Weekly Wisdom #8

You are pretty lucky.

Right here. Right now. You are in the midst of one of the worst financial markets of the last 5 decades. Those at the financial helm screwed up, and the fiscal thread is slowly unwinding. A cascading event of liquidations and leverage, monetary systems are collapsing, global currencies are breaking, and crypto is burning.

Doom. Neverending gloom. It’s all going to zero.

Sike. The money printer will resume. Assets will rip, crypto will fly, and you’ll look back at this exact point and thank yourself for standing admirably in the chaos. This may not be the bottom, but right here, right now. You are positioning yourself to reap ridiculous rewards in the future.

All you have to do is enter the arena.

All you have to do is learn from the wise.

Where does our search for wisdom take us this week?

This week takes us into the realm of the commodities of the future.

• The real reason to buy bitcoin

• Are we on the brink of serious BTC adoption?

• The future outlook on Uranium

Should you buy Bitcoin?

It’s time we explored the mothership. Sovereignty. Freedom. A revolutionary monetary solution that changed it all; Our journey begins in the realm of digital gold.

I have never bought Bitcoin. I am fascinated by technology, the story, and the narrative. But, as an investor and DeFi user, I have never been able to realise the benefit of holding bitcoin over alternatives. The opportunities and potentialities seem far more vast with altcoins.

But have I been naive? Am I overlooking the best asset investment of the decade? Is now the time to start scaling into the mothership? Is Bitcoin the ultimate store of wealth? It’s time we dug a little deeper. Dylan Leclair is ridiculously knowledgeable on everything Bitcoin. He recently gave an eloquent and informative interview on the real reasons to buy bitcoin. Let’s break them down.

There lies a problem.

Dylan believes there is an inherent and critical problem in the world; the cost of capital is fundamentally broken. We’re 50 years into this “fiat experiment”, and there is only one route out; monetary debasement. Dylan states that, right now, the monetary system is unwinding.

Bitcoin, however, has not fundamentally changed; it continues to produce a block every 10 minutes, and hash rates are at all-time highs.

Dylan states that the macro people don't understand the full potential of Bitcoin, nor does the majority of the crypto community (Me included). He hails it as the biggest asymmetric bet over the next decade.

Would Bitcoin not just be replaced?

Everything evolves. Constant iterations and abstractions, is the number one spot not soon to be replaced by a faster horse? Dylan argues that many believe Bitcoin is simply number one because it has a first-mover advantage. This is false. Bitcoin is not the first iteration of digital cash; it is the first iteration that worked. Satoshi built an engineering solution to money, made it open source, and left. It became the top dog because it was the best solution.

Proof of Work

What sets Bitcoin apart from every other token is its consensus mechanism; Proof of work. There is a tangible cost to not only produce a bitcoin but also to send one. To produce a bitcoin, you must spend a whole lot of energy to produce one. And this marginal production cost is constantly increasing. This is how it’s designed.

Yes, USD-denominated metrics are falling across the board, but underlying Bitcoin metrics are currently at all-time-highs. Check out these current facts:

• More people than ever are accumulating

• Hash rates at all time high

• 70% of BTC hasn’t moved in over a year

• 80% is classified as long term holders

• Most week over week, month over month coins leaving exchanges than ever

Leverage Unwind

Deep within the midst of a dubious geopolitical and macroeconomic landscape, excessive leverage is being wiped from the market. This is not a bad thing. A huge amount of bad actors, negligence and quite frankly fraud have been wiped with it. Although a brutal blow to our bags, the industry is now positioned for everyone to proper far greater going forward.

These past few months have been a shining example. Even with all this contagion and unravelling, the inherent system is fundamentally unchanged. And it’s not only unchanged, it’s prospering. Network metrics are at an all-time high!

So, is now the time to think about acquiring? Is Bitcoin the best asymmetric bet of the decade? Or are there still better options in DeFi? Let’s continue our voyage in the realm of digital gold and see what else we can discover.

Are we on the brink of serious BTC adoption?

In this unquestionably unstable monetary landscape we find ourselves in, wading through trillions of dollars of debt, sanctions, and monetary debasement, is now the time that countries and banks to start looking to acquire Bitcoin? Has the digital coin proven its resolve as a better-engineered solution? Potentially… maybe… possibly…

The Wise Guy breaks down a recent Harvard study that hints that Bitcoin adoption could be just around the corner.

It all comes down to sanctions…

This informative video uncovers a research paper written by Matthew Ferranti, an economics PhD student at Harvard. The underlying narrative of the paper is that Central Banks will start acquiring Bitcoin as a hedge against potential sanctions. Matthew states that recent sanctions have proven to other countries that fiat assets are not safe, and Bitcoin is one of the best options these countries have.

How prevalent are sanctions?

• United States has sanction 9000 entities

• European Union has sanctioned 2000 entities

• United Nations has sanctioned 1000

Guy states that this is evident in “just how trigger happy the US are when using money as a weapon”. No country can be sure that it won’t find itself a victim of a monetary sanction by a country such as the US. So, how do central banks hedge against this risk? One of the most prevalent assets to hedge against this risk is…

Gold

Gold is one of the most popular assets on central banks' balance sheets. Not, only a renowned store of value, but the precious metal is also almost impossible to be seized by a country imposing a sanction on another. Matthews's article speculates this is one of the core reasons why central banks continue to store gold. But, it’s not the only reason…

Concern with the current financial system

Ever since the great financial crisis of 2008, world gold reserves have been on the rise. To analyse whether countries are using gold as a hedge against sanctions, Matthew examined data surrounding military imports and exports. Countries importing weapons from countries with imposed sanctions should theoretically be stocking more gold, but does the data follow the thesis?

Through some pretty damn complex mathematics, Matthew has shown there is a slight positive correlation, and even though slight, it holds statistical significance. Gold has proven to be a hedge against sanctions thus far, but what does that have to do with Bitcoin?

Can you censor bitcoin?

Matthew states that the only way to censor transactions on a proof-of-work blockchain, such as bitcoin, is to acquire and sustain 51% of the hash rate. The article implies that executing such a transaction today would be “practically impossible”. The amount of energy required to accumulate 51% of the network would be monumental. Whereas a network like Ethereum would be much easier for sanctions to occur. 65% of Ethereum blocks are, in fact already OFAC compliant!

It’s about more than just geopolitical safety.

Central banks don’t just hold assets that are deemed less risky. Money is money. They want their assets to appreciate. Matthew utilises increasingly complex economic mathematics to predict the future outlook on the Bitcoin price. The result is a graph that predicts the price outlook for the foreseeable future, stating that BTC will return between 10-20% per quarter.

How much gold can you really store?

Due to the difficulty of acquiring and storing a vast amount of gold, Michael believes that Banks weary of sanctions will view Bitcoin as a worthy alternative. According to the IMF, most central banks have already been moving away from USD assets. And an expansive amount of capital has instead moved into gold, is bitcoin next?

Both assets have positives and negatives:

• Gold is internationally recognised, but difficult to buy, sell and store.

• Bitcoin is very liquid, but is volatile and has public transactions.

What about CBDC’s?

Could CBDCs be the answer to all country's worries? Privatized and controlled digital currency? Perhaps. But, for countries with collapsing currencies that don’t have the means to create their own central bank digital currency (CDBC) Bitcoin could be one of their only alternatives. But, there is also still a use case for BTC for banks that can create their CDBCs...

Even those that can develop CBDCs have stated that there are possibilities of acquiring BTC. Why? In a world in which every central bank has, it’s own CBDC, the possibility of sanctions would be much higher. Guy states that when it comes to international trade, countries would be incredibly sceptical about processing payments with other foreign highly controlled currencies. So, what could be an alternative digital currency that all banks could trust and most importantly, actually create themselves?

You guessed it…

The ultimate high stakes

If Bitcoin were to become a currency of trade between central banks, the proof of work mechanism could lead to some serious game theory between nations. As stated prior, Central Banks have the potential to censor the network by controlling 51% of bitcoins hash rate. This would undeniably lead to extreme competition between all parties to ensure the others do not control the network. Hash rates would increase exponentially, and the Bitcoin price would be alongside it.

Of course, alongside facts and data, the paper does sprinkle in a chunk of speculation. Although, I must admit that the Dylan interview and research paper have swayed my long-term outlook on Bitcoin. I have since re-analysed my portfolio allocation to include a significantvpercentage of Bitcoin exposure.

Uranium

Exploration and discovery. The land of digital gold was eye-opening. We now voyage onwards in the realm of commodities; let’s uncover what could potentially be one of the best asymmetric bets in the macro landscape. Buckle up and grab your hazmat suit because it’s about to get radioactive. We’ll keep this one short, as radiation will fuck you up.

A culmination of Geopolitical factors and an energy crisis have caused Uranium to rally, over the past few years. But, is there more room to grow?

For this dive into Uranium, we will be breaking down an interview between Jesse and Doomberg. If you haven’t heard of Doomberg before, you should 100% check them out. The team has multiple decades of commodity-focused industry experience and runs one of the most widely respected and renowned substack newsletters on Energy and finance.

So, why Uranium?

Jesse points out there seems to be a newfound political will to embrace nuclear energy, and we have found ourselves in a “nuclear renaissance”. Doomberg agrees and states that the only way to make any significant dent in the fossil fuel demand would be from a radical deployment of nuclear power worldwide.

Almost everything we use fossil fuel for can be replaced with Nuclear energy. Certain demands do require fossil fuels, such as chemical inputs and the heavy-duty diesel trucking industry, but, Doomberg explains that even the hydrogen economy could be designed around nuclear power.

In a recent substack article called Green Shoots of Logic. Doomberg highlighted that some of the most progressive environmental politicians are beginning to recognize the “undeniable fact that you cannot begin to carbonize the economy unless you have a substantial increase in the amount of Nuclear power you are using.” In fact, there are countless examples of the tides turning on nuclear energy:

1. Diablo Canynon California

2. Palisades Power Plant in Michigan

3. Pickering Nuclear Generating Station in Canada

4. Germany extending the life of the 3 remaining powerplants

5. Japans recommitment to turning on powerplants in the face of LNG crisis

6. China with 50 powerplants under contruction

7. India increasing usage of nucleaur energy

8. Poland is about to build its first nucluer reactor

Doomberg finishes his outlook on Uranium stating that one positive outcome of this recent energy crisis is that amid sky-high oil and gas prices, many world leaders are reevaluating their stance on nuclear energy and paying attention to physics. This can only be a positive thing for Nuclear Energy and Uranium specifically.

Closing thoughts

Digital gold and radioactive renaissance. Are these the commodities of the future? An exponential increase in interest. Worldwise accumulation. Perhaps they are both assets to keep a close eye on.

If you enjoyed it, please feel free to hit that like, and leave a comment on where you would like to voyage next week!