The dollar and the euro are in one cycle, Bitcoin and the crypto market in another.
That of the dollar we already know, hyperinflation, economic slowdown, soaring risk premiums, sovereign debt crisis, cutbacks, unemployment, rate hikes, soaring housing prices and in the end, poverty. A lot of poverty.
We are also familiar with Bitcoin. This is the fourth time in its history that it has suffered a fall of 80%. And then the “I already said so”, “it was coming”, “it’s all speculation”, “it’s all for nothing”, “there’s nothing behind the Bitcoin”, followed by a crypto winter in which the projects that bring value are rearmed by an army of developers who continue to chop code to create new solutions that will jump to the market in the next bull run.
Dollar and Bitcoin are not in the same cycle. Since BITCOIN was created, 12 years ago today, 13 Trillion dollars have been created (35,700 tons of gold have also been found) and in all that time there are still only 21 million BTC.
Many are asking: But how can Bitcoin recover from such a fall? As always, with patience. No one wonders how stocks like META or Netflix will recover?
Or we could ask ourselves how the Gig economy (prevalence of short-term contracts or freelance work) will recover:
The Dollar Cycle
There is a lovely story by Edgar Allan Poe called “A Descent down the Maelström” in which he tells how two brothers in a small boat are engulfed by a hurricane in the middle of the sea.
“It may seem strange, but nevertheless I felt more of a master of myself when we found ourselves in the jaws of the vortex than when we were approaching its horror. Having lost all hope I shook off much of that terror which disabled me at first. I suspect it was desperation that tempered my nerves.”
Just before they are gobbled up, spinning at high speed, they have a strange sense of calm.
Inside the eye of the hurricane, there is no wind or rain, all the debris flies at almost the same speed producing a feeling of relative stillness. The Dollar is there right now. The calm before being engulfed by the hurricane.
The US has a chronic deficit. Like many other countries. Look at the deficit of the Federal Reserve in the last 50 years.
Can you imagine a company with these results?
Total US debt is at $90 trillion and US unfunded liabilities are at $169 trillion, this means a 259 trillion debt.
Unfunded liabilities are debt obligations that do not have sufficient funds set aside to pay them. These liabilities generally refer to the U.S. government’s debts or pension plans and their impact on savings and investment securities.
The USA population is 329.5 millions, this means each citizen debt is 786.039$. But not all of them pay taxes. Only 143.3 Millions of citizens pay taxes, so the debt for each taxpayer is 1.794.Combined that’s $778,000 per US citizen or 1.794.870$ per US tax payer if my numbers are right.
The Federal Reserve has only been able to compensate by printing more money, which is causing this high inflation:
And that system is sustained only because the Dollar is the international reference value, accepted for other countries, but this could change.
More than a spiral staircase, the cycle of the dollar or the euro is more like a water park slide where Powell and Lagarde go down smiling on the trillions they have printed.
In Edgar Alan Poe’s story one of the brothers clings tightly to an iron, it seems more solid, like the dollar, but it weighs too much and drags him helplessly into the eye of the hurricane.
The other brother observes the debris, calculates trajectories, investigates and analyzes. Until he discovers that some debris remains higher up. He lets go of the iron, although it is scary and clings to that debris, although it seems less solid, like Bitcoin. They weigh less and in the end they are propelled by the strong winds to the outside the eye of hurricane and he manages to save himself.
The Bitcoin cycle
This Bitcoin is not the Bitcoin of 2017. It has moved up a level on the spiral staircase. It’s gone up a lot, actually. First of all, in terms of social adoption. While many are sure to jump out of the crypto boat disappointed that they didn’t strike it rich, many are here to stay. Few people knew what Bitcoin was in 2017, there are few people today who don’t know what it is.
On a technological level we are also on another level. Bitcoin lighting is another level. It gives Bitcoin the scalability of the number of transactions to process per minute of Visa or Mastercard. And the other cryptos are also at another level than in 2017, where Ethereum didn’t even exist. Smart contracts, DAO, Metaverse, Play to Earn, no doubt we are at another level.
At the institutional level we are awaiting regulation. But no serious financial institution any longer has the slightest doubt that an important part of its activity must move to Blockchain. For cost, speed, security or simply for opportunity cost. But they are all on the lookout. They just need to figure out how and when. But they no longer discuss what.
It’s up to you to choose. Bitcoin or Dollar?
Yours in crypto