The Start Up
Cryptocurrency - that's the next game. Unregulated, untaxed, incorruptible. Not a part of no government or economy, cause it's its own economy. - Ronald Dacey (StartUp, 2016)
This note is a fitting start to 2023. Yes, I am talking about Sam Bankman-fried or should I call him SBF? Well, every heist master needs a street name.
Like most people it took a while for me to come around to the idea that Cryptocurrency isn't just the next game, it's the future of the global financial system. An immutable, transparent ledger of publicly verified transactions otherwise known as distributed ledger technology. An opportunity for every individual to truly own a piece of digital property that can be transferred across space and time with out any form of intermediation. Well, to most people none of this makes sense. It seems like just another game in town. Well, Leonidas, you are wrong, to take the famous words of Ephialtes of Tracis. If you were a Jew living in Germany in the 1930's then Bitcoin would have saved your life. Seriously? - Yes, absolutely! Most Jews that stayed behind did so to protect their property. Let's imagine Bitcoin was an option in Nazi Germany. Then most Jews would have either converted their property to Bitcoin or collateralized the property for Bitcoin and moved their wealth to another jurisdiction. The Nazis could seize Gold, Cash, Real Estate and Art but they could not seize a piece of code, in fact they wouldn't even know you had it. The average Jew could have crossed the borders with no more than just a rucksack.
In the Napoleonic, first and second world wars counterfeiting to debase currency was a common tactic. In a world of Bitcoin central banks and their populations could have moved to distributed ledger technology. Dare I say, world war 2 would never have happened if Germany had an inflation hedge like Bitcoin.
So yes, for the likes of SBF and Ronald Dacey, DLT was simply the next game in town. So yes, SBF manipulated the idea of immutability, scarcity and wealth creation to orchestrate the largest heist of 2022. $32 billion of customer deposits all gone. To SBF it was a game. To everyone one of those depositors it was a game. Well, a game implies winners and losers and like in all competitive modern games the majority tend to lose. Maybe we ought to stop playing games.
Bitcoin is a liquid asset class that over a decade appreciated more than 200% on an annual basis despite its volatility. It's a long-term inflation hedge in a world where the world's reserve currency is debased at a 10% annual rate. $22 trillion is in the custody of financial institutions. No one can ever access all their wealth beyond a certain figure. Bitcoin is the only asset you can own outright beyond real estate, a Van Gogh and supercars that appreciates in value. So if you don't own a house outright or a supercar, then you have no form of wealth, so effectively you own nothing.
So despite Silk Road in 2012, Mount Gox in 2015, Bitconnect in 2018 and despite SBF in 2022, Bitcoin will re-emerge as the primary source of wealth creation for the next decade,
with its fixed supply schedule and predictable halving events. This is inevitable. So you can either custody your Bitcoin for the next decade or give your money to the SBF who will promise you a 10% annual return on an asset that appreciates 200% annually. I know what I would do.