Why Crypto Newcomers Have to Reject Bitcoin

Why Crypto Newcomers Have to Reject Bitcoin

By kievery | Musings on the Moon | 9 Aug 2021


If you’re wondering if you’re late to the crypto party, you already are.

First published on https://nullscientist.medium.com/

17% of US citizens own Bitcoin.

66% of young Singaporeans own some form of crypto. Specifically, the primary workforce age bracket of 26–45. Young ones aged 18–25 were 3 to 9 times more familiar with altcoins compared to older brackets.

I seriously doubt the demographic composition of those 17% deviates wildly from results in Singapore. The point is the steering mass of the workforce in most countries have a stake in cryptos, and they will vote according to that interest.

Soon the reasons to buy into cryptos will be less about making financial gains and more about not being too financially impoverished in the new paradigm.

There’s a simple yet elegant theory in psychology known as Regulatory Focus (was my senior thesis). Basically it says that people are motivated to take action either through a promotive orientation to accrue gains and achieve goals or by a preventive orientation to stave away losses.

The key phrase above isn’t about promotion or prevention actually. The key phrase most pertinent here is “take action”. And I have found both through poring over volumes of academic literature and life experience that universally most people are predominantly prevention focused; they take action to prevent losses especially for important decisions. Right now is the period before a climax where an uncontrollable torrent of fomo-ed adoption happens through a desperate need to prevent missing out.

Except you already missed out on Bitcoin. Most of the scarce, finite pool of BTC has already been mined and put into circulation. While the production possibility frontier of an economy would be more capital efficient by blockchain technology, its wealth distribution continues to be a zero-sum game. That never changes.

2% of holding entities control more than 70% of circulating bitcoin. Typically the Bitcoin maxi interjects here to explain that part of this is distributed over numerous independent owners parked in centralized funds and exchanges — suggesting that BTC ownership isn’t as disproportionately skewed as the figures imply. However to the outsider looking in, the degree of decentralization does not matter. What matters is how scarce BTC is now and how difficult it is to accrue enough to be relevant.

In fact, playing into Bitcoin’s burgeoning market cap is a losing battle. It is heavily bidded on. You would enter into a cutthroat competition where existing players already have amassed vast amounts at a lower cost basis. Yielding to BTC primacy means implicit acceptance of a new kind of crypto-economic overlords with a virtually infinite potential to collect economic rent. Remember, BTC is an asset you don’t sell — you use it as collateral that can be borrowed against. So borrow depreciating dollars as income, dump it back on the BTC-poor and keep the appreciating asset. To offset the interest rates, park what is borrowed in high-yielding defi apps or even the S&P 500. You can basically short dollars back to suckers at increasingly favorable rates.

The other day there was a discussion about this on Boba Capital:

1*O8MGs0uGfgQKUCftGn9IUg.png


Seemingly, people find the concept of borrowing against BTC as an asset to be strange. But you can already use BTC as a borrowing collateral on blue chip DeFi applications like Aave on Polygon. Sometimes because of the relative supply differences in the lending markets, you can even be paid to borrow through negative interest rates.

Personalities like Jessica Wildfire are wrong about the endgame of BTC investors — they’re not trying to dump it back for dollars; why would you ever trade away an asset that only ever wins for inflating dollar bills? They’re trying to foment and raise it to be the premier value storage asset that captures hundreds of trillions in value so they can make the rest of humanity who are BTC-poor slog harder to pay that rent. Specifically (and I really feel a need to repeat myself to drive home this point), using BTC as an ever appreciating asset to borrow progressively greater and greater volumes of fiat, then dumping the fiat back to everyone else and inflating it in a vicious cycle. Indirectly, this exerts inflationary strain on dollars at an increasing rate while depreciating the wealth of the BTC-poor at an increasing rate.

In that sense, Jessica’s right in the spirit of the argument that they are trying to make the have-nots pay disproportionately more for the same thing- except not once but over and over again for the rest of time. Like a housing rent that keeps going up each month.

Memepower Equivalence Ratio (MER)

If you’re still in denial, I have some more evidence from Google Trends, often used as an indicator of interest in a topic.

The MER of an entity is operationally reflected by its search volume registered on Google Trends as a percentage of the timewise search volume for “sex”. I chose sex because it is typically what everyone is thinking about all the time consciously or subconsciously. It is also something everyone understands and transcends cultures.

Here you can see Bitcoin registering somewhat significantly against sex over the last 12 months on the global chart:

https://trends.google.com/trends/explore?q=bitcoin,sex,crypto,Ethereum,binance

Usually the above is the case for most countries but for the first time over a 12 month period, people in Spain and Argentina were thinking about Bitcoin more than sex. It is obvious why Argentinians do so — that was and still is a matter of survival but Spaniards do not face crippling inflation. Certainly there is a very different kind of motivation for the Spanish to be this concerned about a cryptocurrency. Possibly the Argentinians’ motivations were prevention-oriented while the Spanish were promoting future gains.

This is a historic moment. There is no time before now that the MER of Bitcoin in a country has been greater than one over the period of one year.

1*iB55j5J52yl1TxvzWlq8KA.png

 

Here is the same chart but Sex has been replaced by “coinbase”. Both “Bitcoin” and “crypto” have clearly been on an uptrend.

1*i9Y49GKHdwN591lIGpZnNQ.png

What then if not Bitcoin?

For the uninitiated, Bitcoin itself has its wings clipped and fettered by a constant barrage of whale manipulation and price scalping.

Most tokens of interest are subject to the same fate. It happens to all yield farm tokens.

The problem with DeFi is that it introduces the lowest common denominator to investing. The kind that refuses to accept more than 10% draw downs, much less overnight evaporation of 50% of token value that is commonplace in DeFi. Entering naked yield farms with no hardcoded (token value) protections is saying that you trust other people to have resilient hands and iron hearts unfazed by market turmoil. It reveals the true nature of the plebian mind devoid of courage with no conception of skin in the game. Most capitulate and sell at the first sign of trouble and the token price is run to the ground (zero).

The solution is for 1 billion new crypto adopters to reject BTC and back a token with a heavy transaction tax that severely penalizes incessant scalping.

My proposal is not so much a shill-my-farm request but a plea for a movement to collectively back a token with hardcoded, no-nonsense price protection mechanisms. It doesn’t need to be DRIP. But I spent a long time searching for something like it and found those properties in the DRIP protocol— even considering the abysmal lack of buying pressure everyone vested in the protocol knew to compound instead of claiming their rewards. The community is showing solidarity and continuing to hold instead of the dramatic price dumps you find in virtually every single yield farm in DeFi, even when they are backed by venture capitalists like Defiance Capital and TWO notable founders of prominent ecosystems. Yeah, Dinoswap has not been doing too well with its token price crashing from $4.4 to $1.5 in less than a week.

If you find my investment theses to be interesting and would like to pick my brain, consider joining my DRIP team using this code and then clicking “buddy selected”. A minimum of 1 DRIP is required. White paper exists here.

drip.community/faucet?buddy=0xA8c7aD371f8BF2f870d2642519bb91A67b6123d8

Although the team is dedicated to Drip now, the endgame that will persist is to own and earn passive dividends through rent collection on virtual land.

If you like to donate, send BTC/ETH/DOGE/Zil to kievmoon.888

 

Related: https://nullscientist.medium.com/drip-is-a-ponzi-that-lets-you-keep-all-your-friends-f0d19800da7e

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kievery
kievery

Failed startup guy now crypto maximalist


Musings on the Moon
Musings on the Moon

@nullscientist on twitter. republishing my stuff on nullscientist.medium.com

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