2020 was unforgettable, especially for Bitcoin. To help rethink this year for our readers, we asked our network of contributors to think about Bitcoin’s price action, tech development, community growth, and more in 2020, as well as what all this could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories from our End Of Year 2020 series.
2020 was the most maniacal year in recent memory. The world just can’t decide how to end itself, and schizophrenic jumps back and forth between crises. It’s a shit show and it has seemingly plunged the world into a pit of chaos.
However, chaos is not a pit, as Littlefinger pointed out in “Game of Thrones”. Chaos is a ladder.
Bitcoin has benefited from the ladder of chaos this year, creating new use cases and champions. New deep thinkers have entered space and created content that makes it easier for new Bitcoiners to travel down the rabbit hole. Central bankers around the world have gone completely out of the blue with money printing, and Bitcoin has no doubt established the use case as a corporate treasury reserve.
The three most stunning additions to this year’s space were Robert Breedlove, Jeff Booth, and Lyn Alden. Each has contributed something unique to the space that has had a significant impact on the framework I use to understand Bitcoin, its place in the world, and its place in history.
Robert Breedlove, The Number Zero and Bitcoin
This year, Breedlove helped organize my mental framework for Bitcoin’s place in history, and the magnitude of the impact this invention will have on humanity is vast.
Two weeks after every market in the world threw up (March 14), Breedlove fell “The number zero and Bitcoin. “I printed the paper at work so I could read it during any free time. I read it twice that day, again the next day, and Guy Swann has read it to me at least twice since then.
Before this point, I had not yet come across a thinker who had determined the correct scope of how important an invention Bitcoin is. Breedlove drops the history of the invention / discovery of the number zero, and the vast improvements to human society that resulted from its invention / discovery. The TL: DR is that has enabled zero improvements in productivity and creativity in everything people do. Breedlove’s point is that Bitcoin will deliver similar exponential gains in creativity and productivity in all human endeavors.
Jeff Booth, tomorrow’s prize
The king of exponential thinking this year was Jeff Booth. Booth wrote a book, “The Price Of Tomorrow,” in which he outlined the dichotomy between the exponential and deflationary nature of technology and the exponential inflationary trends of money printing in debt-based Fiat markets.
Exponential factors are difficult for the human mind to grasp, but exponential trends are found everywhere in nature, from the growth of a single-celled embryo to a fully functioning baby, to the way hurricanes develop. Using a thought experiment, Booth asks his reader to guess how thick a sheet of paper folded 50 times on itself would become. Spoiler alert: it would be thick enough to go from earth to sun.
Booth continues with the folded paper metaphor to explain how technology is driving the cost of things around the world down exponentially, making everything cheaper and easier to obtain. These deflationary pressures from technological progress are propelling the counterforce of central bank monetary inflation. To keep the fiat banking slavery system going in the face of the exponential deflationary pressures of technology, the banks have to print more and more money. These practices distort the price signals of the open market and create a major misallocation of capital in the global economy.
Booth argues, and he is right, that the only way to map technological deflation to the economy to provide real price signals is to base all economic calculations on an absolutely scarce commodity, bitcoin. Booth argues that the Cantillon effect, which pushes up asset prices, has grossly mispriced assets around the world at about 90 percent of their value. In other words, there is a repricing event in our future where your home would fall from $ 500,000 to a value of $ 50,000.
Lyn Alden, describes the puzzle
How this inflationary money system works has been outlined by Lyn Alden in a number of newspapers and podcast appearances this year.
Alden is the first person I read who can describe how each piece of the puzzle affects another, and how this Rube Goldberg financial machine is likely to affect different asset classes, governments and people. The TL: DR for Alden’s work is that she’s super smart and capable of bringing her concepts and ideas to the masses in an understandable way. Alden also believes that central banks and governments around the world have cornered themselves with financial liabilities that require them to print more and more money.
US financial markets were hit by severe shocks in September 2019 from the repo market crisis, which allowed the Federal Reserve to secretly print money to keep banks solvent. This was just the opening salvo to go into 2020, and the Federal Reserve took a windfall when the COVID-19 lockdowns began. In any case, to keep the whole system solvent, it would have to implement quantitative easing (QE), and it had to mask this USD supply inflation rate by more than 20 percent under the guise of COVID-19 supporting the economy crisis.
You can see the predicted exponential growth of Booth’s monetary base in real time on the Fed’s own website. During the last financial crisis, total assets on the Fed’s balance sheet have grown from about $ 1 trillion to $ 2 trillion, and this financial crisis has already pushed the balance sheet from $ 4 trillion to $ 7 trillion.
If Booth and Alden turn out to be right in their analysis, then this vertical line on the right side of the balance sheet is just the beginning of an exponential rise, and a new $ 1 trillion spending bill trying to make its way through the US. Congress right now is another indication that Booth and Alden are right. The next set of lockdowns will provide the coverage needed to save zombie companies and illiquid markets with more QE.
Inflation is coming. Expect it.
Michael Saylor, Institutional Bitcoin Derisking
Booth and Alden are not alone in seeing exponential inflation on the horizon. Michael Saylor, CEO of Microstrategy, shocked the Bitcoin space this summer when he announced that his company was moving to a Bitcoin standard and retaining bitcoin as its main treasury reserve.
The genius part of this move was that it was sold as a defensive strategy. Saylor didn’t want to lose the purchasing power of his company’s assets through central bank counterfeiting, so the company now owns an asset that cannot be downgraded. Framing his bitcoin purchases in this way reversed the move for other public and private companies.
At the time of writing, Microstrategy owns approximately $ 700 million worth of bitcoin, and it plans to will buy $ 650 million more in the near future. Saylor appears to have started a new round of game theory mechanics with his purchases, such as Square, MassMutual, Riot and Stoneridge either made their own bitcoin purchases or disclosed that they already had bitcoin on their company balance sheet.
These companies now all play a game of musical chairs. It’s a race to see who can get the most bitcoin on their balance sheet to protect their businesses from the devaluation of their assets due to exponential monetary inflation. This is good for Bitcoin.
Demand for bitcoin is currently outpacing the release of new coins produced by the miners, and the macro trend seems to be for these purchased bitcoin to exit the exchanges and go to cold storage.
There is an incoming liquidity shock on the supply side. This is good for anyone who owns bitcoin over the long term. The simple supply-demand economy will at some point take over and drive bitcoin’s fiat value through the proverbial roof.
The exponential nature of deflationary technology and the printing of inflationary money will have an effect on the price of bitcoin that will shake up the most. Bitcoin is just climbing the ladder. Number goes up.
This is a guest post from Greg Zaj. The views expressed are entirely its own views and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.