Bitcoin has taken a nasty slump of roughly 12 percent and has fallen into the high $49,000 range thanks to Elon Musk and Tesla.
Elon Musk Says “No” to Crypto Payments
Musk – the South African entrepreneur behind the electric car company – made headlines in February when he decided to add approximately $1.5 billion worth of bitcoin to the firm’s asset roster. He later decided that the time had come to make bitcoin a valid payment method for Tesla goods and products. This caused many analysts to go crazy with excitement, and the world’s number one digital currency by market cap surged through the roof.
One of the big things that bitcoin has always struggled with is its status as a speculative asset. For the most part, the currency – while popular – has always been seen strictly as a tool that can potentially increase one’s wealth overnight granted luck plays out to the person’s advantage. However, what many people forget is that bitcoin – along with many of its digital cousins – was designed to serve as a payment currency; something that would knock out credit cards and fiat.
Sadly, this has been a slow journey considering how volatile the cryptocurrency is. Many retailers are not willing to take a chance that they could lose profit within moments of completing a transaction, and to a degree, we cannot fault them. If you were to walk into a store and pay for $50 worth of merchandise with bitcoin, for example, and then the store does not convert it to fiat in time, this sets up a window that bitcoin could drop, meaning you will still walk away with everything you bought while the company has lost out.
This is not entirely fair, and thus several businesses have turned the idea of using crypto for payments away. Therefore, you can imagine the elation that true bitcoin fans had when it was announced that a large company like Tesla would be pushing forward with the bitcoin-as-a-payment-method agenda, but now it looks like Elon Musk is putting the brakes on.
A Huge Blow to BTC
Naturally, this is coming as a huge disappointment to many people. Yes, it is upsetting that bitcoin’s price has taken such a drastic turn for the worse, but it is even more upsetting that such a big barricade has been put in the asset’s way. To come this far as a potential payment method was something that many fans and traders could rejoice over. It was also widely whispered that Tesla was giving many other companies the confidence they needed to accept bitcoin for goods and services.
Now that Tesla is saying “no,” there is a good chance that other firms that were potentially thinking about bitcoin as “the next credit card” will suspend their financial choices as well.
The virtues of Bitcoin reflect those that make up the foundation of the Islamic holiday.
“O you who have believed, decreed upon you is fasting as it was decreed upon those before you that you may become righteous.” — Quran 1:183
Fasting is one of the special rituals of Islam. It encourages and teaches patience and delaying gratification, both of which are essentials to the Bitcoin philosophy. So, what does Bitcoin have to do with Ramadan?
Arabic Etymology Of Fasting And Ramadan
Ṣawm (Arabic for fasting) means abstention, this includes potentially abstention from food, drink, sexual intercourse and/or speaking. Fasting, in the Islamic sense, is the abstention from food, drink and sexual intercourse during the day. Ramadan is the month in which Muslims are obligated to fast.
The etymology and meaning of Ramaḍan is a disputable matter in the sources. Some say it means “hot weather” and it’s named so because when they chose the name it was hot. Others say it’s “the rain in the end of summer and the beginning of the fall,” or “the rain that finds the land burning when fallen” from the word, “Ramaḍi.” Solving this dispute, however, is beyond this article’s topic.
If you ask Muslims about the moral of Ṣawm, many will say, “It’s about sympathy for the poor and the disadvantaged.” However, many Muslim philosophers and philologists hold that it’s about patience, delaying gratification and self-fulfillment. We read in the old Arabic dictionary Lisan Al-Arab, “Fasting is patience.” This brings us to the next idea: HODLing is Ṣawm.
HODLing As Fasting
The philosophy of HODLing, held mainly by Bitcoin maximalists, has an underlying principle rooted in Austrian economics, namely, time preference. In economics, time preference is the current relative valuation placed on receiving a good or some cash at an earlier date compared with receiving it at a later date. HODLing is a low time preference action because it’s an abstention from spending bitcoin on expedient goods, services or products. Trading, on the other hand, is high time preference since it’s focused on making fast gains or interest.
Ṣawm has the same underlying principle as HODLing, that is, delaying gratification. Muslims abstain from eating, drinking and having any sexual intercourse during the day, so that they can receive God’s blessing by being more righteous. Fasting and bitcoin, each in its unique way, incentivize low time preference and delayed gratification, both of which, in turn, usher in self-fulfillment.
You can conceptualize the effect of low time preference as anti-consumerism. Sound money (i.e., bitcoin) is always incompatible with consumerism. How is that?
Bitcoin As Ramadi
As we have said earlier, Ramaḍi means the rain that falls and finds the land burning. The word is cognate to the word Ramaḍan itself.
In our world of hyperinflation, consumerism is incentivized by inflating the money supply (i.e., printing more money). “How is that?” You might ask. Well, if your money purchasing power is always being decreased, then purchasing things now, rather than later, would be the best for you. On the contrary, in a sound money (i.e., bitcoin) system, holding money is incentivized because the purchasing power of each unit is continuously increasing rather than decreasing, thus encouraging HODLing and low time preference.
Bitcoin is the Ramaḍi to our hyperinflated world, it’s the antidote to its inefficient monetary system that is unjustly stealing purchasing power from the poor, making it more and more difficult for them to buy literally anything. Bitcoin extinguishes the fire of hyperinflation, as the Ramaḍi rain extinguishes the burning land. It ushers in a new world of low time preference, high productivity and low consumerism.
From Idea To Expression: The Night Of Power And Sound Money
The Night of Power is the night within which the Quran was sent down. Most Muslims hold that the night was in late Ramadan. However, some scholars believe it can be any day in the year.
In the Night of Power, Ismaili Muslims believe that “the Holy Spirit inspired the Book (kitāb) in a spiritual form into the heart and soul of the Prophet.” Then the Prophet used his soul and imaginal faculty to express divine inspiration. Finally, this expression got recorded and distributed between Muslims.
The process of creating bitcoin was similar to that: First, the idea of sound money with limited supply showed up in Satoshi’s mind, then he used his imaginal faculty to express it in code. Finally, this code was published so that everyone can run Bitcoin and enable the first sound money in the history of man.
An Ismaili commentator said: “In the universal sense, the Night of Power is the spiritual state of receptivity to the Holy Spirit.” Now we might ask, is sound money what God wants for us?
The Only Legitimate Money
“O you who have believed, do not consume one another’s wealth unjustly but only [in lawful] trade by mutual consent…” — Quran 4:29
“Inflation, being a fraudulent invasion of property, could not take place on the free market.” — Murray Rothbard
Continuously printed by central banks, fiat money is a system of continuous devouring of other people’s money and time without any consent, and thus, it’s illegitimate. Central banks, and governments in general, are the first and foremost privileged party in this process, in which other people have no choice due to regulations that prevent using other currencies. This control over the free choice in market is also one thing that is not compatible with Islam, even though some Muslim countries have no problem implementing it. Let’s see this hadith: “When prices were high in the Prophet’s time the people asked him to fix prices for them, but he replied, ‘God is the One who fixes prices, who withholds, gives lavishly and provides, and I hope that when I meet my Lord none of you will have any claim on me for an injustice regarding blood or property.’” So fixing prices, which includes setting minimum wages, is an injustice. How is it different for fixing the currency?
Ramadan is also about being pure and focusing on the more meaningful things in life. Opting out from the ungodly fiat system is a moral obligation on each one of us, and we can’t do that without Bitcoin.
Fast and HODL
The Bitcoin Translator
This is a guest post by Bitcoin Translator. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Other cryptocurrencies have no chance at all in competing with the monstrously large Bitcoin network.
Mimesis Capital: Inside The Event Horizon, Report #16
Bitcoin Versus Ethereum And Other Alts
It’s been “alt season” for the past couple months. Bitcoin has remained situated around $50,000 while Dogecoin, Shiba Inu and Ethereum are soaring.
While short-sighted gamblers like to make bets on the next big dog meme coin, it’s important to review the basics of why bitcoin has accrued value and compare bitcoin to other tokens.
Bitcoin is the best monetary good.
Why? It has specific credible properties: scarce, durable, portable, transactable and so on.
From these properties, we can derive two unique characteristics:
No counterparty risk
No dilution risk
These two characteristics can only be maintained by having the ability to hold your own private keys and run your own full node.
No other coin or token can even compete with bitcoin on these properties and characteristics.
Therefore, no other coin or token can compete with bitcoin as being the best monetary good.
Like the invention of the number zero, “Bitcoin is a path-dependent, one-time invention; its critical breakthrough is the discovery of absolute scarcity — a monetary property never before (and never again) achievable by mankind.” — Robert Breedlove, “The Number Zero and Bitcoin”
The point of money is being able to send wealth through time and space. Bitcoin’s unique properties enable it to do that better than any other good. Since money is a winner-take-all, network effect–driven good, individuals game theoretically converge on bitcoin as a Schelling point due to its specific properties and characteristics.
“Each digital value network carries a network effect, the strength of which can be approximated by the $ value of each. (Shown here as size of circle, with accurate scale.)
With your hard-earned money at stake, pick which circle others will value most.” — @croesus
Why Do Ethereum And Other Alts Have Value?
First, ETH is a token.
Before its launch, 71% of ETH was premined. Some of this ETH was given to developers, but it was mostly distributed to ICO investors.
ETH clearly has not and cannot compete with bitcoin on being a monetary good as its monetary policy has and never will be credibly perfect like bitcoin.
Instead ETH is “pitched” as a promise to be useful in a variety of different applications. Since ETH is a token and not equity in a corporation, the community attempts to create both supply and demand narratives to incentivize speculators to buy and hold the token.
The ETH community must continue to come up with unique narratives that rationalize a reason for holding ETH. It must continue changing if it wants to bring in new buyers.
Some of these include demand use cases like issuing ERC-20 tokens, DeFi, NFTs and DAOs.
Other narratives are supply driven, like “Ultra-Sound Money,” where the community has recently started to argue that ETH supply could potentially decrease over time.
The unethical part of this is some people pitch ETH as “ultra-sound” money, something that is supposedly “better” than bitcoin.
This idea of ETH being “ultra-sound” money is scammy and misleading.
In fact, ETH is actually copying the monetary policy of an ERC-20 token built on ETH, $BOMB. This token has a monetary policy that dictates that supply will forever decline.
The market cap of $BOMB is $3 million. If ETH successfully copies $BOMB and becomes worth just as much, it will trade at $0.02 per ETH, a rather large drawdown from $4,000.
Of course, since this token has a constantly decreasing supply, it should confirm that supply itself (or “ultra-sound” money) does not make a token a good monetary good.
Unlike bitcoin, whose value accrued as a game theory Schelling point from the organically decentralized, credibly fixed nature of its monetary properties, ETH’s value is derived from promises and speculation.
ETH must continue changing and promising more applications and usefulness otherwise why hold the token? The hope is simply that it becomes more scarce and more in demand, forever. Like most startups and bubbles, it’s not the underlying fundamentals that give the asset value, it’s the hope and/or speculation of what it could become.
Like stated above, ETH is a token. It’s useful if you want to use the Ethereum blockchain. It’s not money.
The ETH token is like a Chuck E. Cheese token to use the Ethereum blockchain.
ETH’s best-case scenario: There are sustainable, long-term, useful applications on the Ethereum blockchain that are not able to be built on Bitcoin or Bitcoin second layers, don’t require perfect censorship resistance or decentralization (average person can’t run an Ethereum node), and wouldn’t just be more efficient as a product or service offered by a corporation.
Potential use cases:
Buy an NFT or buy a Fortnite skin (corporation)?
Trade on DeFi exchange or trade on Binance or Coinbase (corporation)?
Get a DeFi loan or get a loan from Unchained Capital, BlockFi or HodlHodl (corporation)?
Casino, gambling or speculation (e.g., Dogecoin, ETH, and all other alts)?
The ONLY major use case for a blockchain is money (bitcoin). For money, you need censorship resistance and decentralization in order to have the best credible monetary properties.
With that said, even if some of these use cases do play out, it doesn’t mean the token (ETH) would accrue value.
When Chuck E. Cheese launched in 1977, you should have bought equity in the business, not their tokens.
ETH And Alts Are Riding Bitcoin’s Monetization
All alts are riding the success of bitcoin. On top of bitcoin’s monetization process, unprecedented monetary and fiscal policy leads to a breakdown in the pricing mechanism of “free” financial markets.
Traditional finance doesn’t understand bitcoin, and they bring their idea of diversification to the world of monetary goods (not a good idea). In addition, retail speculators are shortsighted and constantly looking for the next big thing (SPACs, GME, Dogecoin, ETH, Tron, etc.) to get rich quickly. They fall for unit bias and chase price.
At the end of the day, alts fall to the greater fool theory. Can I sell my token to someone else at a higher price?
The best monetary good (bitcoin) becomes money, and the rest are nothing more than gambling in a casino. Dogecoin (nothing more than a joke/meme) closing in on Ethereum as the number three coin should help shed more light on that.
This is a guest post by Mimesis Capital. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Entropy, a natural phenomenon, is closely related to money and information energy — Bitcoin as information is a reduction of entropy.
When Buckminster Fuller was asked by a 12-year-old boy how he would suggest solving international problems without violence, he answered:
“I always try to solve problems by some artifact, some toolor invention that makes what people are doing obsolete, sothat it makes this particular kind of problem no longerrelevant. My answer would be to develop a world energygrid, an electric grid where everybody is on the same grid. All of a sudden, there would be no problems anymore, nointernational troubles. Our new economic basis wouldn’t begold or dollars; it would be kilowatt hours.”
The above quote from the prescient Buckminster Fuller in 1983 was in reference to his now famous prognostication of the “Kilowatt dollar”, something he first discussed as far back as 1969 (three years before Nixon took us off the gold standard). While Mr. Fuller was referring to a theoretical energy-based unit of money, what he could not have realized at the time is that he was really talking about bitcoin.
Money: Our Most Fundamental Unit Of Social Information Technology
● In a free market society, the greatest network of information by far is price, which itself is, at its core, an intersubjective agreement of value. Money is the abstraction of that value.
● The “Schelling point” for participants in a society is whichever money exists that can best transmit that price information. This is where money “wants” to go.
● Money is, therefore, the facilitator of our communication and distribution of all economic resources. All innovation and societal progress flows from this communication. It is perhaps the most elementary and consequential social tool we have and has been essential to our species’ ability to successfully scale (i.e., dominate and hyper-exponentially populate the Earth).
● This principle of money, while simultaneously vague and grandiose, is perhaps so because it is taken for granted, abstracted away and obfuscated by technocrats, economists and politicians alike who are currently co-piloting our existing monetary system.
● Importantly, money is also the means to transfer uncertainty and risk to those willing to bear that uncertainty. This is one of the key manners in which money acts as information (beyond price itself), as monetary transfer of risk and uncertainty unveils invaluable morsels of information by way of successes and failures. It builds anti-fragility in the system with these increments of volatility throughout time. Without money, there would be no measure of volatility. No means to evaluate success or failure and no motivation for such risk-transferring behavior.
● More specifically, a medium of risk transmission is necessary for the accumulation of productive capital. Risk-takers and those with the appropriate skills to build new
productive capital are not always the same people. Those who already have accumulated wealth are not always those most fit to build new capital stock. Thus, a marketplace is needed to allow the swapping of risk in order to build the capital stock. Money is the medium for such transactions.
With these fundamental and philosophical logos as our background state, let us now explore how money as information technology is key to our grokking of money’s entanglement, with the harnessing of energy as a means to advance civilization. Not only does such an exploration help us to establish just how detrimental fiat forms of money are to the process of energy phase transitions, but it helps us realize just how invaluable bitcoin is as a means to extricate ourselves from the socioeconomic dilemma we currently face.
Energy, Monetary Entropy and Information Parity
For the purposes of the below discussion, let us define entropy in its simplest manner. High entropy is a state of high disorder, whereas low entropy is a state of high order.
An Entropy Equilibrium Hypothesis:
Thermodynamic entropy (TE) increases are always balanced by a commensurate decrease in information entropy (IE), so that:
TE = – IE
where a positive value indicates an increase in entropy and a negative value indicates a decrease in entropy.
This hypothesis is essentially an adaptation of the second law of thermodynamics, combining it with concepts from information theory, and using these observations to create a formula that is more comprehensively applicable to human economic activities. It is a restatement of this law so as to better understand the relationship between energy, money and information. It is simple and symmetrical.
The Power Of X
X ^ = technological innovation’s exponential order of scaling.
○ Human productivity involves taking our temporary and low entropy states — elegant organizations of double-helixed, organic and carbon-based existence — and transforming these arrangements into higher entropy states as we consume other low entropy energy matter to then produce higher entropy energy in the form of work.
○ Technological innovation enables us to do this work easier, faster, better and more abundantly with the same quantity of resources. This is also called productivity.
According to the renowned information theory of Claude Shannon:
Information = Reduced Entropy
Technology, in turn, is what allows information to scale.
Let us further unpack this concept of information, at least in the context of this article, as unstructured data manipulated into a structured and intentionally ordered format that reduces uncertainty.
Just as the first law of thermodynamics teaches us that energy can neither be created nor destroyed, likewise, the second law of thermodynamics states that thermodynamic entropy always increases over time. However, this law says nothing of entropy inherent to information or specific human systems such as market economies. Consequently, the second law of thermodynamics says nothing of the impact of human technological ingenuity on other forms of entropy, particularly related to information.
Given all this analysis, we can refine the above formula further as:
TEX = -IE
However, this equation, spartan as it is, is not complete, at least when applied to human social and economic systems. As previously discussed, given that money is perhaps the basest unit of information technology for social scaling, we must incorporate it into this formula, along with the general exponential order of technological scaling, so that:
Whereby, ME= Monetary Entropy
We will define monetary entropy as the long-term inflation rate of that money. In truth, monetary entropy is influenced by much more than monetary inflation alone (discussed further below), but for the sake of parsimony, let us be content with this lean definition for the moment.
We can now write the hypothesis more comprehensively as:
The crucial realization as it concerns the important paradigm shift inherent to bitcoin is as follows: Fiat money involves a net increase in entropy.
This cannot be overstated and is imperative to this article’s thesis. Such a conclusion is reached despite money theoretically being a form of information that should reduce entropy when applied as intended. However, fiat, unfortunately, is not money as money was intended. Inflation, centralized and thus arbitrary control of the rules of supply (and attempts at also controlling demand via administered risk-free rates), global exchange rate volatility and competitive devaluations and mercantilism, subsidies, free debt-supporting zombie industries, opaque and uneven taxation enforcement, and many other behaviors, all conspire to create an aggregate equation of massive entropy in fiat money economies.
When money is denominated in fiat, ME is always > 0 (and is often well above this threshold, especially in the fullness of time).
When money is denominated in bitcoin, ME always = 0, period. No asterisks, no footnotes.
Another important observation teased out by the above formula is that as TE(X-ME) increases, a system’s inputs (energy resources) exhibit greater scarcity.
Kyle Baranko writes,
If money is not permitted its intrinsic capacity to absorb this scarcity, other resources will need to fill that void. This increases the cost of information production because there are fewer and fewer sources of increasing thermodynamic entropy from which to convert into decreasing informational entropy. Consequently, the system will experience a drag on productivity. Such an environment also manifests hidden costs like environmental externalities and systemic fragility which are easily cemented into chronic problems that become difficult to fix.
If an increase in TE^(X-ME) leads to greater thermodynamic or monetary scarcity, this implies that the equivalent decline in IE leads to a greater supply of structured, ordered information (decreasing informational entropy). Basic laws of supply and demand conclude this will tend to reduce the cost of information proportionally.
If, in the form of bitcoin, money is allowed to absorb thermodynamic entropy, money will accrue the incremental scarcity from increases in thermodynamic entropy values. This is how we arrive at another “mathematical” phenomenon, stated as NgU, or more colloquially known as “number go up.” Growth does NOT need to = gross domestic product (GDP); GDP growth = more consumption.
The largest contributing factor to GDP is consumption, and this has been growing materially as a percentage of GDP ever since the financialization of our economy via exponential growth in money and debt since the 1971 unraveling of Bretton Woods, the subsequent formation of the fiat standard and the USD petrodollar global reserve system. This trend only gets amplified further after each debt shock, forcing more and more consumption and leveraging to extricate ourselves from the newly indebted state we create with each cycle. This is clearly evidenced in the below chart, both at the starting point in the early 1970s, since the Great Financial Crisis (GFC) and more recently the COVID-19 pandemic.
This is a recipe for disaster. It is definitionally unsustainable to grow in perpetuity by this measure given 1) limited thermodynamic resources and, more importantly perhaps, 2) the inefficient use and squandering of these very resources. This squandering is effectuated by inflationary monetary policies that do not allow the economy to transition naturally into a lower consumption society resulting from reduced informational entropy and the abundance this could create if we allow it. A sustainable path requires a redefinition of growth away from concepts requiring increased consumption (quantity of goods and services produced, wage growth, time worked, asset inflation/wealth effects, etc.), allowing the evolution of energy, information and money to virtuously improve our prosperity.
Growth = informational entropy = more time, lower time preference.
The above equation helps us visualize a framework for such a dynamic and demonstrates how bitcoin, as a base layer with a zero monetary entropy, can help propel us into this future.
Money does not = value.
Instead, it is a measure of value created in an economy. Good money, therefore, is information. It informs us of our progress. Bad money blinds us, causing us to veer off onto spindly and corroded dirt roads.
Inflation does not = the Consumer Price Index (CPI).
Inflation is not the cost of gas prices. It is not lumber prices going up. It is not the price of a Big Mac or your electricity bill. It is not even your house’s value appreciating.
The most encompassing definition for inflation is more fundamentally the depreciation of money versus the value otherwise created.
Inflationary monetary systems obfuscate the value created by societal productivity. This simple statement can not be overstated. Since the early decades of the 20th century, we have errantly accepted inflation as a first principle necessity in all free markets. But it is not the natural economic state, and in a broader historical context, it is actually a fairly recent experiment (see Gibson’s Paradox). Quite the opposite is true in terms of the natural state of human progress and free market capitalism. Once this problem is truly appreciated, the value of an absolute scarcity that is verifiable, immutable and censorship resilient across time and space, as well as stateless (belonging to the free market), we suddenly realize just how incredible an invention this truly is. That is the rabbit hole that is bitcoin. The notion is subtle, but once understood, the gravitational desire to dive headfirst down this rabbit hole of myriad societal revolutions becomes an inescapable journey.
Bitcoin = A Mirror
A deflationary monetary system of absolute hard money acts as a mirror for value creation. It is a compass to guide us toward a better economic path. Value is created through human ingenuity, environmental necessity and the compounding productivity driven by our accumulation of collective knowledge. These forces are often labeled generically as technology or innovation, and they always create value decreasing informational entropy. Said differently, all productivity is driven by technology and all technological innovation is deflationary at a fundamental level. That is, as long as money remains a constant in the equation.
If, however, money is inflating, we lose our measure of value. It would be like using the proverbial yardstick that constantly redefines what a yard is: A table is two yards; but then a yardstick creates more units and suddenly that table is four yards. The table did not grow. The measurement unit shrank. A store of value is just as it sounds. It stores all the productivity and work created. If more value is created than a sound money, then that money by definition has more purchasing power and stores greater and greater value. If instead value is being destroyed by money supply abuse, then people will without fail seek to store their value elsewhere. Money must always, therefore, start as a store of value before it becomes a medium of exchange. Deflation is a measure of success in creating economic value as innovation creates more for less. If prices decrease by 5% per year, that is a much greater expression of value creation than our current measures that are perversely inverted, such as “real GDP.” If you print dollars and then count the value created in those very dollars, what does that actually tell you? What if you could instead calculate the amount of goods and services created versus the dollars created. Would that not tell us more?
We live in a time of incredible technological advancements on increasingly exponential growth curves. This is taking information production to an unseen scale of abundance, but such abundance is diluted and often fully negated by fiat’s perversion of money’s potential to synergistically accommodate such plentitude.
If technological productivity has the potential to decrease informational entropy output for each thermodynamic unit of increased entropy input, this is the true definition of wealth creation and prosperity. More for less. Fiat not only robs us of this wealth, but it adds to the entropic dissipation polluting our ecosystem and making it ever more fragile. Yes, “ecosystem.” A word most often associated with environmental dialogues is not coincidentally built from the word “economy” itself (with its etymological roots in the Greek words for “distribution of the home”), as thermodynamic systems are inextricably linked to systems of human productivity (information).
Concluding with the trite axiom, “bitcoin fixes this,” does not even begin to do the solution that is bitcoin the justice it deserves. Bitcoin addresses this problem like Cinderella’s slipper. It is a perfect fit or a perfect solution in this case. Not only does the Bitcoin network inherently take highly disordered information and asymmetrically (through cryptography) make this information incredibly ordered, as eloquently stated by Bitcoiner Gigi in his article Bitcoin’s Eternal Struggle, but bitcoin (the money) with its properties of absolute scarcity, decentralized consensus, immutably programmed supply, rule-based and anti-fragile incentive structure, changes the game entirely. Each of these properties on their own would change the game, as they’re each intensely conducive to decreased informational entropy, especially when compared to fiat. But when combined, the synergistic reduction in entropy is perhaps even more exponential than the Cambrian explosion of information that is being produced by today’s technological abundance.
It will be a great day, perhaps a great filterof sorts, when the ships of money and other technology can sail along the same current.
This is a guest post by Aaron Segal. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Many analysts thought that with so much competition stemming from regions like Canada, the United States would give in sometime this year and submit to a bitcoin-based exchange-traded fund (ETF), but now it looks like that will not be the case.
A Bitcoin ETF May Not Arrive This Year After All
The Securities and Exchange Commission (SEC) has always been relatively stubborn when it comes to permitting bitcoin-based products and services, and despite many new ideas and developments, it looks like that stubbornness is continuing. The government agency has issued a statement on bitcoin, claiming that there is too much risk involved in the asset class and that traders need to remain extremely cautious when entering its doors.
While the statement does not necessarily say that the SEC has no intention of ever approving a bitcoin ETF, it does show an attitude of continued nervousness and fear surrounding crypto, and thus traders may be wrong to think 2021 will be the year where such an ETF is formally introduced.
The statement reads as follows:
The [SEC] staff strongly encourages any investor interested in investing in a mutual fund with exposure to the bitcoin futures market, as discussed below, to carefully consider the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss. Among other things, investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a highly speculative investment. As such, investors should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market.
The battle to get a bitcoin ETF approved with the SEC has been a long and arduous one. While many firms – including Bitwise and Van Eck – have tried with all their might to earn the needed “yes” votes, they have all come up shorthanded.
According to many analysts, the U.S. was likely to become more open minded when it came to a crypto-based ETF this year given that Canada, the country’s neighbor to the north, has already given the greenlight to several ETFs that are both bitcoin and Ethereum-based. The SEC’s own Hester Pierce has even commented that the agency’s refusal to allow such a product up to this point has been a mistake.
Sadly, it does not look like the SEC is taking any new information from these facts. The organization is still warning of the alleged illicit behavior that exists with many forms of crypto, and thus are telling investors to really think twice before getting involved.
Still Too Much Fear
The statement goes on to say:
The areas identified relate to substantive requirements regarding valuation, liquidity, custody, arbitrage mechanisms for exchange-traded funds (ETFs) as well as potential manipulation and other risks associated with cryptocurrency-related markets.
DBS Private Bank has launched a bank-backed trust to manage bitcoin for clients, the first such product in Asia.
DBS Private Bank has launched the first bank-backed cryptocurrency trust in Asia, which will allow private banking clients to invest in and manage bitcoin, according to a Bloombergreport.
Per the report, the trust services are built on DBS Digital Exchange and it would be offering cryptocurrency services to private banking clients for asset management, including for ether, bitcoin cash and XRP in addition to bitcoin. DBS Exchange was launched in December to offer fully integrated cryptocurrency services.
The news is another noteworthy indicator that demand for bitcoin is growing significantly.
According to the bank, this new service will allow its customers to be able to hold bitcoin with confidence about its custody and management. In the words of the group head of DBS Private Bank, Joseph Poon, “Our trust structure allows clients to conveniently hold these assets, with a peace of mind that they will be safely managed and passed on to their intended beneficiaries,” according to Bloomberg.
Bloomberg reported that DBS’s digital exchange currently has 120 clients. The firm holds “S$80 million ($60 million) in assets under custody, with trading volumes up 10-fold to S$30 million to S$40 million.”
Bitcoin mining firms DMG Blockchain Solutions and Argo Blockchain have joined an accord promoting industry decarbonization.
Bitcoin mining companies Argo Blockchain and DMG Blockchain Solutions have partnered with the Crypto Climate Accord (CCA) to promote industry decarbonization.
Per a press release, in conjunction with CAA, both firms are developing a new working group to articulate the accord’s objectives, while looking to increase the transparency of the renewable energy sourcing of cryptocurrency mining operations using new technologies.
The CCA proposes several objectives to bring down the carbon emissions within the bitcoin mining industry, including reaching net-zero emissions from electricity consumption by 2030 and collaborating with supporters to develop technology, tools and strategies to accelerate the adoption and verification of 100% renewables-powered blockchains by 2025.
“The Crypto Climate Accord helps lay the groundwork for real, tangible action to address Bitcoin mining’s impact on the environment,” Peter Wall, CEO of Argo Blockchain, said in the statement.
Jesse Morris, the chief commercial officer at Energy Web, a low-carbon electricity system accelerator, said that this “green hash rate solution is critical,” and that it could help individual mining facilities highlight their use of renewables and set an example for other industries.
The CCA consortium consists of over 40 companies, including 20 organizations focused on the cryptocurrency space.
The debate around bitcoin mining’s energy consumption has long caused misunderstandings about the technology, but it has ramped up recently, as highlighted by Tesla CEO Elon Musk’s recent statements. In a recent tweet, he said that the electric vehicle manufacturer will be suspending all of its bitcoin purchases, citing climate change concerns.
However, while bitcoin mining is based on energy consumption, a large shift toward renewables is taking place through initiatives like this partnership and others. Furthermore, many argue that Bitcoin’s energy consumption is a highly-efficient transfer of energy to permissionless value.
Bill Ackerman is a billionaire investor that knows a thing or two about financial stability and wealth. In a recent interview, he commented that cryptocurrency is a fascinating thing and that it could potentially benefit from some of the poor economic circumstances America is dealing with.
Bill Ackerman Likes Bitcoin, Thinks Inflation May Last a While
For the past year, inflation has been a serious problem in the United States and abroad. The coronavirus pandemic has struck our global markets like nothing else has in the past, and thus the status of the U.S. dollar and virtually every other form of fiat has dropped in the past 12 months.
This has potentially allowed bitcoin to incur the meteoric rises it has been experiencing since last summer. Many people no longer see it as just a speculative asset; it is now a hedge tool that can keep one’s wealth stable during times of economic strife.
While the situation has been good for bitcoin and cryptocurrencies, standard monetary markets are experiencing heavy problems, and Ackerman does not think this is going to be a short-term issue. In his interview, he comments that things are going to last this way for some time, claiming:
I think [inflation is] not temporary. Look at every commodity price, right? Copper, lumber, energy even before the colonial pipeline issue. Look at housing prices. Look at bitcoin, right? Everything is inflating. That is driven by a once-in-a-moment history. People are emerging from a pandemic with the endless spirit that comes from being locked up.
One of the things Ackerman thinks may be contributing to the present situation is that the Fed is doling out historically low interest rates. He says that he can understand why the Fed took such a route, but this cannot last forever if the economy is to ever fully recover. He says:
I think they are going to have to raise rates for sure, and I think they adjusted their policy just at the wrong time. Preemptive policy toward inflation, I think, is a better approach, particularly in a world where we have massive, massive economic stimulus. I think with rates where they are, there is a very good risk of the economy overheating.
An Extraordinary “Phenomenon”
Ackerman also took a few moments to discuss bitcoin and other forms of cryptocurrency, which he thinks are “brilliant” and “fascinating.” He says:
I think crypto is a fascinating phenomenon. I think it is a brilliant technology and I kick myself for not understanding it. It is one of the best speculations ever, but it is not a place where I would feel comfortable personally putting any meaningful amount of assets in. Therefore, I would not invest our firm’s assets.
Rick Rieder, a chief investment officer for major asset manager BlackRock, recently touted many positive attributes of bitcoin.
Rick Rieder, BlackRock’s chief investment officer of global fixed income and head of the global allocation team, recently made notably positive comments regarding Bitcoin during an appearance on CNBC’s “Squawk Box.”
“Bitcoin is an interesting asset,” said Rieder. “I think it’s durable. I think it will be part of the investment arena for years to come.”
Rieder was asked his opinion on Bitcoin in light of Elon Musk’s recent announcement that Tesla will be halting acceptance of the largest cryptocurrency as payment for its electric vehicles due to environmental concerns.
“[There are] some … hurdles to overcome, and I think [Musk] was mentioning one of them,” shared Rieder. He later added some challenges he currently sees regarding Bitcoin, such as volatility, regulatory dynamics and fiat currency concerns.
Greenidge Generation has announced it will offset all greenhouse gas emissions from its bitcoin mining operations by June 2021.
According to a press release sent to Bitcoin Magazine, Greenidge Generation Holdings’ bitcoin mining operations facility in Upstate New York will be entirely carbon neutral by June 1, 2021.
“Greenidge will purchase voluntary carbon offsets from a portfolio of U.S. greenhouse gas reduction projects,” according to the release. “Each project has been reviewed and certified by one of three well-recognized Offset Project Registries … ensuring that any projects funded by Greenidge reduce emissions or increase sequestration of greenhouse gas in a manner that is real, permanent, and verifiable.”
Greenidge Generation Holding Inc. is a holding company that includes Greenidge Generation LLC, its vertically-integrated bitcoin mining and power generation facility in Upstate New York. Its 106-megawatt natural gas plant allows Greenidge to mine bitcoin and contribute to the security of the Bitcoin network with reduced costs while meeting the power needs of homes and businesses in the Finger Lakes region.
“Our bitcoin mining capability is already best-in-class and seamlessly integrated with our electricity generation that powers thousands of homes and businesses,” Jeffrey Kirt, CEO of Greenidge Generation Holdings Inc, per the release. “By taking the bold and unique step of making our cryptocurrency mining fully carbon neutral immediately — as opposed to at some distant date in the future — Greenidge is once again leading in environmental efforts.”
Kirt added that, with this commitment, Greenidge is demonstrating that it is possible to secure the Bitcoin network while maintaining a fully carbon-neutral footprint. The company is also calling on others to join in cutting greenhouse gas emissions “now.”
There has been plenty of movement in the Bitcoin energy field lately. At the beginning of this week, Ninepoint announced it would invest its management fees in forest conservation to offset the carbon footprint of its bitcoin exchange-traded fund (ETF). And yesterday, Argo Blockchain announced that it had purchased two hydro-powered data centers to propel its green bitcoin mining vision.
Highlighting some common misconceptions about Bitcoin as an energy “waster,” on Wednesday, Elon Musk tweeted that his company, Tesla, will halt the acceptance of bitcoin as payment for its electric cars due to environmental concerns.