This Time Is Different

Bitcoin changes the surface area for energy transfer

We’ve seen bubbles build and burst before.

Some folks thought the internet meant economic growth would grow by 10% to 20% every year.. forever.

Financial bubbles often arise due to this-time-is-different syndrome where even experts ignore historical patterns and warning signs. This has led to numerous crises throughout history, from currency debasement to sovereign defaults, highlighting the cyclical nature of financial instability.

As these bubbles burst energy moves from one asset class to another asset class — away from risk toward perceived downside protection + yield — but always denominated in fiat money. Basically: money moving from the left hand to the right hand… but still in the control of central bank printers.

This time is different because Bitcoin is a globally accepted store of wealth and medium of exchange now.

Bitcoin isn't just another asset; it's a paradigm shift — sovereign power for each of us. We can band together to form economic powerhouses or build empires of our own and team-up when great opportunities arise.

No middlemen or parasitic parties of any kind.

In the past, economic cycles trapped energy in the quicksand of fiat. This time, Bitcoin exists as a hardened reservoir, a beacon of algorithmic truth, ready to absorb and redirect that energy.

How’d We get Here?

The history of financial markets is punctuated by bubbles, each characterized by a collective belief that "this time is different."

This syndrome, often infecting otherwise astute individuals, leads to a disregard for historical precedents and warning signs. The consequences are usually disastrous, with bubbles invariably bursting and causing widespread economic damage.

The Roaring Twenties: Bankers and economists in the 1920s, amidst a booming stock market, confidently proclaimed a new era of peace and stability. This belief was shattered by the Great Depression.

The Housing Bubble (2003-2007): Soaring home prices and innovative financial products were seen as signs of progress, rather than red flags for a looming crisis. The subsequent collapse of the housing market triggered the Great Recession.

Throughout history, governments have often resorted to devaluing their currencies or printing excessive amounts of money to finance spending. This practice, while seemingly a quick fix, often leads to runaway inflation and economic instability.

Countries, unable to meet their debt obligations, have defaulted numerous times throughout history. These defaults, while disruptive in the short term, are a recurring feature of the global financial system.

The past two centuries have witnessed a series of financial crises, each with its unique triggers but sharing a common thread of excessive risk-taking and a disregard for historical patterns.

How Does Bitcoin Change Anything?

Can we as a society truly resist the temptation to print more money when times get tough? I'm not so sure. That's why I find Bitcoin's algorithmic hardness so appealing. It's a system where the rules are set in stone, not subject to the whims of politicians or the lure of price action tempting you to create more money.

Bitcoin is changing the rules of the game. Previous economic cycles saw wealth concentrated in fiat currencies and related assets, subject to manipulation and devaluation. This time, Bitcoin offers an escape hatch – a decentralized, immutable store of value that can absorb excess energy from the system.

Its fixed supply—a mere 21 million coins—acts as an impenetrable shield against inflation, preserving its power as a store of value. Unlike gold, Bitcoin transcends physical limitations, seamlessly traversing borders and dividing into minuscule fractions.

With each halving event, Bitcoin's issuance rate shrinks, driving scarcity and potentially fueling appreciation. This is no mere currency; it's a masterpiece of game theory and cryptography, an immutable ledger secured by a symphony of hashing and Merkle trees. Bitcoin's resilience isn't economical; it's mathematical.

What Happens Next?

Bitcoin's journey towards becoming a mainstream store of value and medium of exchange hinges on widespread adoption—not only by individuals, whose interest is rapidly growing, but critically by businesses and institutions as they restructure their capital frameworks.

This involves not just recognizing Bitcoin as legal tender but integrating it into everyday payment systems across the globe.

Institutional Investment: The Catalyst for Demand

Institutional investors like hedge funds, pension funds, and endowments are beginning to see Bitcoin as a legitimate asset class. As these large entities incorporate Bitcoin into their portfolios, we'll see a significant influx of capital into the Bitcoin market. This movement is exemplified by companies like MicroStrategy and Tesla incorporating Bitcoin into their corporate treasuries, setting a trend that encourages other businesses to adopt Bitcoin as a reserve asset.

Integration with Financial Systems: Broadening the Base

Although I advocate for the direct self-custody of Bitcoin over third-party control, integrating Bitcoin with existing financial infrastructures is essential. It will unlock more investment avenues and facilitate broader adoption. The development of Bitcoin-based financial products and services will further expand the ecosystem, attracting more participants.

Retail Investors: Strengthening Market Foundations

Platforms like Robinhood and Square's Cash App are making Bitcoin accessible to a growing number of retail investors, adding to the swelling demand. This demographic plays a crucial role in the robust growth of Bitcoin's market.

Network Development: Enhancing Usability and Security

The ongoing development of the Bitcoin network, including scalability solutions like the Lightning Network, is vital for enhancing transaction speeds and reducing costs, making Bitcoin more viable for daily transactions. Continuous improvements to the network's infrastructure and security are imperative for sustaining Bitcoin's long-term viability.

Bitcoin as a Safe Haven: Beyond Digital Gold

In periods of economic uncertainty or geopolitical tensions, investors traditionally turn to safe-haven assets like gold. Bitcoin, characterized by its limited supply and decentralized nature, is increasingly viewed as an alternative to gold. This perception supports Bitcoin's demand spikes as investors look to protect their wealth during turbulent times.

Of course, Bitcoin has many characteristics that Gold will never have. And if Gold does, $BTC does too… just in superior quality:

1. Portability: Bitcoin is infinitely more portable than gold. It can be transferred across borders instantly with minimal fees, while transporting large quantities of gold is cumbersome, expensive, and risky.

2. Divisibility: Bitcoin is easily divisible into smaller units (satoshis), making it suitable for micro-transactions and everyday purchases. Gold is less divisible limiting its use for smaller transactions.

3. Verifiability: Bitcoin transactions are publicly verifiable on the blockchain, ensuring transparency and immutability. Verifying the authenticity and purity of gold requires specialized expertise and can be prone to fraud.

4. Accessibility: Bitcoin is accessible to anyone with an internet connection, while acquiring and storing physical gold can be challenging, especially for individuals in less developed regions.

5. Liquidity: Bitcoin markets operate 24/7, offering higher liquidity compared to gold markets which are limited to market hours and depend heavily on physical locations for trading. This around-the-clock trading allows for quicker access to funds and easier execution of transactions.

6. Censorship Resistance: Bitcoin transactions are resistant to censorship and cannot be easily blocked or reversed by governments or financial institutions. Gold, however, is susceptible to confiscation and can be restricted by government regulations.

7. Programmability: Bitcoin's underlying blockchain technology allows for smart contracts and other programmable features, opening up a world of possibilities for financial innovation and automation. Gold lacks this programmability, limiting its potential applications.

   1. If you deliver the contracted requirements, you get the sats

8. Decentralization: Unlike gold, which is often mined, stored, and traded through centralized institutions that can manipulate its price and availability, Bitcoin operates on a decentralized network maintained by nodes around the world. This decentralization means no single entity can control Bitcoin entirely, offering a level of political and economic independence not found in gold or any other asset class.

Network Effects: Creating a Self-Reinforcing Cycle

As Bitcoin adoption grows, so do its network effects, which in turn make it more appealing for new users.

This virtuous cycle of adoption and enhancement helps to further solidify Bitcoin's standing in the financial landscape, promising a self-reinforcing momentum makes Bitcoin a new pillar of modern finance.

Bitcoin and Fiat

I believe Bitcoin will become the preferred asset class to store on company balance sheets — we explore that more deeply in this piece here:

The implications of Bitcoin’s presence when this next bubble bursts is profound.

As you study history you learn currency has been a tool to control where energy goes in the economy, and the decisions people make.

Transparency has intentionally never been a priority for those who issue and regulate money. It's easy to manipulate that which hides in the shadows. Bitcoin breaks this mold. It offers a currency where the rules are visible, the supply is known, and ownership is indisputable. This unprecedented transparency is a core part of Bitcoin's revolutionary power.

From murky gold mines & vaults, to the arcane world of traditional finance, a lack of transparency has long undermined trust and efficiency.

Bitcoin shines a light in the dark.

The unique combination of math and game theory at Bitcoin’s heart is area worth studying in more depth. There’s no doubt any rise in Bitcoin implies a drop in fiat, and the reasons for that drop have been the subject our our analysis before.

But what if the bubble bursts and instead of energy moving from these sectors of the stock market to that sector of the stock market… it leaves the market entirely?

And moves toward that shining light: Bitcoin.

That would make the darkness reach parts of the Equities and Debt markets for the first time ever.

Global capital structures are not built for that to happen.

Fragile doesn’t begin to describe it.

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