Corona and Crypto: Understanding the Correlations Everyone Needs to Consider... And a Few Rants In Between For Good Measure!
Corona and Crypto: Understanding the Correlations Everyone Needs to Consider... And a Few Rants In Between For Good Measure!

By BitcoinGordon | BitcoinGordon | 17 Mar 2020


We are in unprecedented times.

We are in uncharted territory.

Unless you know someone personally who survived the black plague (which ain't possible), you don't have personal perspective on the difference between this outbreak and the flu.

I am not writing this to cause panic, but rather to do my part, albeit my extremely tiny part, to help induce the best outcome for our current situation. I've noticed that what is normally an extremely easy thing to time-manage, social media, has quickly slipped into something of major prominence in my schedule. To pull myself back into the schedule needed for other work, I'm writing this long 'thing' instead.

I've studied cultural impact on different regions based on government style, tyranny stemming from historical attempts with Socialism, Communism, Capitalism, Fascism etc. I've studied how these coincide with the economic principles that go along with each. I've found it, therefore, necessary to understand the structure and impact of a global governance via the United Nations since the 1940's forward. This is not 'that' conspiracy thought piece. This is not 'that' article about my strong personal views on right and wrong. This is the most important factual pieces summarized for perspective where we are right now, March 17, 2020.

First, something to understand in establishing an economic plan, and for my example more specifically, a strategy for trading cryptocurrencies, is to understand the principle that percentages mean everything. Much more than the actual numbers, the percentages in the formula for earning and spending are the entire ball game. This is the exact same thing for understanding the virus outbreak. 

Please listen to me carefully if you are still comparing sick apples to sick oranges. Flu can be terrible. Cold can be terrible. There are different strands almost every single time. The elderly are always the most impacted. The comparative numbers since the start of real concern for Corona have led people to waste the first two weeks of global attention on comparisons to everything from deaths from flu, to death tolls from suicide and car wrecks. This was foolish. It is about preventing percentages, and understanding exponential growth. Money=we want exponential growth. Virus=we don't want exponential growth.

If the numbers are reliable, we have two extreme outcomes, S. Korea, which got mostly ahead of the curve and reduced the outbreak, and Italy, which did not. One has capacity to continue to monitor scale, the other does not. In the latter, all hospitals are beyond capacity. Because people could not self-manage, now they must experience lock-down. 

People believe that because children do not catch this sickness, it is ridiculous to over-correct and screw up the economy. It matters that they carry, undetected, and hand it over to everyone in their social circle, meaning parents, which means anyone the parents interact with at the store, at the office.

For the first time since crypto was available to trade on numerous exchanges, there is a stronger correlation to the drastic moves in the stock market. The difference, however, is there is no economic stimulus for crypto. In fact, it can be treated as a speedy triage for everything wrong in the world. The BEST cases for blockchain are needed right now. No matter which outcomes take place, people are going to blame the governments for going that route. Too much money? Central banks and rich old white dudes are the problem. Too little effort, the governments want to kill everybody. Too much worry on testing citizens, it's a police state. Too little response to school closings like in the U.K., careless lack or responsibility. 

A true global crisis does not have a correct response or answer. The more cautious you need to be, the more economic impact. If the economics are not handled far ahead of the realization that it NEEDS to happen, and the infection rate is going to matter much less than starvation and reduced immune systems from malnourishment.

So, the stock market has opened today. Bitcoin trading took small preparatory action with a tiny pump before hand, and right now is holding in the $5000's. At any point, the wrong response in FUD could take crypto down with the market again. Or, the separation could start to kick in when people realize that holding at $5K this far into panic is remarkably resilient.

Let's look at how dramatically different the scenarios can play out.

If people hear there is an economic stimulus so they aren't tragically impacted by lack of work, they are hopeful, but there is an application process. To be completely honest, there shouldn't be. If the process is slow, like we have seen FEMA disaster relief being tragically slow in past years/decades, it will come down to the necessities, beyond TP, including food, water, paying the next mortgage payment, April tax season around the corner (already delayed, but still who's at the IRS managing file? I dunno, do you?). Suddenly, the United Nations dream of all people and countries facing the exact same level of financial concerns can be a reality, and it isn't one of bleeding heart compassion one would hope for. It's a disaster the likes no one in our time has seen.

The virus is bad, but it doesn't have to be. If the first response is masks, gloves, cleaning everything constantly, protecting the aged population, then the virus dies down very quickly, the world suffers 1-2 trillion dollars in efforts, and everyone is healthy enough to pick up the pieces and get back to work. We missed that opportunity already. In reality to the blame game, there are measures for disaster preparedness, but no one wants to err on the side of causing great harm to the economy while there is hope the virus will just fizzle out. It is perfectly understandable that carrying out procedure is much more complex than anyone could imagine.

But now, every government in every country has the same responsibility to respond to the 2 week curve, where it goes from very small to very large and unmanageable. Remember that comment about percentages? Here we go.

Exponential growth, something I'll cover in great detail if we get back to some kind of normal some day. 

Let's look at a seemingly minuscule measurement.

Let's say I have $2000 and I want to get rich off of crypto. I am going to pretend I am perfect at trading and no radical market changes can affect me.

I am going to break that down into 20 positions at $100 each. So, I'm going to measure my growth curve of just one of those positions, and I am going to use the access of 20 of them to help buffer my chances to grow.

At just 0.3% profit over fees, one trade earns me $.30. Wooptidoo.

If I increase the trade size by the 0.3% I earn and nothing else, I get exponential growth. It seems unimportant, in the micro-pennies, for a long time. That remains the case, right up until the time it doesn't.

In a linear scale, I would earn as follows:

In 10 trades, I would earn $3. Not terrible.

$100 x 0.3% x 10 = $3.

In 100 trades, I would earn $30.

In 1000 trades, I would earn $300.

I'm not unhappy about this if I'm perfect and can get through 1000 trades and at least one of my $100 trades is always earning, and the others that may get stuck eventually all clear. Remember, in this scenario, just for the math, I am perfect. It works this way for the virus too. Numbers fluctuate by the accuracy of tests, influence of infection and myriad factors.

Now, the exponential version where one trade grows by the profit.

10 trades, I earn $3.04 instead of $3. Again, wooptifreakindoo.

100 trades, I earn $34.92 instead of $30. Wait a second, that is dramatically bigger. $4.92 in the first 100 trades didn't exist by doing exactly the same thing without adding in profit. This is why people who do amazingly well at trading with huge positions, earning a living from the profits will never out earn me at the end of the curve.

1000 trades in, instead of $300 profit, I now would have $1999.55.

How many of you would prefer to make $2000 over $300 from the exact same work?

So now, I am hopeful you can understand the difference between the horrible death toll from yearly flu outbreaks, and the corona virus.

Get ahead of the curve, and the growth is limited in a very similar way to linear growth. It doesn't get a chance to double, double again, double again again.

If you do not balance the economic crisis just as far ahead as the health crisis, people will find a way to interact with others to get some kind of side hustle going to feed their kids and try to keep from losing their homes. This interaction will keep the rate of infection steady. Each new person who carries, whether sick or not, adds a tiny fraction of new infection contamination into the population. That becomes exponential growth, this time in a bad way. Would you rather have an outbreak of 30 people from the initial 100, or 34? Would you prefer 300 later in the curve, or 2000? It is not any different. The variance from S. Korea to Italy is identical to this model.

Choosing arbitrary numbers I have seen passed around, let's say that in one country, the growth scale, purely by how people interact, goes from 1000 to 1200 to 1400 and continues to grow by around 200 cases/day for a 15 day measured scale before mass outbreak cumulative data.

Let's say another country with the same odds but poor containment procedures, or irresponsible citizens, goes from 1000 to 1222 to 1700 to 2700 to 3000 to 18000 etc. It is all based on the exact same exponential principles.

Let's say in all cases, 20% of people infected need critical care, life support, face potential long term lung problems, and 3% die. By the way, these numbers are being measured as close to 5-7% mortality at present, but it likely depends on capacity of care more than the virus itself. If we have 100 infected, 20 need care, and 5% of those die, that's 1 in 20 mortality. 

With the common flu, the percentage is 0.2% of those needing the most extreme care. But, there are millions and millions of people who get the flu every year. So yeah, in comparison to years of data for the flu, the first 2 months of corona are much smaller numbers. People don't know math, so they got angry it was receiving so much attention when so many more people suffered from catching the flu and suicide (sorry, but the emphasis of stupidity is needed). The percentage is what matters! Are you getting it? 

If the exponential growth meets the 5% mortality of 20% of those infected, because we waited to see whether lock down was needed, and then reported we were starting economic stimulus, people will worry about the first things first. If you're healthy, you know you need to stay out of the population but you won't be able to pay for anything in two weeks, you're going to try to find something you can do to feed your family. If you have elderly who need your care, you're going to find some way to travel to and from, and pick up supplies for them along the way. This will continue exponential growth. The very first thing that needs to have already occurred, is emergency coverage of expenses and supplies. It's what would happen in a global war, as we've seen in the past, and it is needed already now.

Would you prefer to be ticked off that we went so drastic and crazy and in the end very few people died and the economy almost got rekt but didn't? Or, would you prefer the version where it gets out of hand, you're angry at everyone who was selfish and ignored all of the warnings and now you know a relative or friend who died from the virus and you lost your job and only the lucky folks who figured out the remote work still have a fighting chance? Let's err on the side of getting through this mess and getting back to normal lives. The other version means that everything you thought you were planning for in your normal life is now gone. The rest of our lives will be different than we planned and hoped for. Please, let's consider the first version of things, okay?

Now, the final correlation to crypto.

People have a LOT of opinions about how all of this stuff works. Most of those opinions are wrong. 

Gonna just say it; people have no clue about economics. Not even a tiny little bit. This generation has failed miserably to educate and inform when it comes to how the world works, and it's gonna splode on crypto; no question.

There are good projects and there are bad projects. A healthy ecosystem in any industry thrives on competition. If you don't have a crap coin that fails miserably at privacy, you don't have the eventual tech that comes out of the great coin that handles privacy well. If you don't have a few small coins that are 'eh' soso handling privacy, you lose a certain measure of liquidity to build transaction from good coins to decent coins. All coins flow through USD, USDT (Tether dollar), and Bitcoin. Everything else is in very small proportion. Like fiat, hate fiat, I don't care, the dollar is still the standard to measure everything else, and Bitcoin is the everything else that all the other everything else's are measured by. It all matters significantly. Every single coin that is out there, has a following. There are HODLers and there are investors, there are traders and scalpers. Each of these adds a measure of scarcity and volume, and thus liquidity. The HODLer is the most dedicated and the very least helpful in the bunch, until it matters at the very end. The daily trader is the most valuable to the health of crypto. The more coins that are traded against Bitcoin and yes Tether, the more growth there is for crypto.

You don't believe me if you are in crypto, because you don't understand money or economy. So, let me ask, separate from crypto, is a $1 Billion economy healthier or weaker than a $100 Billion economy? What makes the difference in the two? Volume and liquidity. Money is not just printed, it is transacted.

When you earn $100 and let's say you buy a meal, a movie ticket, gas, and a few supplies, you got the food, necessities and 'stuff' you wanted and needed. You contributed $100 to the economy. Thanks. You got that, let's say, from your employer. They earned it from customers. Those customers all earned theirs from someone or somewhere else. That same $100 was earned, spent, and earned and spent over and over again. It isn't like it gets burned the one time you earned it and spent it. It is still out there transacting with others. Each place you spent that money is doing something else with it. That is how trading crypto works. THAT is how crypto works. There is zero value in the very best coins, that do nothing but sit. The very day that everyone listens to you about buying and HODLing, this whole thing goes away.

Lemme ask you, since you still don't believe me; how much as the crypto world gained from the gazillion coins lost in Mt. Gox? None. Nothing. They will only contribute at the end of the scarcity model when that number of Bitcoins fewer, cannot be traded. That's all. What about the origin address and earlier investors? They will get billions of dollars for their thousands of dollars of investment, but not until the very end, when Bitcoin goes way up in price.

So, let's say the other 13 million Bitcoins or so all get bought and held, instead of traded. 

How many people are buying ETH directly from fiat? How many buying TRON without transacting in Tether or Bitcoin first? Not many.

You favor ADA or NANO? You like BAT and that awesome Brave browser? Think a lot of people are living in a 100% BAT token economy? Not a chance.

Volume is the result of coins going from Bitcoin to every other coin and back again. $1 Billion of Bitcoin is easily transacting every hour. There aren't enough Bitcoins to measure that value transacting, and that is because enough people are trading their coins to build value.

Why does that matter?

Well, if value is fixed, then there are only 'x' number of people who can earn 'y' value from Bitcoin, and the growth will be linear based on mining fees, and that's it. Once they're all bought up, no one else gets any Bitcoin. But, if they are traded, each individual has the potential to take their $100 of Bitcoin and earn $2000 from it. You prefer $100 of Bitcoin forever, or $2000 worth of Bitcoin? You may be saying "yeah, but I'll hold mine until it grows to $2000". That's how I know you still don't get it. If everyone does that, it will not get to that point of growth, because it will be only measured by supply, and not by use. If you do not understand that, then you are likely STILL making the same errors about the virus outbreak, and that is why I am writing this stupid long thing. I have to get my rant out of my system, and you really need your eyes opened to this truth.

I want what is best for people, for our economies, and for the outcome of this tragic crisis unfolding. Denial is powerful, and we won't blink and find it has gone away. What we need is a dramatic shift in course to bring things back in. If there is an instant drop in fear over how expenses are paid and supplies are received, people will focus on chilling out, binge watching everything, and the virus will die on non-porous surfaces, and within a matter of weeks life can start to recover, there will be comparatively few deaths, and we will all feel a little relief the world looks somewhat familiar. It concerns me greatly that instead, people will jump immediately into their idiotic flame wars over Bitcoin maxi, XRP maxi, Tron maxi, and TP memes, and after 2 days of cabin fever we'll have speakeasy restaurants and an exponential growth curve none of us can afford. 

Let's make the world a better place and use this time to be loving, thoughtful, and caring towards one another, learn some new things, get good at new skills that can be accomplished from home, and let's focus on protecting the crypto economy by treating it separate from the stock market. Let's use sound principles that fight FUD and FOMO. Let's shake out the disgusting opportunists that use the fear of death to shill their ridiculous coins, and focus on principles that will help us all build the wealth we so greatly need in the months and years to come.

Stay safe everyone. I care about you. I care about our futures, and I hate panic and FUD. I don't want the drastic results we may be facing, but I firmly believe facing them now with sobering reality is the way to avoid going over the cliff. We are inches away, so take heed and play it safe for a very short time. Otherwise, I'm afraid at least as far as the economy, we're not going to make it. It's going to very quickly look like the U.N.'s dream take over, and despite the belief of many, that is the worst scenario for freedom.

God bless you all.

Gordon Freeman Out.

 


BitcoinGordon
BitcoinGordon

Hi! I'm Gordon Freeman (I hear they made a likeness of me in some video game... totally unrelated... or...).


BitcoinGordon
BitcoinGordon

Welcome! This is my blog for all things crypto, from my day trading and tutorials to general crypto news.

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