Many friends have seen my science on Twitter, and Bitcoin Without Borders is one of my core missions. In addition, my full-time job is to make investments related to cryptocurrencies. It is a serious investment job abroad. The same job as general venture capital is to find early value depressions and try to avoid value traps. The domestic industry is strangely divided into "mine circle", "chain circle" and "currency circle". I do n’t know which circle I am, so many people ask, I often joked that I am doing “alternative investment in the super-sovereign world”, and the other party generally does n’t ask any more questions. Because fiat currency is a sovereign currency, VC is an alternative investment. Today I want to talk about the status of the industry in a more uncommercial, easier and more realistic way. Not only the status quo in the country, but what the status quo in the world looks like.
Some basic things that everyone has been accustomed to in the past few decades will change a lot: For example, we used to think that China had the largest population in the world and was a big country. However, the number of Chinese born in 2019 was only 11 million and the number of new born in the past two years The loss of 6 million can be said to be a cliff-like decline. If the industrial structure, medical insurance, social security, pensions, etc. cannot keep up with the changes in this demographic structure, the overall economic situation of China in the future will have very great challenges. We always think that most people aged 60 and 65 should retire and take grandchildren. I went to the streets of Japan this time and saw that there are still many grandparents in their 70s and 80s who are driving by themselves. Without work, this is the future of an aging population.
In the past, entrepreneurial financing was full of money. The SoftBank Vision Fund suddenly appeared to be equivalent to 100 billion-dollar VCs. We often joked that there used to be To B to C and even to VC, and now to SB (Softbank). But not all money is smart money, stupid money creates bubbles, and smart money picks up cabbage. When SoftBank threw $ 100 billion around, Buffett's Berkshire Hathaway cash position reached a record high. The recent WeWork scandal is a good example. In the end, not only was the listing unsuccessful, it took billions of dollars to send away the defeated CEO, and finally he bought himself at a price of one-fifth of the current valuation. So … the rumors of the first and second-tier capital markets were raging, and suddenly everyone was out of money.
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The United States that relied on gold in the 20th century
Let's take a look at the picture above: We are actually living in a very special era, and there have been no world-class wars for more than fifty years. The yellow line is gold. The comparison of the purchasing power of gold with the purchasing power of other mainstream sovereign currencies, such as the US dollar, the mark, the Swiss franc, and the red line is the yen. As you can see, with inflation, the purchasing power of sovereign currencies has continued to fall. I remember very well. When I was a kid, I ate McDonald's chicken wings, and the pair cost less than five dollars. McDonald's is already a very conservative company in domestic prices.
Then we look at this picture again. Gold is what we have always called the super-sovereign currency in the traditional economics circle. Do you know why the U.S. dollar has become such a world currency? There is a very important reason. During World War II, the United States entered the war at the latest, and the United States had a very large amount of industrial capacity. The United States manufactured many aircraft and tanks. The missile was sold to Britain, France and Russia. One of the most famous fighters that the United States sold to the United Kingdom at that time was called the P40. At that time, one ton of gold could buy 25 such aircraft. The British used 50,000 such aircraft in World War II, which is equivalent to paying for the United Kingdom alone. Give the United States 2000 tons of gold. At the end of the 19th century, the United States' gold reserves rose from more than 200 tons to 20,000 tons after World War II, a direct increase of 100 times. After the Second World War, the United States quickly occupied more than half of global gold reserves. If you have a supersovereign currency and what we call a store of value, you might as well bind the entire world's monetary system to the US dollar. The United States' gold reserves were the foundation of the Bretton Woods system that year. Of course, due to a series of geopolitical and economic disputes, the US dollar was decoupled from gold. Because the US dollar has always been the dominant position in the world economy and trade, as well as the military and political status of the United States, the US dollar has become the world's best choice even if it is decoupled from gold.
The legal payment of national currency is natural, and the matter of national legal payment is based on the confidence of the country's economic development and taxation capacity. In the above picture, Turkey, Brazil, Argentina, Colombia, why these countries use Bitcoin digital currency to stand in the forefront of the world, it is simple, these countries have faced more or less different degrees in the past ten years. In light of the crisis of the fiat currency in its own country, according to the consumer price index, from 2018 to 2019, prices in Germany rose by 1.7%, and prices in the United States rose by 1.9%. In many countries, consumer prices have risen even more: 11% in Nigeria, 20% in Turkey, and 47% in Argentina. One extreme example is Venezuela. Prices rose by 2.3 million percent in 2018-hyperinflation is so severe that savings are not realizable. The currency began to evaporate within hours of reaching the bank account. Local people need to exchange their Venezuelan local currency for necessities and food as fast as possible: Venezuela was the richest country in the twentieth century, and now it has become hell. Argentina has reached the level of developed countries in the last century, but it also fell back to developing countries due to severe inflation caused by the turmoil.
This is not an age of peace and harmony, and we are fortunate to live in a peaceful and stable country. Under the correct leadership, China ’s GDP has increased by nearly 10% every year for the past three decades, which means that our standard of living has doubled every seven years. This volume has never happened in the world.
If Huawei USD bank account is frozen
I heard that Chinese pork has increased by 100% in the past 12 months. Can you guarantee that there is an exchange intermediary that can guarantee that I can also buy a pound of pork for 100 units of value tomorrow? Now people all over the world are distressed by this problem, not just by China.
You went to Argentina and Venezuela. After one night, you could buy a pound of pork for one hundred yuan the day before, and you could only buy one or two pork for one hundred yuan the next day. That's such an exaggeration. I have a lot of friends in Venezuela and Argentina. They said that they never dare to save money, because saving means that money can basically become waste paper the next day. When they are going to buy milk bread, they have to carry money in their schoolbags.
Now countries that are relatively stable, have strong sovereignty, and have strong economic strength are also doing a risk assessment: Will the US dollar collapse at some point? Because the central banks of various countries now have a large amount of US dollar assets in addition to gold.
Russia's gold reserves are rising rapidly. Beginning in 2018, Russia's U.S. debt and other U.S. dollar assets have collapsed. This certainly has a lot to do with geopolitics, but the most important point is that when the United States weaponizes the U.S. dollar, he can do a very simple thing: Central banks around the world now set up accounts with the Federal Reserve. It is equivalent to saying that I am the central bank of China. I want to open an account in the Federal Reserve to exchange for US dollars. The Federal Reserve can do one thing and freeze your account anytime, anywhere. For example, the United States is considering freezing Huawei ’s account. This is absolutely possible. Operational things. What a terrible thing the dollar hegemony is, he can freeze Huawei's account and even freeze his central bank account. This is what we mean by a single point of failure, which is called single point failure. The risks of centralization are obvious
Dedollarization is the mega trend
We can now take a look at the continuous decline of US dollar assets in the foreign exchange reserves of central banks in various countries. The euro and the renminbi have basically replaced the decline in dollar assets.
As a central bank, he must also be prevented from being subverted by centralization risks. If you invest, you must have a portfolio strategy, which is a diversification of investment assets. What you need to find is a low correlation asset. As a central mother, the assets in his hands are the so-called reserve funds. Originally, the main reserves have always been gold, and the US dollar anchored with gold. Then they must also consider how to make a diversified configuration.
This is also what we say that there is a lot of room for growth in gold reserves. We only have gold, a so-called supersovereign currency. So we now think that Bitcoin has gradually become a possible super-sovereign currency under the experience of the past 10 years. Not to mention whether it is currency or not, because the properties of currency itself are very complicated. It must be a supersovereign value store, and it is the only option for supersovereign value store. Because other assets such as houses, land, gold, etc., the sovereign states can confiscate and seize them if necessary, without any reason. For the first time, Bitcoin has technically guaranteed the beautiful vision of "sacred and inviolable private property." Anyone wants to get something for themselves, and they want to be protected. There is also a layer of operational advantages for Bitcoin ’s “supersovereignty”. If the Venezuelan people find that this place has become a purgatory, if their wealth is in the form of Bitcoin, they can take it calmly. Own wealth, choose to go to another better sovereign country.
We have been talking about institutional entry. In fact, most of the entry now is for institutions that come in to trade, not for the currency. I have divided institutions into two categories: institutions that profit from volatility, such as most Wall Street institutions, and institutions that profit from "non-volatility". The central banks of various countries are the latter. The monetary policies of central banks are designed to reduce economic fluctuations and curb inflation, while the latter is the future major Bitcoin currency holder.
Bullish on DECP, bullish on Bitcoin
A stable digital fiat currency like DECP is of great significance. For example, let M0 return strongly, allow the central bank to have direct contact with the flexibility of the money supply, make monetary policy "programmable", and make taxation policies highly executable. Internationally, especially in the developing countries, cross-border payment settlement will also be of great significance in the future. The core idea of Zuckerberg's Libra hearing was to persuade Congress, that is to say, why Facebook issued Libra, because the Chinese yuan and China's legal digital currency may threaten the hegemony of the dollar in the future. So he said, "If America doesn't innovate, our financial leadership is not guaranteed." That is, the financial hegemony of the United States may not be guaranteed, although in my opinion, this has nothing to do with Libra.
We can see that with geopolitical conflicts, in the downward trend of the large economic cycle, many of our economic indicators are now very similar to those in the late 1930s. What happened after the late 1930s, World War II. We are now at a very sensitive economic inflection point. When every major global economic crisis comes, the central bank can continue to cut interest rates. The central bank's rate cut is a very powerful economic weapon, but the European Central Bank and the Bank of Japan have already lowered it. It is equivalent to putting money in the bank, and I have to give the bank money. If we say that the global economic crisis is coming again, what financial weapons will the central bank have? We cannot think of this.
And when we communicated with many established institutions on Wall Street, we felt that the next economic crisis might not be an economic crisis of a certain type of assets. Because we know that the real estate subprime mortgage crisis in 2008, and then the Asian economic crisis is due to the collapse of Asian stock markets, the collapse of the Thai currency, and so on. What if the next global economic crisis does not come from a certain type of assets, and if it is a comprehensive currency crisis? This possibility is not without. Except for the countries mentioned above, which have fallen into the fiat currency crisis to varying degrees, what if the euro crashes? There are many cracks in the European Union, whether it is coalition politics or economic integration, and Brexit is a feather.
Three major cycles overlap, and the 1920s were the golden age of Bitcoin
So speaking of our industry, I personally think that the next 10 years will be a superimposed decade of three large cycles:
1. The debt cycle is what we call the credit cycle
2. The large cycle of sovereign currency. Because of the sovereign currency system, our Bretton Woods system is now 75 years old. In fact, no large currency system has survived for a hundred years. The global monetary system may be to regime change cycle superimposed.
3. The next two Bitcoin halving cycles
So this will be the birth of three great cycles superimposed Bitcoin golden age, it is a huge opportunity and a challenge. Born on a Bitcoin world financial crisis, but also the first time in his life experience of the financial crisis.
We say bitcoin is not anxious. Why Bitcoin no anxiety, a lot of people handle every day the price may be very anxious to say how bitcoin is not up, there will be no market is not halved.
Our old chives often say that a 50% change is considered sideways. Because of volatility than with the original, now it is nothing of the volatility of Bitcoin average volatility now, even lower than many commodities.
Trading Compliance / lightning network / strong main network, bitcoin fundamentals are getting better
You can see the big compliance mechanism admission, is the largest institutional foreign Bakkt. Bakkt is a compliant digital currency trading platform under the New York Stock Exchange. Their trading volume has skyrocketed. Of course, their skyrocketing has plummeted along with the trading volume of other platforms. When it first came out, Bakkt should only have a few bitcoins per day, and now it can trade up to 5000BTC a day.
We need to know first approach agencies or nature of the transaction-based institutions, and they will help the market structure as well as price discovery, price discovery is better. For example, Bakkt has US $ 120 million in insurance and a very mature commissioner model, which is such an FCM. This may be something you have never traded on exchanges in many currency circles. Currency exchange rings might be to buy an account, buy a ID card, then you can deal, and that they are not.
Bitcoin fundamentals are actually getting better, count more dispersed force. Trading on the chain surge is already over foreign Alipay –PayPal, about to catch up with MasterCard and VISA. Transaction fees miners has exceeded 10 billion US dollars. The miner's income is divided into two parts, one is the block reward of the mining itself, and the other is the commission. Fee income has now exceeded 10 billion US dollars.
Bitfinex has also accepted the Lightning Network. This is a purse, wallet domestic mainstream, including currency letter, Cobo, perplexity in fact a few months ago has been fully supported by the lightning network. Now bitfinex also supports it. In the future, it will be the first streaming exchange that accepts the Lightning Network. It will push other exchanges to support it. In the future, it will be very convenient for you to transfer coins between various wallets and exchanges.
If someone tells you that Bitcoin is unpleasant, you can throw this picture to his face. The thing about the Lightning Network is to make Bitcoin extremely fast without changing it.
Because everyone needs to know what will become gold? Things that don't change become gold. If gold is easily oxidized like copper and iron, it will not become gold. Because I used one ounce of gold in Egypt three thousand years ago. What cannot be changed, or hardly changed, can become a store of value. In the past 10 years, I have experienced numerous price fluctuations, stolen exchanges, industry vulnerabilities, rebellion of giant companies, ABCDEFG fork, and so on. They say things that are more exciting than movies. But bitcoin is still that bitcoin, 21 million bitcoins will not change due to the fork, and a block will not become faster due to a new mining machine in 10 minutes. No matter the network changes from 3G to 4G, bitcoin Network always runs steadily and never crashes.
Most importantly, the "invariant" nature of Bitcoin is determined by the PoW mechanism designed by Satoshi Nakamoto. Any change in Bitcoin needs to reach a consensus through real workload, whether it is electricity or brainpower (miner, developer, full node trinity). In this sense, the Bitcoin governance model is similar to a democratic system with checks and balances. Miners are like the administrative department of the government, handling daily business operations and enforcement rules; client developers are like the legislative department, enacting and passing new laws; (full node client) users are judicial departments, ensuring that the other two branches do not do Anything unconstitutional. So it is not a blockchain, not an encrypted digital signature, PoW is one of the greatest inventions of Bitcoin.
Happy 11th birthday of Bitcoin!
Send me a sentence I often say: long bitcoin, short the world. The Chinese translation is awkward, that is, to do more bitcoin and short the world. I think this may not be good because we don't want the world to be really chaotic. A better translation might be that the world is not broken, and Bitcoin is not standing. Broken refers to the fact that the world will always form a crack due to the lack of consensus in human society at some point in the era. Bitcoin, a simple but robust, stable but resilient creature, can thrive in this crack.
Looking forward to the golden age of Bitcoin.
Article Source: All Air
Original link: https://mp.weixin.qq.com/s/crcRj6VOGMlFbM_PDA1eVg