Incoherence

There’s a wing of the Bitcoin faction who are bullish on crypto but bearish on the US and / or global economy. Or, is it a wing of the economically bearish faction that is bullish on Bitcoin? In either case, it’s a weird mentality to have and does not at all line up with how things actually work.

Bitcoin is almost perfectly correlated with the Nasdaq 100. Growth investing is growth investing. If people are excited about tech, they’re buyers of both. And the alt coins will, in the end, do whatever Bitcoin does. Not hourly or daily, but generally. Directionally.

The bearish but bullish on Bitcoin folks have carved out a strange piece of territory to defend, but you must consider the origins of where this stance came from…

If you spent ten years fighting one of the greatest bull markets for stocks of all time between 2010 and 2020, and you lost all of your credibility and followership (and subscribers!) as a result, “pivoting to crypto” is the logical move. Starting over. Don’t associate me with telling you to fight the Fed since Dow 10,000. Associate me with the coins now, I’m doing coins! All coins!

Okay, I understand that. Good move. Only move, other than going into construction or joining up with Uber. Everybody should be allowed to reinvent themselves. We’ll all play along, bon chance in the blockchain hustle, we’re all rooting for you.

But now, if you’re a former doomster who’s gone full-on crypto, laser eyes in the avatar and everything, you have to balance things. Emotionally – spiritually – of course you’re still rooting for the crash that never came, somewhere in the recesses of your mind. There’s still time for me to right! But you’re torn, because you also need the crypto bubble to keep going in order for the pivot to make sense. But you can’t have both.

If there’s a massive crash and recession, there’s going to be a lot less fun and games to be played with inflated coin prices and collectible bullsh*t that no one really needs. People are going to batten down the hatches and stop lighting their money on fire at OpenSea or Coinbase. They’re going to stop treating their savings like a video game. Survival and bill-paying tends to take precedence over buying and displaying digital trinkets for the approval of strangers. Big booms in collectibles and speculation only ever occur in the latter stages of an economic expansion, always always always accompanied by a big bull market in stocks and real estate. Works of art, cars, baseball cards, comic books, Rolexes, and now, yes, NFTs, do not operate in their own parallel, unrelated universe, walled off from the vicissitudes of the rising and falling of the wealth effect. They ARE the wealth effect. Same with professional sports franchises and private jet purchases. NFT prices and “values” are every bit as much the physical manifestation of a bull market-driven wealth effect as a record-smashing sale price for a Damien Hirst sculpture or a software CEO’s purchase of an NBA franchise.

When is a person most likely to buy a Ferrari? Within minutes of his startup being valued at $3 billion on the heels of the latest funding round. Less funding rounds at lower dollar amounts mean less Ferrari collecting. Now replace Ferrari with Bored Ape and tell me what the difference is. There isn’t any difference. I shouldn’t have to explain this. The US economy oscillates between moments where people have too much money without a care in the world and moments where capital becomes scarce, risk-taking gets curtailed and people revert back to their best behavior with the money they earn. I’ll let you guess which end of this continuum we’re currently closer to.

If stocks get cut in half and the economy’s participants all decide to get “risk-off” in their posture and their allocation decisions, the coins are going down. Way down. You cannot have an IQ above 100 and not understand this.

So, if you’re simultaneously promoting crypto projects while prophesying economic meltdown and a stock market crash, the rest of us are going to go ahead and assume you’re doing so just for attention.

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And now, I simply must insist that you listen to the latest episode of Joe and Tracy’s Odd Lots, in which Bloomberg columnist Matt Levine listens, mouth agape, as FTX founder Sam Bankman-Fried explains why much of what goes on in token land is an outright ponzi. This is really an awesome conversation and it hammers home the fact that, absent a lot of excess capital flying around lasciviously in search of a honey pot, a lot of DeFi conceits are going to start collapsing in on themselves.

Please make time for this, it must be heard to be believed: