A project that was born out of the ashes of the last major financial crisis is now turning the corner to complete a full cycle of the Fed loosening and tightening their policies between crises.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
The message stamped into Bitcoin's genesis block, now cemented into history with more than a decade's worth of transaction history sitting on top of it, was printed in the British Press following the Fall of 2008. A time that will be remembered for quite a while and a time that saw the Federal Reserve make significant cuts to the Federal Funds Rate. Taking the rate at which banks trade their reserves held at the Fed from just over 2% to under 0.20% in the span of a few months. A drastic measure that was taken to save the economy from complete collapse by stoking the lending markets via low-interest rates. In retrospect, I would argue these actions have done more to harm the long term prospects of the global economy than good. But this letter is a reflection on Bitcoin and its relation to the traditional financial system, not a critique of Fed policy. So I'll spare you from that spiel for today.
Bitcoin has seen a lot in the ten and a half years that it has been in production. It has been through a couple of election cycles. It has been around to see itself banned in a number of countries. It has been there as countries like Venezuela and Argentina have experienced hyperinflation. It has stood strong as the world's superpowers have become increasingly hostile towards each other. Through it all though, a block has not been produced during a time in which the Fed has significantly cut rates. Until [what seems to be very likely] today.
A project that was born out of the ashes of the last major financial crisis is now turning the corner to complete a full cycle of the Fed loosening and tightening their policies between crises. Once we eventually find the floor during this era of rate cuts (whether that is above or below the x-axis is the question that should be on everyone's mind), Bitcoin will have been in production for a full economic cycle. What will be interesting to observe is whether it has reached a stage of maturity at which it acts as a safe haven asset if there is turmoil in the global financial markets. Will the world recognize the need for a digital currency, a currency more fit for our modern condition, as central planners destroy people's confidence in their ability to micromanage the currencies we have been forced to use since birth? We shall see.
I am very confident in the fact that the Fed has no idea what it's doing. If you have not been convinced of this yet, make sure you peep Enders Game by Parker Lewis. Parker just made this epic paper public and it does an incredible job of detailing the inconsistencies, incompetence, and hubris of the Fed leading up to, during and after the financial crisis.
Will a full economic cycle of Bitcoin existing and working as advertised be enough to show people that it is a formidable safe haven asset? Uncle Marty would not be the least bit surprised.
Get your pushups in.