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To investors,
There is chaos and uncertainty in the world right now. Russia and Ukraine. Hamas and Israel. China and Taiwan. The southern border. Our national debt. Housing affordability. Inflation. A lack of leadership. Undisciplined monetary policy. Loss of trust in mainstream media.
The list seems to go on forever.
In times of uncertainty, humans have a desire to take action so they can feel some semblance of control. This is most obvious in central bank’s constant reaction to whatever is happening in the world. If an outlook looks bleak, they will cut interest rates and print money. If an outlook looks strong, they will raise interest rates and sell assets off their balance sheet.
The entire world runs off a reactive monetary policy which requires humans to understand complex situations, while predicting how their decisions today will affect the future.
This is not only insane, but it has proven to be nearly impossible over the years. Humans are horrible at understanding complex situations. Try to get a group of people to agree on how to handle Russia, Hamas, our national debt, or inflation.
It won’t happen.
Thankfully, the world is realizing we have another option—bitcoin. The decentralized currency benefits from an algorithmic monetary policy that has become the most disciplined central bank ever created. Bitcoin’s monetary policy does not change, regardless of what happens in the world. Changes in geopolitics, consumer demand, or articles in the media can not influence what the software is designed to do.
The idea of a disciplined central bank becomes incredibly important in a world filled with undisciplined central banks, which are obviously unprepared to deal with the ever-changing cocktail of chaos and uncertainty.
Don’t take my word for it though.
The market is screaming this message at the moment. Bitcoin’s price has appreciated more than 20% in the last 7 days. Some of that appreciation is due to speculation around the spot bitcoin ETF approval, but some of the global interest is being driven by the increasing global chaos and uncertainty. There is never one single thing that drives the movement of asset prices and bitcoin is no different.
Upon further analysis, you will find some very interesting data points regarding bitcoin. For example, Dylan LeClair pointed out that treasury bonds are now down more than bitcoin.
Think about that for a second. We have been told for decades that bonds were the safe investment. People flee to bonds in times of chaos and uncertainty. At least that is what the market analysts, investors, or economists would tell you.
Again, the market is telling us something different. We have to listen or we risk misunderstanding the current situation.
Another interesting data point related to the recent rise in bitcoin is how China’s current economic environment could be impacting the digital currency. Tyler Durden points out that “every time China FX outflows surge, bitcoin erupts.”
This chart shows an acceleration of capital flight from China last Friday, which is quickly followed by the recent price appreciation of bitcoin.
Chinese investors are not the only ones participating in the fun though. Speculation around a spot bitcoin ETF in the United States continues to drive significant interest domestically as well. Yesterday, news broke that Blackrock has successfully obtained a CUSIP number for their bitcoin ETF (normal part of the process) and they also amended their filing to state an intention of seeding the fund with capital before the end of October.
Neither of these developments are a surprise, but any updates or movement on the ETF front will continue to elicit interest from various groups anticipating the spot bitcoin ETF approval.
As if these data points were not enough, the bitcoin supply is highly illiquid at the moment. The total supply held by long-term holders is the highest it has ever been in history.
More than 56% of all bitcoin in circulation has not moved in the last two years, which is despite the volatility associated with an approximately 80% drawdown in price from the previous all-time high of $69,000.
That is a level of conviction from bitcoin holders that can not be found in any other financial asset.
Because of this market illiqudity, Bloomberg’s Jamie Coutts points out:
“For half a year, this asset danced between $25k-$31k. More coins have changed hands in this tight range than anywhere else in its price distribution. This is also the longest period of compressed volatility in its history. The next phase in the breakdown of the fiat monetary order is nearly upon us. Gold is also hinting at this. When bitcoin breaks $31k, its an air pocket to $39k.”
So to recap—we have a decentralized currency that has perfected an algorithmic monetary policy which provides the most disciplined monetary policy ever created, which is becoming better understood on a global basis, while the world is experiencing a heightened level of chaos and uncertainty.
Bitcoin is the calm among the rough sea.
Many investors on Wall Street and elsewhere would have laughed at that statement if I said it a few years ago. But they have a harder time laughing when Blackrock CEO Larry Fink is on national television saying bitcoin is a flight to quality during these tough times.
I am a big fan of Lyn Alden’s recent point about the importance of spending the time to learn about bitcoin with fresh eyes. She writes:
“If you had an opinion about Bitcoin in the prior cycle, don't go on that. Do a fresh reset. Review the facts now. Bitcoin rewards those who humbly re-assess. Understand how it consumes energy, what it fixes, etc. Spend a couple hundred hours on it, bullish or bearish.
The next cycle is likely to be volatile, as was the last cycle. I don't like the "buy bitcoin" meme. I prefer the "study bitcoin" meme. Just take the time to understand it. It's like telling someone to research the internet, but of value rather than dialogue.”
Whether you like bitcoin, hate bitcoin, or are indifferent to the asset, it is important that you spend the time to re-evaluate what is happening here. Sometimes in financial markets you have to simply find the most important thing and get it right—I believe bitcoin is that one thing that will ultimately determine the financial performance for millions of investors in the coming decade.
Bitcoin was the best performing asset over the last decade and the increasing chaos, uncertainty, and undisciplined monetary policy globally seems to suggest that the asset will be very important for the next one.
Hope you all have a great day. I’ll talk to you tomorrow.
-Anthony Pompliano
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Lance Lambert is the co-founder, editor-in-chief, & CEO of ResiClub, a brand new media publication that I co-founded with Lance to cover residential real estate.
In this conversation, we talk about housing affordability, how we got here, why it’s so bad, impact of interest rates, specific market analysis of what’s hot & what’s not, potential solutions, and what Lance is building with ResiClub.
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Millions Finally Realize Bitcoin Is Certainty In A World Of Chaos