Trading This Bull Market

I am far more interested in writing about the future of the blockchain space, potential applications, and to tease out the problems the industry is coming up against than writing about the day-to-day rigamarole. I am not going to make this a cascade of blockchain news articles and I am not going to turn this into a daily journal account of my trading woes. This propensity of mine is an artifact of my philosophy “training” in undergrad; I have always been into pontificating online. Prior iterations of this blog were simply musings about the future and society from a technological or philosophical perspective. I have always been fascinated with the creation of art and technology. I see these two as the same activity and they are innately human.

We, as Heidegger said, are a being towards death. We are the only creature that is intimately aware that we’re going to die. Our lives are spent wrestling with this reality and trying to determine what to do with our lives in the meanwhile. Biologically, we have a built-in imperative to reproduce. This, for most species, is enough. This, for most humans, is enough. We are born, we grow up, we find love, create children, provide love for them, then die. The cycle repeats ad infinitum as each generation tries to learn from the previous generation and improve.

Our higher order cognitive abilities have also given us a self consciousness, allowing for metacognition. That is, we can think about thinking, we can analyze the way we process information. This brings about the capacity for systemization. This brings about the capacity for technology. Similarly, this metacognition can be applied to our intuition or emotions. We can think about how we feel about things, and we can express it. This is our capacity for art. These two processes are one in the same, and produce the two most humane things on this Earth.

For me, the blockchain space is the current frontier for this desire to build new technologies and for self-expression. There are other fronts, and slowly but surely I will incorporate them into this space, but this one is my passion. If you come for that, you have no need to fear, I will be sure to continue producing that type of thousand-foot-view content.

With that being said, we are likely about to experience another Bitcoin & cryptocurrency bull market. Things are going to get stupid again. Like, really really stupid.

You all have this seen this comical artifact of the last Bitcoin wave:

Up until now, this has been a meme of what not to do. In the not so distant future, this is going to be “cute.” That was the Bitcoin “test pump.” It’s likely that those people are underwater or have sold the bottom at this point, so it won’t be them, but this new wave of bull market geniuses are going to make that last wave look silly. People who held through the last bear market; people who have successfully traded on Bitmex and Deribit the whole way up the next bull cycle; and traders who are savvy enough actually take profit at the top. Actually, the really insane thing is that we now have a slew of USD-pegged stablecoins. Which means, unlike last time, when you had to transfer all of your Bitcoin to an on-ramp like Coinbase, most current investors are comfortable converting their cryptocurrency into the endless slew of USDT, TUSD, USDC, etc. coins. Not only that, exchanges like Binance, Bittrex, Bitifinex, etc. let you convert directly into fiat on their exchange. It is going to be insane.

This blog will still be dedicated towards the above, but I will likely put in a some more articles about trading here and there since that is another of my passions. I love trading and it is what is giving me the financial capital to produce this blog.

What Is Prompting This Bull Market?

Bitcoin is a deflationary asset. In short, that means that Bitcoin becomes more valuable over time due to scarcity. This scarcity is created in two parts. There will only ever be 21 million Bitcoin. While you can have fraction of a Bitcoin–and theoretically it can be split indefinitely–there is a limited max supply. Which means, as long as people perceive value in the coin, the lack of avaiable supply will increase the demand. The second aspect of Bitcoin’s scarcity is based in the proof-of-work algorithm that mines the blocks. GPUs are clocking endless hertz in order to confirm the transactions, and every four years the miner’s reward is halved; dubbed The Halving.

The Halving is the event that reinforces the demand for Bitcoin. The block difficulty increases and the reward is cut in half. Which means, there is more competition for fewer Bitcoin as a reward. The smaller reward + increased work for the reward makes the reward more valuable. In 2020, the reward for successfully mining a block will revert from 12.5 to 6.25 Bitcoin per block. This shift creates a surge of interest leading up to the Halving. Miners and investors come in foaming at the mouth in order to get a part of the action before the price skyrockets. We are about one year away from the next Halvening and the price has already moved 130%+ to the upside over the course of this year. Over the last week, the price has increased by 50% alone. We are approaching another chaotic climb uphill and the Bitcoin hysteria will start again.

If you are new to this space or if you know someone who is new to this space, I have written a book, Bitcoin For Blockheads that can help newcomers understand what is going on. The link is here.

I wouldn’t be writing this blog if I didn’t believe in the blockchain. Unless you’re a boomer, you likely don’t remember, but people thought the internet was a fad. They really believed that this tech craze would just stop. It’s just some shit that weird tech guys were into. In hindsight, we laugh, but the same can and has been said about blockchain. Every other day there’s another banker or politician or whatever speaking about how Bitcoin is a scam, game for gamblers, etc. There is a guttural aversion that the old guard has towards this technology; that’s usually a sign of something.

People have a hard time thinking in parallel–an idea I stole from Nassim Taleb–but he’s right. We see the same patterns play out in different spaces over and over again. Yet, people cant seem to connect the dots or see how they’re falling into the same trap. Bitcoin and cryptocurrencies affect on the world and the old financial and political guard’s chastizement of this “fad” is akin to the “Great Generation” a.k.a. Boomers++ criticizing the Baby Boomer’s new fangled rock & roll for not being real music. It’s like how the Boomers criticized Gen X for their hip hop. Or how Gen X criticizes the new “mumble rappers” for not knowing how to rap. It’s hilarious to see this shit play out time and time again and the lack of self-awareness when it happens.

Couldn’t resist

During the bear market, the dwarves were tinkering away in Mt. Moria in order to strengthen and reinforce the different blockchains. The financial institutions created new legacy markets and trading platforms. There has been an explosion of new Bitcoin/fiat onramps like Cash App. The time has come for the masses to swarm in to get a piece of the pie.

Does this mean everyone will prosper? No, likely not.

This boom will definitely be a bubble, though this is not to say that there isn’t real value in Bitcoin The cycle of booms and busts is simply how markets work. The dot-com boom wasn’t the end of the internet, and pretty much every company that survived (excluding Yahoo!) is currently far more valuable than they were during the dotcom boom. This is the time when we see what the blockchain can really do. The last boom was a result of the block reward halving and the promises of Blockchain 3.0. Thousands of altcoin companies launched accompanied by fancy websites and outlandish promises of what the future could hold. Equipped only with a whitepaper, these companies attained multi-billion dollar valuations. Ripple briefly was the most valuable company in silicon valley. Binance became the fastest profitable unicorn (a company valued at over 1 billion dollars) ever; achieving this feat in only one fiscal quarter.

Will It Be All “Sunshine And Rainbows?”

What will this new wave bring with it? I have no idea, but we will finally get to see what these companies have to offer. We will get more active blockchains, we will get more functional wallets, and we will hopefully see some real use cases develop. There are some projects that I am really excited about, and there are some darkhorse projects that I have never heard of that are going to come out of the woodwork. There’s also going to be some dark things that will accompany this wave. We are going to see more people getting robbed, tortured, and kill for their Bitcoin. We will likely hear about assassination markets and slavery markets pop up on the dark web that uses private coins to traffic. We will definitely see exit scams. We will see more Ponzi schemes. We will see major hacks. The financial incentive to propagate these things is far too large. This is the case with any and every new technology. Technology is morally neutral–regardless of what people say.

You are going to read articles about how Bitcoin and other cryptocurrencies are “bad for the environment.” You are going to read articles about how there’s “child pornography on the blockchain.” You are going to read articles that speak on how “unfair,” “immoral,” or “unsafe” that cryptocurrencies are. This is all absolute and utter bullshit.

Do not let yourself get shaken out by losers.

Yes, they’re losers.

There is an anti-capitalist mentality amongst the intelligentsia (though, Bitcoin is more like “micro-capitalism,” but I’ll write about that later). Bitcoin utilizes capitalist markets to perform an end goal. The scarcity makes the asset class very valuable and there are those who will let their “morality” keep them away from valuable opportunities. This “slave morality” as Nietzsche put it might amount to any of the adjectives I mentioned above. These people have an image of themselves that is undermined by taking authentic action so they will write articles to demonize those that are not held back by these proclivities. They are bitter and they are losers. Do not get swept up in this.

Value is tied to risk and scarcity. If you do not take any risk, there’s no value there because anyone can get what you have. If anyone can get what you have, then there is no scarcity, i.e. no value present; an if-and-only-if. It doesn’t matter what the arena is, the value is created by those two components. If you have ever considered getting into cryptocurrency, there is no “right time.” Technology is accelerating at a dazzling rate. You will never have time to make sense of what is going on. You have to take risks and “pop a wheelie on the zeitgeist.”

Where “pop a wheelie on the zeitgeist came from.
“I’m In It” – Kanye West

As I am writing this article, Bitcoin has just scraped 8,000 USD and I feel confident in saying that we will eclipse the 20,000 USD valuation from 2017. In fact, we will beat it by multiples. That is to say, you need to get in now. Before the media attention and before all of your friends, family, and the “authorities” believe that it is a safe investment. When it is safe, it will no longer be a good investment. That is not to say throw financial caution to the wind. I am not a financial advisor, nor will I ever be. Take the appropriate precautions, this is an incredibly volatile asset class. With that said, Bitcoin is to value transfer, what email was to message. Think about that. The speed, scope, and permissionless transfer of information. The ability to send written information boundariless and instantaneously transformed the world overnight. What do you think will happen to the planet if that happens with equity?

What are you waiting for?

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