The Great Reset

Three ominous questions continue to plague people in and out of the crypto world.

Is Bitcoin dead?

Is crypto dead? 

Is this Crypto Winter?  

The answer to the first two is a definite, No! As far as Crypto Winter is concerned, I’m a little less confident, but it’s sure felt cold out there in the crypto world these past few weeks. And it’s not just crypto that’s taking a plunge. No matter what investments you own, it may seem like they have fallen off a cliff.

Although it seems as if most of the investment world has pressed down on the elevator, I’ll let you in on a little secret— it’s all a game. It’s a game that only a few could win before crypto came into the picture, but now with crypto, and Bitcoin, in particular, more folks can play to win.

The game has one rule, “buy low, sell high.” No matter what, that’s literally the ONLY rule for success.

It seems simple, but the legacy investment landscape appears confusing, mystical, and full of hidden fees. Our “yearly check-up” starts with a visit to a financial adviser, usually at a bank or a fancy office. They sit with us and review a big pie chart that’s neatly split into primary-colored wedges, and no matter when you look at it, it’s all whole.  

You started the year with $50,000 in the account, and now you have $55,000. WOW! That’s five grand, Man! And then you may be thinking, “I sure picked the right random person at the right random bank to manage my money.” But there’s another side of the story.  

I don’t think many of the advisers will talk about inflation and real growth rates because if you compare your gain against inflation, it tells a vastly different story. In the year elapsed since your last financial check-up, your dollar value has grown by 10%. Yay! But inflation spent more than 8% of that gain, and that’s only if you believe the CPI numbers accurately represent the increase in prices. Some think inflation is much closer to 14% or even 18%. So although the number of dollars you own increased by 10%, you can only purchase 2% more than what you could buy at the beginning of the year, giving you an ACTUAL gain of 2%, if you are lucky.

To make it worse, wages have NOT increased in proportion to inflation, so you are getting paid less and less each year even with a modest 5% raise—if you are lucky to get a raise. This income-to-inflation ratio has a nasty negative compounding effect hidden from our eyes because our data sources are so disconnected. You have a bank, an investment company, a stockbroker, online stock trading accounts, and the government with thousands of pages of reports each quarter. It’s an overwhelming and arduous process for the average person to sift through.

This hidden vanishing act is easy to see in gas prices. To compare, imagine how much gas you could buy with one hour’s worth of your weekly pay a year ago and compare that to now. Heck, you can do that with anything. How many eggs would you be able to buy? How many loaves of bread? What percentage of a Motel 8 night stay would you be able to buy then and now with one hour’s earnings?

One truth that crypto folks have in common is we all believe the 60/40 portfolio idea is passe and misguided. The days of a one-hundred-page prospectus every quarter detailing every inch of every business you own—even as little as one share— are over. Let’s face it, how many of those did you read?

When I bought APPL in 2001, I read the prospectus but didn’t understand it. I thought it was exciting that I got mail from Apple. You see, one year after college, I created my own ROTH 401k and played the game on the other side. I lost when e-Trade liquidated my stocks to pay for a bogus monthly fee. Bye-bye APPL and the immense gains I would have received!

How is Crypto Different?  

I feel like many facets of the non-crypto world are angling against us crypto folks, and I don’t understand why. We are for one thing and one thing only—freedom of investment choice. We value the freedom to make a mistake, the freedom to realize success, and the freedom to speak and spend as we wish on legal endeavors.

What does it matter where I invest my money? And lately, why do all my conversations start with, “So, Bitcoin is dead, huh?”  And why are people so quick to tout that “it will go to zero” without really understanding what IT is?

The whole scenario ticks me off, and I find that most people who harbor these attitudes are the ones with money already. Sure, it makes sense from their vantage point to cast dispersions, but none of these people have taken the time to understand just what Bitcoin IS. So, I’m here to educate. Let’s go!

Let me take this moment to explain that not all crypto is Bitcoin, but all Bitcoin is crypto. We need distinct lines drawn in the sand here. Bitcoin and the rest of the crypto market are entirely different, although they sit on the same technology, blockchain.

Blockchain is the database that stores who owns what, and each cryptocurrency uses various aspects of blockchain technologies in different ways to make up its own unique use case.

Bitcoin is much more than just a cryptocurrency. Bitcoin is money free from government control and essential to a free society. Money without restrictions allows anyone who has it to become self-sovereign. That’s what it’s all about—becoming your own financial representative and not being at the mercy of a random bank, government, or another third party you aren’t even aware holds keys to your cash. Knowing that you can store your accumulated wealth without worrying it will be stolen is a luxury that not many in the world have.

Why Should I Care?

Forget that most of the world has no wealth. And forget that those people who don’t live in the USA can’t necessarily protect their wealth with the force needed to preserve it. Instead, let’s focus on your long-term life strategy. I don’t mean how you intend to make money after retirement or how much you need to pay for your kids’ college. I mean your life strategy. How do you want to live your life?

One mentality I have had to step back from is this push-shove attitude of getting by with very little. I spent decades working non-stop, and no matter what I end up with, I won’t get those decades back. I was fortunate to work at home to see my daughters grow into young women. But I was unfortunate to be tethered to a phone or computer for nearly all my waking hours.

Discovering Bitcoin freed me from this construct as I was able to see the world through a new lens— a vantage point that considered time as an equal to quantity. My future became clearer as I understood just what Bitcoin, in particular, was and how it could fit my needs. And in the end, I have learned how to hedge my future self against my current one.

I’m reminded of a passage in a report that I recently read:

“Our Two Sats: We think the two developments observed this year couldn’t be more opposed. Time will certainly tell which path is more successful, but given our view of digital assets, it isn’t surprising that we think an outright ban will be difficult to achieve at best and, if successful, will lead to a significant loss of wealth and opportunity. History has shown capital flows to where it is treated best, and embracing innovation leads to more wealth and prosperity. We also think there is a very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future. We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”

That paragraph has a lot to digest. Let’s dissect it into chunks, so I can present an undeniable argument for owning even a tiny piece of Bitcoin.  

First of all, Bitcoin will be valuable when you need it to be, even if it isn’t valuable now. This value is the main reason people become believers so quickly, but it’s also why so many are reluctant to learn anything. It’s probably because we phrase it like that— learning. Who wants to do that? Most of us would much rather go to our financial adviser once a year and ensure our pie is still whole.

So, you are probably wondering why I didn’t properly cite the abovementioned article. It’s really to gauge your readiness to discount any preconceived notions you might harbor. The quote comes from a study put out by Fidelity Digital Assets. Oh yeah—- these are the same folks who sent us thousands of pages of a confusing prospectus that we properly recycled, of course.

First, thank you, Fidelity, for adding some ironic humor for those who can see it. “Our Two Sats” is both relevant and earth-shattering.

What’s a Sat?

A sat (or satoshi) is the smallest unit of measurement within the Bitcoin currency—kind of like a penny.

The saying “my 2 cents” comes to mind as you express your opinion, such as Fidelity Digital Assets is expressing theirs in this study. “Our Two Sats” may seem a throw-away line here just for giggles, but I have to believe it’s there for a reason.

Let’s peel away the layers…

2 cents = $0.02

2 sats = 0.00000002 BTC = $0.00042 (at today’s BTC price of $20,900)

Fidelity appears to be saying these are the same, meaning that perhaps one day, one sat will equal one cent.

As measured by this site.

I have often thought this is where BTC will settle—having one sat equal to one cent. You see, the dollar can only be separated into 100 unique units. In contrast, a Bitcoin can be broken into 100 million satoshis, making Bitcoin a far more useful currency once pegged in place.

Fidelity is trying to tell us that what you see now is NOT what will exist in the future.

Think of the time before credit cards, before checks, before savings accounts, before we were able to buy stocks. Think then and realize that nearly all aspects of the financial world are different now. And it will be vastly different in the future. Fidelity knows this fact, and they also want you to understand Bitcoin is entirely different from other currencies. So, they published this study alongside many others, such as this one, to educate whoever wishes to learn.

Look, if you are the one who read, digested, and acted upon the prior prospectus, stop reading this and go to those two studies. No amount of explanation by me can adequately cover the vast meat on the bones of those two studies. They lay out every point any Bitcoin believer knows but can’t always sufficiently describe. If you are still reading, let’s go back to that quote above, as that says it all, in my opinion.

So, Banning Bitcoin  

Sooooo many people told me that the government would just ban Bitcoin, and it would go away.

This action is impossible, according to Fidelity: “… we think an outright ban will be difficult to achieve at best, and if successful, will lead to a significant loss of wealth and opportunity.”

Think about that—Bitcoin is here to stay, and no amount of technical or regulatory hocus-pocus can will it away. The network of Bitcoin miners and nodes is so extensive now that the only way to stop Bitcoin from working is to plunge the world into an instant and persistent blackout, though even then, the Bitcoin mining farms that get their energy from renewables will still be running the network.

Many large banks, investment firms, wealthy individuals, and celebrities have already made their purchases known. So, if any governmental body were to take a tough stance against Bitcoin, it would be slighting those with the capital to fund their re-elections. Therefore, in my opinion, any governmental ban wouldn’t last more than two election cycles.

It doesn’t seem feasible that folks can ban an already integrated payment and wealth storage system that has entrenched itself. For example, China banned all things crypto, yet they account for 22% of the Bitcoin mining in the world currently, and this is behind the “Great Internet Firewall.”  

Let’s take a look at the next part of that quote:

“History has shown capital flows to where it is treated best and embracing innovation leads to more wealth and prosperity.”

The internet gave birth to Amazon and Google— two phenomenal investments slated to fail by most informed investors. In comparison, Bitcoin has risen from the ashes of the last two financial meltdowns. Consequently, more and more large companies, banks, investment firms, and wealthy individuals (called whales) are biting off thousands and thousands more BTC while the claims circulate that Bitcoin is a poor investment. It’s fair to say that in the current dip, Bitcoin has been accumulated en masse by those with means and will continue to be sucked up at a startling rate while it’s underpriced.

Sure, It’s a Game… So Are Stocks

This next part of Fidelity’s passage is the most important yet because, without buyers, there are no markets. Fidelity goes on to say: “We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance.”

Think that through— even if other countries DO NOT BELIEVE, they will be forced to buy Bitcoin. This concept is the hidden truth that needs to get out to more folks— the smoking gun of approval. This one sentence should be shouted from the rooftops because Fidelity is literally saying that nearly every country in the world will own Bitcoin eventually. Because if these countries don’t, they cannot compete in the new financial world to come. And remember that there will ONLY ever be 21 million Bitcoin.

Let’s lay it out a bit differently.

Let’s pretend Beanie Babies are essential to world finance, and there are only 21 million Beanie Babies worldwide. This scarcity would have every country fighting for more Beanie Babies, right? It’s the same with Bitcoin. Unlike the US dollar, Bitcoin cannot be mass-produced at will at no cost. Bitcoin’s quantity is constant, making it more valuable and reliable over time since it can be split into 100 million sats. Perhaps entire countries will not be able to afford one whole BTC if they start buying too late?

You see, other countries have the same problem with inflation that we have. They run sovereign wealth funds with their profits to properly invest assets because they can’t put them in a bank account and retain their buying power. In fact, the more money in a bank account earning less than inflation results in more and more buying power being lost over time. Countries must invest in preserving their worldwide buying power, and in doing that, they look for outsized opportunities. An “outsized opportunity” is an investment that involves a small investment, which eventually leads to a potentially massive return. Coming into cryptocurrency at this point is a great opportunity to spend a little and gain a lot in the long run. Fidelity sees this opportunity, too, as they go on…

“In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future.”

And finally, the coup de grâce, “We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.” Central banks… eh? Hum…

With the participation of central banks, we are talking about TRILLIONS of dollars being thrown around daily; these central banks are the investors that Fidelity believes will be investing in Bitcoin down the line. Sure, not tomorrow or next year,  but I’ll have my Bitcoin for sale at the right price when they come into the market. Until then, I’ll continue to stack my sats. Earning sats all over the place is the focus of my life now, and I recommend to anyone I meet that they buy a little Bitcoin— nothing big. A little will go a long way.

Penny, Dollar, Sat, Bitcoin

Imagine if one sat eventually equals one cent; let’s explore this potentiality Fidelity loosely suggested.

From before:

2 cents = $0.02

2 sats = 0.00000002 BTC = $0.00042 (at today’s BTC price of $20,900)

Now, let’s say I spent $1 today on Bitcoin, and I received 4,727 sats, as seen below on this cool site I found detailing the value of Bitcoin compared to a dollar over time.

Finishing the math:

4,727 sats = 0.00004727 BTC

If 0.00000001 BTC = $0.01

Then 0.00004727 BTC would equal $47.27

Translation: Every single dollar bill you invested today would be worth nearly $50 in that reality.

Crypto Winter

As real summer rolled in, it felt like the prices of nearly every investment fell and landed abruptly on our shoulders. It didn’t seem to matter; it all came down at once. This moment in time is not a tremendously happy point in the world’s economy.

If you think about it, the economy is two entities balanced against each other, the worldwide product of people power and the global quantity of money. If at any point the balance shifts towards one side or another, prices fall or rise on various components within.

As massive market-moving events are happening like war, famine, energy shortages, supply chain mismanagements, and overall massive monetary manipulation at the highest level, it’s easy to see why we all believe Crypto Winter has descended. Crypto Winter is when all crypto plummets in value relative to the US dollar— sound familiar? 

I’ve seen it before and will see it again; those who don’t believe will probably not foresee the light at the end of the tunnel because I have to tell you that what comes down must also go up. This is my new Newton’s law— the law of common sense. When you measure one thing in another, there are two sides to the equation. For example, as more dollars are created, and less demand for them is present, the value of each dollar will go down.

Therefore, anything measured by the dollar will eventually be elevated. For instance, not all of the oil in the world is being sold in dollars anymore, ending the “petrodollar,” and Fidelity suggests most sovereign nations will trade their dollars to buy Bitcoin. It all ties neatly together. And although it’s foolish to put ALL of your wealth into Bitcoin, it would be equally as silly to put none of your wealth into it.

The Great Reset

What goes up must come down. These last few weeks have been very turbulent in the market. No matter what you own, it’s most likely fallen in price relative to the US dollar. This is because the dollar is actually getting stronger. The strengthening dollar is a good sign in the long run because the prices of Bitcoin have held at a decent point. But in the short term, my portfolio is down nearly 75% when calculating its total value in US dollars.

Thankfully, I don’t look at that number to evaluate my portfolio value. Instead, I look at the value of my portfolio as measured in Bitcoin since that’s the main asset I wish to accumulate. It has only gone down 25% in its Bitcoin valuation. Part of this downturn is because my spread of investments is properly weighted towards strong assets like Bitcoin, Ethereum, and other layer one / utility coins. It’s funny because the assets that retained their values relative to BTC grew in percentage in my portfolio as other assets shrunk in their percentages.

I haven’t sold ANY of my HODL assets intentionally because I refuse to be the one selling the bottom. Sure, I can’t predict when the bottom will hit, but I don’t want to look back and see that I was forced to sell anything prematurely. At this point, the majority of my assets are underwater, so I’d be a forced seller.  

Instead, I held and added to my bags to build the number of assets I own and lower each asset’s average buy-in price. I have expanded my base into many new investments I wanted to buy earlier but held off for better bargains. I see my strategy as the great reset— making lemonade out of lemons, so to speak. Why am I so optimistic in the darkest of days? Because I do not believe Bitcoin and cryptocurrencies are dead, and I have faith that my assets will recover and thrive someday. Until then, grab your blankets and gloves as we ride out what could be a long, blustery crypto winter.