Saylor Moon
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Is a speculative attack on USD coming soon? If it does, it's going to be a crazy sight to see. Every institution that can borrow will and essentially short the dollar by going long Bitcoin. The dollar will begin hyperinflating and there will be a lot of unhappy rent-seekers that will want some blood. It may in the end create calls for a CBDC to control the lending/printing of money, which is currently in the hands of too many banking institutions. But we're getting ahead of ourselves. Let's start from the godfather of the speculative attack: Michael Saylor.
For those with assets, loans are really easy to get. In a fiat economy, loans have no opportunity cost so banking institutions are incentivized to lend as much money as possible to qualified borrowers. More loans, more interest payments, more profit. And the rich borrow. A lot. Loans are how Cantillionaires stay rich. They use the newly printed money to invest in all sorts of stuff and as long as their investment returns higher than the minuscule interest rate from the bank, they come out ahead, sometimes my many multiples.
Using these loans to buy Bitcoin is what we can call a speculative attack on the dollar. That's essentially what Michael Saylor has done with every kind of loan he could get. He's used unsecured loans, secured loans, and stock issuance, among other things, to acquire as much Bitcoin as possible. I'm sure he'd take out more loans if he could and I have no doubt in my mind he's looking into more ways to add more to the incredible Bitcoin position he has.
What's going to be even crazier is that he will soon be able to use the Bitcoin itself as collateral. Wall Street isn't that comfortable with this idea yet, but at some point, they're going to because there's too much free money in it for them. And then the real leverage games can begin. He's in deep profit on his Bitcoin position and as the price goes up, there will be more loans available. But at least at the moment, banks aren't loaning out with Bitcoin as collateral just yet.
As such, he has to wait for more stock issuances to buy more Bitcoin. With almost 1% of all BTC in his treasury, there's a lot of demand for his stock and with additional issuances, the market now knows he'll buy more BTC. As a result, he can keep issuing stock and buying Bitcoin this until he's saturated market demand. The result is that MicroStrategy right now trades like a 2x Long Bitcoin ETF.
But here's where it gets fun. What happens when there are more companies besides MicroStrategy that use this strategy? You really just need one more CEO with this level of conviction to take this strategy to the next level. The stock's returns have been so insanely high that some company will mimic it. Heck, even someone that doesn't have a company right now could, perhaps, buy up a small cap stock with some cash on its balance sheet, buy Bitcoin with it and then issue more shares to buy even more Bitcoin. It would be slower, of course, but there's no reason why it won't work. The key is a large cash position and a way to get lots of debt. This hypothetical alternative to MSTR would have to have some differentiation of course, and perhaps they'd use more or less leverage than MSTR.
For that matter, could we see a mining infrastructure company go in this direction? Keep lots of Bitcoin on the balance sheet and use USD loans to mine more. If the treasury is in BTC and the acquisition strategy is mining, then it could very well use its line of credit to become something like MSTR, only a bit more related to energy production.
How about one of these zombie companies? A visionary CEO could turn a zombie company into a living one by making it into a Bitcoin substitute. A company like IBM has lots of assets to get loans with. Use those assets to put Bitcoin on the treasury. It can quickly become another stock that's a store of value. Speaking of which, the reason MSTR is doing so well is because it's taking the store of value premium away from other stocks. Stocks have functioned as a de facto store of value for a long time, the premium is now leaking towards something that holds its value better.
The presence of Bitcoin on the balance sheet turns the store of value premium in these stocks into Bitcoin substitutes. And it really won't take many companies to do these things for the entire market to expand USD and complete the monetization of Bitcoin.
I was pretty confused when I read the headline nostr:npub1az9xj85cmxv8e9j9y80lvqp97crsqdu2fpu3srwthd99qfu9qsgstam8y8
Work on yourself. When bitcoin goes up, you don't want to be like the people who win the lottery and subsequently ruin their lives.
It takes virtue to handle significant wealth.
I worry that most of us won't be able to handle $500k BTC.
Clean up your tabs.
A split that seems inevitable: Woke vs. Based
lots of people that are not ready for the red pill. Not just Bitcoin, but everything else.
Time in the market, not time the market.
Every time you trade out, you're removing time that you could be holding Bitcoin.
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Bitcoin Tech Talk #385
Bad money corrupts good character.
slow and steady organic growth will win over debt funded fragile sales.
that's why Nostr will win
We're being gaslit to believe that the problems we have are unsolvable.
They are completely solvable. But that would remove rent-seekers from their positions, so the solvable problems don't get solved.
Free product idea:
Nostr mail.
Provide an email relay for Nostr, but filter out any spam before encrypting to the public key of the recipient and provide a way to send to a normal email address from your Nostr messages but add something that lets the recipient sign up for private messages, too.
If you want to be popular, Bitcoin is not for you.
If you want to be invited to the right parties, Bitcoin is not for you.
If you want to influence the hoity-toity, Bitcoin is not for you.
If you want to climb the status ladder, Bitcoin is not for you.
If you want respect from the establishment, Bitcoin is not for you.
But if you want self-sovereignty, Bitcoin is for you.
Debt debases property rights
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Debt is weird. You borrow something against some collateral you have and return that something, usually with interest later on. Technically speaking, debt is a displacement of money over time, allowing you to bring consumption forward. What's weird about it isn't the mechanism, but what happens with the collateral.
The collateral is something you own and by putting that up against what you're borrowing, it's not really "owned" by you anymore, but rather shared. There's a debt contract where you own the collateral if you pay back what you owe, or the lender owns the collateral if you don't. It's like Schrodinger's cat, but with property. The ownership of the collateral doesn't resolve until the debt is settled through repayment or default. And since the debt settlement is in the future, the property rights around the collateral are in an in-between, uncertain state in the present.
Now I'm not writing about possession or property rights in the legal sense. Various jurisdictions have different rules about who controls the collateral during the time of the debt. For mortgages, the borrower gets use out of the house, for pawning, the store takes possession during the duration of the loan. That's a practical question and the rules differ. When I say that debt is weird, I'm talking more about the metaphysical property right. Whose is the collateral?
It's a bit of a tangled web because both parties have some claim to it. It's not entirely owned by one party or the other during the duration of the loan, and it's that ambiguity that debases the collateral in question. Suppose, for instance, that during the duration of the loan, the collateral is exploited in some way as to reduce its value so that it no longer covers the cost of the loan. This very well may be the economically rational thing to do if the borrower plans to default.
Take for example an auto loan. The borrower can use the car as an Uber during the months it takes for the bank to repossess it to earn money while depreciating the value of the car. Similarly, a person with an underwater mortgage may use the place to host events and trash the place while not making payments.
In other words, the lack of clarity around who owns what makes for bad incentives. Of course, this is exacerbated in a fiat monetary system as debt, particularly collateralized debt, is ubiquitous. The debt printed out of nothing decreases the incentives to take care of property that ends up as collateral.
In other words, debt, especially fiat debt, debases the things society finds most valuable, particularly as the debt goes bad and default becomes imminent. Of course, there are many debts that are repaid and collateral remains pristine. But those are situations where the loan plays out as expected, that is, the collateral stays at or increases in value. When the unexpected disasters happen, particularly when it's at the macro-economic level, the mechanism of fiat debt ends up destroying way more value than simple possession.
Which brings us to the many different debt mechanisms in the Bitcoin space. The more I study it, the more I'm convinced that adding debt mechanisms is generally not a good idea. I think it's fine for two consenting parties to do a debt contract. But complicated "DeFi" solutions all end up in weird places because of the lack of possession. There usually ends up with some trusted party that abuses the collateral in their possession and we get disasters like 3AC, FTX, DCG and Celsius.
As Hoppe says, all rights are property rights. Let's not debase it in some degenerates' quest to play more financial games.
Gut feeling is that BM's July conference will debase the brand even more than it already has.
Lots of VCs pumping ordinals/BRC-20/inscriptions that will find that Bitcoiners just aren't interested.
I wish the media would put as big a microscope on the deep state as they do El Salvador.
People that matter for Bitcoin, roughly in order of importance:
Diamond Hands
People that help people get through bear markets without selling
People that explain Bitcoin's store of value function well
Core Devs
Infrastructure Devs
Miners
Privacy Advocates
Wallet Makers
People that combat FUD
Exchange Operators
Conference Organizers
...
Degens
...
Paper Hands
Marketers
VCs
Shitcoin on Bitcoin advocates
Shitcoiners
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Non-technical people are gullible about technical stuff.
Mainstream economics people are gullible about economics stuff.
The worst combination is the mainstream economics non-technical people that think they know stuff when really, they haven't verified anything and use all sorts of manipulated substitutes for real knowledge.
And yes, I'm describing most VCs.