Are Institutional Investments Fueling Correlation Between Crypto and Stock Markets?

Interest rate hikes and runaway inflation has continued to engulf the investment scene, given that the global economy finds itself on rocky grounds based on factors like the invasion of Ukraine by Russia.


To tame rising inflation, various governments have resorted to increasing interest rates, which have had detrimental effects on the financial markets. For example, the Federal Reserve (Fed) raised the interest rate by 75 basis points (bps) earlier this month, a scenario that was last seen in 1994. 


Traditionally, institutional investors were heavily inclined toward stocks in the financial scene, but they have spread their wings to include crypto in their portfolios. 


With macroeconomic factors like interest rate hikes affecting both stocks and crypto, this begs the question: are institutional investments propelling the correlation between the two markets?


What triggered institutional investors to enter the crypto scene?


With the onset of the coronavirus (Covid-19) pandemic in early 2020, global economic turmoil emerged based on massive layoffs as social distancing and travel restrictions took effect.


As a result, governments like that of the United States adopted financial initiatives like quantitative easing or printing more money to caution their citizens against the economic effects triggered by the pandemic. For instance, the American administration printed more than $6 trillion for this purpose. 


As many investors faced an uncertain future, cryptocurrencies emerged as a leading alternative to fill the void as hedges against inflation in the long term, and institutional investors were not left behind. Therefore, before the onset of the pandemic, institutional investors’ presence in the crypto space was not felt as retail investors dominated the market, but this has now changed.


For instance, MicroStrategy, a Nasdaq-listed business intelligence and software firm has been setting the ball rolling in institutional investments with its Bitcoin holdings surpassing 129,000 BTC.


Institutional investors also played an instrumental role in enabling Bitcoin to breach the then all-time high (ATH) of $20K in December 2020 after trying to break this zone for at least three years. 


While payments giants like PayPal, Visa, and MasterCard have already set foot in the crypto sector, institutional investments can no longer be said to be operating in oblivion in this space.

For instance, PayPal recently upgraded its crypto wallet capabilities, enabling users to send supported digital assets to other wallets. 


How deep-rooted is the correlation between crypto and stocks?


A notable trend has been happening in the market whenever investors forfeit stocks based on factors like surging inflation because Bitcoin’s price has also fallen.


Last year, Santiment acknowledged that as the S&P 500 index experienced mild drops, Bitcoin followed suit. The market insight provider explained:

“Over the past month, Bitcoin and the S&P 500 have been correlating quite strongly, and that includes the mild decline over the past couple of days. Meanwhile, the inverse correlation between BTC and gold’s price has calmed down significantly.”


Source: Santiment


The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the United States.


In April this year, the 30-day correlation between Bitcoin and tech stocks reached a 21-month high. Arcane Research acknowledged:

“Bitcoin’s 30-day correlation to tech stocks has climbed to highs not seen since July 2020. At the same time, Bitcoin’s correlation to gold has plunged to all-time lows.”


Source: TradingView/ArcaneResearch


The correlation between Bitcoin and S&P 500 has had various experts weigh-in, with some stipulating that the tightened monetary policy was the root cause. For instance, Joe Dipasquale, the CEO of crypto hedge fund BitBull Capital, noted:

“The monetary policy tightening is causing investors to reduce their exposure to risk assets, and BTC’s current correlation to the S&P 500 has led it also to drop today.”

As crypto prices plummeted last month, Edward Moya, a senior market analyst at forex exchange company Oanda, opined that a decline in tech stocks triggered the sell-off. During the same time, Mati Greenspan, the CEO of Quantum Economics, stated that the correlation between BTC and S&P 500 had reached a new frustrating all-time high.



Source: Mati Greenspan


After the Fed increased the interest rate by 0.5bps on May 4, a few days later, the crypto market cap dropped by 9.83%, whereas the major stock indexes in the U.S.– the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite – fell to their lowest level since 2020.


Therefore, tightened macroeconomic factors and investor sentiments have been affecting both cryptocurrencies and stocks, and the most likely answer is that institutional investors are behind the scenes.

Image source: Shutterstock


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Lightning Speed 004: What’s The Lightning Development Initiative?

There’s no denying that 2021 was the Lightning Network’s year. What does the future hold, though? If the objective is to onboard the next billion people, the network needs work and fine-tuning. To grab the bull by the horns, The Human Rights Foundation and Strike set up three 1 BTC bounties

The bounties will go to the first person or team to develop an anonymous Lightning tip jar, a tokenless way to peg BTC to dollars, or a privacy-focused wallet that supports some kind of Chaumian e-cash feature. In a Twitter Spaces conversation about the program, they named it The Lightning Development Initiative. 

A catchy name that we’ll use from now on to refer to all of this. This fourth edition of Lightning Speed is all about the future. Let’s explore the three ideas and the new information that we have about each of them.

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The Lightning Development Initiative In Twitter Spaces

Among the speakers were Strike’s Jack Mallers, The Human Rights Foundation’s Alex Gladstein, Bitcoin Magazine’s Christian Keroles AKA CK Snarks, and Tales From The Crypt’s Matt Odell. It took place December 29th and Bitcoin Magazine hosted it. A Twitter user named Gigi summarized it for us.

Bounty #1: An Anonymous Tip Jar

In our sister site Bitcoinist’s report, they described the challenge as follows:

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“Can you create a Lightning tip jar that doesn’t reveal any information about the parties involved? That’s the first task. How to receive completely anonymous donations. According to Bitcoin Mag, the “goal is to enable anyone to use free and open-source software (FOSS) to print a QR code that can be used for receiving Lightning payments privately. Importantly, “The QR code should not reveal the public key or IP address of the user.” 

In the Lightning Development Initiative’s report, we learned that this has to do with the two competing protocols, Bolt12 and lnurl. Jack Mallers “pointed out the absolute need for interoperability on LN and that even though lnurl might not be “optimal” right now, the market will eventually decide what open standard they prefer to use. He thinks that currently UX is a major focus for the LN community and we should make peace with the fact that there will be competition between solutions.”

Mallers put forth another interesting idea, “contrary to the Bitcoin main chain, we can somewhat afford to f**k up on the Lightning Network. As long as the Bitcoin monetary policy is not threatened then we can freely fiddle on top of the protocol via Lightning.”

BTCUSD price chart for 01/14/2021 - TradingView

BTC price chart for 01/14/2022 on Bitfinex | Source: BTC/USD on

Bounty #2: Stablecoin On Lightning Without A Token

Bitcoinist described this one as:

“The second challenge seems to be even more difficult, at least on a conceptual level. The HRF and Strike want a wallet that enables “anyone to “peg” an amount of bitcoin to U.S. dollars without needing an exchange or another token.” That’s right, without a centralized entity. And relying only on sats and bitcoin.”

Gigi summarizes why the world needs this:

“The goal is to allow people to access dollars without a single point of failure. Further down the line, as Bitcoin becomes less volatile, these people can use btc, but until then there’s massive demand for holding value in dollars. The tether market cap is proof of this.”

Bounty #3: A Chaumian E-Cash Feature

First of all, Investopedia defines Chaumian e-cash as:

“eCash was a digital-based system that facilitated the transfer of funds anonymously. A pioneer in cryptocurrency, its goal was to secure the privacy of individuals that use the Internet for micropayments. eCash was created by Dr. David Chaum under his company, DigiCash, in 1990.“

So, once again, anonymity is the priority. As Alex Gladstein put it when announcing the bounties, they’re “for the first open-source, non-custodial, non-KYC Lightning wallets to ship features requested by dissidents worldwide.” Also, take into consideration the words of security expert Brian Trollz’s words, “Bitcoin without privacy is nothing but a surveillance system.”

What does Gigi have for us on this topic? “We need a sort of Chaumian e-cash, extremely easy to use for the Plebs and accessible. Maybe the solution is a federated  one, making it harder to regulate.” He then quotes Jack Mallers again, “There’s going to be a singular standard for the internet of money (Bitcoin). Many will compete on top of BTC so we need “interoperability to the standard.”

Conclusion: The Future Is Bright

Developers, teams, companies, anyone can earn the Lighting Development Initiative’s bounties. The non-profit OpenSats will serve as the judge. They are all open for the whole year. If by the end of 2022 no one has claimed them, the money will go to the Human Rights Foundation’s Bitcoin Development Fund on January 1st. Which is fair. Especially considering they gave 425 million Sats to these worthy organizations and individuals.

For more information and details read Bitcoinist’s original report.

Featured Image by Micah Tindell on Unsplash  | Charts by TradingView


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The Roads To Hyperbitcoinization


The widespread adoption of bitcoin is a topic that has raised immense expectations for change to monetary systems, governments, and society in general. Over the years, bitcoiners have fiercely defended their belief that bitcoin represents a superior form of money and expressed a large number of hypotheses about possible pathways to the broader adoption of bitcoin. Over the years, Bitcoiners have fiercely defended their belief that bitcoin represents a superior form of money and expressed a large number of hypotheses about possible pathways to the broader adoption of bitcoin. In this article, we investigate the concept of hyperbitcoinization which represents one of the most promising potential developments of our time. By hyperbitcoinization, we mean the process of rapid and irreversible adoption of bitcoin as the primary global monetary reserve.

This article is part of a longer series of research by Fulgur Ventures wherein we outline the views and predictions made by the bitcoin community concerning the prospect of hyperbitcoinization. In our analysis we highlight “transition agents,” i.e., main players, groups of players, or institutions that could accelerate the transition to a bitcoin world. For each topic, we base our arguments on the references collected, and if possible, present data that aims to verify the probability of this outcome.

This first article describes top-down scenarios initiated by institutional agents or governments whose influence is expected to trickle down to a wider audience, while a second article will provide an understanding of bottom-up types of initiatives.

The views presented in this article are intended to capture the pulse of the Bitcoin community and remain hypothetical. This is an initial foray into analyzing hypothesized hyperbitcoinization scenarios; we expect that this area will require on-going investigation.


The informational resources that most accurately reflect the extent of bitcoin adoption are often private and/or anonymous, but a significant part of the sentiment is publicly available. The methodology employed in this study can be broken down into four steps: collection, content analysis, validation/extrapolation, and convergence.

Step 1: Collection

With the aim of identifying agents of transition that may initiate a hyperbitcoinization scenario, we conducted online research of articles, blog posts, podcasts, videos, data sets, tweet samples and research papers from July 2013 to July 2021 that either contained the term “hyperbitcoinization” or referenced the rapid adoption of bitcoin:

Figure 1. Frequency of “hyperbitcoinization” in online materials.

Figure 1. Frequency of “hyperbitcoinization” in online materials.

Step 2: Analysis

Through analysis of the articles and transcripts of the videos/podcasts we identified recurring themes highlighting the current social, political, and monetary contexts, the agents or events engendering the transition to the bitcoin world, and only a few projections about the prospect of a hyperbitcoinized world.

Step 3: Validation/Extrapolation

Qualitative data collected in step 1 most often came in the form of predictions discussed within the bitcoin community that have yet to be subjected to critical examination by the wider financial and economic communities. In the following section we present a quantitative analysis that critically examines these hypothesized causal pathways by using micro and macroeconomic data from government, institutional, and public databases to extrapolate the feasibility of such scenarios.

Step 4: Convergence

In the last step, we coded each reference to hyperbitcoinization according to a descriptive theme so that we might present a coherent overview of the current discussion within the Bitcoin community. Despite the great diversity of authors, the analysis that follows shows that hyperbitcoinization predictions converge on a limited number of cases where the transition is triggered by four main groups of actors. These four groups who may influence hyperbitcoinization include central banks, governments, the private sphere, and the Bitcoin community.

Top-Down Scenarios

The financial and economic worlds, crystallized in the fiat system for the last several decades, are unable to perceive credible alternatives to their current reality. According to current economic and financial elites, a different monetary system based on the gold standard or the bitcoin standard would give rise to an anarchic and violent society wherein all concepts of law, economics, or civilization would disappear. Bitcoiners, on the other hand, offer a more optimistic narrative (Keiser and Seiche 2021). Inspired by libertarian thought, they see the government as a superfluous or useless element of society whose interventionism in the monetary field prevents the proper functioning of the market. In this view, the advent of bitcoin would restore monetary stability based on the fixed and transparent production of money.

Figure 2. Hyperbitcoinization scenarios driven by central banks. 

Figure 2. Hyperbitcoinization scenarios driven by central banks. 

Central Banks

Inflation of Money Supply

Out of all the hypotheses made by Bitcoin community members, the most frequent reason cited as a possible trigger for hyperbitcoinization centers on money manipulation by central banks. At several points in history, monetary inflation set off a vicious cycle of decreased purchasing power that culminated in a complete loss of faith in the currency under inflationary pressure. In figure 3, we rank countries based on an annualized increase in broad money between the years 2015–2020.

Figure 3. Annualized monetary inflation (CAGR period 2015–2020). The World Bank. 2021. Broad Money (Current LCU). Washington, D.C.: The World Bank.

Figure 3. Annualized monetary inflation (CAGR period 2015–2020). The World Bank. 2021. Broad Money (Current LCU). Washington, D.C.: The World Bank.

Unsurprisingly, figure 3 shows that a large number of countries from this sample suffer from aggressive interventionism with yearly increases of monetary supply higher than 10%. For instance, a 10% annual increase of the money supply implies a decrease in purchasing power of 40% after only five years. The stability and predictability of bitcoin supply has the potential to disrupt the vicious cycle of manipulated monies leading to the loss of faith in the manipulated currency, and elicit the interest of the general population in the hardest form of money ever invented.

Central Bank Digital Currencies

The imminent launch of CBDCs (Central Bank Digital Currencies) by several countries will undoubtedly impact the cryptocurrency industry, but it is not completely clear how this intervention will unravel. Initially we can expect central governments to nudge their populations toward CBDCs through large-scale educational campaigns that will likely have a collateral effect on bitcoin adoption. However, as the limits of centrally-governed monies emerge, we can predict this will push new users into Bitcoin’s arms for at least four of the following reasons:

  • The shadow economy is not comprised exclusively of black market trades of illegal substances and trafficking. It encompasses any economic activity or transaction that occurs without being declared to the government. Redman (2020) predicts that bitcoin could only be an alternative to a cashless society that wants to operate under the radar.
  • The emergence of CBDCs is raising serious concerns in many democratic countries. A survey conducted by the European Central Bank (ECB) highlighted that, for European citizens and merchants, the privacy of transactions was seen as the most important feature of digital currencies. Even if central banks defend themselves from surveillance, identity management based on “loosely coupled account links, can keep track of necessary data to implement prudent regulation and crack down on money laundering and other criminal offences, as well as easing the workload for commercial banks” (Fan, 2020).
  • Several central banks have already announced the development of their coins on public blockchains (South Korea on Klaytn, and the ECB most likely on either Ethereum or Tezos) or on state-controlled blockchain (e.g., China’s digital Yuan). Even if Ethereum is a blockchain with one of the largest ecosystems, its security and decentralization is questionable in comparison to the Bitcoin network. An upcoming shift from the proof-of-work to proof-of-stake consensus algorithm also involves several existential risks that should not be associated with the creation of a currency imposed upon a population.
  • The superiority of bitcoin over other currencies has long been argued by the Bitcoin community. Recently, several CBDC projects carried out by central banks confirmed this superiority and recalled the importance of a fixed monetary supply, a censorship-resistant protocol, or of pseudonymous transactions. The most advanced experiences in the field suggest that the notion of programmable money has already been tested in several forms. By issuing coupons whose use is limited to certain sectors, the local government of Chengdu (China) encourages its population to favor public transport. Even if at first glance this type of initiative seems laudable, it quickly gives a glimpse of the kinds of abuses that such a system could generate. In addition, another initiative deserving of attention allows the central government to increase money velocity by issuing e-CNYs whose validity is limited in time. Even if this feature seems to have been deployed only as a pilot project, it raises several questions about currency fungibility and, most importantly, on the immense controlling power that any central bank could have by despoiling the population.


One of the most common hyperbitcoinization hypotheses is the adoption of bitcoin initiated by governments. Figure 4 describes several prospective scenarios hypothesized by the Bitcoin community that have yet to occur.

Figure 4. Hyperbitcoinization scenarios driven by governments.

Figure 4. Hyperbitcoinization scenarios driven by governments.

State Hoarding Of Bitcoin Scenario

In this scenario, the transition toward a bitcoin standard unfolds in distinct ways whether we look at it from the angle of individuals or governments. In “Layered Money,” Nik Bhatia (2021) predicts that governments will progressively build a healthier monetary system on top of the hardest money ever created: bitcoin.

Figure 5. Nik Bhatia. 2021. “Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies.” Nikhil Bhatia.

Figure 5. Nik Bhatia. 2021. “Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies.” Nikhil Bhatia.

Several countries have reported possession of bitcoin after seizing it from criminal activities, but no country has announced a specific strategy for hoarding digital assets as a reserve currency. In this context, El Salvador is an outlier in adopting bitcoin. The acceptance of bitcoin as a legal tender in El Salvador could be interpreted as an isolated political decision, but the successive announcements by the government to first implement a national mining policy with the BigBlock Datacenter and subsequently to hoard BTC, confirm the execution of a broader bitcoin strategy in the country.

“Sputnik” Trade Scenario

For decades, the dollar’s status as a global reserve currency has given the U.S. the privilege to impose sanctions on a global scale (figure 6).

Figure 6. Map of countries sanctioned by U.S., JojotoRudess, CC BY-SA 4.0 , via Wikimedia Commons.

Figure 6. Map of countries sanctioned by U.S., JojotoRudess, CC BY-SA 4.0 , via Wikimedia Commons.

Predictions about the demise of the hegemonic dollar are not new, but recently new narratives have appeared speculating on how the adoption of bitcoin could contribute to the decline of the U.S. dollar (Clemente 2021). If two countries suffering under U.S. sanctions start using bitcoin as a settlement layer to circumvent these sanctions, doing so may provide the same kind of rude awakening for world governments as Sputnik had for U.S. space policy in the 1960s. From that point, it could set an alternative path for other countries to replicate. Iran, whose economy has been under embargo since 1979, sits on a large reserve of fossil fuel energy that could either be exported against a payment in bitcoin or by selling hashrate. The Iranian currency could become one of the most sought after global currencies and reposition the country on the pedestal of sound money (Keiser and Seiche 2021).

El Salvador Case

The announcement made by the president of El Salvador to accept Bitcoin as legal tender was greeted as a consecration by the Bitcoin community in the word. El Salvador, whose economy has been hit hard by the Covid-19 pandemic, has long dealt with high crime rates linked to drug trafficking. The country’s dependence on the U.S. is high both in terms of exports and expatriate remittances (figure 7).

Figure 7. Total cost of transaction for remittance of $200 based on World Bank data. World Bank, Remittance Prices Worldwide, available at,

Figure 7. Total cost of transaction for remittance of $200 based on World Bank data. World Bank, Remittance Prices Worldwide, available at,

The bill proposed by President Nayib Bukele to the legislative assembly aims to position the country on the rails of prosperity by creating job opportunities, driving more inclusion, and boosting the economy. Even if this bill created a lot of excitement among Bitcoiners, forced money law — in this case bitcoin as a legal tender — diverges from the Bitcoin community’s central values of freedom, voluntarism, and free competition (Koning 2021).

This initiative provoked mixed reactions from global financial institutions. As expected, the International Monetary Fund expressed serious concern about the adoption of bitcoin as legal tender by the Central American country and pronounced that the bill presented a number of macroeconomic, financial, and legal risks. The Central American Bank for Economic Integration (CABEI), whose mission is to promote the economic integration and social development of the Central American region, took a more constructive and pragmatic approach. They offered technical assistance to the country to help with the implementation of the new system.

Since the announcement of the bill, officials from Paraguay, Panama, and Mexico have expressed their intentions to present crypto-related bills in the coming months to duplicate the process initiated by President Bukele.

If the experience in El Salvador, whose dependence on remittances is estimated at 24% of Gross Domestic Product, translates into an improvement in economic conditions, many countries beyond Central America could be incentivized to follow the same path as shown on the following map:

Figure 8. World Bank staff estimates of personal remittance received (% GDP) for Africa & Asia based on IMF balance of payments data, and World Bank and OECD GDP estimates.

Figure 8. World Bank staff estimates of personal remittance received (% GDP) for Africa & Asia based on IMF balance of payments data, and World Bank and OECD GDP estimates.

On an exploratory basis, we estimated the impact on countries’ GDP if current remittance solutions are replaced by Lightning Network (LN) payments. As part of this estimate, we assumed a zero cost LN transaction and remittance cost equivalent to the average observed for transactions of $200 in each country. Figure 9 shows that the economic impact would be particularly beneficial for countries whose dependence on foreign capital inflows is greater than 20%.

Figure 9. World Bank staff estimates of the impact of zero-cost transactions on country GDP (%) based on IMF balance of payments data, and World Bank and OECD GDP estimates.

Figure 9. World Bank staff estimates of the impact of zero-cost transactions on country GDP (%) based on IMF balance of payments data, and World Bank and OECD GDP estimates.


This study synthesized hyperbitcoinization scenarios and identified key agents that may initiate this transition. We categorized these scenarios into two groups: (1) top-down initiatives stemming from institutional actors such as central banks and governments, and (2) bottom-up initiatives emerging from the private sphere and Bitcoin communities. This first article presented an exhaustive analysis of the “top-down” scenarios, however the current state of adoption of Bitcoin technology does not permit drawing definitive conclusions about the influence of a particular agent. Rather this article serves as a foundational framework to continue our analysis of these prospective scenarios over time. The decentralized nature of Bitcoin is often in tension with the priorities of governments and financial organizations which are centralized, but this study shows how these institutions may play a major role — intentionally or unintentionally — in a mass adoption of bitcoin.

In a second article, we will present bottom-up scenarios driven by private and individual actors as a comparison to the top-down pathways.

If you have further interest in the subject matter and would like to keep updated: Fulgur Ventures’ Research blog and resources can be found here

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


Alden, L., & Posch, A. (Aug 6, 2020). Lyn Alden “Bullish On Bitcoin – A Strategic Value Investors View”

Clemente III, W. (Jan 24, 2021). “Hyperbitcoinization. The Path To Becoming The World’s Dominant Form Of Money”

Fan, Y. (April 1, 2020). “Some Thoughts On CBDC Operations In China”

Keiser, M., & Seiche, L. (Jan 8, 2021). ES MCCVR 2020: Max Keiser & Lina Seiche – “Hyperbitcoinization: Maximalist Utopia or Inevitable Endgame?”

Koning, J. (June 16, 2021). “Hyperbitcoinization: By Choice or by Force?” American Research for Economic Research.

Minting Coins. (Sept 9, 2017) #88 “Hyperbitcoinization + SEC Meeting, Overstock, Google, & Byzantium Metropolis”

Redman, J. (April 6, 2020). Hyperbitcoinization: Visions of Bitcoin Fueling the Post Covid-19 Shadow Economy”

Suberg, W., & Draper, T. (March 3, 2021). “Netflix ‘Might’ Be Next Fortune 100 Firm To Buy Bitcoin — Tim Draper”


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To Know Bitcoin Is To Love Bitcoin

understanding of the bitcoin protocol vs confidence in success

It is my contention that an individual’s certainty of the inevitable success of the Bitcoin protocol is asymptotically correlated to that person’s understanding of it. Behind the Bitcoin protocol is an amalgam of technologies that work together to create a whole greater than the sum of its parts. To fully understand the profundity of this invention so early in its life, a person needs to have a hungry curiosity as well as the willingness to dedicate many, many hours of focused effort on key educational materials that span a variety of disciplines.

In the meantime, however, I will say: Understanding Bitcoin starts with understanding money. And that starts with realizing that you may not yet understand money from a first principles foundation.

Since the beginning of the technology which our civilization collectively refers to as “money,” the preferred value exchange medium of every age has always been naturally emergent and collectively agreed upon by a free market of trade due to specific attributes of that medium. Early examples include seashells, bones, beads, stones, and precious metals.

Until the development of the nation-state, money had never been a piece of paper whose use is mandated by force and whose sole value proposition comes from being backed by “the full faith and credit” of an organization which, as Murry Rothbard wrote in “Anatomy of the State,” achieves its ends by maintaining a “self-enforced monopoly on the use of force and violence, [and ultimate power of legislation] in a given territorial area.” Although as the territorial area of a government becomes more localized, voting necessarily becomes more transparent and easier to verify and settle.There are more practical and actionable checks and balances, as well as more manageable oversight. There is also a strong human element (social consensus layer), as members of any local government body are likely to know many of their constituents on a neighborly level.

Large, predatory government feigns to serve its citizens, but, as Rothbard notes, in reality it is “the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered, but by coercion.” The monopoly on legal coercion is maintained through violence, social conditioning and indoctrination, extortion, gatekeeping, exploitation and monetary debasement. At this point, many people will defend their governments, citing the services a government does provide: public safety, education, roads, social programs, safety nets, etc. I contend that such things are better managed and financed by public and private free industries operating within a free market of exchange under a sound money standard. In a scenario such as this, where prosperity itself is significantly more ample, the number of men and women who require social assistance will be greatly reduced. Those who do require it will be helped as they always have — through the beneficent generosity of those who have the means to provide assistance. It is important to note here that the moral standards of a sound money society are continually on the rise and after several succeeding generations of such, it will become increasingly clear that we live in a reality of abundance, both spiritually and materially.

As the standards and quality of life within a society flourish, so does that society’s industry, moral caliber and intellectual progression. This often leads to emergent solutions to fundamental problems. Take education for example: Save for a few specialized occupations in medical and research fields, modern society has collectively crafted a tool that has all but replaced centralized higher educational institutions. People have begun to realize they don’t need to spend $100,000 to waste four years on busy work just to receive a piece of paper saying they had the privilege. Vastly superior and arguably more relevant educations on any given subject can be attained in half the time by a sufficiently curious mind and an internet connection, which puts at our fingertips the entirety of the collective human knowledge base in video, graphical, audio and text formats, as well as provides the means to communicate in real-time 24/7 with billions of others for help. It’s important to note that neither the infrastructure nor maintenance of the internet requires the existence of a federal government.

For the most part, the useful services a state does provide neither accurately reflect the price of taxes paid nor does it justify the true cost of our enslavement as we allow a governmental monopoly on money to persist. The hijacking of free-market money and the gradual transition to monopoly-mandated fiat currencies spans over several centuries and was completed in the U.S. in 1971. The fiat monetary system is an inherently evil system designed to increase wealth inequality while also enriching those highest up in the system (search: “Cantillon effect”).

Furthermore, fiat money is debt. It only comes into existence via a loan, which future generations of taxpayers will be required to pay back, plus interest. Fiat money inexorably requires ever-increasing levels of more fiat money to prevent a complete collapse. It is the very definition of a Ponzi scheme. (see: The Biggest Scam in the History of Mankind.) 

Thanks to Bitcoin, we now have a non-violent opportunity, a “sly roundabout way that governments can’t stop” to return to a free-market-sound-money standard. The hyphenated words are to differentiate between the common notion of a “free market economy” versus one in which society has the freedom to select its monetary asset.

What you’ll be witnessing over the next 10 years is the global market naturally converging on the most advanced monetary technology to ever exist, which will increasingly become the world’s preferred method of exchanging value. I think it’s important to emphasize that I am not advocating for total removal of government, but rather a simple separation of money and state, in which case the necessary purview of government would be greatly reduced.

Society needs an enforcer of ethics and standards for suppliers and providers of the public. In “The Principle of Sound Money,” Ludwig von Mises asks, “But how to keep under control the men entrusted with the handling of the government apparatus, lest they use their position to harm those whom they were elected to serve? How to prevent the rulers from using their position to become despots and enslaving the citizenry?” Governments have monopoly control over the creation and issuance of a monetary system and constitutional authority to dictate all legislation and regulation concerning the use and conditions of that system, which results in a debt-slave rat race that keeps the majority of people unaware, overworked, underpaid, extorted, and metabolically unhealthy.

Remove from the hands of the state the monopolistic power it wields over money — the very tool that humanity uses to shape and forge civilization itself — and watch the state become a servant of “We the People” once more.

It’s a little-understood fact that money is perhaps one of the most fundamentally important technologies that’s ever emerged from our species. It is a tool developed by mankind for the purpose of preserving, channeling, exchanging, focusing and directing human time and energy. That stored time and energy is the very driver that catalyzes the advancement of our species’ civilization.

Money’s role in our species’ ability to aspire to such unimaginable heights as the modern age is as significant as the development of the complex communication system we know as language, another emergent phenomenon of our species.

Just as language allows us to communicate general information, monetary technology allows us to communicate value. Money can be thought of as a vast value assessment and allocation network that communicates what we collectively value and how much we value it. Ultimately, it signals to the world where our energy as a civilization is incentivized to continue focusing.

To control, subjugate and manipulate a society’s value assessment and allocation network is to control and direct the people within that society towards certain behaviors and ends. By distorting natural incentives to save, grow, build and contribute, a monetary standard that is rooted in debt, debasement and inflation encourages unchecked consumerism, reckless corporate growth, laxing moral standards and short-sighted decision-making that often goes against the best interest of future generations for the sake of short term profits.

Unlike the communication we exchange via language — where dishonesty is common and repercussions can be ambiguous — unfettered value communication created by markets exchanging a free-market-monetary-asset is incentivized to be truthful. This is because any dishonesty would quickly and accurately be revealed by changes reflected in corresponding markets, and it’s never in the long term interest of a participant to lose money or damage reputation in such a way that would put them out of business.

In a centrally-planned monetary system, dishonesty is not allowed to be reflected in market fluctuations because all price-signaling indicators are dampened and controlled. Things like manipulating interest rates, mass creation of new monetary units, bailing out reckless or malicious entities and regulations imposed by the central planners keep free-market price signals suppressed and unable to communicate problems within the system.

When you interfere with and manipulate the natural price-signaling mechanisms of a society’s monetary network as central banks do, you introduce friction, inefficiencies and errors into the system. If done long enough, the markets within that system become completely disconnected from reality. We are witnessing this scenario play out in economies around the globe. Thankfully a superior monetary technology now exists to take the place of government-mandated fiat.

Humans have been experimenting with and improving the quality of their monetary technology throughout history. From bones and beads to salt and stones. As increasingly efficient trade and commerce advanced the evolution and expansion of human civilization, we eventually learned to mine, melt and refine precious metals. For several millennia, gold was the standard of sound monetary technology and it powered entire civilizations. As the most stable metal of all the elements, gold doesn’t rust, corrode or tarnish. It’s highly malleable and intrinsically alluring. Perhaps most importantly, it’s relatively scarce.

However, gold has a few big problems. These problems become greater and greater impediments to its ability to be an adequate monetary technology as civilization continues to advance.

1. Gold is inconvenient to transport large amounts and to divide into small or unique units of value, limiting its ease of use and convenience. This leads, naturally, to gold-backed paper notes. A piece of paper that acts as an IOU for your gold in a secure, centralized vault. Different notes can represent different amounts of gold and everyone can trade using these notes, knowing that they can be redeemed for gold at any time.

This sounds like a perfect solution until you realize that it requires trusting the vault keeper to not distribute more notes than there is gold to redeem. What’s worse, imagine the vault keeper does this and then starts handing out paper note interest-bearing loans to the unassuming public. The vault keeper gets rich, along with his family and friends. Eventually, the charade can’t continue, the vault keeper is forced to declare he has no gold yet everyone decides it is easiest to just keep using the paper notes, leaving the vault keeper free to continue making as many notes as he desires. That’s literally a TLDR for what has happened in the US over the last century.

2. Verifying the authenticity of gold is expensive and difficult. Without advanced scientific tools or melting the gold, you must trust that the source of the gold is being honest about its purity. Rulers of societies can, and throughout history have, secretly debased the purity of precious metal coins in order to create additional coins. Historically this is followed by a collapse of the governing body engaged in the debasement.

3. Actual exchange of gold requires parties to be in close physical proximity to each other.

Bitcoin is highly divisible. It is trivial to maintain sovereign control over your bitcoin. It is verifiably scarce. It can be moved at near the speed of light over communication channels on a vast global decentralized digital network, and there is a comprehensive, mathematically verifiable, publicly transparent audit completed on the entire ledger of the Bitcoin protocol every 10 minutes.

If you fully grasp the above points and still face a persistent hesitation and doubt regarding Bitcoin’s ultimate triumph, it can likely be concluded that you must not yet possess a technical understanding of how the Bitcoin protocol is able to satisfy the role of sound money and achieve this global standard without concern of governmental disapproval, malicious attacks, hacks or worry of creeping corruption within the Bitcoin system itself.

If this is the case, putting in the work to understand the technical properties of the protocol is absolutely necessary. Do not trust me, verify it for yourself.

PS: Bitcoin doesn’t solve wealth inequality.

I believe inequality to be an emergent phenomenon specific to inherent imperfections in our shared human nature which hasn’t yet collectively achieved enlightenment. The collective character flaws that make us all oh-so-human are perhaps why humanity requires sound money in the first place. An incorruptible value system is designed to keep everyone honest, accountable and productive.

Bitcoin does eliminate dependency on a system that is designed specifically to exacerbate and intensify wealth inequality. That legacy system distorts the very price signal mechanisms that a monetary network would use to facilitate a natural and continual rebalancing of that inequality.

In that sense, Bitcoin is not designed to facilitate redistribution of wealth. It is designed to be a superior monetary alternative, to provide an opportunity for people to voluntarily opt-out of an existing corrupt system and into something that is more fair. Redistribution of wealth is a second-order effect, a resultant consequence that is determined by a person’s timeliness in recognizing and opting into the superior emerging system.

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


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Bitcoin Blowback: A History Of Dollar Hegemony, Economic Warfare And A Bright Orange Alternative


The United States dollar dominates world commerce. In 2019, it made up 88% of global trade, and no other currencies came close. This dominance gave the United States power over any other country that exports anything from anywhere. For example, due to the mechanics of the petrodollar, oil is settled in dollars regardless of where it comes from. Consequently, not only does this frustrate U.S. rivals by making them vulnerable to trade sanctions, but ultimately causes them to craft savvier innovations to conduct commerce. This is what the Central Intelligence Agency (CIA) calls blowback.

Blowback (a term which originated within the CIA), explains the unintended consequence and unwanted side effects of a covert operation. The effects of blowback typically manifest themselves as “random” acts of political violence without a discernible, direct cause; because the public—in whose name the intelligence agency acted—are unaware of the affected secret attacks that provoked revenge (counterattack) against them.

This article will chronicle the history of America’s dollar hegemony, the strides taken to achieve that position, and the unintended consequences that followed to this day. The main goal of this piece is to demonstrate how much of a fool’s errand it is for a single nation to maintain supremacy over the world reserve currency, and how the world is reframing the technological innovation of money as we know it. The short answer: #BitcoinFixesThis.

The Roots Of Dollar Hegemony: Economic Warfare And Debt As A Weapon

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.” – John Maynard Keynes

Even before the dollar became the world reserve currency, America was able to wield it as an economic weapon and make other nations abide by its monetary policy. The dollar as a monetary system and network is unfair to those who are forced to abide by its dominance. However, history shows us that a single world currency was the best solution the global economy needed, mostly to win wars. It’s crucial to understand how we got to this point. Let’s look at the roots of how dollar hegemony came to be.

The root cause of other countries depending on the dollar was due to their decision to print more money to fund war efforts. Arguably, the only thing war is good for is printing more money. World War I demonstrated that Germany was forced to destroy their currency through hyperinflation. The German Deutsche mark was fully pegged to gold until it entered the First World War. Going to war is expensive, and printing unlimited amounts of money was (is) the only way Germany could finance their military actions. Economist Carl Hellfrick stated in 1915, “The only way to finance the cost of war is to shift the burden into the future via loans.”

Germany (and as every other government state does during times of war) defended their monetary policy by saying it was an “economic necessity,” and that once they secured victory over Europe, there would be an economic boom as they ruled over resource-rich nations and charged reparations to the countries they defeated. A fair argument in theory, but even the Marxist theorist Ed Bernstein understood in 1918 that “there’s a point in which printing money destroys purchasing power by causing inflation.” A Marxist, of all people!

When Germany lost the war, they were forced to pay reparations, which was paid for with borrowed money to pay on top of the debt they were already in. By 1923, the German economy went from having 8.6 billion to 40 quintillion Deutsche marks in circulation, all from printing to fight the war. Germany received between 27 and 38 billion marks in loans during the reparation period. By 1931, German foreign debt stood at 21.514 billion marks, with the main sources of aid stemming from the United States.

As for the German people, the rich got richer, while the poor suffered. The German middle and lower classes were left with no other choice but to barter for actual goods because their money became worthless. The rich on the other hand prospered because they owned assets and financed it with debt, which became worthless since they could easily pay it off due the hyperinflation.

Even Britain, who held the dominant currency at the time, began borrowing money for the first time to fund the war. Their banker of last resort was the United States of America, a foreshadow of the dollar hegemony to come in the next war. America used its monetary policy as a war strategy by forcing both their opponents and allies to bleed themselves into bankruptcy. As the economies of warring nations were destroyed, so were any chances of a military victory. In Germany’s case, the economic unrest from hyperinflation was a catalyst to the rise of populism, and eventually Hitler’s Nazi regime. Although a dependency on a single fiat currency was helpful in economic aid and cooperation in wartime, the strategy of dollar hegemony as a weapon would lead to more unintended consequences (blowback) in the future.

Bretton Woods: Dollar Hegemony Comes To Fruition

Since the end of World War II, the dollar has been the dominant leader in international trade and cooperation. It officially began in 1944, where 45 allied nations met in New Hampshire at the Bretton Woods conference.

The conference was an effort to avoid the consequences (blowback) that ensued following the end of WWI during the Treaty of Versailles in 1919. Britain owed the U.S. substantial sums of debt by the end of the war, which could not be repaid because the funds were used to support allies like the French. Since the Allies could not pay back Britain, Britain could not pay back the U.S. In response, it was decided at the conference in Versailles that Germany would make reparations to the French, British, and Americans for the debts. However, it was unrealistic for Germany to meet these demands having just destroyed their economy through hyperinflation to fund war efforts. If Germany couldn’t pay up, neither could the Allies. Thus, many nations’ “assets” on bank balance sheets internationally were actually unrecoverable loans, leading to a banking crisis in 1931. Continued insistence by creditor nations for the repayment of Allied war debts and reparations caused a breakdown in the international financial system and a world economic depression.

To avoid similar blowback, the political basis for Bretton Woods consisted of two key conditions: a failure to deal with economic problems after the First World War had led to the second and the centralization of power in a small number of states. The representatives of each nation agreed to peg their currencies to the U.S. dollar, while the dollar would be pegged to gold (hence, the gold standard). Similar to the First World War, America acted as Britain and France’s bank by selling them arms and supplies and lending them money to fight WWII. Once again, the Allies turned to America to help rebuild their countries after the war. Most of this financing was paid for in gold, and the U.S. became the dominant superpower by accumulating two-thirds of the world’s gold reserves from the allied countries.

As the dust cleared from the battlefield, the dollar was the most stable and plentiful currency remaining and the U.S. became the biggest economy on the global stage. America became the bank of the world as nations continued to deposit their gold reserves at the Federal Reserve in exchange for dollars (or treasury bills). Countries used these dollars to store their value by buying U.S. debt à la treasury bills. This created a U.S.-backed “gold standard” and worked fairly well with a gold-pegged dollar. This sound monetary policy created a golden age of capitalism, resulting in a post-war boom as trade flourished via a universal agreement for scarce money.

As global trade grew, so did the use of the dollar for conducting business to regrow the global economy. Even after the U.S. went off the gold standard in 1971, the dollar still remained the global currency of choice. But why?

Josseled In The Jungle

With the privilege of holding the world’s reserve currency, America continued to assert its dominance through funding war efforts. In 1965, the U.S. quietly launched a bombing attack in North Vietnam. For the next three years, the U.S. continued dropping bombs on the Ho Chi Minh trail under what would be revealed as Operation Rolling Thunder. The Vietnam Conflict was bloodier, longer, and much more expensive than expected. Naturally, the U.S. began rapidly borrowing money to fund the war and turned the money printer back on.

Having suspicions of having their gold reserves rehypothecated and the incessant printing of dollars caused other nations to worry about the state of America’s economy. Fearing debasement of the dollar, the Allies began requesting to have their gold reserves back. France’s Charles DeGaul was most aggressive on this by converting $150 million of reserves back into gold and threatened another $150 million. Consequently, this triggered a bank run on Fort Knox as more nations converted into gold, and the U.S. began making the same mistake Germany did as they continued to print more money and watch their ice cube of gold reserves melt away. In reaction to the blowback, Nixon “temporarily” suspended the convertibility of dollars into gold in 1971, and the dollar officially became a fiat currency. The hegemony of the U.S. dollar was hanging in the balance.

Enter The Petrodollar

In 1974, the Petrodollar was created as a last-ditch effort to maintain the dollar’s dominance. The Nixon administration made a deal with Saudi Arabia where they would only allow other countries to buy oil from them in U.S. dollars. In return, the U.S. would protect them by providing military support and selling them weapons. Furthermore, unbeknownst to the American public, America would provide Saudi Arabia preferential deals on treasuries if they promised to use dollars to buy back U.S. debt. This arrangement led to the formation of the Organization of the Petroleum Exporting Countries (OPEC) where the combined parties controlled 80% of the world’s oil reserves in dollars and would rush that profit back into U.S. treasuries—or a form of Petrodollar “recycling.” With OPEC, the U.S. was allowed to continue running up ginormous deficits to finance social welfare programs and the Military-Industrial Complex. Due to this newly created artificial demand for dollars, America could not devalue her currency. The dollar’s exorbitant privilege of hegemony over global economic cooperation was restored once again.

America’s position of dollar hegemony was threatened most notably during this time by the Saudi Arabian oil embargo in October 1973. The U.S.’s stranglehold on dollar supremacy was nothing compared to Saudi control of the oil supply. Although it only lasted until March 1974, the embargo had a massive impact on the world economy as gas prices soared from $1.39 in 1970 to $8.32 a barrel by 1974. This shock strengthened the bond between three main sectors: big corporations, international banks and the government. These sectors comprise the corporatocracy and were the catalyst of many policy changes and how the global economy would view oil moving forward in order to maintain the flow of petrodollars back into the United States.


In addition to OPEC, America and Saudi Arabia had another arrangement. To avoid another economic catastrophe, the U.S.-Saudi Arabian Joint Economic Commission (JECOR) was formed as a strategic agreement for American corporations to provide infrastructure projects in Saudi Arabia. Former reporter Thomas W. Lippmann describes the agreement as such:

“JECOR’s mission was twofold: first, to teach the Saudis—who had no tradition of organized public agencies—how to operate the fundamental bureaucracy of a modern state; and second, to ensure that all the contracts awarded in pursuit of that mission went to American companies. JECOR would operate for 25 years, channeling billions of Saudi oil dollars back to the United States, but would attract almost no attention in this country because Congress ignored it. The Saudis were paying for it, so there was no need for US appropriations or congressional oversight.”

The interest Saudi Arabia made in their U.S. treasuries would be paid to American corporations to build their new infrastructure and paid for by the treasury department. This would reinstall the dollar’s dominance and strengthen American and Saudi relations by liberalizing the Saudi Arabian economy via the amount of money the oil embargo produced for the Saudi kingdom.

By the end of Bill Clinton’s presidency, JECOR discontinued operations. Saudi Arabia is now, by all technological measurements, a fully modern country. However, this new relationship with Saudi Arabia would complicate U.S. relations with neighboring countries in the Middle East and determine foreign policy decisions from here on. Dollar hegemony was restored, but it would not remain without its consequences.

Through strengthening relations with the Saudi royal family, the U.S. made an ally out of Osama Bin Laden, who had close ties with the Mujahideen, the guerrilla-type militant groups led by the Islamist Afghan fighters in the Soviet–Afghan War. In what would be documented as Operation Cyclone, the CIA would go on to train and fund the Mujahideen to fight the Soviets in Afghanistan. Although these efforts aided in the collapse of the Soviet Union in the 1990s, members of the Mujahideen would later join al-Qaeda and participate in the attacks in New York on September 11, 2001. Countless other unintended consequences (blowback) have followed, all for the sake of maintaining the economic interests that maintain the petrodollar and solidify America’s dollar hegemony.

How The Dollar’s International Transactions Work

Once the U.S. forced countries to settle crucial commodities like oil, coffee, and gold in dollars, the world became used to this coercive form of business. The dollar became very liquid, making it easier than any other currency to buy and sell goods all over the world. Bitcoiner criticisms of centralization and fiat chicanery aside, the U.S. banking system is still very efficient to this day. Thus, both its liquidity and banking efficiency are the two key points that make it easier and cheaper to buy and sell in dollars, but what exactly are the mechanics of the dollar hegemony system that makes it so efficient?

Imagine a Canadian Lumber Company sells boards to a French Home Builder. The seller’s bank (Canada) and the buyer’s bank (France) settle the payment in dollars via correspondent banks in the U.S. The correspondent banks have accounts with the U.S. Federal Reserve. The money is transferred seamlessly between the correspondent banks’ Fed accounts because their status as correspondent banks means they are seen as safe counter parties. In the eyes of the United States, the use of all the correspondent banks in other countries means that every transaction is being conducted (technically) on U.S. soil, giving it legal jurisdiction and compelling foreign countries to abide by its laws on money laundering and corruption.

The Dollar As A Weapon Today

The dollar still dominates global trade and causes friction between the U.S. and other nation states. The only benefactor of this system is America and her allies. You can see this in the standoff between the U.S. and Iraq. In a Wall Street Journal article by Ian Talley and Isabel Coles, it describes the following scenario: Iraq says it wants to throw U.S. troops out of the country, since the U.S. has occupied the country since the second Gulf War. In response, the U.S. can use the dollar as a weapon and just cut Iraq off from receiving dollars and remove Iraq from the U.S. monetary system entirely. One of the main reasons the U.S. invaded Iraq in the first place was because former Iraqi leader, Sudam Hussein, priced oil in euros instead of dollars. This protest was a direct threat to the dollar’s legitimacy.

Since the attacks on 9/11, the U.S. uses the power of the dollar to advance its foreign policy goals. The idea? Cut out the sources of funding for terrorist organizations. The U.S. uses its control of the dollar to

1. increase surveillance of global money flows, and

2. curb financing toward bad actors.

The U.S. accomplishes this by imposing sanctions on rivals. Under this system, if a business or country tried to trade with a sanctioned entity in dollars, the U.S. has the power to cut off their access to U.S. currency. However, other countries have been building workarounds.

Resistance To Dollar Hegemony

We have now arrived at the inevitable blowback of the dollar’s dominance: resistance. Some European Union countries oppose the U.S. sanctions against Iran. Sanctions on Iran were put in after the U.S. withdrew from the 2015 JCPOA (Iran Nuclear Deal) in 2018 and included banning dollar transactions with Iranian banks. As a result, the EU developed a euro-backed system, the Instrument In Support of Trade Exchanges (INSTEX) without having to send money across borders. However, the system didn’t prove to be as successful as planned and was disbanded.

In retrospect, the dollar has had a decent run for over half a century as the global reserve currency.

  • The U.S. makes up 20% GDP.
  • 40% all debt issued is in the U.S. dollar.
  • 60% of exchange reserves is in U.S. dollars.

However, we can expect this to drop. Russia just announced they will completely remove U.S. dollar assets from its National Wealth Fund. In a research note after the announcement, Russian President Vladimir Putin stated that their messaging is “’we don’t need the U.S., we don’t need to transact in dollars, and we are invulnerable to more U.S. sanctions.”

Russia’s central bank governor, Elvira Nabiullina, told CNBC that digital currencies will be the future of financial systems because it “correlates with this development of digital economy.” Russia aims to have a prototype of their digital ruble out by the end of 2021, a sure sign that other countries suffering from the dollar’s policy will follow in Russia’s footsteps. Countries victimized by sanctions and strict trade laws will create alternatives beneficial to them.

No longer are foreign countries buying the majority of U.S. treasuries. The buyer of last resort is the Federal Reserve. The Fed will continue lowering interest rates and treasury yields will fall until monetary manipulation takes place and owning U.S. debt will become unattractive to foreign countries. On the domestic level, printing and monetizing debt will continue and asset price inflation (as well as health/welfare programs) will price out the middle class and poor. As for America’s economy, the Triffin Dilemma states holding the reserve currency means there will be less jobs at home since the U.S. exports cheap labor and more imported goods. America is dependent on the rest of the world for goods and is much less self-sufficient. As the reserve currency continues to inflate asset prices and dilute the value of investments, the only rational economic decision for American investors will be to store their wealth in bitcoin.

China still exports to the U.S. but doesn’t recycle their dollars like Saudi Arabia. They are losing faith in the value U.S. treasuries hold and are selling them to fund their own economic imperial efforts such as the Belt and Road initiative. The dollar hegemony has created geopolitical and economic blow back where more countries are doing business with each other outside of the dollar system.

Eventually, currency wars lead to real wars. China and Europe are competing with the U.S. by pumping more money into their systems. Every country is incentivized to devalue their currency to stay competitive. It’s a race to the bottom: the beggar via neighbor policy. Eventually, a country will run out of ways to weaken the currency, and hyperinflation is, therefore, inevitable. It is only a matter of time that every country will react to the dollar’s dominance and search for a greater alternative.

Bitcoin: The New Monetary Hegemony

In the future, the U.S.’s monetary hegemony faces a much larger threat, now that it’s victim-countries have found a new tool to chip away at the power of the dollar: bitcoin. The points mentioned above demonstrate how other nation states and Americans themselves will, and are, beginning to lose faith in the dollar.

The area in the world that is primed for using bitcoin as a monetary escape is Central America. With countries like El Salvador adopting bitcoin as legal tender, people can trade openly and freely anywhere in the world without having their savings diminished before their eyes. In the Kingdom of Tonga, remittances make up 40% of their economy but, in real terms, that’s approximately 20% after fees are paid to Western Union. Bitcoin will enable the elimination of all fees and bring more money into the pockets of the country’s people and yield real economic growth and prosperity. Talk about an unintended consequence.

Bitcoin has rules, not rulers. Instead of a nation state hegemon, there are strict rules of the Bitcoin network’s protocol that all participants of the network must abide by in order to participate in the world economy. These characteristics are what make bitcoin the ultimate form of blowback against dollar hegemony.

If the power of the dollar falls, it could hurt the United States’ ability to control the global trading system. All efforts before bitcoin have been proven futile. Now, with a completely open, permission-less, censorship-free, confiscation-resistant monetary network, any and all countries around the world can trade with each other.

Like the dollar, bitcoin is an economic weapon. Unlike the dollar however, bitcoin is a weapon of self-defense. Before bitcoin, countries had no other viable choice but to peg their economies to the dollar and depend on America for economic cooperation. As mentioned above, this has led to countless examples of economic hardship. Bitcoin gives people an option. Opting into the Bitcoin network guarantees the protection of one’s wealth and property regardless of any entity. Trade within the Bitcoin network cannot be stopped, and economic cooperation can flourish. Bitcoin is the inevitable blowback the world has desperately needed for over a century. Now, the wait is over.

Special thanks to @newzealandhodl.

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


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Bitcoin And The Illusion Of Reality

A look at how the people in power may have more in common with a jewel beetle than you’d initially expect and how bitcoin may have the answer.

In this article, we touch on:

● Why the government and the Federal Reserve are incentivized to expand the money supply and lower interest.

● The byproducts of monetary expansion and lower interest rates.

● What a world with a decentralized sound currency such as bitcoin will look like.

● Why our misinformed inflationary beliefs are hampering innovation, destroying our planet’s habitats, creating wealth inequality and increasing fragility within our economy.

The Lure Of The Beer Bottle And Economic Growth

The Australian jewel beetle,1 a part of the Coleoptera family,2 has been around for about 300 million years. Therefore, you would assume that if the jewel beetle has survived this long, it must perceive the world as it really is.3

As humans have evolved, we have seen great leaps and bounds in technology. One beneficiary of this advancement in technology has been the glass beer bottle. More precisely, the brown, stubby Australian beer bottle. When discarded in the desert, this beer bottle’s color, size and shape attracts male jewel beetles searching for mating partners. These beetles, through evolution, have been taught that the bigger and browner the female, the better. When they found this beer bottle, they thought they had stumbled upon the perfect brown female beetle, and as a result, a drop-off in population ensued. Why would you go for the much smaller, inferior jewel beetle when a big, brown, stubby beer bottle meets all your needs? The beetle’s inability to perceive the world as it really is nearly became the catalyst to its demise until Australian bottle manufacturers caught on and switched bottles.

Throughout history, we have been taught that the world works in a certain way. Our governments are continuously trying to increase productivity and efficiency to enhance economic growth. However, wealth inequality continues to expand, and there appears to be an ever-increasing amount of social tension and unrest. As tempting as it may seem to target growth at all costs, we should take a step back and ask ourselves, do we perceive the world as it really is?

Before we can determine whether we have a firm grasp on reality, we must first look at our current system. To start, let’s look at how the government tracks growth. If we delve into government economic policy, we see the federal government seeks to accomplish three policy goals: full employment, economic growth and stable prices.4 At first glance, these seem like healthy goals to set; however, by setting these goals, we see that the government is incentivized to perform certain actions outlined below.

Full Employment

The Federal Reserve tracks employment rates using a metric called the labor force participation rate.5 This metric gives a good measure of the economy’s active workforce, assuming we want full employment. For the Federal Reserve to influence employment, it must encourage businesses to borrow money to expand and hire more workers. This is done through monetary expansion and the lowering of interest rates.6

Therefore, by setting the goal of full employment, it is in the Federal Reserve’s best interest to lower interest rates and increase the money supply, thus, minimizing unemployment.

Economic Growth

The government uses a metric called gross domestic product (GDP) as a proxy for economic growth. However, similar to the labor force participation rate, the most effective way to increase GDP is through monetary expansion and lower interest rates. This is because as interest rates become more favorable and capital is more readily available; people consume, businesses expand and governments spend. This directly affects the four areas of GDP, which are consumption, investment, government and net exports.

However, GDP is not a measure that includes debt. In the short term, the Federal Reserve can inflate GDP through monetary expansion and the lowering of interest rates, but by doing so, it increases the debt burden, which acts as a deflationary headwind. Therefore, just like full employment, by setting the goal of economic growth, it is in the Federal Reserve’s best interest to intervene to give the illusion of productive growth.

Stable Prices

The Federal Reserve tracks a metric called core personal consumption expenditures (PCE). This metric distills the average price of a basket of consumer goods and services, similar to the consumer price index (CPI). The Federal Reserve uses the core PCE metric instead of CPI because of its lower volatility.7 It then targets a 2% annual growth rate and adjusts policy decisions accordingly.

The issue with tracking prices using the core PCE is that it does not include food, energy or asset prices. These three categories make up the majority of our economy’s expenditure. In addition to this lack of accuracy in tracking consumer price inflation, core PCE is changed regularly with plausible-sounding justifications for doing so. Coincidentally, these changes have also coincided with a flattening of volatility. Because of this intervention and lack of accuracy with actual consumption habits, core PCE does not provide true insight into inflation within the economy.

According to Brent X. Donnelly,“a Honda Accord cost $12,000 in 1990, and it costs $25,000 now. The Bureau of Labor Statistics says new car prices are close to unchanged over the past 30 years.”

Therefore, as core PCE can give the illusion of stable prices, the Federal Reserve can intervene through monetary expansion and lowering rates without the worry of affecting price stability. This allows them to disregard stable prices and focus on full employment and economic growth.

In addition to the stable prices, full employment and economic growth, there are three other important factors we must take into consideration:

1. The Debt Burden: As the currency loses purchasing power and interest rates trend ever lower, it encourages debt consumption. This debt consumption now stands at a whopping 257% of U.S. GDP9 and 356% of global GDP.10 This substantial debt burden incentivizes the Federal Reserve to further expand the money supply and lower interest rates to reduce the deflationary effects of the debt burden. This constant attempt to outrun deflation creates this never-ending feedback loop of lower rates and monetary expansion. In turn, the debt burden continuously expands, and the deflationary effects become ever greater.

2. Triffin Dilemma: As we know, the U.S. dollar (USD) holds the position of the global reserve currency. This is one of the principal ways that the U.S. maintains its global power. However, by holding the global reserve currency status, the U.S. is in a bind. Does it protect its position as the global reserve currency at the expense of its economy, or does it focus on its economy at the expense of potentially losing reserve currency status? This paradox is called the Triffin dilemma.11 As the global reserve currency, most international trade is made in USD. This creates a constant demand for dollars. Therefore, to maintain reserve currency status, you have to ensure global USD liquidity meets demand. To provide global USD liquidity, you have to outsource manufacturing and encourage a consumer culture. By doing so, you create a movement of domestic dollars internationally through foreign goods consumption. Lastly, to encourage a consumer culture, you have to lower rates and debase the currency. Paradoxically, the U.S. is concurrently outsourcing manufacturing to secure global USD liquidity, while also trying to achieve full employment. This further incentivizes the lowering of rates and the debasement of the currency. As the global reserve currency, you cannot maintain reserve currency status, grow your manufacturing base, and preserve sovereignty.12

3. Global Competition: Besides the Triffin dilemma, foreign countries are in a race against each other to debase their currency. This way, their exports become more favorable, thus, increasing the flow of capital to their country. We now see an incentive for a continual lowering of rates and debasement of the currency, not just in the U.S., but globally.

“Show me the incentive, and I will show you the outcome.” — Charlie Munger

It is now clear that due to economic policy, the debt burden, the Triffin dilemma and global competition, governments globally are incentivized to continuously lower interest rates and expand their money supply.

If we take a step back for a second and look at how we have been taught the world works, we have been taught that overtime:

● Cost of goods and services increase

● Asset prices (i.e., real estate, stocks, commodities) increase

● Money loses its purchasing power

● The cost of borrowing decreases

If we then think about what has to happen for all of those beliefs to continue to maintain validity, we come to two conclusions:

1. Interest rates must continue to fall to promote consumption and facilitate the debt burden.

2. There must be a continual expansion of the money supply for prices of goods, services and assets to increase in perpetuity.

The two levers that the Federal Reserve uses to maintain its global power, prevent a deflationary debt collapse and meet economic policy are the same two levers required to retain our current belief structure. This makes you question whether we perceive the world as it really is or whether we are seeing an illusion that the government wants us to see. This leads us to wonder what would happen if we were to stop manipulating the money supply and let interest rates normalize?

The hurdle we face is that the Federal Reserve is not incentivized to reduce intervention and allow interest rates to normalize. Therefore, we must take a different approach, such as transitioning toward a decentralized monetary system operating on a sound currency. This way, no single entity, such as the Federal Reserve, can manipulate the currency in alignment with their interests.

What are the distinguishing features that separate a decentralized sound currency from a fiat currency such as the USD?

Store of Value: Currency is essentially a store of energy, just like a battery. To obtain currency, we must expend energy through work/labor or the trade of goods and services. This currency then acts as a store of our spent energy and resources, allowing us to use this energy at a future date in time. Under this lens, the USD is effectively a leaking battery, losing up to 17.33%13 of its value each year because of monetary expansion destroying its purchasing power. On the other hand, a sound currency acts as a nondepleting store of energy, allowing us to focus on the future instead of worrying about our depleting purchasing power.

Lacks Manipulation: A decentralized sound currency must be immune to control and manipulation. When a currency, such as the USD, is under the supervision of a central bank, monetary policy is implemented, which aligns and benefits the people in power and people closest to those in power at the expense of the rest. This is known as the Cantillon Effect.14 Instead, we must have a currency where any changes implemented must first reach a consensus among the currency holders. This ensures change that aligns and benefits the population, as opposed to those in power.

Additionally, a decentralized sound currency that is not under the influence of the central banks or people in power removes barriers for who can and cannot use the currency. This reduces the potential for a consolidation of power and reduction in innovation. We will talk about this in more depth below.

There are other beneficial features to a currency: divisibility, durability, portability and recognizability; however, these traits are beneficial to any currency, not just a decentralized sound currency. For this reason, I have only touched on the two principal features which separate a decentralized sound currency from other types of currency.

Regarding which currency offers the best decentralized characteristics, as it stands, our best option is bitcoin. Since its inception, bitcoin has shown incredible resilience in addition to an exponential increase in adoption. This has been down to its decentralized, transparent, predictable and immutable nature, making it a great store of value. However, to truly understand the benefits of a decentralized monetary system, we must first look at the byproducts of the current system. Let’s start with the side effects of intervention (i.e., monetary expansion and the lowering of interest rates) and its impact on the economy.

Magnifies the Wealth Gap: Monetary expansion causes a rise in asset prices, while at the same time diminishing the dollar’s purchasing power. As we know, the wealthy hold assets while the lower class holds cash, thus creating an ever-expanding wealth gap and a consolidation of power. Additionally, this ever-increasing wealth inequality leads to social tension and unrest.

Dampens Innovation: A centrally controlled monetary system alongside monetary intervention has two consequential byproducts which dampen innovation:

1. Zombie Companies: A zombie company is a company that is unable to support itself financially.15 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. By 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%16 of listed companies in the U.S. are zombie companies, and this number is rising.

2. Consolidation of Power: Our current economy operates as a closed system. Central planners (people in power) aggregate and sort innovative technology and, with their influence over legislation and the monetary system, control what kind of innovation is allowed and implemented. Not only is this oversight, aggregation and sorting costly, but it also reduces society’s ability to adapt and evolve. However, more importantly, it does not give the general population a voice regarding what technology provides actual value to society. Instead, innovation is only endorsed within the strict boundaries17 of the central planners. This ensures their growth and control are not impacted. In turn, they are aiding in their consolidation of power.18

Increased Fragility and 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 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.

“We can ignore reality, but we cannot ignore the consequences of ignoring reality.” — Ayn Rand.

It is now clear that the narrative that intervention from the Federal Reserve is good for the economy, good for economic growth and, most of all, good for the average Joe doesn’t seem to paint a complete picture. We must, therefore, contrast the way we currently operate to a decentralized monetary system, allowing us to get a better grasp on the reality of our situation.

Decentralized Monetary System

Although there are many questions regarding what a decentralized monetary system operating on a currency such as bitcoin may look like, we will touch on some of the key benefits. Moving forward, when I mention bitcoin, I am referring to its decentralized and immutable characteristics, which make it one of the best stores of value. Additionally, when I mention a bitcoin standard, I am referring to bitcoin being adopted as the currency at the core of the monetary system. There are key benefits to a bitcoin standard:

Strengthening Currency

We have been led to believe that the cost of goods, services and assets (i.e., real estate, stocks, commodities) increases over time. This is unnatural and has occurred due to unfathomable monetary expansion and the lowering of interest rates, causing a continual reduction in the dollar’s purchasing power.

Suppose we were to move toward a bitcoin standard. We would remove the ability of central planners to manipulate the currency in their favor. In turn, we would see an increase in bitcoin’s purchasing power. This increase would come about in two ways:

1. As bitcoin has a finite supply, demand over time would increase. Increased demand strengthens the currency, which promotes saving, further restricting supply and increasing demand.

2. With the advancement in technology, the cost of goods and services should decline over time. This further increases the purchasing power of bitcoin as it allows you to purchase more for less. We describe this in further detail below.

Higher Interest Rates And Increased Financial Stability

We are very much accustomed to low interest rates and monetary expansion, providing an abundance of capital. This gives us the illusion of liquidity and economic stability, which in reality is merely smoke and mirrors. This intervention prevents us from getting a true sense of the actual cost of borrowing. It hides the fact that our economy is essentially just a giant debt house of cards, needing a constant fix of lower rates and greater monetary expansion to keep up the facade.

To better understand the actual cost of borrowing, two things need to happen:

1. Natural Supply and Demand: Interest rates should be determined naturally by the supply and demand for borrowing. With the Federal Reserve stepping in and manipulating interest rates in an attempt to promote growth and reduce stress on the economy, the actual cost of borrowing is masked. With the loss of accurate supply/demand information, we lose the ability to make meaningful economic decisions. We currently have $18 trillion of negative-yielding debt globally.19 In what world does it make logical sense to lend out money today to be paid back less tomorrow?

2. Transparency: We need to have greater transparency regarding what happens with our money. Many believe that any holdings and assets held by our bank and brokerage accounts sit there until we are ready to use them. Unfortunately, this is not the case. Instead, our banks and brokerages use our assets for their own benefit (i.e., lending, repurchase agreements,20 rehypothecation,21 etc.). This lack of transparency results in artificially low interest rates as there is a perceived abundance of capital in the system. In reality, what we really have is a sprawling system collateralized by a small capital base, and when you have a lack of collateral in addition to an enormous debt burden, any unexpected stress on the economy quickly becomes catastrophic. Increased transparency will lead to an increased understanding of where our capital goes, leading to more conscious lending and increased financial stability.

Bitcoin fixes both issues. First, with bitcoin’s fixed supply, you have a strengthening currency that promotes a shift toward saving. This creates increased demand which, in the end, results in a rise in interest rates. Second, bitcoin is the first asset that gives both transparency, and the owner an effective and cheap way to self-custody their own assets. This prevents the rehypothecation/reuse of assets without the owner’s knowledge. Ultimately, this reduces the perceived abundance of capital in the system, raising interest rates and increasing financial stability.

Lastly, this belief that higher interest rates are a drag on the economy, while lower rates are a sign of growth, could not be further from the truth. As Richard Werner points out,22higher growth leads to higher rates and lower growth leads to lower rates.” Lower rates are a sign that the economy is unable to sustain its current trajectory. Therefore, to continue on this path requires lower rates to fuel its inefficiency and lack of productivity. However, as discussed, by further lowering rates, you exacerbate the issue by compounding debt and encouraging malinvestment. The truth of the matter is that we have been lulled into this false belief that we need lower rates when in actual fact we need to change the way we operate. We must allow rates to naturally rise and creative destruction and innovation (discussed in greater detail later) to make way for a new, sustainable growth trajectory. Here are a few of the many benefits of higher interest rates:

Increased Accountability and Responsibility: As the cost of capital increases with higher rates, individuals, corporations and the government will be more fiscally conscious when taking on debt. This results in greater accountability and responsibility.

Greater Return on Savings: Higher rates increase the return on interest accounts, bonds or any interest-bearing asset. This benefits retirees, conservative investors, households, the lower class, and so on.

Reduced Market Manipulation: With lower interest rates, equity valuations place more emphasis on future potential cash flows. This makes speculative growth investments more favorable. However, as there is no underpinning in reality, these investments face a greater potential for narrative manipulation and market manipulation. On the other hand, higher rates increase the cost of capital, which reduces the weight of future cash flows in equity valuations. In turn, we see a reduction in market manipulation as this makes cash flowing, value-driven businesses more favorable, which have already proven their value to society.

Reduction in the Price of Assets (i.e., stocks, real estate, businesses): As it becomes more costly to borrow, we see a decline in the abundance of capital in the system. Therefore, demand drops in relation to supply which creates a reduction in prices.

Reduced Consumption: Lower rates make borrowing more favorable, which encourages consumption. The reverse is also true, whereby higher rates discourage debt consumption and, in turn, reduce personal, corporate and governmental consumption.

Reduction In Malinvestment

As we have seen time and time again, when the economy is under stress, the central bank and government will step in and attempt to prevent further losses and, in some instances, socialize losses and privatize profits,23 leading to a consolidation of power. With the increased knowledge that the Federal Reserve will backstop the economy in times of stress, the economy becomes rife with malinvestment as individuals and corporations no longer fear detrimental financial collapse.

With bitcoin’s fixed supply, central banks and governments will lack the ability to intervene. This lack of intervention, combined with a strengthening currency and increased cost of borrowing, will promote greater fiscal accountability and responsibility. In turn, individuals, corporations and governments will be encouraged to save instead of consume and invest in products, services and innovations that add actual value instead of the next hot lottery ticket. Ultimately, this will lead to a clearing out of malinvestment.

For example, if an individual, corporation or government takes on debt, yet the currency is strengthening against this debt, it becomes apparent that they better be putting this debt to good use. They must have confidence in the productivity and efficiency gains that this debt will hopefully provide. Otherwise, they will be unable to pay down this debt in the future.

Increased Innovation

A transition toward a bitcoin standard impacts innovation on both a governmental/corporate level in addition to an individual level.

Government and Corporate: As discussed above, our government currently operates as a closed system. In this system, the central planners consistently have to expend resources to defend themselves and their beliefs against innovation, which does not align or benefit the closed system. This hampering of innovation is a major downfall to our current system. Additionally, centrally planned, closed systems do not allow for creative destruction (the dismantling of outdated processes and systems to make way for improved technology). Instead, they consolidate power and reduce innovation to maintain the status quo (as mentioned above).

On the other hand, open systems, such as the decentralized bitcoin standard, have the ability to adapt and expand unimpeded. This allows the system, if necessary, to move in lockstep with the newest and most beneficial technology as there is no oversight, aggregation and sorting of data to determine what innovation aligns with the beliefs of the system. This rewards innovation and allows for value to naturally percolate to the top, benefiting society as a whole.

Individual: Sound currencies, such as bitcoin, act as a solid store of wealth because of their strengthening purchasing power. Because of this, you no longer have to use your productive capacity worrying about how to preserve wealth due to your depleting purchasing power. Instead, you can focus your productive capacity on creating, innovating and adding value to society.

We should not be maintaining old, obsolete systems and practices to benefit a small group of people, corporations or the government. Instead, we should opt for decentralized open systems that benefit society and allow for innovation and growth.

Reduction In The Cost Of Products And Services

Let’s look at improvements in technology from a product perspective. We see that when we promote innovation, we are rewarded with increased efficiency and productivity, leading to higher quality products and greater output at lower prices. These benefits don’t just aid manufacturing either; we see the same benefits in raw material extraction, product distribution, e-commerce and end-of-life product recycling.

One exciting industry that has exponentially grown over the last decade has been 3D printing. The rate at which 3D printing technology is advancing may mean that there will be a reduced need for traditional manufacturing in the not-so-distant future.24 As 3D printing becomes cheaper and more accessible, the end user will be able to purchase blueprints and print almost any product at home. This will slowly make the manufacturing and distribution sectors obsolete.

In our current society, due to inflation, we are under the illusion that the cost of goods and services goes up over time. In reality, constant technological advancement should bring about a continual deflationary wave over society, whereby the cost of goods and services becomes ever cheaper and more accessible. By adopting a bitcoin standard, we are allowing reality to play out.

Increased Quality Of Products And Services

As mentioned above, in our current system, we have been under the inflationary assumption that the price of energy, products and services goes up over time. At the same time, our currency’s purchasing power diminishes from one day to the next. Because of the destruction of purchasing power and rising prices, we are incentivized to consume. This reduction in purchasing power day to day does not promote saving. People are incentivized to buy the lower quality product today, rather than the higher quality product tomorrow.

Suppose we were to adopt a bitcoin standard. We would see an increase in the quality of products and services as our mindset shifts from consumption to saving. When you have a strengthening currency, for you to want to spend the currency, the product or service has to offer greater short-term value than the long-term value of saving the strengthening currency. This leads to a demand for higher quality products and services, reduces consumption and reduces waste.

Change In How We View Jobs

Because of the economic policy goal of full employment, the government and Federal Reserve regularly intervene and encourage debt consumption by companies in an attempt to create jobs and reduce unemployment. However, if a large portion of jobs are being fueled by debt, and we were to accept the reality of our deflationary environment, debt would very quickly become a significant burden when used unwisely. Therefore, unless the debt was used to hire workers in response to actual demand, many of these jobs would not exist.

With a bitcoin standard, the government and Federal Reserve will be unable to debase the currency to promote debt consumption to stimulate job growth. Therefore, as the currency strengthens, any debt that is not being used productively will quickly become a significant headwind causing a wave of bankruptcies because of vast amounts of unproductive, debt-consumption businesses.

This may sound counterproductive. However, if your business requires never-ending stimulus and debt consumption to survive, maybe it shouldn’t be around in the first place. We have just been taught to believe that job growth at any cost is healthy and sustainable when, in reality, it is asinine. A shift toward a decentralized sound currency would reduce the potential of unsustainable job growth as it promotes accountability and productive debt use.

Furthermore, a currency that prevents intervention accepts that we are in a technology revolution that is consuming jobs at an ever-increasing pace. In contrast, at the moment, we operate in a way where we must restrict innovation to prevent job loss so we can meet economic policy goals. If computers one day surpass our intelligence, how is it possible that we will continually create more jobs?25 We are not allowing creative destruction to take place and society to adapt naturally. Therefore, we need to change our belief structure around jobs.

1. More Free Time: We have been taught that we should work nine till five, five days a week to maximize our benefit to society. However, in a deflationary world where the currency is strengthening, and we see increased productivity and efficiency due to technology, the cost of living should naturally decline over time. Therefore, we should see increased benefit with a reduced workload, leading to more free time and allowing us to focus on family, hobbies and introspection.

2. The Transition of Jobs: With the advancement of innovation in AI, robotics, 3D printing, and more, we need to accept that there will be a constant destruction of jobs. Therefore, we should embrace a natural shift toward more artistic, intellectual and abstract endeavors where humans still have the upper hand over computers.

Because of the economic policy leading to the fallacy of job growth at any cost, we end up creating a burden of continual job creation at the expense of innovation and the population’s well-being. In reality, we should allow creative destruction and let society naturally find its equilibrium.

Increased Standard Of Living And Wealth Inequality

Since the lower class tends to hold currency, in a transition to an innovation-focused economy with a strengthening currency, they would see a drop in the cost of living. Additionally, we would see an improvement in the quality of goods, services and assets, ultimately resulting in reduced wealth inequality and an enhanced standard of living.

What separates developed countries from developing countries is that developed countries have a formal property system due to property law.26 Essentially, this grants people the ability to obtain and prove ownership of property and assets, allowing them to use these assets productively to borrow against, lend and generate capital to build wealth.

Globally we have 6.5 billion people27 in developing countries, of which 1.7 billion are unbanked.28 Within these economies, most people are unable to obtain true ownership over their assets, preventing them from storing and creating wealth. With bitcoin, we have true, provable ownership. This gives us the ability to effectively store wealth and, more importantly, borrow against and lend in order to build wealth. Not only would a transition to a bitcoin standard be hugely beneficial in regards to inequality and the standard of living, but it would also help boost innovation and give people their freedom.

If we can create a society based on Maslow’s hierarchy29 of needs where everyone’s basic needs are met, we would have a world where people can focus on learning, discovering and helping, instead of focusing on where their next meal is coming from or how they’re going to afford shelter. A bitcoin standard would allow us to work toward this.30

Decreased Environmental Destruction

In our current system, we are incentivized to consume because of economic policy goals, continual price inflation and the destruction of purchasing power. To meet this consumer demand, we are destroying natural resources by trying to extract every ounce of energy we can get our hands on. This is not sustainable. Our current inflationary system does not work with a finite resource planet.

If we are to shift toward a bitcoin standard, we would be incentivized to transition from consumption to saving. This shift toward saving would create demand for better quality and longevity in products. In turn, this would channel energy toward innovation and promote increased sustainability, efficiency and productivity in raw material extraction, manufacturing and recycling. Combined, this would put less pressure on our planet and its natural resources, therefore, reducing the unnecessary destruction of our incredible habitats.

When we contrast this against our current system, we see that, as the people in power control the currency, they have the ability to mask the truth and stunt innovation. This is illuminated by direct funding toward specific sectors that best align with their interests. A perfect example is the oil industry:31

● $20.5 billion — Direct subsidies for fossil fuel production

● $14.5 billion — Consumption subsidies helping consumers pay for energy

● $81 billion — U.S. military spending protecting global oil supplies

Government subsidies favor fossil fuels over renewables seven to one.

What is unique about bitcoin is that due to its lack of manipulation, one can only earn/obtain bitcoin by means of work or the sacrifice of resources. This allows bitcoin to act as a voting mechanism that channels truth and innovation by enabling ideas that provide true value to rise to the top.32 This, therefore, directs energy toward what is best for the economy, instead of what is best for the people in power.

A potential benefactor to this channeling of energy could be the solar industry. What is astounding with solar is that in a single hour,33 more solar energy hits Earth than we consume globally in a year. By directing our capital and ingenuity into solar, we can, over time, capture solar energy more effectively. However, we must first adopt a decentralized currency to transfer power to the individual and away from the people in power. In turn, this would reduce subsidies for unsustainable, destructive industries and channel energy toward sustainable endeavors, such as solar.

A Needed Change In How We View Growth

GDP is not a measure of productivity, efficiency or standard of living. Instead, it is essentially a measure of consumption, with 68.22% of GDP34 coming from consumption. When the Federal Reserve sets the goal of economic growth. What they’re really targeting is increased consumption at the expense of our planet’s resources. In addition to consumption being an inefficient use of our planet’s finite resources, it is unsustainable to grow consumption in perpetuity. Therefore, it is imperative that we redefine growth.

On the other hand, bitcoin channels ingenuity, encourages saving and increases our standard of living. A transition toward a bitcoin standard would promote a shift away from metrics focused on increased consumption (i.e., household consumption, corporate sales, imports and exports, government expenditure) and toward metrics such as increased innovation, higher standard of living, increased sustainability and reduced work hours. In turn, we would be incentivizing real productive and sustainable growth.

“Value is created through human ingenuity, environmental necessity and the compounding productivity driven by our accumulation of collective knowledge.” — Aaron Segal, Bitcoin Magazine35

To be clear, the people in power aren’t necessarily the issue. They are just a product of the centralized system. They have their own agenda and are striving to meet the goals laid out before them, unaware that reaching their goals comes at the expense of the general population. Instead, the issue is that we operate as a centrally planned economy, with a minority group given control over the legislative branch and the monetary system. Although everyone is entitled to their own beliefs, with a centrally planned system, we have a group of central planners as a proxy for the rest of the population. Consequently, any decisions are based on the central planner’s personal beliefs and incentive structures and lack the population’s true interests.

By transitioning to a more decentralized system, we ensure that decisions are made based on what is best for the community instead of the minority. Therefore, change is only implemented when a consensus is reached within the community. Additionally, by giving control back to the

majority, we accept that humans are inherently flawed and remove the potential for bad actors.

It is also worth noting that although we have highlighted the positives of a more decentralized system operating on bitcoin, no one system is perfect. Like a centrally planned closed system, a decentralized open system has its flaws as well (i.e., coordination can be difficult, emergency decisions can be challenging, etc.). However, it is important to take a step back and look at who the primary benefactor to each system is. In a centrally planned system, the primary benefactors are the central planners. Whereas in a decentralized system, the primary benefactor is the economy.

In addition, a more decentralized economy allows for true free-market capitalism. This has one huge benefit over crony capitalism, communism and socialism, in that it is far superior when it comes to error correction.36 Evolution at its core is error correction. In crony capitalism, communism and socialism, there will always be a manipulation of supply and demand to meet the needs of the economic school of thought in place. This inadvertently destroys economic price signals, consequently preventing the economy from error-correcting accurately, and in turn, hampering its ability to adapt, evolve and innovate effectively.

“Free market capitalism is a social system in which we see the world through as many eyes as possible (via words and prices) to attain a high resolution picture of reality.” — Robert Breedlove, Masters and Slaves of Money37

The Reality Of The Situation

When we contrast our current economy to that of a decentralized bitcoin standard economy, we realize that the targeting of continual economic growth and full employment is at odds with reality. Intervention via monetary policy gives us the illusion that we live in this inflationary world. However, the reality of the situation is that we live in a deflationary world and that over time, prices should drop as technology advances and the currency strengthens. The byproduct of trying to meet our current misinformed inflationary beliefs is a hampering of innovation, destruction of the planet’s habitats, ever-expanding wealth inequality and increasing fragility in our economy.

“Deflation is a measure of success in creating economic value as innovation creates more for less.” — Aaron Segal, Bitcoin Magazine38

It is, therefore, essential for us to

1. Reframe how we view this world and adjust to the reality of our deflationary situation.

2. Redefine growth from a sustainable perspective and away from metrics focused on increased consumption (household consumption, corporate sales, imports and exports, asset prices).

3. Decentralize the monetary system. Doing so removes the government’s controlling capabilities, ensuring they act as a service provider with the population’s interests at heart.

The longer we go down this inflationary path, the more challenging and catastrophic the consequences of the inevitable transition to our deflationary reality will be. Unless we can break down our current belief structures and move toward a decentralized sound currency, we will continue to see environmental destruction, economic fragility, wealth inequality and social unrest.

To conclude, it is clear that we do not perceive the world as it really is. Instead, like the jewel beetle, which believed that bigger and browner is better, the people in power today hold the same belief toward growth and consumption, unaware that it is this belief that could be the demise of our economy and our planet’s natural resources. It is, therefore, paramount that we

do not fear change, innovation and creative destruction. Instead, we should embrace it and, more importantly, educate others about the reality of our situation.

“When new thinking is needed, it is very easy for us to remain entrenched.” — Jeff Booth, Price of Tomorrow

My wholehearted gratitude goes out to these incredible minds who have contributed to the Bitcoin community:











1 Krulwich, Robert. “The Love That Dared Not Speak Its Name, Of A Beetle For A Beer Bottle.” NPR, June 19, 2013, for-a-beer-bottle.

2 “Evolution of Insects.” Wikipedia, Accessed May 24,2021.

3 Hoffman, Donald. “Do We See Reality As It Is?” YouTube, June 11, 2015,

4 “The Goals of Economic Policy.” Cliff Notes, Accessed May 24, 2021.

5 “Labor Force Participation Rate.” FRED, Accessed May 24, 2021.

6 Amadeo, Kimberly. “How Is Unemployment Controlled?” The Balance, November 5, 2020,

7 Mislinski, Jill. “CPI and PCE: Two Measures of Inflation and Fed Policy.” Advisor Perspectives, March 1, 2021,

8 Donnelly, Brent X. “I’m Trying To Understand Hedonic Adjustments.” Epsilon Theory, May 10, 2021,

9 Frank, Silvan. “US Debt to GDP.” Longtermtrends, 2020, Accessed April 28, 2021.

10 Rabouin, Dion. “Global Debt Soars to 356% of GDP.” Axios, February 18, 2021,

11 Smith, Tim. “How The Triffin Dilemma Affects Currencies.” Investopedia, June 25, 2019,

12 Gladstein, Alex. “The Hidden Costs of the Petrodollar.” Bitcoin Magazine, April 29, 2021,

13 Bunney, Sebastian. “Why More Isn’t Better.” Bitcoin Magazine, May 12, 2021,

14 Rouanet, Louis. “How Central Banking Increased Inequality.” Mises Institute, August 15, 2017, 0Cantillon%20explained%20that%20the,consumer%20price%20inflation%20comes%20about.

15 Bunney, Sebastian. “Why More Isn’t Better.” Bitcoin Magazine, May 12, 2021,

16 Sharma, Ruchir. “The Rescues Ruining Capitalism.” The Wall Street Journal, July 24, 2020,

17 ZAPFL, Daniel. “Open Innovation vs. Closed Innovation.” Lead Innovation, October 3, 2018, ovation%20is%20based,place%20exclusively%20within%20the%20company.

18 Pettinger, Tejvan. “Why does capitalism cause monopoly?” Economics Help, August 5, 2016,

19 Mullen, Cormac. “World’s Negative-Yielding Debt Pile Hits $18 Trillion Record.” Bloomberg, December 11, 2020,

20 Reiff, Nathan. “Repurchase Agreement (Repo).” Investopedia, March 18, 2020,

21 Kagen, Julia. “Rehypothecation.” Investopedia, May 27, 2020,

22 DiMartino Booth, Danielle. “How Banks Work & Dictate the Economy.” YouTube, April 8, 2021,

23 Kenton, Will. “Privatizing Profits And Socializing Losses.” Investopedia, April 14, 2021,

24 “Will 3D Printing Replace Traditional Manufacturing?” BCN3D, July 20, 2020, %20many%20years%20from,some%20processes%20within%20the%20industry.

25 Booth, Jeff. The Price of Tomorrow. Stanley Press, 2020.

26 De Soto, Hernando. The Mystery of Capital. Basic Books, 2000.

27 Wang, Brian. “Developed Country Population from 17% to over 50% of World by 2050.” Next Big Future, November 19, 2018,

28 World Bank. “THE UNBANKED.” World Bank, 2017,

29 Mcleod, Saul. “Maslow’s Hierarchy of Needs.” Simple Psychology, December 29, 2020,

30 Fridman, Lex. “#181 — Sergey Nazarov: Chainlink, Smart Contracts, and Oracle Networks.” Apple Podcasts, 2021,

31 Generation180. “The Absurd Truth About Fossil Fuel Subsidies.” Generation180, November 25, 2020,

32 Bunney, Sebastian. “Why More Isn’t Better.” Bitcoin Magazine, May 12, 2021,

33 Harrington, Rebecca. “This Incredible Fact Should Get You Psyched About Solar Power.” Business Insider, September 29, 2015,

34 “Consumption as Percent of GDP by Country: The Latest Data.” The Global Economy, 2021,

35 Segal, Aaron. “Bitcoin Information Theory.” Bitcoin Magazine, May 14, 2021,

36 Breedlove, Robert. “What Is Money?” YouTube, April 28, 2021,

37 Breedlove, Robert. “Masters and Slaves of Money.” Medium, July 5, 2020,

38 Segal, Aaron. “Bitcoin Information Theory.” Bitcoin Magazine, May 14, 2021, 

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.


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Bitcoin Lurks Where Monetary Responsibility Has Been Abdicated

Rule IV: Notice That Bitcoin Lurks Where Monetary Responsibility Has Been Abdicated

A reimagination of “Beyond Order” by Jordan Peterson through the lens of Bitcoin.


This writing mirrors the exact chronological structure of Beyond Order; offering perspective through a Bitcoin lens. This is part four of a 12-part series, and reading the book adds a second dimension. All quotes credited to Jordan Peterson. All reflections inspired by Satoshi Nakamoto.

Make Yourself Invaluable

“What is left undone is often risky, difficult, and necessary. But that also means — does it not? — that it is worthwhile and significant.”

Bitcoin is risky for nocoiners who have not done their research,difficult for newcomers trying to learn and necessary for those who understand. Polarizing controversy is by definition significant, and Bitcoin is polarizing. The deep divide over the existence of Bitcoin validates its legitimacy as something worthy of exploration.

“It appears that the meaning that most effectively sustains life is to be found in the adoption of responsibility.”

Owning bitcoin is the act of adopting full ownership and accountability. Bitcoin rewards patience, teaches responsibility and nourishes curiosity. Einstein described compound interest as the eighth wonder of the world,and bitcoin to date compounds at 200% annually. This single asset offers normal people a path to retirement – just what saving the dollar had once represented. An asset you could bank on. Today’s dollar is a short-term holding bin that must be invested in order to reach retirement.

Responsibility And Meaning

“You must risk something that matters.”

Talk is cheap. The only way to have skin in the game is to actually own Bitcoin. Everything else is academic. To quote Nassim Taleb, “Don’t tell me what you think, tell me what you have in your portfolio.”

“[Peter] Pan says, ‘To die will be an awfully big adventure.’ But the psychologically insightful unseen narrator objects: ‘To live would be an awfully big adventure…’”

Peter Pan’s Lost Boys celebrate never growing up. After all, who wants to grow up in an increasingly dysfunctional world? Younger generations believe older generations kicked a grenade down the road straight into their laps. Spending a lifetime buried by the debt our elders created seems like an awful adventure. Nocoiners clearly see problems (and claim there are no good solutions) yet so many are quick to call Bitcoin a scam. It would be an awful end to the adventure to drown because you ignored the liferaft. Bitcoiners tend to choose to live life as an awfully big adventure.

Rescue Your Father: Osiris And Horus

“Osiris… a young, vibrant god [who] produced one of the first great and enduring civilizations. But he aged, as all things do, and became willfully blind.”

Gold has been used as base money for thousands of years and still succeeds in its purpose. In contrast, since 1450, we’ve had six world reserve currencies with an average shelf life of 90 years. Lyn Alden explains why the U.S. dollar never had a chance at maintaining parity with gold: It has an unsustainable design forcing it to continuously expand in order to satisfy ever-increasing global exports and oil consumption demands. We all age — but willful blindness is optional.

“We are well advised to take on challenges at precisely the rate that engages and compels alertness, and forces the development of courage, skill, and talent, and to avoid foolhardy confrontation with that which lies beyond current comprehension.”

Do not go all-in on a whim,but buy an amount of Bitcoin that matches your current level of understanding. Minimize your fear of a Bitcoin price dip by dollar-cost-averaging (DCA) to maintain your sanity and avoid getting REKT. Swan Bitcoin and River Financial offer Bitcoin-only DCA tools with educational resources to help you move from custodial to self-custody. Increase your daily purchases as your knowledge increases and, when you feel confident, make the leap into a flavor of custody that offers you the right balance between security and convenience. Grow your Bitcoin stack in proportion to your understanding. Start with a small investment, take the plunge, and “get off zero”.

And Who Might That Be?

“Because the future is coming, as certainly, for all intents and purposes, as the sun rises in the morning. And you are best advised to be ready for it.”

Bitcoin is coming. It’s a parallel universe. An immutable chain of time and trust tethered to our physical world through entropy. What is the price of time? What is the value of trust? Priceless. The bond amongst Bitcoin, time, and trust is as predictable as the sun rising in the morning. My best advice: be ready for it.

“We discovered the future, some long time ago — and now the future is where we each live, in potential. We treat that as reality.”

Imagine life before the discovery of the future. We take it for granted and our descendants will pose a similar statement: Imagine life before the discovery of digital scarcity. That future will be our reality. Fiat currencies pose a very different reality: Imagine financial ruin by robbing yourself tomorrow to pay for today.

“If you treat the person you are committed to in a manner that does not work when it is repeated across time, then you are playing a denigrating game, and you are both going to suffer terribly for it.”

Our relationship to fiat money is a repeated story of disintegration across time. The comprehensive suffering across large swaths of society must be attributed, at least in part, to the fact that money touches everything and our money has become toxic. Money is the common thread across all governments, industries, and households. When we serve money instead of money serving us, we all suffer terribly for it.

Happiness And Responsibility

“… like pleasure, attainment is unreliable… people experience positive emotion in relationship to the pursuit of a valuable goal… That is what produces the most reliable positive emotion.”

We tell the story of our lives as actors in a story, not numbers on a conveyor belt. In order to formulate the story of ourselves that we are proud to tell, we must pursue goals we deem valuable. Tech is obsessed with placing numbers before narratives. This means humans are being forced through algorithmic pinholes which results in empty, unspontaneous and predetermined stories that we are often too embarrassed to tell in their entirety.However, we are human beings who cannot help but tell our story. So in order to salvage our dignity among our peers, we use social media to showcase highly curated splices of our life while suppressing the ugly parts. Studies show chasing “likes” on social media produces negative emotions.

Technology is a black hole we are all being sucked into. We all see that our lives are increasingly dictated by computers. Computers have become the permanent middlemen connecting humans broadly by separating us intimately. Computers draw the metaphorical dividing line: Either you tell computers what to do or they tell you what to do. Fair or not, living above or below the computer line largely determines your fate. But not all computer programs are designed for evil. As Muneeb put it, “Google has a famous motto ‘Don’t be evil.’ But maybe it should be ‘Can’t be evil.’”

You may not be a Bitcoin tech savant like Adam Back but that does not preclude you from living a life immersed in a truthful and transparent narrative that you can be proud to share. Bitcoin is the oldest social network known to mankind: Money. It is designed to only tell the truth, andthat is a story we can all be proud to associate with in its entirety. That is pursuing a valuable goal that produces the most reliable positive emotion.

“There is no escaping the future… the right attitude is to turn around voluntarily and confront it. That works.”

Inertia leaves us drifting through life on autopilot. Breaking that inertia and turning around voluntarily to go toe-to-toe with discomfort is the inspirational story of David Goggins. You may not like it but his results don’t lie and what he does simply works. “Can’t Hurt Me” speaks to something timeless yet forgotten. We are waking up to the reality that the right attitude is to choose to be the hero of our own story.

Freedom exists in many forms. Financial freedom is embedded in the American Dream. Today the math stacks up against you. Simply saving money no longer suffices. To attain financial freedom you must learn to invest your savings. Bitcoin is in a goldilocks period: It is designed to store your money in the long run but is currently in an adolescent growth stage giving it tremendous asymmetrical upside. If you can ride out $50,000 bitcoin during these teenage years, then imagine its future value at maturity.

Pick Up The Extra Weight

“If you attend to your conscience, you will begin to determine that some of the things you are doing are wrong…”

One by one, fiat maximalists awaken to the realization that the green grass on which they’re sitting in the sun itself sits at the center of a prison yard. And they aren’t the ones wearing badges.

“You are all aimed in one direction. You are no longer a house divided against itself. You are standing solidly on a firm foundation. You are no longer so easy to dissuade or discourage. Your resolution trumps your nihilism and despair.”

Bitcoin Maximalism.

“You think, ‘The world is not set right. It is deeply troubling to me.’ That very disenchantment, however, can serve as the indicator of destiny. It speaks of abdicated responsibility — of things left undone, of things that still need to be done.”

“The Matrix” introduced us to the red pill: “Remember, all the red pill offers is the truth — nothing more.” Trust your intuition. Governments believe they can control all variables and it’s best to blue pill their citizens. If you sense that our world is deeply troubled, let that serve as an indicator that something must change. Believe in yourself and set the world right by taking the orange pill.

Notice that Bitcoin lurks where monetary responsibility has been abdicated.

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


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