Bitcoin Is a Bullshit Meter
And, Good Lord, Is This World Filled with Bullshit
Three days ago, I published an article in which I explained what the acronym “FUD” means. Less than 24 hours after hitting the “Publish” button, the digital asset markets got hit with a tsunami of FUD. First, we had Elon Musk do his part in spreading the environmental FUD, which was then followed by more Tether FUD (this FUD was actually kind of legit), which was topped off by some U.S. regulator FUD. Even I, for the first time in maybe two or three years, felt a bit of panic as the digital asset markets tanked. And you know what I did when I felt that panic? I bought the dip.
You can also see the above index here.
In these moments of panic, it’s important to remind yourself of the old Warren Buffet maxim:
Be fearful when others are greedy, and be greedy when others are fearful.
Or you can listen to Shardi B.
Basically, the same difference.
Since it takes a lot for markets to emotionally shake me these days, I know that when I do feel such fear, a bottom is likely forming. I don’t really get scared when the price of Bitcoin or other digital assets drop because, as I wrote in the first edition of this newsletter, I bought into the cryptocurrency markets when they were at a top in January of 2018, so my first lesson in markets was what it feels like to lose money. Back then, especially, I wasn’t so worried about losing that money, because I never put in more than I was willing to lose. It was more of an experiment than anything. Actually, a better way to put it, looking back, was that it was like a downpayment on my education in the space. Having some skin in the game made me begin to pay attention, to learn more. And so my advice to you today if you are new to this market or to markets in general is to develop thicker skin and to do your homework (and, obviously, don’t put in more money than you are willing to lose.)
The thicker skin is necessary to help you to look at markets more objectively. Without thick skin, you will most likely trade emotionally. Trading emotionally usually means trading (or “FOMOing”) into the euphoria and selling into the despair. In other words, emotional traders put more money into a trade when they seen green on their charts (prices rising) and sell when they see red on the charts (prices falling), while professional traders, like the ones at JPMorgan who I’ve mentioned repeatedly in various editions of this newsletter, do the complete opposite. They sell when markets are green and they buy when markets are red. I was describing this dynamic to a Chinese friend of mine yesterday, and she responded by explaining that the Chinese have an analogy for this. Below is said analogy:
Knowing when to sell is like harvesting chives. When you see the long green stem fully emerge from the ground, it is time to pick it.
Truly profound, and yet so simple. So, when you see long green candles on your candlestick charts, it is likely time to harvest, to sell. When you see red, it is likely time to plant some seeds, to buy. Again, though, it is important to understand past Bitcoin cycles to see the bigger picture at play here.
So, if you sold any of your holdings yesterday, you sold while you should have been buying. And you sold to the institutions that understand that inexperienced retail traders are easy to scare, and, therefore, easy to buy from. This is where the doing your homework component of the equation comes in.
If you are going to invest in an asset, read up on that asset. Read up on it to no end. Develop a thesis on why you want to invest in that asset. If you don’t understand the asset in which you are investing and are only investing in that asset for speculative purposes, you will likely lose your money. So, if you really don’t understand what Bitcoin is, or if you don’t understand the massive difference in investing in something like Bitcoin vs. Ethereum, then you likely should not be investing in digital asset markets. If this newsletter or the mainstream media is your only source of information about digital assets, then you likely should not be investing in digital asset markets. This newsletter should be nothing more than a jumping off point for you to do your own research.
I share the thoughts in the previous paragraph because, after hundreds and hundreds of hours of studying markets in both formal and informal settings, I’ve developed my own concept of what assets like Bitcoin and Ethereum are, and I have my own reasons for holding these assets - and those reasons have changed and evolved over time. Because I have never seem to have had the best mind for math or engineering, I struggle to absorb the technical aspects of what Bitcoin is (I am even reading a book on these technical aspects now; so difficult to understand!), but I have developed a clear philosophical perspective on what it is. To me, Bitcoin is a bullshit meter. It’s a bullshit meter in a world where:
Donald J. Trump, a “real estate tycoon”, can masquerade as a U.S. president, convincing struggling working class people that he is going to make them rich, after gaining a reputation for not paying working class people for the work they have done on his properties. This same con artist also convinced these same working people that cutting taxes for the richest Americans and devaluing the U.S. dollar by printing 23% of the U.S. dollars that ever existed just in his last year in office was going to to be the path to their prosperity. Fucking lunacy
Barrack Obama not only didn’t prosecute one single banker who caused the financial collapse of 2008, he gave them all more taxpayer dollars. I know, I know… but he was Black, and while his being the first Black American president was something that was surely worth celebrating, it wasn’t a reason to abandon your critical thinking skills. As my favorite artist on planet Earth, Immortal Technique, said right after Obama was elected, Rome had a Black caesar during its decline, as well. Please remember who put Obama in office, and please don’t kid yourself by pretending that they didn’t know that most people would focus more on his being the first Black American president than the substance of his policy
Biden has now been in office for over 100 days and has not forgiven a single dollar in student loan debt, though, he campaigned on the promise that he would forgive at least $10,000 for anyone who still had loans
The DNC did everything in its power - twice - to stop the nomination of Bernie Sanders, someone who might have actually done something about student loan debt
Private universities and colleges put you a quarter million dollars in debt, and get you to think more like Karl Marx and less like Jeff Bezos in the process. The most troubling part about this is that the woke intelligentsia that teach at these colleges don’t see anything wrong with this. Something needs to justify their PhDs, right?
Janet Yellen, the current U.S. Secretary of the Treasury earned $7.2 million in speaking fees from big banks in the last two years, and gets a slap on the wrist for even mentioning the rising inflation in the U.S.
Charlie Munger, Warren Buffet’s partner, states that Bitcoin is “disgusting and contrary to the interests of civilization” while continuing to invest in McDonald’s and Coca Cola, as America and the rest of the world increasingly faces an obesity epidemic. Munger also really likes to invest in those same banks like to do all of the money laundering that I spoke about in a recent edition of the newsletter. His money really seems to be invested in the betterment of civilization. What a smart guy
The U.S. Federal Reserve, an institution that is neither federal nor a reserve, prints money to further enrich the wealthiest in our society while the further widening the inequality gap. (And for those who want to argue that the Fed had to print this money because of COVID, my response is 1. Okay, maybe. But that money could have been distributed to the most vulnerable instead of to commercial banks (Read my piece on The Cantillon Effect for more on that) and 2. COVID was simply the straw that broke the camels back in markets; the Fed was injecting money into repo markets at the end of 2019 and the beginning of 2020. I saw this and moved all of my money from stocks into cash positions in December of 2020, a few months before the March 2020 market crash. I saw that crash coming; COVID just happened to be the catalyst for it. My financial advisor thought I was being extreme at the time, though, he wasn’t so against my decision by the end of March 2020. That financial advisor no longer manages any of my money)
Mind boggling Powell gets away with this bullshit unchallenged when even billionaires are openly admitting it.(Article link in Tweet above - “Powell Says Fed Policies Absolutely Don’t Add to Inequality” (Bloomberg). And the billionaire to which Henrich is referring is Stanley Druckenmiller. You can see what Druckenmiller has to say here. Start at 38:00)
Now, what has Bitcoin done since the financial crisis of 2008/2009? (Note: Bitcoin was actually invented in 2009 because Obama focused more on money printing than on prosecuting bankers). Oh, that’s right - it’s gone from being worth $0.00 to being worth $48,082.33 (as of the time of publication). And look at all of the bullshit we’ve experienced in the past 12 years.
Now, of course Bitcoin isn’t technically a “bullshit meter”, but it was created as an alternative to the current financial system within almost a year of that financial system exposing itself for the fraud that it really is. It is also important to keep in mind that, technically, Bitcoin isn’t an inflation hedge either, because it isn’t pegged to the U.S. dollar. (Gold also isn’t technically an inflation hedge for the same reason.) It is, though, in and of itself, a deflationary monetary technology. To put that in layperson’s terms, less Bitcoin is produced as time marches on, while more and more dollars tend to be printed. This ever-increasing scarcity is one of the factors that gives Bitcoin its “value”.
So, to paraphrase Chamath Palihapitiya on the most recent episode of the All-In Podcast, the markets are one of the last places where’s people’s votes really matter. My investing is Bitcoin is partially my vote to opt out of the traditional financial system. It’s also partially speculative, and partially based on the fact that that I believe that Bitcoin is a superior form of monetary technology as compared to the U.S. dollar, or to any fiat currency for that matter. Either way, I share all of this to make the point that I have developed my own thesis for holding Bitcoin, and that this thesis differs from the reasons for why I hold other digital assets/cryptocurrencies. I highly suggest that you do the same, because, if you don’t, you aren’t investing, you’re gambling. And as Scott Melker recently said, “If you like gambling, I suggest going to Vegas. You’ll probably lose money, but at least the drinks are free there.” Some signs that you are gambling include: having no understanding of the role that the asset you are buying plays in the current financial system, having no idea of the utility of the asset you are buying, and buying a coin with a dog’s face on it.
So, do you homework, and next time you find yourself panicking as the price of Bitcoin drops, remember that it’s likely a time to buy, not sell (unless we’re at the end of a bull market cycle). The mainstream media and other legacy institutions are going to continue to roll their FUD dice and choose one topic or another with which to scare you out of your position. The best way to not lose your footing is to know why you’ve invested in this asset and what you consider the value of this asset to be. Again, and as always, though, this isn’t financial advice and I am not a financial advisor. I’m just a guy who’s really tired of all of the bullshit.
Best,
Frank
Twitter: @frankcorva
Currently Reading: On the Hippocrates at Apple Who Fired Antonio Garcia-Martinez, by Matt Taibbi
If you’ve found this newsletter and would like to donate, please feel free to do so through the following avenues.
Venmo: @Francis-Corva
PayPal: @fcorva
