BITCOIN FUNDAMENTALS: Secure, Borderless, Unconfiscatable . . . and You!
My strength is explaining things so that the average person “can get it.” I am no guru, have average intelligence but hopefully a degree of street smarts and common sense. My philosophy is if I can’t understand it, neither can my readers. . . and my aim is to KISS . . . keep it simple stupid!
Put simply I hold that Money Management trumps Fundamentals and Fundamentals trumps Technical. All three tools are useful. All three are related. All three deserve attention. And none should be ignored.
Money Management is how to manage money! Duh! By far the easiest thing to learn, but also the most difficult thing to master.
Fundamentals are extremely difficult to learn . . . especially when there is so much disinformation whether it be the economy, securities, commodities, or bitcoin. Further, fundamental analysis is information unique.
Technical’s are also difficult to learn. . . but much easier to learn than fundamentals because technical analysis is information in common. For the most part the same technical analysis can be applied to the economy, stocks, commodities or bitcoin.
The emphasis in this shorty is fundamentals of bitcoin and THE BITCOIN STANDARD which I have compacted into three easily understood components.
SECURITY
Bitcoin is secure because it is the longest chain with limited supply secured by proof of work. I am not a developer. . . I did not buy my first bitcoin until August 2013 some where under $100. And while I have no expertise in the back end of Bitcoin, I did realize early on that if this digital asset was truly limited in supply and secure it had fundamental potential.
Again, the innards of bitcoin is not my thing. . . and just as I rely on honest qualified suppliers and contractors in my business, I rely on honest qualified experts who are diligent making bitcoin secure.
It has taken time to find these experts . . . and early on I was taken in by THE CRYPTO WORLD . . . by the idea of “better than bitcoin” and the canard of competing crypto standards. . . so the word integrity in bitcoin development is something we as laymen must diligently search for and value.
I always defer this part of the fundamentals to these experts and I personally look forward to the upcoming Unconfiscatable Conference section featuring Jimmy Song, Peter Todd, John Dilley, and Pavel Morevac where I am sure I will be taken to a new level of understanding just why the longest chain with a limited supply is secure through proof of work.
But for most of us laymen understanding the concept of longest chain secured by proof of work is sufficient for understanding why THE BITCOIN STANDARD is also the Hayek Standard. That does not mean a different standard with a longer chain secured by proof of work can’t come along, but intrinsically this is highly unlikely, a bad bet, and nothing to lose sleep over.
BORDERLESS
The second fundamental for 2019 is that Bitcoin is borderless. By borderless I mean it is a value transfer system without national boundaries.
Hundreds of thousands and even millions of dollars in value can be transferred quickly, securely, and for pennies. This is something that can not be duplicated with fiat, or silver, gold, stamps, or gems. . . and is a fundamental intrinsic quality to bitcoin. For the first time in history individual wealth is not locked in by borders. While your physical body may not be able to escape tyranny, your wealth can escape.
While other cyrpto wannabes can and do imitate this feature, they do so only by sacrificing the first fundamental already outlined . . . security. Imitators can only be secured by a lesser chain with far less security.
UNCONFISCATABLE
This is by far my favorite fundamental of bitcoin. So long as you own your private keys, bitcoin is unconfiscatable.
Frankly, until now this has never been a word! The first time I heard it was early last year while listening to one of Tyler Jenks YouTube videos with Leah Wald.
I have never been able to find it again, and Leah and Tyler have never been able to provide me with the original link, but I had it in my notes, used it in an article, and also started using it as the ice breaker to introduce bitcoin to my fellow contractors, entrepreneurs, and business associates.
The ice breaker is this. “What do you have that cannot be confiscated?”
After asking this question, just be silent and wait for a response. It is like watching a light bulb go off!
Slowly as the person starts thinking things through like house, car, bank account, IRA, social security, gold, silver, etc. . . . they see the value of bitcoin!
I have found this to be the easiest and most profound method of introducing bitcoin fellow entrepreneurs and Tone Vays was able to obtain the domain for the first historic UNCONFISCATBLE CONFERENCE!
So these are the fundamentals in a nutshell! Don’t get caught up in the nonsense. Bitcoin is lousy cash and sucks as a store of value!
Bitcoin is a speculative investment for early adopters who recognize that a common STANDARD, as envisioned by F.A. Hayek is a pre-requisite for a level playing field for the emergence of a store of value and efficient cash. . . and that the digital asset with the longest chain, secured through proof of work, with an unprintable limited supply, and unconfiscatable . . . or BITCOIN . . . is the sole digital asset meeting said requirements for such a STANDARD to emerge.
Dollar cost averaging into bitcoin with 5%-15% of one’s net worth is sound money management if we are right on the fundamentals or wrong on the fundamentals!
If we are right, great! If we are wrong, your cost is 5% -15% of your wealth for a damn good insurance policy against a looming debt crisis.
Technical analysis like that taught by Tone Vay’s and others is also useful for timing and entrance and exit tactics, (also known as trading) within the 5%-15% parameters of your net worth.
Again, I hold that Money Management trumps Fundamentals and Fundamentals trumps Technical. All three tools are useful. All three are related. All three deserve attention. And none should be ignored. So all are addressed in this shorty.
Now I love the chart below by Murad Mamudov.
Frankly, Murad Mahmudov very possibly has it right. . . but he could be wrong! Bitcoin as a reliable store of value and useful cash is yet to come . . . if it is to come at all.
Bitcoin may well be simply a speculative avenue that reflects the ebb and flow of wealth escaping tyranny . . . and nothing more.
In fact, this is what bitcoin is now and will continue to be if it fails to emerge as a reliable store of value and useful cash. . . a flight to safety and means to transfer wealth with repeated bouts of 10X gains followed by 90% losses.
This does not mean bitcoin is not useful, it simply means it is what it is. . . and the vision for a store of value and useful cash will not be fulfilled.
This is the common sense easy to understand fundamentals. It is very possible bitcoin will never become a reliable store of value and or useful cash! This is not an unthinkable scenario for BITCOIN STANDARD BEARERS!
And this brings me to the 4th Bitcoin fundamental.
. . . YOU
Tyler Jenks and Leah Wald just published an outstanding fundamental case outlining the world economy, bitcoin, hyperwave, gold, sound money and possible solutions to the debt crisis.
They have also asked for comment. So here is my two cents worth.
It is amazing to me how quickly parallel thoughts are traveling around THE BITCOIN STANDARD WORLD. . . and this is a fundamental that should not be discounted.
If you are reading this now . . . it is you who is the 4th fundamental that no analyst can take into account. We can all go into our incantations, spells, analysis, and forecasts but the outcome depends on you . . . and what we do individually and collectively today, tomorrow, and the day after that.
YOU ARE THE NEW AND FOURTH FUNDAMENTAL ALL ANALYSTS HAVE MISSED!
The Jenks/Wald article is timely and on point and I have little to add to it except my own thoughts have been on a parallel track.
While THE BITCOIN STANDARD is the Hayek Standard in the exclusive digital world, this does not preclude emerging competing standards in the non-exclusive digital worlds!
It is bitcoin and the emerging BITCOIN STANDARD that may enable competing standards apart from THE BITCOIN STANDARD. . . such as a competing digital gold standard, a competing digital standard of a basket of commodities, and even competing government fiat standards within their own borders. . . by keeping them honest.
Bitcoin will not lose its function as a parameter or catalyst but it may not necessarily develop into the be-all solution. . . but rather act like governor that prevents over revving an engine.
Competing standards are a healthy thing. But by competing standards I mean genuinely different standards by currency competition versus THE CRYPTO WORLD view of the pseudo currency competition they advocate and self promote.
Both gold and a commodity index, and to a lesser extent the dollar, are established as stores of value. They have already accomplished what THE BITCOIN STANDARD is seeking.
Further, while fiat has a poor track record as a store of value, fiat does have a reliable track record as cash.
My point is that bitcoin may provide us sound money, but not quite the way we envision. In fact, it is almost guaranteed it will emerge in ways we have yet to envision.
Bitcoin and the emerging BITCOIN STANDARD may simply be the enabling catalyst for emerging competing standards that act as a better store of value and useful cash . . . including the restoration of the gold standard. Now wouldn’t that be something! This is a possible solution which is not illustrated on Murad’s Mahmudov’s curve.
I also distinguish my view from that of the prevalent Anarcho-Capitalist view promoted by Murray Rothbard and his followers which I consider unworkable and dangerous. While I strongly hold to limited government with law and standards enforced by courts, which is the only necessary regulation, I do not hold anarchy will cause anything but harm . . . as we can already see in THE CRYPTO WORLD which is the closest example of the consequences of the Anarcho-Capitalist view.
Further, while cash may very well develop to some degree on THE BITCOIN STANDARD off chain just as gold cash developed off chain to a degree, the vast majority of reliable cash has been provided and is provided via government fiat.
Further, seignorage is a legitimate form of revenue for nation-states to finance enforcement and courts of law. No other regulation is required. Seignorage is essentially a reward to government for providing citizens the valuable service of useful cash.
Finally, I want to end on this note. Just as the revenue of seignorage may legitimately be the prerogative of governments, free market banking is the prerogative of you . . . MY FELLOW HODLERS.
The Lost Art of Commercial Banking must be relearned and restored whether it be on the standard is Bitcoin, gold, a basket of commodities, or fiat!
The correct formula for money supply will not be supplied by Keysianism or by Monetarists (those who propose a formula for inflating the money supply).
Banking was once and can once again be an honorable enterprise which literally creates non-inflationary purchasing media based on the amount of new goods being offered into the marketplace and retires the new purchasing media as these goods are purchased in the marketplace. Also, known as self retiring commercial paper.
No such banking currently exists with bitcoin, gold, or a commodities index standard. And in many ways such banking can more easily be accomplished with gold or a basket of commodities, for unlike bitcoin they are a well established store of value.
My wife and I will be leaving in a few hours for our trek to Las Vegas and the Unconfiscatable Conference. We look forward to meeting all of you able to attend.
Unfortunately, not only have I been ill but the same bug was transferred to my wife and our four children and two grandchildren . . . we are all much better now . . . but while the website is complete . . . I have not been able to get my part done. . . but hopefully this last part will get done be me prior to the big day on Saturday. But I thought this article is far more important than the website.
My current trading position remains unchanged, except I did get stopped out at small profit to the addition I made at 3567. Basis continues to tell me we will not break down and most likely will break to the upside. . . we shall see.
Hope this helps.
UOG
