The Moment

In the Torre del Oro bar in Madrid, a bull called “Segador” hangs on the wall, well known to Enric Juliana, with whom he used to talk: “Segador is still there, in the greenish depths of the Cave of Zarathustra, scrutinizing eternity. He is the telepathic bull of the Plaza Mayor in Madrid, who speaks without speaking and watches without blinking. Senequist. Patient. Hieratic. Infinite. You have to stare at Segador after three cups of gazpacho with cumin. He never fails. He always answers.

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-New around here?

Yes, I heard about your conversation and I need to talk to a bull.

-It’s hard to find a bull that talks those days, bears are overgrown.

The situation is ugly. Nasdaq is down 30% since its ATH last November, and BTC is down 60%. There seems to be no ground under our feet.

-Don’t look at the feet of the bull that jumps into the ring, look him in the eye.

Look up. But how? The global economy is collapsing, a major recession is looming. US employment data are not encouraging, the Fed can only raise rates because of runaway inflation, and that is just the opposite recipe for fighting recession. War, pandemic, supply crisis, I only see black swans.

-Wars come, until they go. Pandemics kill, until they adapt. Supplies slow down, but they don’t stop.

Do you think it’s temporary? is all this just circumstantial? I find it hard to see. I’ve lost a little faith in change.

-There’s a said “solo el necio confunde el valor con el precio” (only the fool confuses value with price)

You are right about that. We see a lot of Black Swans that affect price a lot, but give value to crypto. It is a contradiction. Bitcoin is without a doubt a better store of value than the dollar or gold, it kicks it a thousand times. And DeFi are cheaper, more efficient and safer than traditional finance, that’s also clear. ETH has no rival in traditional banking. When there is a war, an inflation crisis like in Turkey (61%), Argentina (55%), EUR (7,5%) or USA (8,3%) crypto adoption incfreases. When the FED raises rates, BTC falls dragged down by the Nasdaq, but its value increases as an alternative to the inflationary system. I have never seen such a difference between value and price.

-That’s why you have to look it in the eye.

But I’m scared. And I’m not the only one. The sentiment index has gone from 24% panic to 43%, it has doubled in just one month.

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And take a look at our weekly sentiment chart:

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4 panic hits in only one week. And we better not talk abou Terra-luna… One of the top crypto assets in market cap. almost erased from the market. USDT, the Terra stable coin, heavily attacked. Look at it’s social chart, it’s frightening:

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I feel so sorry for the Terra community. They had to sell their BTC to try to hold it’s stable coin and that pushed also BTC price down.

-No bullfighter fights without fear.

We don’t have to get carried away by the psychological effect. Only the reason will set us free. Data, analysis and reflection, I often preach it, but it is difficult to apply. We are emotional animals after all.

-And what does the data tell you?

Inflation is not temporary. In fact, there is no such thing as temporary inflation, there is only more or less inflation, but there always is. If in recent years with rates at zero for months and months we have never fallen into deflation, I don’t think we will ever see it, really. Prices are going to continue to rise, and it will go a long way. Look at this graph, diesel at all-time highs, and you already know that it is the basis of many industries (tractors, transportation, …). It will have a transversal impact in many sectors:

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You really believe the inflation rate in USA is only 8,3% or it’s been cooked? Gasoline +43.6%, Used Cars +22.7%, Gas Utilities +22.7%, Meats/Fish/Eggs +14.3%, New Cars +13.2%, Electricity +11.0%, Food at home +10.8%, Transportation +8.5% and housing raised at least 20%.

The data also tells me that central banks can only fight inflation by reducing the liquidity of the markets, and the lack of liquidity creates more volatility, the great evil of BTC in the short term. Volatility triggers the divergence between value and price. Look at this graph of the volatility rate of the Nasdaq, from 15 pre-pandemic to 20 in 2021 and now we are not below 30. We have doubled the normal volatility rate.

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And if we get bearish, and look at the yearly lows for BTC over the last few years, well, okay, we could drop to 25k, 20k or whatever.

But in general, if you have a long view, it is still an unbeatable asset, whatever we compare it to, I don’t care: Tesla, Apple, Gold, or whatever. I would not give the bull up for dead.

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-It would be a big mistake. How many bullfighters have ended up in the hospital because they thought the bull was dead before its time?

Many. Of course a lot of cryptos are over valuated and the sector needs to be debugged of projects without bussiness model, without real value. It’s necessary and good for the market.

It’s true that the macro situation is affecting BTC price, but at the end, what we are seeing live is the end of the current financial system with the perfect storm for Stagflation (inflation + unemployment + recession) and monetary policy that can increase the recession instead of fighting it. And a new financial order lead by Bitcoin will rise. Fairer, more distributed, more efficient, with clear unmutable rules.

And there are so many who wants Bitcoin dead. Look at the threatening letter from a couple of US senators to the CEO of Fidellity, the first pension fund in the US that allows workers to invest part of their retirement fund in crypto. Institutional money has not even begun to flow into crypto yet. Regulation is inevitable, and that will attract institutional. UK will introduce bill to support “the safe adoption of cryptocurrencies” like Bitcoin. Regulation it’s like branding a red hood in front of a bull.

-A 584 kilo bull that shoots out at 127 m/s from the bullfighting gate.

Got it 😉 A 584 billion market cap bull, with 127 million users. Is the same level of adoption that the internet had in 1997. So what now?

-Now you have to ask yourself, where do you want to be when the bull jumps into the bullring?

Of course I will not be in the stands. Not even in the “burladero” (mockery). We have come to fight, so I’ll be in the center of the bullring and looking the bull in the eye.

Yours in crypto.

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