Inevitable
Three Things #111: March 17, 2024
I’ve been advocating publicly for Bitcoin, Ethereum, Spacemesh, and other blockchains and cryptocurrencies for years. I can speak for hours about the social and economic benefits they bring to people everywhere, and I’ve personally witnessed the positive impacts they’ve had in many places, especially in the developing world. In spite of this, however, I’ve privately had my doubts: about where we’re going and about whether this whole crypto thing is going to work out. I consider that a good thing because it’s important to be hard on yourself and to hold yourself (and your industry) to a high standard, to question basic assumptions, etc., rather than just drinking the Kool-ade.
I could give you a ton of reasons why crypto might not work. Regulators might decide to shut it all down, or at least to make on ramps and off ramps so difficult as to be impracticable for 99% of people and 99% of use cases. Despite spending billions upon billions of dollars in R&D and marketing over decades, crypto might fail to deliver any use cases or applications that everyday people care about (other than maybe Bitcoin and stable coins) and might eventually fade away. We might simply never come up with a narrative that appeals to ordinary people and that addresses crypto’s horrible mainstream reputation. The usability may remain so poor and the barrier to entry so high for the average user that crypto may fail to ever appeal to more than a tiny, niche audience. We might never have robust infrastructure or be able to scale to the levels required to support real applications with millions or billions of users. Rogue AI agents might attack and take over. I could go on.
But recently something changed. After witnessing three market cycles, after working on infrastructure and usability in an effort to fix some of these problems while continuing to have doubts about long term viability, I noticed recently that a lot of my doubts have evaporated. For the first time ever, crypto really feels inevitable, and not only because bitcoin recently set a new all time high. Here’s why.
Thing #1: Instability 📊
One of my favorite ways to describe Bitcoin is that it’s a hedge against political instability and ineptitude. Both of those are at an all time high. Maybe standards have fallen and politicians and central bankers really are dumber than they ever were before, or maybe it’s just more obvious when they screw up due to the Internet and the rapid spread of information, but either way more people than ever before are losing faith in formerly trusted but actually inept, corrupt, broken institutions.
Banks are horrible and getting worse. Central banks continue to print money like there’s no tomorrow. National debt continues to rise at unprecedented, unsustainable levels, and no one in charge has a plan to rein in spending or get things under control. Raising taxes is out of the question, as is cutting spending in an age when pretty much everyone in both parties has grown fat on government largesse. Literally no one has a plan. The house is on fire, the emperor has no clothes, and it seems as if no one cares.
But Bitcoiners get it, and Bitcoiners care. More and more people are starting to wake up to the power and importance of a currency whose supply cannot be arbitrarily inflated or debased, and a money that you control yourself (rather than your government or your bank permitting you to transact with your own money).
Let me be clear: I’m not a Bitcoin maximalist and I’m not a full on subscriber to Austrian economics. I think there are times and ways in which it makes sense for a government or central bank to intervene in the economy, to respond to crises and temporarily increase the circulating supply of currency, etc. For this reason, for a long time I wasn’t terribly sympathetic to Bitcoiners’ pleas that we need a hard money above all, that fixing the money fixes the world, etc. It was easy to feel that, in fact, we could get away with inflating the monetary supply a with few to no consequences. All of that changed in the past few years, and over time the Bitcoiners’ message has begun to truly resonate for me. I’m not alone.
Today I see how this prerogative is abused time and again by pretty much every government and central bank in the world. I see how this spending is no longer temporary or restrained, and how budgets are simply never balanced anymore because rich world governments feel that they can spend their way out of every crisis, big and small. I see how governments and central banks feel entitled to print their way through wars and out of crises with little to no restraint and hardly any accountability. More and more people are waking up to this reality, including many that are not Bitcoiners, not Austrian school believers, and are not libertarian but are just ordinary people annoyed by inflation and forever wars.
The world needs an alternative to untrustworthy, debased fiat money. It’s clear today that that alternative is Bitcoin. Yes, there will continue to be a place for manipulated fiat money. I don’t believe in hyperbitcoinization and I don’t think fiat money is going away anytime soon. Central governments, especially the big ones, are still the most powerful actors in the world and they’ll continue to find creative ways to inflate supply, buy their way out of crises, spend their way through forever wars, and mollify the unhappy masses. At least, they will until they no longer can and some sort of crisis or reset occurs. This has happened many times in many places and, given the unending, escalating political brinksmanship I wouldn’t at all be surprised if it happens even to big, rich economies like the United States. It’s a question of when, not if.
When that day comes, Bitcoin will be there. More and more people are coming around to this idea: not that Bitcoin is perfect or that it fixes everything, but that it’s a viable, secure, battle tested, production ready alternative, that no one controls it, and that it’s not going away anytime soon. That’s good enough for now.
It doesn’t make me happy to say this, but the reality is that the world is becoming more chaotic, more lawless, and more unstable, and Bitcoin is designed to thrive amidst chaos, instability, and lawlessness.
Bitcoin’s critics often point to its volatility. Set against the backdrop of a world that’s getting more unstable every day, this is no longer a disqualifier.
Thing #2: Crypto Nihilism 🐶
I was first introduced to the idea of financial nihilism two or three years ago via Demetri Kofinas who, as far as I know, first gave it a name. Since then it’s taken off, especially recently.
Financial nihilism is best understood as the opposite of Warren Buffet-style value investing, which posits that assets have an intrinsic, fundamental value and that investors can best profit by buying assets that they determine are currently undervalued by the market for idiosyncratic reasons (i.e., where price is below value). In contrast, financial nihilism posits that all value is an idiosyncratic story and there’s no such thing as fundamental value. As such, value accrues not due to some underlying notion of intrinsic value but rather to memes—to cultural artifacts that are funny or otherwise relevant or timely. To a financial nihilist value investing sounds quaint and outmoded—like something your grandparents did.
The underlying cultural engine driving financial nihilism is the feeling that financial security, including a stable income and owning one’s own home, is and forever will be out of reach. Financial nihilists and young people in general feel that escaping debt (especially due to student loans and credit cards) is nigh on impossible, that they don’t have much to lose (since they don’t have much to begin with), and that as a result the most rational thing to do is to gamble on the latest memes. Its most famous manifestation is the rise of meme stocks (“stonks”) like Gamestop and meme coins.
Meme coins obviously aren’t new. Dogecoin was created in 2013 and there are now hundreds with new ones appearing every day. Since first encountering meme coins I’ve alternated between disinterest and distaste, sometimes bordering on disgust with the success of these stupid, vapid, meaningless projects when the “real” projects that have done real work, built real things, and offer real value to the world have been continually undervalued in comparison. (Of course, a financial nihilist would take issue with the notion of real value, arguing that memes are as real as anything else.)
It took a while but I’ve changed my mind quite recently, and I think I’m not alone. As I wrote two years ago when something finally clicked for me and I finally understood the rise of NFTs, another trend of which I was skeptical for a long time, I’m beginning to understand that memes, meme stocks, and meme coins are in fact a legitimate and important manifestation of the values and voice of their respective communities. I’ve seen the way that even silly memes bring people together, the way people create and manifest value and affinity together, and while it’s still a bit silly and ironic on some level it’s also fun and totally fine if you don’t take it too seriously (and don’t invest money you can’t afford to lose). In retrospect this should’ve been obvious from the moment the Dogecoin community banded together to sponsor a NASCAR in 2014, which was probably the first ever large scale manifestation of this phenomenon.
If the 2017 market cycle was driven by the ICO boom, 2020 was DeFi summer and 2021 was the rise of NFTs, 2024 is looking more and more like the year of the meme coin, the closely related PolitiFi, and in general the message to left curve everything. We were hoping it would be something more serious this time around like AI x crypto or DePIN—and those projects may still have their moment—but the overwhelming existential absurdity of another Trump v Biden election, the sad reality of inflation and yet more forever wars, and the political and economic disenfranchisement of an entire young generation has manifest in the only way possible: bell curve memes and chuds vs. chads.
In feeling distaste towards meme coins and crypto tomfoolery in general I’ve been wrong by trying to be too right curve. I see that now. The people and projects that succeed in today’s world are not the “right curve” Warren Buffets, nor the “mid curve” Jim Cramers, they’re the left curve degen Chads. Even the best bets of all, the ones that look like total no brainers today, BTC and ETH, were left curve degen Chad bets a few years ago. Your grandfather’s stock picking advice no longer applies here. The world has changed and it’s time to move on.
Yes, okay, like fiat money the S&P index isn’t going anywhere and stonks will probably continue to do okay, but what a large and rapidly growing cohort of young investors is telling us by voting with their dollars and their $BTC is that the system is broken. It doesn’t work for them, it never did and it never will, and they recognize that they will never get ahead by playing by the existing rules within the existing system. Hence the need for new systems, new asset classes, and new, left curve meme-driven investment strategies.
All of this will add fuel to the fire of crypto because there’s no other platform for these sort of inane cultural, political bets and no other place to trade them or profit from them. Cryptocurrencies allow for far more creative expression, far more innovation, and far faster meme generation than traditional assets, which will never be able to keep up with a rapidly evolving popular culture. Today’s young people want to feel in the driver’s seat of culture, rather than be downstream of the investment advice of some anointed tastemaker. Stocks and bonds don’t stand a chance.
And I’m okay with all of this. I’ve made my peace with all of it, because as I wrote last week I’m here to have fun and build cool things with dear frens, and memes and co-creating cultural value together is very much a part of that journey.
Of course, the great irony is that there’s a a delicious dialectic at work here as well. Meme coins wouldn’t exist without “serious,” R&D heavy, right curve projects like Bitcoin and Ethereum (and maybe someday Spacemesh). And in turn speculation and frenzy driven by those meme coins feeds, at least in part, back into infrastructure investment. After all, the degens need a place to trade all of those meme coins, so blockchains will have to scale to handle way more transactions, which may mean that they’re actually ready one day to fully replace the S&P and the existing financial system. If that’s what it takes to get there, sign me the heck up.
Thing #3: Normies 🕴️
The “institutional adoption is coming” meme has existed for years in crypto and it drove previous market cycles including the 2017 bull market. At the time the first institutional investors, including some investment banks, began to dip their toes into crypto, mostly through research and commentary and not very much through trading. The same meme took off again a few years later when bitcoin options first began trading.
The news this cycle is, of course, of the approval of ten bitcoin spot ETFs. The event was highly anticipated and expected and in the event, when it finally happened, it felt a little bit like a “buy the rumor, sell the news” type of moment. It took a few weeks post-approval until things started to heat up, but once they did, they really got going.
The numbers today are staggering. We’ve seen hundreds of millions of dollars flow into these ETFs every single day over the past few months, reaching as high as $1bn in a single day, and tens of billions of net inflow into crypto assets overall. That sort of inbound flow wouldn’t be possible without institutional investors. And the Bitcoin ETFs have very rapidly become among the most highly traded ETFs; one was briefly the fourth most highly traded ETF in the world.
And we’re just getting started. The inflows are continuing. More and more financial advisors are recommending bitcoin and other crypto assets as part of a diversified portfolio. Most people, even those with easy access to bitcoin, still don’t own any, and over the next few years many of them are going to be acquiring bitcoin. As the Boomer generation ages more and more of their accumulated wealth will flow into the hands of younger investors who cut their teeth on crypto assets and understand them, and prefer them to things like stocks and bonds. Less than 1% of global wealth is held in crypto assets today; it seems inevitable that that number will increase substantially in the near future. All of this portends very well for crypto assets like bitcoin that are trustworthy and provably scarce.
Bitcoin has been around for a while but I think most investors haven’t taken the time to really study it or understand Bitcoin’s economics. The idea of a commodity that’s strictly limited in supply, for which no more will ever be created beyond a strict limit, sort of boggles the investor’s mind. Companies can issue more stock more or less at will. More gold is produced every year. Commodities are continually produced, and the supply of fiat currencies is always inflating.
This simply isn’t true of bitcoin, which is in a class of its own. The supply is dwindling, issuance is about to halve, and soon all of the bitcoin ever to exist will have been mined. Nothing anyone does will increase it (short of a major economic overhaul like tail issuance, but I doubt that will happen). What’s more, a small number of powerful actors like Microstrategy are snatching up bitcoin at astounding rates, and they will never sell it. At least one sovereign state has bought bitcoin very publicly, and it’s highly likely that others are doing so surreptitiously. More and more celebrities and influencers are cottoning onto it, acquiring it, and telling their hundreds of millions of followers to do the same. Every bitcoin one of these actors buys is one bitcoin off the market, that no one else can buy. Acquiring bitcoin is about to get much harder, which means the price will keep going up.
Combined with the above trends, especially with the loss of faith in fiat money and central banks, bitcoin is absolutely unstoppable. Even normies who have historically been anti bitcoin and anti crypto have begun to come around to this inevitability and get onboard. The future has never looked brighter. In fact today I have trouble imagining a world where bitcoin doesn’t thrive. Among other things, that world would have to be one of responsible, trusted administrations and central bankers that know how to control inflation and don’t recklessly print money. It’s fun to imagine such a world, where Bitcoin might not be necessary, but that world isn’t our world and isn’t likely to be a reality in my lifetime.
In 2024 the rise of cryptoassets feels unstoppable and inevitable. I’ve always felt cautiously optimistic and somewhat confident, but today I feel absolutely bullish, more than ever before. I continue to acquire bitcoin even at these “high” prices because I know it will continue to rise and it will lift all other crypto assets with it. Even crypto UX is getting better: the software is more usable, there’s less latency and fees are lower, there’s more blockspace, etc.
The best time to buy bitcoin was in 2010. The second best time is today. More people wake up to this reality every day, and we’ve already reached critical mass. Buckle up because the next few years are going to get even crazier.