6% in August bringing its total bitcoin holdings to 6,695 BTC. Of its bitcoin holdings, 4,812 BTC were purchased in January 2021 for an average price of $31,168. Like many bitcoin miners, Marathon continues to expand its bitcoin treasury, keeping the business well capitalized and ready to deploy the assets if ever needed.
Source:Marathon Sep 2021 IR Presentation
As of August 31, Riot held approximately 3,128 BTC, all of which were produced by its self-mining operations. By Q4 2022, Riot anticipates achieving a total hash rate capacity of 7.7 EH/s with a fully-deployed mining fleet of 81,146 Antminers. Marathon also expects to have a mining fleet of 133,000 machines deployed by the middle of next year, and they look to be on track with 21,584 miners secured as of September 1.
Binance, which has been plagued of late by high-profile regulatory admonitions, is now under investigation over insider trading claims, according to a report today from Bloomberg.
The report, which cites anonymous sources, states that that Commodity Futures Trading Commission is involved. The CFTC has regulatory purview over derivatives trading in the U.S. Such crypto trading products are offered on Binance’s global exchange but not on its U.S.-based affiliate.
Binance is already being probed by the CFTC, which is investigating whether the world’s top exchange illegally allowed U.S. residents to use the service. The Department of Justice and Internal Revenue Service have also been looking into the firm’s activities, according to a May report.
Pascal Hügli is a self-employed writer, moderator and debater. He is also a lecturer at the University of Applied Sciences in Business Administration in Zurich where he teaches students about Bitcoin and crypto assets. With hisnewsletter Insight DeFi, he wants to inform the masses competently and concisely about the events and opportunities of the new decentralized world of Bitcoin and Co. He is also the author of “Ignore at Your Own Risk: The New Decentralized World of Bitcoin and Blockchain.”
If you — like me — identify as a Bitcoiner, it is easy to get carried away by the very features and prospects that bitcoin stands for. It represents a new form of base money unlike anything ever seen before. Virtual in nature, this new money is operated by a distributed set of validators that establish a global consensus on who owns what, how much at what point in time on the Bitcoin blockchain itself. As such, Bitcoin’s distributed ledger has given rise to a non-sovereign property system.
This property system’s value unit is endowed with a programmed issuance schedule as well as in-built scarcity. This scarcity cannot easily be tampered with as bitcoin is no one else’s debt or liability, can be self-custodied using software in combination with hardware solution, and acts as a foundation for a new financial order. This financial order is built in layers empowering a new kind of species: the Sovereign Individual.
An Excitement Not Everybody Shares
I hope you can feel it: My excitement is real. I truly think that Bitcoin is one of the most disrupting, most innovative and most life-changing developments of our current time. This is why I set out to lecture about Bitcoin at Zurich’s University of Applied Sciences in Business Administration (HWZ). It’s one of the most prestigious business schools in Switzerland, bringing together people from all different fields like banking, insurance, communications, management or marketing.
The courses I teach are not only about Bitcoin. Nevertheless, I am trying hard to focus on Bitcoin and tell my students why it’s worthwhile to understand Bitcoin in-depth. Although, as a teacher I am trying to present the topic as objectively as possible, I make no secret of the fact that I am fascinated by Bitcoin, its clear-cut monetary features and the many prospects that follow from it.
What I have been encountering for the past few years, however, is somewhat disillusioning. Teaching people about the properties of sound money, absolute digital scarcity, the merits of true decentralization or the seemingly endless balance sheet expansion of central banks is way over many people’s heads. Although Bitcoin’s monetary properties are indeed unrivaled, absolute digital scarcity is revolutionary, true decentralization is rare and central bank balance sheet expansion is happening fast and in real-time, dwelling on these highly relevant points has shown to be rather inefficacious.
In short, presenting and promoting Bitcoin as a monetary technology and freedom enhancing tool against time theft has not made it click with most people I met. If anything, a sovereign individual’s tool kit consisting of rationally plausible Bitcoin arguments did usually resonate with two out of ten people. And with these two people, I guess, their affirmation of my points was more a manifestation of having preached to the converted rather than having genuinely swayed them with the arguments.
Making People Relate To Bitcoin
Having had the chance to thoroughly present to hundreds of Nocoiners, it dawned on me: I’ve been approaching my endeavor to teach about Bitcoin’s true disruptive and revolutionary potential the wrong way all along. Forcing philosophical points about Bitcoin — that totally make sense when having pondered on them for years — down somebody else’s throat does not really help. It’s much more helpful to appeal to people’s concrete pain points and how to relate these to bitcoin and how this new base money might be designed to provide remedy.
As a consequence, I started identifying different groups that need to be intellectually appealed to differently. When talking to a typical Western person that is way over-banked and does not feel like needing a new money, I am presenting Bitcoin as a global monetary network that is available uninterruptedly. Asking them about how they manage to make bank transfers on weekends usually gets my point across quite nicely.
What resonates with the banking or fintech crowd is showcasing to them the power of lightning-fast micropayments that happen cross-border and are conducted in seconds. Whether it is through examples like PolloFeed or livestreaming sats in the pursuit of building Podcasting 2.0 using Breez, the power of conveniently sending amounts of money the normal banking system cannot even handle across the entire globe is usually jaw-dropping.
Creating Emotional Reaction Is What Sticks
When it comes to millennials and younger generations, my preferred way of pitching Bitcoin is through the lens of a new savings technology that is most likely going to make up for government pension entitlements (like 401ks or IRAs) that might still exist today but not tomorrow. In a way, Bitcoin can be seen as a global piggy bank that stores monetary energy better than everything else. With more and more people continuing to pay into it through regular DCA payments, using services like Swan, Relai, Bitaroo, liquidity is growing and making every holder better off. As such, Bitcoin can truly be seen as the millennial’s revenge against the slow but steady destruction of the traditional way of saving.
Fair interest rates are also what professional investors are demanding. They have been faced with a low to zero interest rate environment for years now. Presented with the case of Bitcoin being an insurance policy against fiat currency debasement resonates more and more with professional money managers. Exemplary for them is Bridgewater’s Ray Dalio, who publicly stated that he prefers bitcoin to low-yielding bonds.
In Switzerland, holding bitcoin is particularly ringing a bell with people, who are forced to pay negative interest rates on their wealth in nominal terms. Most Swiss banks charge -0.75% per annum from 1 million Swiss francs or higher (roughly $1.08 million). The Swiss government-owned bank PostFinance even charges a negative interest rate of -0.75% per annum from 100,000 Swiss francs (roughly $108,900). Once people are forced to pay up for storing arbitrary fiat numbers with a bank, becoming your own bank by taking self-custody of your bitcoin becomes rather attractive.
Another emotionally charged reality making the case for bitcoin tangible is rising asset prices, particularly rising home prices. Especially for younger folks, housing has become quite unaffordable in places like Switzerland. Even the Swiss central bank recently warned of an overvalued housing market. Presenting Bitcoin as digital real estate, whose possession is most likely a way to outperform the relentlessly rising house prices in order to one day still buy a physical property, is an argument that catches on rather quickly.
The List Goes On And On
As I have discovered throughout my journey of educating normies about Bitcoin, there are tons of concrete talking points for Bitcoin that hit it out of the ballpark. Most importantly, people have to be addressed where they are most likely to relate because they understand the issues at stake. One interesting experience I have made regards the Bitcoin energy topic. Usually, people fret about Bitcoin’s energy usage. If, however, you talk to people who understand a thing or two about energy markets, they are likely to understand Bitcoin’s potential as an energy buyer of last resort as well as an amortizing force for innovative development of future energy production facilities.
Other areas are the gaming sector or the growing community advocating for a censorship-resistant internet and social media. As is becoming more obvious by the day, Bitcoin will play a huge part in bringing significant change to these fields. If people’s attention is drawn to these facts, they are much more prone to understand the value of Bitcoin and why it’s one of the most interesting forces for change and good in today’s world.
This is a guest post by Pascal Hügli. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. orBitcoin Magazine.
