The Boring Phase
Keep Learning, Keep Going
We’re deep into the boring phase of the Bitcoin cycle.
It’s a period where bitcoin’s price chops sideways, and most people lose interest in it.
This is my second time through this phase, and I remember what it was like in 2019.
You’re probably thinking “Is it really worth staying invested in this thing?” just as I thought the same thing to myself back then.
My humble opinion: Yes, it is. (Not financial advice.)
In 2018-2019, the price of bitcoin chopped sideways for almost the entirety of the two years.
Had you dollar-cost averaged into bitcoin during that time, you would have been sitting pretty by the time the bull market began in March 2020.
That bull market went into full effect later in 2020 and was in part catalyzed by the third bitcoin halving, which took place in May 2020.
Read more: Bitcoin halving: How it works and why it matters (CoinTelegraph)
The good news is that the fourth Bitcoin halving is around the corner; it’s scheduled for April 2024, about 8 months from now.
Usually, bitcoin’s price doesn’t take off until a few months after the halving, though, which means you have about a year to accumulate before bitcoin becomes a lot more expensive — if bitcoin’s price performs the same way it did during previous halving cycles.
That being said, we may see a “major deflationary bust” — as David Hunter puts it — or “a crash that will make you empty your bowels in your khakis” — as Frank Corva puts it — before the halving, which would be followed by the Fed printing enough money to make your eyes bleed.
What’s up with the melt-up?
About two weeks ago, Natalie Brunell had David Hunter, a professional investor with 50 years of experience on Wall Street, on her podcast, Coin Stories.
I highly suggest you listen to this conversation.
TL;DR — Hunter believes we’re coming to the end of a secular bull market that’s lasted over 40 years. He thinks it will end with a quick and drastic increase in asset prices, a melt-up, followed by the biggest market crash in the post-WWII period. Once this crash occurs, a commodity supercycle will begin. (Also, Hunter doesn’t care much for bitcoin.)
For those of you who are thinking “You’ve been talking about this crash forever in this newsletter, Frank, and it still hasn’t come…” my response is that “Yes, it has. We’re still just papering over the issues, though, making the system even more fragile.”
The US government in conjunction with the Fed have spent upwards of $4 trillion (about 4x the $800 billion we spent in 2008 to bail out the financial system) this year in efforts to deal with the Silicon Valley Bank and First Republic Bank blow ups as well as to service its debts and fund programs like Social Security and Medicare.
Things will likely continue to break as the Fed further hikes rates and/or keeps them high for longer.
When they break further, a major bust will likely play out, and the only way to stave off global financial markets collapsing will be to print more money than we’ve ever seen printed before.
At this point, the debt spiral that’s already begun goes into full force.
Lastly, in the episode, Hunter mentions that bonds may be worth investing in for the next few months, but that we’ll then we’ll likely see sovereign debt markets unravel as we move into double digit inflation.
Greg Foss, a bond trader with 30 years experience, echoes this sentiment…
Bondpocalypse
In the following podcast Greg Foss posits that in the coming years, people will look for safety in bitcoin rather than bonds.
TL;DR — Since WWII, people have fled to US Treasuries for safety when the market was bad. Before that, they fled to British bonds. Since sovereign debt bonds are broken (they’ll likely yield less than the inflation rate in years to come), people will eventually come to view bitcoin less like a risk asset and more like a flight-to-safety asset.
For more on why US bonds are broken and who broke them, read “Bond Villain” by Balajis Srinivasan.
Personally, I feel Greg Foss is only half right. I think people may come to view bitcoin as a flight-to-safety asset, and I think they’ll also look to gold and other commodities as a flight-to-safety play, as well.
Less Devastating Podcast Episodes
I won’t lie — listening to those two podcast episodes above made me want to jump off the RFK Bridge.
Part of the reason I started by own podcast was to share uplifting stories of people who have financially disenfranchised historically who are now benefiting from holding and using bitcoin.
So, if you listen to either or both of the two podcast episodes above, you might counter the despair you’ll likely feel with a dose of hope from a new renaissance capital podcast episode :)
You can listen via Apple Podcasts:
I’d also greatly appreciate if you could leave a review for the pod on Apple Podcasts. It will help the pod to reach more listeners. Thanks!
Paul Krugman Wants You to Get Poorer More Quickly
The man is a true psychopath.
Here’s what normalized 3% inflation would mean for your purchasing power:
At least the response’s to Krugman’s tweet provided some comedic relief:
And I couldn’t help but chime in with my favorite new meme:
Is Bitcoin Back in the Deep Value Zone?
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