Market Lab Report / Dr. K's Crypto-Corner
by Dr. Chris Kacher
Nation-state command-and-control will transform into a self-organized digital society: Viva la Evolution™
Bitcoin is Feasting on Gold
They showed a chart of gold in the 1970s then overlaid the chart of BTC over the last 11 years. The thesis is that BTC is the new gold, everyone needs an inflation hedge, and nobody's buying gold. Most people over 50 own gold than BTC. When they pass the gold down to their next of kin which they sometimes do well before they die for tax reasons, this younger generation typically trades it in for BTC. Gold is not as trusted by the young. It comes out of the ground at $600/oz, the price is manipulated by the miners and JP Morgan's of the world with the paper trade which is 100-times the volume of all gold, it's expensive to move around, it's expensive to store, and fraud is common #fakegold. So just as digital is eating the world, it should not be surprising that bitcoin is eating gold.
There is also an interesting correlation between BTC adoption and the internet. Bitcoin has roughly the same the number users as the Internet had in 1997. But Bitcoin's growing faster. The next 4 years on its current path will bring the number of Bitcoin users to 1 billion, or the equivalent of 2005 for the Internet. P2P platforms have also driven the exponential adoption of crypto in countries such as Nigeria and Afghanistan where banks and ATMs are out of cash, so BTC is being hoarded with citizens hiding it from the Taliban. I remember in 2016 being in Buenos Aires where ATMs were often out of cash or it would take over an hour due to the long lines of people waiting to take cash out.
Meanwhile bitcoin continues to eat the remittance market as those in developing countries cant afford the 30% or greater haircut in fees from platforms such as Western Union. In Nigeria, their remittance services dropped by $6 billion because people are using BTC to move value with their phones.
The End of Fiat?
Deloitte spoke with 1700 top financial executives and the conclusion among them was that fiat money is nearing its end by 2025-2030. If you look at the increase in household wealth by the increase in money supply, they correlate, but it is only the top 1% who are truly benefitting. It does not trickle down by much. When you put money into a system, it doesn't disappear, but due to the Cantillon effect, only those who hold stocks, real estate, bonds, and hard assets get the most benefit. The top 1% benefit the most. The middle and lower classes benefit the least. Meanwhile, fiat debases as the money supply increases. When a government increases its money supply by 50%, its currency debases by 50%. On top of this, we have amplifiers on this effect with C19, supply chain problems, and inflation that has been an issue, especially with essentials such as health care and education. The anti-bitcoin gold bug Peter Schiff could have thrown $100k at BTC a decade ago when he knew about it and admits he could have been a billionaire, yet he has become even more acerbic against bitcoin which he insists has no value and no purpose except for money laundering and other nefarious activities. Schiff sounds like Nouriel Roubini in the early to mid-1990s when Roubini said mobile phones were a dead end and the internet was only good for fraud and drug trafficking.
Let's play through a scenario where fiat nears its end. As QE continues to debase currencies, stocks, bitcoin, and hard assets continue to rise. Real estate would naturally follow as shown by the S&P CoreLogic Case-Shiller U.S. National Home Price Index which started to soar in price in late 2020. Wages meanwhile have not kept up with inflation, so assets get far more expensive while wage earners dont have the added buying power to afford those assets. So unless one owns a sufficient amount of stocks, bitcoin, or hard assets, one's buying power will diminish in an accelerated manner through no fault of their own. The process happens slowly so most people don't realize what's happening until it becomes more severe. The middle and lower classes around the world including in the U.S., U.K., and the E.U. are getting the worst of it. Social unrest has been on the steep rise as a consequence. Some cities that were once deemed generally safe are no longer safe.
The Decentralization of Political Power
QE that started in late 2008 to avert a continuation of the financial meltdown increased risk taking and has landed us in the world where fiat must continue to be globally debased to avoid a debt crisis. Centuries of data show this cannot continue indefinitely. Historically, it always has ended in revolution and war. The difference this time is exponentially growing technologies such as blockchain and AI which increase utility and thus wealth by orders of magnitude. Those with stocks, bitcoin, and hard assets will control a majority of the wealth. Since wealth is power, those individuals making up this growing number will eventually have more power than dead broke governments who did not hold assets outside of fiat. Those in governments who hold stocks, bitcoin, and hard assets will see their respective government diminishing in scope and power, thus may exit with their assets in hand. This will further contribute to the decentralization of political power as the great transformational of wealth takes place in the coming years by those who hold such assets. WW3 will therefore be averted as blockchain creates this decentralization of political power through the $400 trillion addressable market in DeFi and NFTs not to mention DAOs (decentralized autonomous organizations).
General- Stocks and Bonds
The major averages continue to march forward to new highs, a consequence of QE. Meanwhile, the 30-year Treasury bond which stands around 2% is expected to go to zero by Bloomberg's Mike McGlone as much of the world continues to falter, QE continues at full mast, and bond yields in some countries go even more negative. Social security trust funds are also projected to run out of money in 12 years, one year ahead of projections. Dont depend on the government. Moving money out of fiat and into bitcoin and hard assets has been a growing practice not just among corporations but also the wealthy.