Thriller "A Bitcoin Zine"

Act I

The Creation of the Fed

The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law.

Today, the Federal Reserve's responsibilities fall into four general areas.

Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.

Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.

Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.

Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.

Upon its creation in 1913, twelve central banks all act as a lender of last resort for their regions. Federal Reserve Board is above these central banks that act as a regulatory agency. Originally FRB was only allowed to veto decisions not make them. This caused paralysis in the original system as they all couldn’t agree further fuel for the beginnings of the great depression.

The Great Depression

World War 1 had only ended 10 years after the start of the Great Depression in 1929. All of Europe bankrupted themselves after WW1 because they financed it by borrowing. Their Debt to GDP levels were something like 200-300%. They paid for it by inflating the debt away. The Allies demanded reparations to Germany because they owed the U.S. The U.S. refused to forgive these debts. The Germans thought this was completely unfair and never wanted to pay.

Debt to GDP Ratio: Most countries around the world rely on sovereign debt to finance their government and economy. When this debt is used in moderation, it can position an economy to grow more quickly. This is much like using debt to finance a business.

The debt-to-GDP ratio is a financial measurement for a country, similar to a business' debt to equity ratio. Both ratios are designed to help interested parties determine if a country has too much debt. It is a measurement of financial health.

There is no set ideal ratio for a country to have to indicate it's financial health. However, when the ratio is used with other information, it can help you develop a working concept of a country's health. This can help you decide whether a country's economy is worth investing in.

U.S.'s debt-to-GDP ratio is expected to eclipse 120% this year. To put these figures into perspective, the U.S.’s highest debt-to-GDP ratio was 121.7% at the end of World War II, in 1946. Debt levels gradually fell from their post-World War II peak, before plateauing between 31% and 40% in the 1970’s—ultimately hitting a historic 31.7% low, in 1974. Ratios have steadily risen since 1980 and then jumped sharply, following 2007’s subprime housing crisis and the subsequent financial meltdown.

One of the consequences of WW1 was massive inflation which caused hyper inflation in the early 1920’s. Central Bankers spent most of the mid to late 1920’s trying save the British pound from collapsing. They actually went back to the Gold Standard because they thought it was the cure for hyper-inflation. They were wrong. The world suffered from the shortage of gold in the 1920’s as there was not enough to go around (2/3 of the Gold was with the U.S. because of WW1, capital flights, payments etc…) Main problem was Britain went back to the old exchange rate for XAU/GBP (Gold / British pound.) Which…

Today we discuss Bitcoin in June.

TradingShot

The May Triangle The price has been consolidating within a Triangle since the May 07 $10100 High. Typically when Triangles break, that is the direction to follow.- If the current Triangle breaks upwards, we still have the August 20, 2019 Lower Highs trend-line (dotted line) to consider as well as (and more importantly) the $10500 9-month Resistance.- If the Triangle breaks downwards, it will make contact with the 1D MA50 (blue line) and then have two important Support levels to consider: the $8400 Symmetrical Support 1 (from the March 01, 2020 low) and the $7750 Symmetrical Support 2…

As Quantitative Easing approaches infinity, it simply has to have an impact on things whose quantity can’t be eased.

Quantitative easing is a tool that central banks, like us, can use to inject money directly into the economy.

Money is either physical, like banknotes, or digital, like the money in your bank account. Quantitative easing involves us creating digital money. We then use it to buy things like government debt in the form of bonds. You may also hear it called ‘QE’ or ‘asset purchase’ – these are the same thing.

The aim of QE is simple: by creating this ‘new’ money, we aim to boost spending and investment in the economy.

But Why Quantitative Easing Infinity?

When governments increase the quantity of paper money, it takes more pieces of paper money to buy things that have fixed quantities, like stocks and real estate. They settle above where they would absent an increase in the amount of money.

The policy is already achieving its goal: the S&P500 is actually above its May 31, 2019 level. There is no chance that would be true without trillions of new dollars. Like hydrostatic pressure, that flood of new money will float all boats — inflating the price of other fixed-quantity assets like gold, bitcoin, and other cryptocurrencies.

Bitcoin has its inflation curve transparently laid out for 100 years in advance. Nobody knows how many dollars will be printed this year or the next. If you plot inflation curves for Bitcoin and USD on a chart, Bitcoin’s curve will be going down, and dollar’s will be going up.

Moreover, the rate of increase of USD supply changes abruptly: every ten years there’s a crisis and new dollars are printed. The main problem with dollars and other traditional currencies is that the inflation surges aren’t coordinated with the people who use the money.

At the time of writing, more than $6Trillion has already been injected into the monetary and financial system that the Fed has decided to save whatever it costs to the American people.

A Lone Wolf Speaks…

Economists and analysts are paid and incentivized to operate within the existing Keynesian system of government based inflationary economics. To a certain degree we all are incentivized to support the current system since we all need to pay our rent (or mortgage) and our other bills. That is until the system breaks down, which when it does, the game of musical chairs will be over, and someone will be left with no chair to sit in. Paul Tudor Jones, the famous hedge fund manager, recently came to this conclusion in a very public way.

Seeking Refuge from the Great Monetary Inflation

- according to Paul Tudor Jones

So with this type of monetary growth as a backdrop, here is one way to navigate these extraordinary times and policy actions.

At the end of the day, the best profit-maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping in the performance dust because you thought you were smarter than the market. If I am forced to forecast, my bet is it will be Bitcoin.

A store of value is anything that holds its purchasing power in the future. It is completely a function of people’s perception of its worth.

Bitcoin reminds me of gold when I first got in the business in 1976. Gold had just been productized as a futures instrument (like Bitcoin recently) and had enjoyed a heck of a bull market, almost tripling in price. It then corrected almost 50% in nearly two years similar to Bitcoin’s 28-month 80% correction! You can see the similarities in the two charts below.

Citations:

Investor Letter, Paul Tudor Jones, May 2020 DelphiDigital RealClearPolitics

Goldman Sachs’ latest client conference call will include a subject that Wall Street has either long derided or shrugged off: Bitcoin.

Per an invitation to investors, the investment bank is holding a client call on “US Economic Outlook & “Implications of Current Policies for Inflation, Gold and Bitcoin.” The conference call, set for May 27 at 10:30am EST, is the fifteenth in a series on macro economic and financial trends.

Sharmin Mossavar-Rhami, a Chief Investment Officer at Goldman, will host the call alongside Jason Furman, an economics professor at the Harvard Kennedy Business school and Jan Hatzius, a…

On May 11th, the block reward in the Bitcoin network was decreased from 12.5 to 6.25 BTC heralding the 3rd halving in Bitcoin history.

Block #630000, was the first to bring a decreased reward, and it was mined by the AntPool mining pool group.

On Chain Metrics

The number of active addresses (and entities) has increased to levels not seen since the 2017 bull market - as has the number of new addresses - suggesting an increase not just in activity, but also in adoption.

Not only are we seeing increased on-chain activity from new adopters, but also from longer-term investors; specifically, hodlers and whales.

Miners

No surprise that ASIC chip manufacturers have caught up to the cutting edge. Miners now have the smallest & most efficient nanometer chip architecture. This is interesting because in the past, if you purchased a miner, by the time it was shipped to you, there would be a better generation making yours almost obsolete. (ahem Bitmain) Now that miners have caught up to mainstream generalized chip fabrication, when you buy a mining rig, you know that there will not be one 2x as fast next month. This enables more predictability and the costs of miners will come down thanks to mass production. Miners will mine and hold, speculating, and covering power costs until they are forced to sell. The mining industry is simply going to look for cheaper & greener electricity like geothermal, hydroelectric, as well as to use up excess power that power-plants where going to the waste in the first place.

Bitcoin Hash Rate as of Today.

The hashrate will fall that is for certain. Most have made the move back to BCH and BSV. Also the weakest miners will have to shut down unless we see a huge increase in the price, around 15–30% will shut off. Now some miners will turn on again after the first difficulty adjustment takes place. The older machines will eventually shut off as new, many old mining machines, especially S9, will fade away from the market, better machines will come online (some mining farms may have access to free electricity, so they could still run S9.) These new machines will push the difficulty rate higher which will make older machines with less hash-power unprofitable. I foresee this happening in a span from June, July and part of August.

Bullish Factors after the halving

Facebook Calibra launch in October

Ethereum 2.0 Launch in 3rd Quarter.

Bakkt Phase 2 Roll-out sometime this summer.

China’s Digital Yuan release rolling out now and the rest of the year.

CBDC’s set to release to the public at some point in 2021. Possible Cryptocurrency Act as well.

More Stimulus Checks? Later this summer.

More Fed printing….brrr

Bitcoin Upgrades; BIP 340 Schnorr Signatures, BIP 341 Taproot, BIP 342 Tapscript, Stratum V2 —all possible for implementation in 2021.

Bitcoin

Events impacting Bitcoin 2020 — the halving, proving itself as a safe haven asset, quantitative easing, businesses emerging from the crisis, regulation changes and technical upgrades — all individually have the potential to change its path forever, but all combined at once & no one is going to want to look away.

This time, the price may be growing faster, since more people consider Bitcoin as a safe haven asset because of the crisis. There are chances we will never see prices like in the middle of March ever again. History is telling us that the Bitcoin price will typically begin to rise significantly within the 12 months following a halving — I think we will see the real rally in 2021. Now, Bitcoin is a full-fledged asset used by Wall Street companies and I think it’s ready to establish itself in some way.

One potential framework for analyzing the impact of halvings is to study the change in the stock-to-flow ratio across each halving. The first halving reduced the supply by 15% of the total outstanding bitcoins. That’s a huge impac…

CoinDesk's annual conference on the future of the global financial system is happening this week. Consensus: Distributed features hundreds of hours of programming with more than 150 speakers over five days, from May 11th-15th.

Highlights

Chris Giancarlo and Martin Chorzempa talking with CoinDesk Asia about the Digital Dollar

Giancarlo is a renowned blockchain technology advocate and key contributor to the global discourse on cryptocurrencies and digital assets. Mr. Giancarlo is the founder of the Digital Dollar Project, dedicated to catalyzing exploration of a US central bank digital currency. During his tenure as Chairman of the CFTC, the agency published primers on virtual currencies and smart contracts, the first bitcoin futures contracts were offered, and the CFTC launched LabCFTC as the agency’s stakeholder in the digital evolution of derivatives trading markets.

Martin Chorzempa, research fellow, joined the Peterson Institute for International Economics in 2017. He gained expertise in financial innovation while in Germany as a Fulbright Scholar and researcher at the Association of German Banks. He conducted research on financial liberalization in Beijing, first as a Luce Scholar at Peking University’s China Center for Economic Research and then at the China Finance 40 Forum, China’s leading independent think tank.

Kathleen Breitman discussing Blockchain Gaming

Kathleen is the co-founder of Coase, a software company which aims to lower transaction costs online, and Tezos, a smart contract platform.

Caitlin Long on Bitcoin and Crypto Custody.

Caitlin Long is a 22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. She led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 13 blockchain-enabling laws in 2018 and 2019. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), held senior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997).

QuadrigaCX Bankruptcy and Fallout

QuadrigaCX, you know the story: CEO found missing, $190 million of customer's funds missing, mismanagement, conspiracy. It's been a little over a year since former CEO Gerald Cotten's death was reported, setting off a whirlwind investigation, and this panel will give you insight into where the case stands today. And if you're a frustrated creditor, just allow you to vent and be heard.

Tong Zou (Speaker) - QuadrigaCX Affected User, a software engineer, used to be based in San Francisco, now based in Vancouver.

Evan Thomas (Speaker) - Evan is a Canadian litigator focusing on cases involving technology, privacy and data. He advises clients in the crypto space on matters relating to regulatory enforcement, litigation and other risks.

Magdalena Gronowska (Speaker) - Quadriga Bankruptcy Inspector; Partner • MetaMesh. Magdalena is active in Canada’s digital asset ecosystem – she recently supported the IPO launch of North America's first regulated, TSX-listed Bitcoin Fund, sits on the Board of Inspectors overseeing the CAD214 million bankruptcy of Quadriga, is a Partner at Metamesh – a blockchain and digital asset consultancy, and advises the Blockchain for Climate Foundation. Prior to joining the private sector, Magdalena managed multiple $million to $billion public sector initiatives that helped businesses start up, compete globally, and adopt technology.

JPMorgan Extends Banking Services to Bitcoin Exchanges - JPMorgan is said to be now serving crypto exchanges. Coinbase and Gemini are reportedly the bank’s first clients. This is the first time JPMorgan has taken clients from the crypto space. Coinbase and Gemini's accounts were approved last month,…

Bitcoin’s long-anticipated halving event took place today.

At the time it took place (19:23 UTC or 3:30 p.m. ET), bitcoin was trading below its 10-day and 50-day moving averages, bearish technical indicators after a huge 10% drop in price on May 10 at 00:00 UTC. This was triggered by an outage striking San Francisco-based exchange Coinbase. At press time, bitcoin (BTC) was trading down less than a percent over 24 hours at $8,677.

The bitcoin halving, which reduced the new supply of bitcoin generated by cryptocurrency miners from 12.5 to 6.25 BTC per block (a reduction from roughly 1,800 BTC down to 900 BTC per…

CoinDesk's annual conference on the future of the global financial system is happening this week. Consensus: Distributed features hundreds of hours of programming with more than 150 speakers over five days, from May 11th-15th.

Highlights

Yves Mersch on Central Bank Digital Currencies

Member of the Executive Board, Vice-Chair of the Supervisory Board • European Central Bank

Yves Mersch was appointed to the Executive Board of the ECB in 2012 when serving his third term as Governor of the Banque centrale du Luxembourg, a position he had held since 1998. In 2019 he was appointed Vice-Chair of the ECB’s Supervisory Board.Before setting up his country’s central bank, he represented his country in the International Monetary Fund, World Bank, European Investment Bank and other multilateral organisations, as well as in private companies where he has been globally active in both financial and industrial areas.Mr Mersch holds postgraduate degrees in political science from Paris Sorbonne, and law from Paris Panthéon University. He is the longest-serving member on the ECB’s Governing Council.

Former Treasury Secretary Lawrence Summers & fintech author and futurist Dave Birch

Former Treasury Secretary Lawrence H. Summers is one of America’s leading economists. In addition to serving as 71st Secretary of the Treasury in the Clinton Administration, Dr. Summers served as Director of the White House National Economic Council in the Obama Administration, as President of Harvard University, and as the Chief Economist of the World Bank.Dr. Summers’ tenure at the U.S. Treasury coincided with the longest period of sustained economic growth in U.S. history. He is the only Treasury Secretary in the last half century to have left office with the national budget in surplus. Dr. Summers has played a key role in addressing every major financial crisis for the last two decades.

David G.W. Birch is an author, advisor and commentator on digital financial services. He is Global Ambassador for Consult Hyperion (the secure electronic transactions consultancy that he helped to found), Technology Fellow at the Centre for the Study of Financial Innovation (the London-based think tank) and a Visiting Professor at the University of Surrey Business School.

Chris Giancarlo and the Digital Dollar Project & Dante Disparte of Libra Association

The Honorable J. Christopher (“Chris”) Giancarlo is an American attorney and former business executive who served as 13th Chairman of the United States Commodity Futures Trading Commission (CFTC).

Dante Disparte is the vice chairman and Head of Policy and Communications for the Libra Association, a newly-formed organization that has brought together social impact organizations and a diverse group of leading businesses from around the world to create a low-friction, high-trust payment system that empowers billions of people.

Gavin Wood on Chain Mergers and Acquisitions

Gavin Wood, an original co-founder of Ethereum, took a few good swipes at the second-largest cryptocurrency he helped create, calling out its lack of “agency” when upgrading to its next version, Ethereum 2.0.

Plan B discussion: Saifedean Ammous, Erik Voorhees

Saifedean Ammous is the author of The Bitcoin Standard: The Decentralized Alternative to Central Banking, the first academic study of the economics of bitcoin. He also runs saifedean.com, a platform for online courses in economics.

Erik Voorhees is among the top-recognized serial Bitcoin advocates and entrepreneurs, understanding Bitcoin as one of the most important inventions ever created by humanity.

US Banking Regulator Suggests Federal Licensing Framework for Crypto Firms - Brian Brooks, chief operating officer of the U.S. Office of the Comptroller of the Currency (OCC), the nation's national bank overseer, said Monday he believes crypto companies could fall under a federal licensing regime…

Today we discuss Bitcoin in May.

We have discussed, Bitcoin Halving in a recent episode but from that episode we have concluded bitcoin price action is a result of the halving as well as, “Have the miners priced in the halving?”

We used historical market data and even went a step further to study market trends in order to predict potential future prices. It was a lot of fun to say the least.

Based on our analysis, we can only speculate on the price at the time of the halving.

Our analysis…

The third halving event in Bitcoin’s history is approaching. A halving in Bitcoin is when the number of new bitcoin created roughly every ten minutes is cut in half. This change in the Bitcoin issuance rate is scheduled to take place every 210,000 blocks (around every four years).

After hitting a 2020 high of over $10K in mid-February, the bitcoin price was lower than $5K a month later. Since then its been an uphill climb, the price of bitcoin has recovered somewhat to around $7.8K. Since ‘Black Thursday’ (March 12), bitcoin prices have gained 103% since then rising from $3.8K to $7.8K per bitcoin.

Miners

Hash Rate increasing 12 Days out…

Miners, miners, miners…we have to remember the halving cleanses the removal of inefficient miners. We have to understand why this is important and related to bitcoin price. First the bitcoin rewards get allocated to the very efficient miners — the people that have deployed correctly relative to low [cost] electricity. Ultimately we want bitcoin in the hands of these types of miners because they do not have to sell as much bitcoin. Most if not all miners will operate at a loss after the halving, which creates even more sell pressure because everything they are mining is going to get sold. The very efficient miners have better margins, they don’t have to sell as much bitcoin, because they have prepared for this adjustment. This could take 2-4 months for inefficient miners to get removed from the network.

The question to ask is. “Have the miners priced in the halving?” This is the most important question when predicating price going into the halving. Which is also related to the downward bitcoin price movement?

Currency Wars

Money Printer go burrrr…

Adjusting the money supply in line with demand is one of the primary functions of FED and central banks. The most important rule of the game is to avoid a deflationary environment, most people expect tomorrow’s dollar to be very stable. We know Fiat currencies tend to be inflationary by their nature.

The importance of dynamic money supply was learned the hard way in 1929 when the FED failed to tackle a deflationary dollar. As the dollar deflated, the purchasing power of each dollar increased. People chose to save rather than spend. The velocity of money dropped, the economy contracted and the worst recession of the century followed.

It is safe to acknowledge that fiat currencies are great for day-to-day transactions for now. They are fine for short term savings for now. They are convenient for rainy-day funds…not anymore they have become terrible as savings instruments.

Remember Bitcoin is not a fiat currency and it is certainly not responsible for keeping liquidity within an economy. Bitcoin is a disinflationary asset with a fixed and transparent supply schedule. Don’t save in fiat. Save in Bitcoin.

Bullish Factors going into the halving

The drop…to 6 bitcoin is far more vital this halving than most people understand.

Consensus 2020, Ethereal 2020, Virtual Blockchain Week.

More Stimulus Checks? Possibly and if so more will enter Bitcoin.

Unforeseen Major FinTech Announcements.

Buy-side pressure overtakes Sell-side pressure.

Bearish Factors going into the halving

Covid-19, Lock-down.

Massive layoffs, Unemployment, No excess fiat.

Signs of a Great Depression in play?

The unexpectedness of 2020? We do not know what is around the corner economically especially this year.

Bitcoin

We need to discuss PlanB because he is releasing a variation on the Bitcoin stock-to-flow model. This new model, known as the “S2FX”, model. PlanB’s S2FX model combines the valuation of Bitcoin with assets such as gold and silver.

PlanB has come to the conclusion that bitcoin as an asset is going through a series of “phase transitions”.

These BTC narratives seem very…