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Market Lab Report - Dead cat bounces in stocks & crypto; AI + Blockchain

Market Lab Report / Dr. K's Crypto-Corner

by Dr. Chris Kacher

The (R)Evolution Will Not Be Centralized™


AI + Blockchain

Famed angel investor and thought leader Naval Ravikant has said Google coders have all the power. Indeed, they can influence thought by biasing for or against how high a link appears when doing keyword searches. This extends to other centralized platforms such as YouTube, Twitter et al.  YouTube receives more than 80 Years of video uploads per day. TikTok boasts hundreds of clips uploaded every single second. Google indexes more than 50 Billion websites. Their AI algos are coded in a biased manner so they hold enormous power over the ability to shape thought.

AI is expected to surpass human intelligence in about a decade, so how do we implement blockchain and AI to improve society by preventing what Orwell called "Groupthink" in his classic work "1984"? I published a piece on how such technologies can be used to force honesty in reporting and thus across mainstream media because it makes misinformation and disinformation uneconomic. This will boost accuracy while allowing the free flow of information to individuals. Of course, this begs the question of how to find and define morality in AI. AI is a double-edged sword which can be tempered through the decentralization of AI. Decentralizing AI would allow many to steer the evolutionary progress of AI instead of just having a small, centralized group of people making the decisions. None of us are as smart as all of us.

Bitcoin's Nash Equilibrium + Schelling Point

The Nash equilibrium is the game state where no player has an incentive to deviate from their chosen strategy after anticipating the decisions of others. The Nash equilibrium in the history of money has been gold because it is hard to change. The Nash equilibrium of fiat currency trends towards zero. This is the race to debase. Fiat currency has a limited lifespan. Every country is debasing their currency to fund political aims and pay soaring debts. 

The Nash equilibrium of Bitcoin is global money where holding, saving, and investing are rewarded; Gresham’s law in action; Schelling Point underscored. In the long run, you are better off spending and borrowing soft-money fiat currency while buying and saving hard-money Bitcoin. 

Bitcoin Protects Assets While Averting Hot Wars

As I mentioned in a prior report, every asset held by a nation carries value that is defended with human lives. This extends to real estate, gold, oil, and equities whose chain of custody can end in bloodshed as all assets are protected and defended by rule of law and military might. Bitcoin transforms their physical values into digital synthetic values in cyberspace using units of value called satoshis. In doing this, the chain of custody no longer has to end in bloodshed as assets are protected and defended by electricity and code. The cost of a human life is hence replaced with the cost of electricity for defending assets. Human beings are using Bitcoin to metacognitively evolve their thinking to solve the existential threat of global nuclear MAD (mutually assured destruction) using code.

Markets

Stock markets remain in sloppy, choppy downtrends pressured by higher rates. The Fed's Bullard is now pushing for a 75 bps rate hike in May. It has been said stocks take the stairs up and the elevator down though the ride down is never smooth but instead contains sharp dead cat bounces as price overall moves lower. If stocks take the elevator down, crypto takes the trap door down. In 2018, bitcoin rallied a number of times but those who tried to profit from the bounces typically lost out because the rallies were sharp and short. A 2x (98%) rally after a 133x move from trough-to-peak is small on a relative basis as can be seen from the chart. Nevertheless, back in 2018, crypto commentators would claim the bull market has begun once again each time bitcoin rallied even 10-20%. This happened several times throughout 2018 like a broken record. Meanwhile, the average crypto hedge fund according to Price Waterhouse Coopers (PwC) lost -54%. The retail public fared far worse on balance. Bitcoin corrected -84% from peak-to-trough in 2018 while ethereum corrected -95%. Altcoins fared far worse. Note, it takes a 5x gain to get back to breakeven after an 80% loss, and a 20x gain to get back to breakeven after a 95% loss. A -95% loss is NOT just "15%" worse than -80%.

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This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2022 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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