Today’s article will be dedicated to this asset that is causing so much ink to flow. Loved unconditionally by some, decried as a mere speculative bubble by others, the Bitcoin has not finished talking about him. But the current periodfrom a geopolitical or economic point of view, leads to an interest in alternative assets which he represents wonderfully.
If you are already convinced by the proposal of Bitcoin, I probably have nothing to bring you. If you’re skeptical about it, you probably won’t change your mind. But I would have at least one thesis which will explain why I like what he represents so much and why he is, in my opinion, essential in this environment.
Wishing you an excellent read!
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Genesis Block
Satoshi Nakamoto, the mastermind behind Bitcoin, created the first transaction block itself. The idea of Bitcoin has been political from the start, although it is neither of ” LAW “ or of ” LEFT “. Anyone who thinks the financial system is problematic can find themselves in the promise of Bitcoin, no matter their political edge.
The story is well known: in the first block of transaction was a hexadecimal message.
5468652054696d65732030332f4a616e2f32303039204368616e63656c6c6f72206f6e206272696e6b206f66207365636f6e64206261696c6f75742120666f7376
Which when decoded to ASCII gives this.
The Times 03/Jan/2009 – Chancellor on brink of second bailout for banks
It is also amusing to note its price, which was only 1.50 pounds sterling in 2009, is now 2.50 pounds sterling. A 66% increase.
To come back to this one, in French:
The Times 03/Jan/2009 – Chancellor set to give banks second bailout
This message is still relevant, 14 years laterat a time when some banks fall and are, of course, bailed out by the government…just like in 2009, when the inability of banks to properly manage their risk was bailed out by public money.
With the policies of zero interest rate and astronomical valuations of tech startups which often did not even generate a profit, the SVB has become a monstrous entity. The bank did not speculate in the mortgage market, but it adapted to the daily madness of the financial markets.
THE huge amounts of fresh money deposited daily with the SVB have been placed on the money market to win at least a small yield. But that was before the EDF decides to mount his skyrocketing rate to counter inflation. The banks are then seated onhuge latent lossesand startups need cash which they are looking to recover, as their previously flourishing business struggles in this new environment of long rates.
Ever higher was the only currency in the markets. Not only startup valuations were unreasonable, but also thousands of altcoins, NFTs, Rolexes, Legos, … Everything was good for speculation. Cash was the worst investment.
The chaos of the crypto industry
“Seriously, trying to sell us the reliability of crypto after the fall of FTX and LUNA [Terra] ? »
I hear you ruminating behind your screen. And it is true that thecrypto industry is an even more variant fragile of the established financial system. Most crypto projects have only served VCs (venture capital or venture capital) in order to pour their surplus cash into a free money period. The words “blockchain”, “decentralization” And “metaverse” shone, and that was all it took to convince them. We were literally creating money out of nothing.
The winners ? The crooked VCs. Losers ? We.
And it needs separate Bitcoin from the majority of crypto projects invested heavily by VCs. It is fundamentally different: no fundraising and no one to represent it, without falling into maximalism and throwing away everything that happens that is not Bitcoin. Ethereum is also an extremely interesting project, just fundamentally different. But that’s not the topic of the day.
As said Robert SchillerAmerican economist, at the time of the Dotcom bubble:
“Nothing important has ever been built without irrational exuberance. »
“Nothing of importance has ever been built without irrational exuberance. »
This irrational exuberance must pass before the real added value is felt.
Now that trust in our elites has been eroded, with inflation rates around the world hitting double digits, bankrupt banks and inflation still well off target? There Fiat moneysince the end of the Bretton Woods agreements, is not collateralized only to our trust towards her. Thanks to Bitcoin, we no longer need to trust our bank. But we will come back to this point later.
Nevertheless, one can be disappointed with the promise of Bitcoin. He was introduced as a inflation shieldand here it is -60% from HUD at a time of inflation. In my view, it is simply suffering from the boundless monetary expansion and the peak it has scored because of it. Has he failed so far? Not for me. I’bitcoin ecosystem is more alive than ever, and it is still the ecosystem most decentralized and disinflationary existing. No operating hours, no CEO, no account blocking, no central entity to manage it, usable by all and all the time. His promise has so far been kept.
Holding money in a bank is not without risk, because you have to trust in the ability of banks to manage their risks. And as history has proven to us time and time again, they can’t. With Bitcoin, you can forget about reserves, interest rates and counterparty risk. There is only code. He is leaning on himself.
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A CDS on the financial system
It’s an idea developed by financier Greg Foss, who imagines the Bitcoin as a CDS on the fiat money system. And I find this example particularly relevant.
For those who don’t know what a CDS is, a simple reminder: CDS are derivatives playing an insurance role. They are used to protect against non-payment of a debt. We already talked about it in an article for the Journal du Coin in October 2022at the time when Credit Suisse was already in difficulty and when the price of CDS on its debt exploded.
Greg Foss thinks the Bitcoin should be considered a payment default insurance of all fiat currencies. When the risk on fiat currencies increases, Bitcoin enjoys a premium. Does that sound crazy to you? However, searches for Bitcoin have recently seen an explosion, with setbacks of the SVB and Credit Suisse.
As its price which won 40% since the collapse of the SVB.
THE Bitcoin is already a defense against the financial system. So it’s sort of a CDS on the latter. But the noticeable difference of Bitcoin is that it has no no consideration.
If you saw “The Big Shorts” (which I highly recommend) – a film where we follow a handful of winners who speculated on CDS during the subprime crisis – you know the risk. In 2008, if you had CDS on Lehman Brothers, you made a lot of money. But your counterparty, in other words the person from whom you bought this CDS, still had to be able to pay you.
THE Bitcoin is therefore still better than CDS since it has no counterpart (as long as you keep it on a key). It is an insurance on the failure of the world system.
That’s why I think the worst allocation you could put into Bitcoin is 0%.
As my former manager (whom I salute if he passes by here) liked to recall:
“Bitcoin is a theta-free option. »
Understand here: Bitcoin is a blanket throughout the financial system no time limit. If you leave it in a portfolio made up of several other assets, it will have either a significant upward impact or a negligible downward impact. You do not have no interest in not holding it at all.
Your bitcoins have great value and deserve maximum protection! To sleep with peace of mind, equip yourself with a secure Ledger hardware wallet and receive up to $30 in BTC for the purchase of a Nano key. Your security is priceless (commercial link).