Rodrigo A

Interested in economics, politics, history, and finance.

[Rodrigo A @InTheHills6]

@TommyThornton 486.5

[Will @WClemente]

Despite being down nearly 70% from its 2021 highs, there is still a high likelihood that Bitcoin succeeds.

With the market going sideways, Bitcoin volatility near all time lows, and me losing my mind, decided to compile a few thoughts on why:

It is widely known that Bitcoin was created out of the 2008 financial crisis, with the foresight of Satoshi that the moral hazard and incentives set in place during that time period of central bank intervention would cause an alteration in the fabric of financial perception due to continued monetary expansion. In the 15 years since, federal debt as a percentage of GDP (The US economy's output) has risen from 60% to 120% today.

There are two ways to resolve this from first principles: Either we must increase the growth of the economy at a greater pace than debt creation or lower the amount of debt created relative to the growth of the economy. While the economy surprised estimates and grew by 2.4% (annualized) in the second quarter, during that time period public debt grew by 2.7%, which comes out to 10.8% annualized. To keep pace with decades of debt creation, the US would need nothing short of an AI-fueled utopian miracle. On the other hand, political incentives to be liked and re-elected leave a low probability that elected leaders will prioritize greatly cutting spending.

At the same time baby boomers are coming into retiring age. The social security programs that they rely on must be supported by the new working class, which is smaller and in a tougher environment for relative wealth creation than baby boomers.

These factors combined leaves us with a high probability of debt relative to GDP increasing.

So with debt growing relative to the output of our economy, how will be service the debt? The answer is quite convenient when you have the global reserve currency like the US does, which is through monetary debasement. To keep things simple, if the United States issues debt at a 5% annual interest rate, they can simply increase the amount of monetary units (5% in this case) that they are paying the interest in accordingly. This means that they are paying back their debt in nominal terms (raw dollar value), but not in real terms (adjusted for debasement), and it’s the countries that we issue debt to that get screwed in the process. However, from the US’ perspective, why would you not just continue debasing the debt away? At this point we have continued to do so for so long that the amount of debt we’ve accumulated relative to GDP leaves only one realistic option to avoid defaulting, which is monetary debasement. Many would consider the structure what the US is doing to be a ponzi scheme, as they issue debt that’s paid down by issuing more monetary units and newly issued debt.

So, what assets should benefit from this over the long term? This largely boils down to growth and scarcity. Stocks are a decent option, which is obvious by just looking at a chart of equities over the last 15 years. Interestingly, relative to M2 money supply the S&P 500 has barely made new highs.

Real estate seems like a decent option as well, but isn’t highly liquid. Venture/angel investing is an option, but will be highly difficult to properly execute on by an every day citizen that hasn't gone through Y-Combinator. Commodities seem like a decent long term bet, but ultimately the choosing of which largely can boil down to scarcity, utility, and monetary properties. While gold has traditionally been widely viewed as the go-to commodity to own during periods of debasement, after the next Bitcoin halving, the digital asset will have a higher stock to flow ratio than both gold and silver; while also being more transportable, divisible, verifiable, and provably scarce than all other commodities on the planet. While the recent rate hiking campaign (that is increasing federal debt as treasury yields rise) to combat the rise of CPI in late 2021-early 2022 has put a damper on most assets, this does not alter the long-term trend of the monetary/debt situation in the US, which with enough time will lead to money printing. This is not to mention the increasing likelihood of something “breaking” the higher and longer that the Federal Reserve maintains interest rates, that will ultimately be met with intervention – the timing of which has been wrongly speculated on for over a year by commentators (including myself), so refer to your favorite macro pundit.

I recently read through a report from the United Nations which included a couple very interesting charts regarding trends on global sentiment and perception around living standards; some of which I think also point towards pre-conditioning that is favorable for Bitcoin to reach mass adoption. For one, negative news about the world has surged to new highs (chart below), which could partially be attributed to the polarization of these headlines and incentive for journalists to write negative news for click based advertising dollars -- but I think the larger driver is a decreasing outlook for people to be able to live a better life than they do today.

Meanwhile, the UN's global human development index has declined for two years in a row (report was published in 2022 so slightly outdated) and has erased the gains of the previous 5 years. All the while, political polarization is on the rise throughout the world (shown by the chart below).

Combine these factors and what do you get? According to Pew Research, public trust in government is near the lowest that its ever been, down from 79% when the study originally began in 1960 to just 16% today.

Why is this happening? While the answer to this is likely greatly nuanced and I don’t mean to overgeneralize – I think there’s a high probability that these trends are largely fueled by monetary debasement. Why? Continued expansion of money supply inflates the value of those who own assets, while making them harder for those who don’t own them, to obtain. Here’s a breakdown of assets by wealth group as of Q1 2023 in the United States: (shown in chart below)

As a large portion of Americans continue to feel more left behind and dissatisfied, they will likely seek to rebel against the current system, or seek alternatives, which is a dynamic that macro historians/commentators such as Ray Dalio have discussed at length. I believe these dynamics will create the preconditioning for a willingness to adopt an alternative monetary system; and with the existence of an escape valve via Bitcoin today, my money is on the first successful iteration of digital scarcity becoming adopted by society. Not to mention a similar dynamic takes place on the nation state level with the US itself benefitting from the dollar system and others not. Meanwhile, combined with the structural trends of debt/demographics and obvious trend of the world becoming increasingly digital, the setup for Bitcoin is becoming increasingly favorable.

All to say, over a decade plus time time horizon, orange coin good.

Sources: https://t.co/C5jtPUZRqX, https://t.co/MPVCEeAVs3, https://t.co/uRD4euOR4w

[Rodrigo A @InTheHills6]

@Owen_Stoneking @AmandaMGoetz Great article man

[Rodrigo A @InTheHills6]

@GuyDealership Thoughts on the Scion FRS?

[Rodrigo A @InTheHills6]

@iamwillcannon Cold

[Rodrigo A @InTheHills6]

@iamwillcannon Email

[Rodrigo A @InTheHills6]

@ZubyMusic What are the most common characteristics among the coolest and most interesting people you have met?

[Jason Ai. Williams @GoingParabolic]

I feel like doing some good and giving away some money today 💰💰💰!!!!

🔥Like
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🔥and Follow ME!

I will pick someone randomly to give $5,000 in #Bitcoin!
(Disclaimer :v my money my way!)

[Rodrigo A @InTheHills6]

@Zach_HODL_ON @Mashinsky @CelsiusNetwork It would be pretty cool if a percentage of bitcoin mined was coverted to cel for either a) increased yield for holding cel token b) burning more cel token

[Rodrigo A @InTheHills6]

https://t.co/KQedpHpXYr @Route2FI

Great educational thread. If you are looking for crypto material to read here's your outlet.

[Route 2 FI @Route2FI]

A couple of days ago I asked you about the best newsletter and blogs for crypto and DeFi.

Here are my 7 favorites that I read everything from + 16 other newsletters that I read from time to time.

THREAD/

[Rodrigo A @InTheHills6]

Here's my top 3 tweet threads of today: January 25th, 2022

[Rodrigo A @InTheHills6]

@PeterMcCormack Am I missing something, u can’t buy 2.55 bitcoin for ~46,000

[Rodrigo A @InTheHills6]

"Develop the habit of letting small bad things happen. If you don’t you’ll never find time for the life changing big things." - Tim Ferris

[Erik Voorhees @ErikVoorhees]

Strong men make green candles.
Green candles make weak men.
Weak men make red candles.
Red candles make strong men.

[Rodrigo A @InTheHills6]

If you don’t produce you won’t thrive, no matter how skilled or talented you are.

[Rodrigo A @InTheHills6]

@Pseudome17 @Travis_Kling @twobitidiot Thanks bro

[Rodrigo A @InTheHills6]

Don’t let perceptions of misfortune take away from all that you are working towards. Remember the ups and downs just lead to destiny, and to derive implications based on something you can't fully see yet is simply a waste of attentiveness that could be put to better use.

[Rodrigo A @InTheHills6]

While it was necessary to work hard to get to this point, your goal depends on a much shorter time frame than expected. Life’s mistakes stand out and overshadow success, always recognize the opportunity at hand and never take anything for granted.