If there is such a thing as a ‘public good’ innovation with acceptable trade-offs, Bitcoin and Litecoin would certainly fit into that category. By abstracting digital information into value that cannot be undermined, today’s economic incentives face obsolescence.
In this issue
- Bitcoin analysis
- A bitcoin economy
- Latest happenings
- Listening material
Bitcoin closed a flat week at $28,000 after a 30% move the week before. The immediate weekly range consists of $28,950 and $26,600, with price testing the lower bounds on Monday and Tuesday morning.
On a daily time-frame, a retest of last-month’s highs ($25,200) is certainly possible, if not probable. The local H4 trend indicates consolidation to this demand-area order-block is on the cards. On the flip side, the $30,000-$32,000 psychological level is an area to expect sellers to come in, especially when considering this was the price-point at which the Luna-foundation crash created many new Bitcoin hodlers that may want their infinitely debaseable paper money back.
Regardless, the breakout, and albeit sloppy re-test of the 200-daily EMA, coupled with higher local highs, and higher lows is indicative of a positive trend. A weekly close above $34,000 opens the door to $42,000.
A Bitcoin economy
For starters, a ‘Bitcoin’ economy is not a bitcoin-only economy in my estimation, but one that’s based on high-integrity proof-of-work (PoW) public blockchains which include Litecoin, Monero and potentially others that have varying use-cases and technologies, especially in regards to privacy tech. (something Bitcoin lacks).
Regardless, Bitcoin’s mere existence is a challenge to the status quo which has existed for the last five centuries. Over decades, the idea of central banks and governments being the sole proprietors of money and the economy at large has become normalised, despite the fact that this centrally planned economy has reliably failed time and again.
Bitcoin stands as an immutable ledger with a set and ascribed digital unit which cannot be altered. Litecoin and Monero are modified iterations with additional privacy integrations. Some have posited a ‘Nakamoto standard’, comprised of a basket of reliable PoW coins as an acceptable version of a multi-chain economy, often trumpeted by proof-of-stake (PoS) proponents as a marketing term targeting an unsuspecting general public, but I digress.
This reinvention of money is built around the common belief that money represents value, work or some form of useful societal input. As a result, ownership of money is necessarily decentralised and comes part and parcel with owning a piece of the network. The idea is not dissimilar from local councils and decentralised governance machinations which until 2009 had no real monetary anchor.
So what does an economic system built on an open, transparent and verifiable public network look like?
First and foremost, incentives are realigned to serve that society (people, businesses and governments). Today’s money is designed to inflate, thereby purchasing less goods and services over time. Together with constant monetary policy tampering, wealth generation disintegrates, incentivising people to spend as inflation ramps up, causing blind consumerism and a gambling mentality. Since saving money does not work by design, investments and the search for yield is the only option to ‘beat inflation’ under a fiat regime.
In other words, fiat incentivises a society to sacrifice the future for the present.
On the other hand, a monetary system built on a Nakamoto standard (for lack of a better word) is one where wealth can be saved because an individual's contribution is known and verifiable on a peer-to-peer basis. The incentive mechanics change to consuming what you actually need, while saving for the future, all the while adding value through work and contributions that are valuable to society.
At the same time, the relationship between wealth and political power is significantly rolled back if not severed entirely, making rent-seeking behaviour and wealth concentration difficult. Since political power cannot be used to protect wealth, the only way to earn more is to contribute, add value or innovate (besides stealing).
The feedback loop of wealth, power and discretion over tomorrow’s systems (in that order), is thrown into disarray with Bitcoin, because no amount of political back scratching can create more bitcoin to distribute to insiders (unlike fiat funny money).
These baseline fundamentals are the tip of the iceberg, but represent a monolithic upgrade in the core incentives that drive society. Additionally, bitcoin also impacts speed, efficiency and delivery of services via secondary layers built on top of the network — i.e. the finance aspect of the economy. These layered abstractions (the Lightning network, Liquid, Litecoin’s MWEB for e.g.) provide money-services that literally cannot be done on existing legacy infrastructure.
By turning money into decentralised, immutable and unassailable data, everyone on earth has access to apolitical monetary rails, which can be used 24/7/365 with just an internet connection — forever.
The internet ushered in an era of connectivity and innovation unlike anything we’ve ever seen before. By replacing legacy money with public money, Bitcoin is the next iteration of that same ethos which will usher in a second wind of collaboration and productivity.
While incumbents aren’t going quietly into that good night, there is nothing more powerful than an idea whose time has come.
That my friends, is what a Bitcoin economy looks like at a high-level. These fundamentals can be extrapolated to every aspect of society which involves some kind of trade-off, ethics, philosophy — everything.
- Central Banks on the War Path in Preparation for CBDC Rollout.
- Crypto Funds See Largest Inflows Since July 2022 as Traditional Banks Collapse.
- Bank Deposits Fall as Investors Flee to Bitcoin.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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