Copyright © 2020 by Jason A. Williams

All rights reserved. No part of this book may be reproduced or used in any manner without written permission of the copyright owner except for the use of quotes in a review.

Nothing in this book should be construed as investment advice. Any opinions expressed by Jason A. Williams in this book are not, and should not be read as, a recommendation to make any investment.

ISBN 978-1-8383184-1-3

Book design and layout: Sadie Butterworth-Jones

Illustrations: Ruxandra Șerbănoiu

Money printer graphic: Tim Van Helsdingen

Contents

PART 1: WHY BITCOIN MATTERS NOW

Chapter 1: Money Printer Go Brrr

Chapter 2: A Brief Run-in With the FBI

Chapter 3: Magic Internet Money

Chapter 4: Bitcoin Is Scarce… Really Scarce

Chapter 5: The Big Short

Chapter 6: Here’s How the Money Printer Actually Works

Chapter 7: “Bitcoin Saved My Family”

Chapter 8: How to Buy $425 Million of Bitcoin

Chapter 9: Bitcoin’s ‘Number Go Up’ Technology

Chapter 10: The Investment Case for Bitcoin

PART 2: A BRIEF HISTORY OF MONEY (AND MONEY PRINTING)

Chapter 11: If Ramen Is Money, So Is Bitcoin

Chapter 12: Ancient Money Printer Go Brrr

Chapter 13: How Scarce Is Bitcoin, Really?

Chapter 14: Colonial Money Printer Go Brrr

Chapter 15: Gold vs Bitcoin: Why Investors Are Almost Right, but Not Quite

Chapter 16: WAR: What Is It Good for? Printing Money

Chapter 17: How the Dollar Became the Global Reserve Currency

Chapter 18: WTF Happened In 1971?

Chapter 19: “Choose a Big Fucking Television” — Why Governments Will Always Devalue Your Money

Chapter 20: The $27 Trillion Problem No-One Is Talking About

Chapter 21: Currency Wars Lead to Real Wars

PART 3: HYPERBITCOINIZATION: HOW BITCOIN BECOMES THE NEXT GLOBAL RESERVE CURRENCY

Chapter 22: “Hell Is Coming” — The 2020 Crisis

Chapter 23: The Bitcoin Halving

Chapter 24: The End of the US dollar?

Chapter 25: Central Bank Digital Currencies Are Coming… and They’re Terrifying

Chapter 26: The Fourth Turning — A New Era Begins

Chapter 27: Only “Dumb, Inexperienced Kids” Buy Bitcoin

Chapter 28: Hyperbitcoinization

Chapter 29: Nation-States Are Hoarding Bitcoin

Chapter 30: You Are Still Early

Chapter 31: The End (Don’t Buy Coffee With Bitcoin)

About the author…

PART 1:

WHY BITCOIN MATTERS NOW

Chapter 1:

Money Printer Go Brrr

I grew up listening to Wu-Tang Clan when I was a kid. I must have listened to C.R.E.A.M. a thousand times. Over and over and over again. That hook still gets me today. Cash rules everything around me, CREAM, get the money.

Dollar, dollar bill y’all. It was my mantra as I built myself up from nothing. But Method Man would be pretty pissed if he knew how much that dollar bill was worth today. Look what happened to the buying power of a dollar since they released C.R.E.A.M. in 1991.

Image: Official Data Foundation

It’s worth 50 cents today. 50, 50 cents, y’all.

Why does this happen? Why has the dollar lost half its value in 30 years? The answer is simple: they’re fucking with the money. To be more accurate, they’re printing money. Trillions and trillions of dollars of it.

This is the crux of the whole book. The money in your bank account is slowly wasting away because of money printing. I could quote an economist about inflation here, but Dave “El Presidente” Portnoy sums it up best: “You can’t just be like, oh, here’s a katrillion, katrillion, katrillion. You flood the market with katrillions, the katrillions mean nothing.” It makes the currency worthless.

This is the root problem of our money. And it happens so gradually over time you barely even notice. Until now.

In 2020, the money printers went into overdrive to tackle the Covid-19 crisis. Trillions of fresh dollars pumped into the system to stop it collapsing. More money in a few months than almost 200 years of American history. Totally unprecedented.

This book is an attempt to figure out what happens next, and I come to only one conclusion. As crazy as it sounds, I think we’ll look back on the year 2020 as the moment that triggered the end of the dollar era, and the start of a new global reserve currency. The bitcoin era.

March 2020

I was on a beach in Peru, surfing and enjoying my birthday when the reports started coming in. A new virus out of China had the city of Wuhan locked down. Within weeks it spread to Italy, then Seattle, then New York — a full-blown pandemic. The whole world went into a panic. Lockdowns, shelter-in-place orders, travel bans. Total chaos.

I can still remember the eerie streets of Times Square. Billboards flashing Coca-Cola signs to no-one. Stock market tickers bleeding red. The S&P 500 down 33%. In the coming months, 55 million people across America lost their jobs. Small businesses were crushed. Restaurants, barbershops, salons, car dealers, retailers. Decimated. At one point, almost half the nation was unemployed.

Riots broke out across the country, fueled by decades of racism and inequality. Tear gas flooded the streets of Washington DC and rioters clashed with police. Looters smashed up storefronts. People died on the sidewalk.

On Wall Street, traders were reeling from the fastest crash in history. $16 trillion wiped out in a matter of weeks. The Dow suffered its biggest single-day points loss in history. The price of oil briefly turned negative and newspaper headlines screamed about a second ‘Great Depression.’ This was it. This was the financial crash to end all crashes. Except… the powers-that-be couldn’t let that happen.

You probably saw the headlines. The Fed Will Pump Another $2.3 Trillion Into the Economy. Congress Agrees $2 Trillion Stimulus Package.

The US has Thrown More Than $6 Trillion at the Coronavirus Crisis.

This is more money than we even knew existed. When did we start throwing around the ‘trillion’ figure? And where the hell was all this money coming from?

They printed it.

In a small room in Washington DC, twelve central bankers at the Federal Reserve — mostly old, white men — made a decision. How could they stop the economy from crashing into a depression? Print more money.

I’m not exaggerating. Federal Reserve chairman Jerome Powell was later asked, “Is it fair to say you simply flooded the system with money?”

“Yes, we did,” he replied.

“Where does it come from, do you just print it?”

In the video interview you can see him shuffle awkwardly. He knew he was about to shatter everything we thought we knew about the dollar: “We print it digitally. We, as a central bank, have the ability to create money .”

Just let that sink in a minute. The Federal Reserve — the bank of banks — created money out of thin air. And then they passed it out to other banks and corporations like candy. The Fed pressed a button and added trillions of dollars to their balance sheet. They promised “infinite cash” if it was needed. The money rained down. And it worked. Stock markets began to recover. By August, stocks were back to record highs. Wall Street was saved… again.

Image: CNBC

But something didn’t feel right. On April 9th, a CNBC headline cheered the stock market’s “best week since 1938.” But underneath the headline, in the very same screenshot, was another: “More than 16 million Americans have lost their jobs in 3 weeks.”

How could this be right? The lines for food banks in New York were eight blocks long. Most were struggling to pay their rent. Small companies were going bust. Mom and pop businesses that had survived decades were suddenly gone. Young people had their future ripped out of their hands.

But at least the stock market was going up.

This is what happens when you create money out of thin air and hand it out to those at the top. The rich get richer. The poor get screwed. This is how our money system works.

And here’s the worst part. Every time they flood the market with freshly-printed dollars, they devalue the cash in your pocket. If you print katrillions, the katrillions mean nothing! They’ve been doing it for decades. You can literally see it happening over time.

Here’s a graph of the dollar’s purchasing power over the last century:

Image: US Bureau of Labor Statistics / St. Louis Federal Reserve

By the way, this is the Fed’s own chart. They know what they’re doing. They are devaluing your savings every year. Like going out and setting fire to your cash. This has been going on quietly for a long time, but never on this scale. In just three months of 2020, the Fed expanded its balance sheet by $3 trillion. Put it this way, that’s more new dollars in a few weeks than the first 240 years of American history. Insane. The world started waking up to what was happening. In a small corner of the internet, a new meme began circulating: Money printer go brrr.

It depicts a manic-looking banker printing endless dollars to keep the stock market from falling. The meme appeared in Bloomberg, Forbes, the Wall Street Journal. And suddenly people started asking questions. What happens if we keep printing endless money? Does the dollar lose value? Why do we pay taxes if we can just print the cash?

Image: Maxc

Wait, what exactly is money?

I’m reminded of this quote from Henry Ford: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

I think the revolution is coming. People are starting to realize that something is wrong with our money, even if they can’t put their finger on it. Why do I get no interest at my bank anymore? How come my parents bought a house for $50k but now a bungalow costs a million bucks? Why is the stock market going up but millions of people can’t afford food? What actually happened to the banks in the 2008 financial crisis?

On top of that, we’re shifting into a whole new era. You can feel it. Riots in the streets, a rise in populism, rising inequality, anger and division. Throughout history, these moments happen right before a breaking point. Some call it a ‘fourth turning’ — a generational cycle that brings shattering change and revolution. It feels like we’re right on the edge.

These fourth turnings also bring a change in the money system. Last time around, in the 1930s, we established the dollar as the world’s global reserve currency. This time around? It’ll be bitcoin.

To truly understand bitcoin, you have to unlearn everything you know about money. That’s the process I went through to write this book. And when you look back through the history of money, you end up at a pretty scary conclusion: the dollar is nearing the end of its lifespan as the dominant currency.

It’s not as crazy as it sounds. Every dominant currency in history has eventually been replaced. Shells, gold coins, the Dutch florin, the British pound. And ‘infinite’ currencies, like the dollar, have always ended in disaster.

When you start pulling at this thread, you realize that bitcoin is the only logical conclusion. This magic internet money, created by a ghost-like figure, emerged out of the 2008 financial crisis as a ‘screw you’ to the rigged banking system. But in 2020 we realized it wasn’t just the banks that are broken, it’s the whole system of money. We need an alternative. A new form of money, completely independent of banks and governments. A native digital currency for a digital world. A whole new financial system.

And most important of all, bitcoin is scarce . Look back through history and you’ll realize that all the best forms of currency have one key feature: scarcity. But not anymore. Not the dollar. This era of insane money printing is not normal. It’s an experiment. And whenever it was tried, throughout history, it has failed. Every. Single. Time.

Most of us think bitcoin is crazy the first time we hear about it. A scam, a Ponzi scheme, a bubble, money for hackers and drug dealers. But it’s not. As we’ll discover, bitcoin is the best form of money ever invented. Not only that, it’s the best-performing financial asset on the planet, swallowing everything in its path. It will devour government currencies that are printing themselves into oblivion and it will establish itself as the next global reserve currency. It might take years, decades, but it’s happening. And there’s one simple reason why:

Bitcoin is hard money you can’t fuck with.

Chapter 2:

A Brief Run-in With the FBI

September 2017. The price of bitcoin just doubled in two weeks and hit a new record high. Things were getting crazy. Guys on YouTube were boasting about their crypto riches and their new Lambos. Paris Hilton was shilling obscure cryptocurrencies on Twitter. Nipsey Hussle was planning a crypto utopia in Europe. Something was bubbling up. You could feel it.

Then my phone rang and shattered everything. It was my wife. “Jason, there are two FBI agents at the house, they want to speak to you.”

My heart stopped. “What do they want?”

“They won’t say.”

Shit. I tried to calm my breathing down, composed myself, then got on the phone with them. They wanted to meet somewhere. I told them the first thing that came into my head. “Can we meet at Dunkin’ Donuts?”

‘Dunks’ is my de-facto office when I’m not working at the tire recycling plant. Good WiFi, two-dollar coffee, I’ll stay there all day. I walked in like normal. Coffee machines steaming, people buzzing around. But this time I couldn’t relax.

I got there first and sat in the back. I was wearing my gear from the plant — reflective vest, camo hat, beard and RayBans — my usual look. Not exactly inconspicuous.

That’s when they pulled up. Like it was right out of a movie. A black Lincoln Town Car stopped out front, two guys in suits got out of the vehicle. They made a beeline right to me. No messing around, they knew exactly who I was.

“Jason Williams?”

“Hi,” I shook their hands, tried to stay calm.

They introduced themselves and put a manila folder on the table in front of me. I remembered something I heard a long time ago: if you tell the truth, you don’t have to remember what you said . Just tell the truth.

It started off with the basics. My background, education, my work, my patents. Who, where, what, why, how. And then they said something that scared the hell out of me.

“Are these your bank transactions?” They flipped the manila folder open and showed me a piece of paper. It was my bank account records. Every transaction, every payment. Everything. You don’t just get this information unless there’s something big going on. My heart was thumping.

“Yeah, that’s me,” I was nervous.

“You bought 500 (ASIC) Bitcoin miners last year and imported them from China?”

I nodded.

“That’s a lot of computers.”

It takes a lot of computers to mine a lot of bitcoin.

The other guy showed me a piece of paper. “And this is a record of where they got checked at the border?” I looked at the paper and nodded again. Turns out it’s pretty hard to import 500 ASIC miners. There’s a whole aluminum extrusion issue. I remember they were stacked up in pallets at the border until I got the all clear.

“Help me out,” the FBI agent leaned in. “If someone buys 500 crypto miners, they need a lot of electricity to power it, right?”

“A lot,” I said.

“So why aren’t I seeing a spike in energy use around here? I should be seeing enough power to light up Times Square.” He was exaggerating but I knew what he meant. This is how the FBI tracks bad actors. Spikes in energy use often lead them to a meth lab or a shady crypto mining operation.

In my case, the suspicious activity is no energy use . Who buys a million dollars worth of bitcoin mining equipment without consuming any extra energy?

“What’s going on here?”

I tried to explain that I run a renewable energy plant, fueled by recovered energy from the tires we process. We feed the energy straight into the mining rigs. I’m self-sufficient. Off the grid.

Their confused looks told me they weren’t buying it. “Can I just show you?”

I got in the truck with them and directed them to the PRTI power plant. It’s a ten-minute drive through North Carolina. Giant conifer trees line the roadside. We made the journey in stony silence. After a while, one of the agents asked me, “Have you heard of the dark-net task force?”

Yeah, I’ve heard of the dark-net task force. It’s the FBI branch that took down the Silk Road — the ‘Amazon of drugs’ powered by bitcoin in 2013. It was one of bitcoin’s earliest use cases and why crypto became tainted with illicit activity. I know I have nothing to hide, but it still freaks me out. After they busted the Silk Road, they put Ross Ulbricht — the founder — in prison for life, without parole. Like I said, they’re not messing around.

Finally we drove down a dirt track to the industrial plant. Two 18-wheelers were parked up, full of tires to unload. Six processing towers stood in the middle. Warehouses to the back. “The trucks bring the tires to the plant,” I said as we got out of the car. “We toss them into these cylinders and heat them from the bottom. At a certain temperature and pressure, the tires go from being a semi-solid to a gas, I pull the syngas out of the reaction, cool it, and capture oil. The syngas I can’t turn into oil is used to create thermal energy and fuel boilers. The leftover carbon is sorta like mid-grade Appalachian coal. We use that too for power.” I walked them around the plant. “So all the oil, the syngas, the heat, and the carbon char is used for power.”

“And where does bitcoin come into this?” The agents asked.

“Through here,” I led them through a door to the side of the warehouse and up a staircase. In front of us is the world’s first waste—to-energy cryptocurrency mine. I have fans moving the total volume of the air out of the mine six times a minute. This keeps the miners in an operating environment that maintains their efficiency. The computers are processing so much information they can overheat without being kept cool or having enough fresh air. The rigs are stacked up to the ceiling on metal shelves and there’s a low hum from the computers. The air is moving like a wind tunnel, hot columns and fresh air columns. Small LED lights flashing all over the room.

“All of the outputs from the plant are energy — well, except for a small amount of bronze-coated steel I capture from the tires,” I said. “So I divert power into here.” I pointed at the computer hardware flashing in front of us. “I use the power to mine cryptocurrency. Bitcoin, ethereum.” This is how new bitcoin is created or minted. People like me run huge computer systems to keep the Bitcoin network running. I’m processing transactions and keeping the network secure. And I’m rewarded in new bitcoin and new ethereum for doing it.

I watched their faces take it all in. “So that’s why there’s no spike in energy around here…”

“Exactly,” I said. “It’s legit.” In fact, it’s the biggest waste-to-energy cryptocurrency mining operation in the world that I know of.

Back when I first got into bitcoin, this was the lightbulb moment for me. I wasn’t a radical libertarian who liked the idea of stateless currency, I wasn’t a cryptography nerd or anything like that. I’m a scientist, an engineer who loves building things and experimenting. Plugging in a bitcoin miner for the first time and watching it work changed everything. After that I went all in.

But I wasn’t always convinced...

Chapter 3:

Magic Internet Money

“Wait, what do you mean we should invest in bitcoin?”

Like almost everyone who hears about bitcoin, it took a while to click. I was actually pretty pissed the first time my business partner told me he’d bought some cryptocurrency mining rigs. I think everyone has the same reaction when they first hear about it. Magic internet money? Seriously?

I’d recently sold my healthcare business for a nine-figure exit. More money than I even knew existed when I was a kid. After two decades of building that wealth, I figured my only job now was protect it and grow it with smart and careful investments.

I put a bunch into real estate and made a few early-stage investments in startups. Later I met my partner Anthony ‘Pomp’ Pompliano and we set up our first venture fund out of a Starbucks in North Carolina. We deployed some capital in seed-stage and pre-IPO companies like Lyft and SpaceX. But cryptocurrency? I needed to know more.

“I’m just saying, there’s something there. We should consider it,” Pomp told me on this long drive to meet an investor.

“Alright,” I said. “We’ve got a three-hour car journey to kill time. Let’s get into it.”

Hard money you can’t fuck with

This small section of the book took me longer than any other… because describing bitcoin in one paragraph is almost impossible. I wanted to sum it up as neatly as I could for you. After writing and deleting thousands of words, I finally figured it out in one sentence:

Bitcoin is just hard money you can’t fuck with.

It’s really that simple. I mean this in two different ways:

1. No-one can mess with your money

Bitcoin is completely independent. It exists outside of banks. It doesn’t belong to any government. It doesn’t care about borders. It’s open to everyone, no matter who you are or where you live. It can’t be controlled by any one person, group or company. The network has never been hacked and it can’t be shut down. Bitcoiners call this ‘censorship-resistant’ — absolutely anyone can use bitcoin and no-one can stop you from making transactions. A completely parallel financial system controlled by no-one. Bitcoin could be the incorruptible substance that transforms humanity. This is really big.

2. No-one can fuck with the bitcoin money supply

As I explained, the US can print as much new currency as it likes. Trillions of dollars of it. And we know this devalues the money. Bitcoin is different. The supply is fixed at 21 million BTC, hard-coded, and programmed centuries into the future. Completely transparent and fair. This is what I mean by ‘hard’ money. The supply is fixed. It can’t be inflated.

You just cannot fuck with bitcoin in any way. No-one can. It’s bulletproof. Neutral and impartial to everything else going on in the world. That’s why it’s the perfect global reserve currency for the next digital era.

Obviously, that’s not how Pomp and I talked about it back in the car that day. We started with the basics…

Magic internet money

Bitcoin is digital money. You can send it to anyone in the world, instantly, over the internet. As easy as email. Every transaction is encrypted and locked with a cryptographic signature, hence, cryptocurrency.

There’s bitcoin… and there’s Bitcoin

There’s bitcoin the currency (with a lower-case ‘b’) And Bitcoin the network or ‘protocol’ (with an upper-case ‘B’) that makes it all work. Think of the Bitcoin network like the internet. A web of computers that sends transactions back and forth.

No banks

Bitcoin is designed to cut out the “trusted third party” like banks. There should be no middle-man like PayPal or Bank of America controlling your cash. We shouldn’t have to trust a bank to hold our money.

No governments

Bitcoin is the first truly global currency. It goes beyond borders and can’t be controlled by a government or central banks.

Actually, no central authority, at all…

No-one owns the Bitcoin network. There’s no central authority in control of Bitcoin. There’s no CEO, no headquarters, no master computer with a reset password, no central database to hack. Again, it’s like the internet. No-one owns the internet. No government can shut it all down because it exists on millions of computers all at once.

This is what bitcoiners call “decentralized.”

So who created this thing?

That’s the best thing about it. No-one knows. Some anonymous person or group who calls themselves Satoshi Nakamoto. They appeared out of nowhere in 2008 and published the Bitcoin white paper. Three years later, Satoshi completely disappeared. Logged off, stopped working on it and vanished.

It was a genius move, creating a completely unstoppable movement, independent of a central body or figure. Bitcoin belongs to everyone. If you don’t know who created it, you can’t force them to shut it down. It’s like V for Vendetta. In the movie, an anonymous person called ‘V’ masterminds a revolution, then disappears. At the end of the movie, thousands of people show up to overthrow the system, all wearing the ‘V’ masks. No-one know who started it, and now it’s too big to stop. It’s the same with bitcoin.

Bitcoin is money for the new digital era

As we talked it through in the car that day, the wheels started to turn for me. My first thought was this is like video game money . I’m a big gamer and that’s really how I first understood it. I knew we were moving into a digital economy and we need a native internet currency that goes beyond borders.

That’s how Twitter CEO Jack Dorsey describes it, too. “The internet is going to have a native currency so let’s not wait for it to happen, let’s help it happen.”

It makes total sense. Our bank systems and international payment rails were built in the ‘70s and ‘80s. They’re not fit for a digital world. I can send an email to anyone in the world in seconds. I can call you from the other side of the planet and talk to you in real-time. But it takes me five days to wire you money? It’s insane. I could get on a plane with a suitcase full of dollars, fly to Australia, drive across the country and personally hand you some cash faster than wiring it from my bank account. Most of the time, sending money abroad is just an inconvenience, but think about a migrant worker trying to send some money back home to his family in a different country. The whole system is a total disaster.

Then I look at my kids and watch them play video games with people on the other side of the planet. They’ll never understand a system where you wait five days to send money. They just won’t. They’ll expect instant, digitally native currency.

The establishment hated it

There was something else that got me excited. The establishment, like banks and traditional investors, hated it . Warren Buffett famously called bitcoin “rat poison squared.” JP Morgan boss Jamie Dimon said it was a “fraud” and would fire any employee trading it. Nobel prize-winning economist Joseph Stiglitz claimed it was only used for nefarious activity and said “no government can allow that.”

I guess the rebellious contrarian inside me was drawn to it because of this. There was one other time in my life when I remember such a violent backlash: when I started my first company.

I was in my early 20s doing a surgical residency at Yale. My whole life I’d focused and prepared to practice medicine. But when I finally got there I was really confused by what I saw. Doctors and nurses were angry and pissed off. Customer service was completely non-existent. Patients were treated pretty cruelly, I thought, with total disregard for the cost of the care they were trying to get access to. So I came up with an idea to take all the non-life-threatening emergencies — broken bones, allergic reactions, colds, coughs — and put them in a retail setting: abandoned restaurants, old Blockbuster Video buildings etc. I called it FastMed, an urgent care facility outside the hospital.

People thought I was totally crazy. They hated the idea because it was disruptive and new and scary. Whenever you get this much backlash from the established industry, it’s because it’s a threat. And that means you’ve tapped into something special. I dropped out immediately and started FastMed. We went on to open up 123 locations across the country.

I felt this fierce resistance to change when I started FastMed. And I could feel it with bitcoin. I still feel it. Whenever you get that backlash from inside an industry, you know you’re onto something.

Come on, how do you hack this thing?

After the basics, Pomp and I spent most of the drive talking about this. Digital money on the internet? There’s got to be a way to hack it.

“It’s never been hacked,” Pomp said.

“Come on, I hear about bitcoin hacks all the time.”

“It’s. Never. Been. Hacked.”

He was right. Hackers have stolen bitcoin (little ‘b’) out of people’s digital wallets if they don’t hold them securely. But the actual Bitcoin network (big ‘B’) is a fortress of computers all over the world that are fighting to protect the system. Michael Saylor calls it a “swarm of cyber hornets… exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.” And it’s never been breached.

The swarm of cyber hornets

My giant setup at the energy plant is one of thousands — maybe millions — of computers running Bitcoin. I’m one of the cyber hornets. I’m processing bitcoin transactions and keeping the network running. Not literally… the Bitcoin software is doing it for me. Anyone can download it, if you’ve got enough processing power.

This is what makes Bitcoin revolutionary. Instead of one computer at a bank keeping track of all the money (centralized), there are thousands of computers all over the world (decentralized).

Hacking Bitcoin is basically a game of whack-a-mole. You can hack me and my rig (and, trust me, I have been), but if you try to do something shady like change the supply of bitcoin or give yourself more money, all the other computers would notice and reject it. It’s called ‘consensus’ — you need a majority of Bitcoin users to agree before any change is made.

The only way to hack Bitcoin is to somehow control more than 50% of all the computers or processing power. Basically impossible at this point. This is one thing people don’t talk about enough: Bitcoin isn’t just a currency or financial system, it’s the strongest computer network in history. And it only has one job: protecting hard money. It’s a $280 billion bug bounty — the biggest reward for hackers in history if they could figure it out — and no-one’s broken it.

Seriously. This is the strongest army of computers on the planet acting like a fortress to protect your money. And people still think this thing doesn’t have value?

Image: Ruxandra Șerbănoiu

How is new bitcoin created?

This is where it starts to get a little bit complicated. So let’s make it easier. I love physics, but it wasn’t complicated textbooks that got me hooked, it was this one physics book that was written like a comic. Do you guys remember the Harold and the Purple Crayon books? Harold took his purple crayon everywhere and drew paths, boats, hot air balloons, trees and mountains as he walked through the story. This is how we’ll explain complicated things through the book.

Harold draws a computer, just like mine at the power plant. He spends all day at the computer processing bitcoin transactions. For that ‘work’, Harold is rewarded. Ka-ching! He gets some newly created bitcoin.

Although, it’s a little more complicated than that. Harold is actually competing against all the other computers on the Bitcoin network. They all want that sweet bitcoin money, so they turn up the energy and try to work harder and faster than Harold. This is called mining.

Here’s how it works. Harold bundles up lots of new bitcoin transactions and puts them in a ‘block’. Then Harold draws a math puzzle. If Harold’s computer is the first to solve the math puzzle, his block gets added to a long chain (hence, blockchain). Ka-ching! He’s rewarded with that sweet bitcoin.

Every ten minutes there’s a new block with 6.25 BTC in it. And the competition starts again. In the early days, you could ‘mine’ bitcoin with a basic laptop. Nowadays, you need a ton of power and a lot of specialized equipment.

Pomp and I talked about this mining competition back and forth in the car that day. I remember looking at Pomp and smiling. “Dude, I run an energy plant.”

A few weeks later, I was buying as much mining equipment as I could get my hands on. Literally, I was buying old equipment from people’s college dorm rooms. Then I got on a plane to Singapore, China and ordered hundreds of mining rigs. We were all in.

These are all the practical aspects of bitcoin. And they’re super interesting to me. I love the engineering aspect of it, and I could see we needed some kind of digitally-native, global currency. It was a cool experiment, but I didn’t think it was big enough to replace the dollar. Then one thing changed everything:

Only 21 million bitcoin will ever exist

“Hang on, wait. There are only 21 million bitcoin?” My brain went into overdrive when we started talking about this back in the car. I might not understand cryptography, but I know about scarcity. Gold, artwork, limited-edition sneakers, Pokemon cards… humans love scarcity. It’s like something primal in our brain, we just love to collect scarce assets.

“Yeah, the supply is hard-coded. There will never be more than 21 million BTC.”

This is the game-changer. Remember, every other form of currency on the planet right now is infinite . Dollars, euros, yen… they all have an endless supply. Money printer go brrr. The Fed literally told us themselves: “There is infinite cash at the Federal Reserve.”

21 million. I can’t stress how important this is. The whole next chapter is dedicated to it. Really, this whole book comes down to bitcoin’s hard-coded 21 million supply cap.

Chapter 4:

Bitcoin Is Scarce… Really Scarce

There will only ever be 21 million bitcoins ever created. That’s it.

Put it this way, if every millionaire decides they want to own a full bitcoin, they can’t. There are 50 million millionaires on the planet, only 21 million bitcoins. There aren’t even enough bitcoins for every person living in Texas. If you own one bitcoin, you’re in 0.0027% of the world’s population that can ever hold a full BTC.

And most of the bitcoin supply is already out there. 18.5 million BTC has been mined and distributed into circulation.

Image: ARK Investment Management LLC / Coin Metrics

Bitcoin is really scarce…

It’s like digital land. There’s a finite amount of it available for all the people on the planet. And right now there’s a land grab. A game of accumulation.

You might say that scarcity doesn’t matter, but it does. Humans have a natural desire to collect scarce things . Why do you think kids line up around the block for limited-edition Supreme drops or Nike sneakers? Scarcity has some kind of primal, inherent value. Think about gold and Picasso paintings. They’re expensive for a reason: not many exist and everyone wants them.

Take Pokemon cards. A holographic Charizard is rare and difficult to find, so the market values it more highly. Even today, 20 years after the Pokemon card craze, a first-edition Charizard card costs $1,000 on eBay. The rarest of all Pokemon cards sells for $100,000 — the Pikachu Illustrator card. It’s considered the ‘Holy Grail of Pokemon’ because only four exist. But a Squirtle card is worth about $0.99 today on eBay. You get a Squirtle card almost every time you buy a packet of Pokemon cards. The market is flooded with Squirtles and Bulbasaurs, so they’re worth less. The open market values scarcity.

Gold is scarce too. They say that all the gold that’s been mined could fit in two Olympic-size swimming pools. As far as we know, there’s not much gold left underground and it’s difficult to get it out. That’s why gold became desirable. And it’s why gold was the standard of money for centuries. Throughout history, assets with a scarce or limited supply have always held their value better than ‘infinite’ paper money.

Bitcoin is often called ‘digital gold’ because of its scarce supply. But bitcoin is way better than gold.

Actually, bitcoin is finite

Gold is scarce, but bitcoin is finite. There’s a difference. We’ll almost certainly find more gold in the oceans one day. We might even mine gold on asteroids in the future. No-one truly knows how much gold actually exists. This can’t happen with bitcoin. We know its total supply is 21 million. It’s hard-coded. You can literally check the code and see it right there in front of you. 21 million bitcoin.

It is absolutely, completely finite. Only one other thing like it exists: time. Only bitcoin and time are truly, truly finite.

Everything else on the planet has an uncertain supply. Nike could release more limited-edition sneakers, we might discover a new Picasso painting, central banks will keep printing new dollars.

It’s hard to overstate this. The revolution here is digital scarcity . This is bitcoin’s defining feature.

The halving

Here’s the ingenious part. Every four years, the daily issuance of bitcoin is cut in half in a process called the halving. Bitcoin’s supply gets even scarcer. When Satoshi mined the first-ever bitcoin block, he was rewarded with 50 BTC. Bitcoin blocks are produced every ten minutes, so that’s about 7,200 per day. At this supply rate, more than 10 million BTC were minted in the first four years — about half of the entire bitcoin supply.

Image: Coin Metrics

In late 2012, bitcoin went through its first ‘halving’. The bitcoin block reward was cut from 50 BTC to 25 BTC. About 3,600 new bitcoin every day. In 2016, it was cut in half again. And in 2020, it was halved again. Just 6.25 BTC every ten minutes.

We’ve gone from 7,200 new bitcoin every day to just 900 new bitcoin.

This process will continue every four years until all 21 million bitcoin have been created, in about 2140. Because the supply is front-loaded, most of bitcoin’s total supply is already in circulation (about 18.5 million at the time of writing). There’s only 2.5 million left to mine. Bitcoin keeps getting more scarce.

Remember when I said you can’t fuck with bitcoin’s supply? This is why. The halving is algorithmically coded every four years (and just so happens to coincide with the US Presidential Election — another genius move by Satoshi to throw the financial system into chaos every four years). We know the exact bitcoin supply schedule for centuries in advance. You can’t say this about any other currency or asset on the planet.

It’s also why bitcoin is the best-performing asset on the planet for the last ten years. The halving creates a huge supply shock in the market. Literally overnight, the daily supply of bitcoin gets cut in half. So if demand for BTC remains equal (or increases), the price has to go up. We’ll get deeper into this later.

There’s something special about owning an asset with a known, fixed supply. If you own one bitcoin, you will always own 1/21 millionth of the supply. Forever. You can’t say that about the dollar because the supply keeps getting bigger. The dollar supply is expanding faster than you can accumulate it. This gives bitcoin a strange quality: you always want more of the pie because it’s yours forever. I always joke on Twitter that I just need eight more and I’ll be all set.

How many bitcoins are available, really?

The game of accumulation has already begun. So let’s dive into the numbers and you’ll see how scarce bitcoin truly is.

Remember, there will only ever be 21 million bitcoins and 18.5 million are already in circulation. So who’s holding them? Bitcoin creator Satoshi Nakamoto holds 1 million BTC after mining the early supply. Those bitcoins have never moved and probably never will. Remember the Winklevoss twins, the Harvard rowers from the Social Network movie? After suing Mark Zuckerberg over Facebook ownership, they bought up at least 1% of the entire bitcoin supply. Pomp and I had the same goal and joke that our only regret is that we didn’t buy more for ourselves and our clients.

One early investor, Chamath Palihapitiya, claims to have bought millions of dollars worth back in 2013, and he’s never sold. You can do the math — that’s a lot of bitcoin. Grayscale Investment Trust now owns around 500,000 BTC (about 2.7% of the supply) for its clients. At their current buying pace, they’re on track to own 5% of the supply by the end of 2021. One major tech company, MicroStrategy, just bought $425 million worth of Bitcoin (0.18% of the total supply) to hold on its balance sheet. The CEO Michael Saylor personally owns another 17,732 BTC. You can quickly see how the bitcoin pie gets eaten up by big players.

22% of the available bitcoin supply hasn’t moved for five years. They’re held by long-term, wealthy ‘whales’ and they’re not for sale. All across the bitcoin community, you’ll hear cries of “hodl!” These guys are accumulating as much bitcoin as possible to hold indefinitely.

This is game theory. We accumulate things we think will be valuable to others in the future. As we’ll find out, this is the basis of all good money through history. And it’s why bitcoin is still in the earliest stages of money evolution. We’re building a foundation. In other words, don’t buy coffee with bitcoin. Don’t buy anything with bitcoin right now. Accumulate it, hold it. Every time we take bitcoin off the market and ‘hoard’ it, we’re making it more scarce. We’re giving it more value and driving the price higher. At a certain tipping point in the future, when enough people are holding bitcoin, the price will naturally stabilize and we can begin using it to exchange. But it takes time.

Four million bitcoin lost forever

And then there’s lost coins. An estimated four million bitcoin are already lost or inaccessible on broken or forgotten hard drives. Many early adopters forgot about their stash or lost their wallets. You’ve got to remember, bitcoin was close to worthless in the early days so it was easy to forget about them. And we don’t have the sophisticated storage solutions we have now.

James Howells is one of the unlucky few who will never get his bitcoin back. He started mining bitcoin in 2009 and accumulated 7,500 BTC on an old laptop. A few years later he scrapped the laptop for parts and accidentally threw away the hard drive. Those bitcoins are now buried under 350 tonnes of waste in a British landfill site. They’re worth about $90 million today.

There are lots of stories like this.

So let’s assume there are only 17 million bitcoin actually available. That means 0.0027 BTC for each person on the planet. If bitcoin is the global currency, this might be your share of bitcoin, if you’re lucky. As I write this, that would cost you just $42.

Only 2.5 million left to be minted

As for the future, only 2.5 million bitcoins will be minted in the next century. As Bitcoin security expert Jameson Lopp put it, “More bitcoins have been lost in the past 10 years than will be found in the next 100 years.”

Just think about that for a minute. Only 2.5 million bitcoin will be minted for the next 100 years. That’s one BTC for each person in Houston — a relatively small city — for the next 100 years.

It’s not much.

And even that new supply is getting eaten up fast. Just two companies — Square and Grayscale Trust are currently buying the entire supply of newly-mined BTC. Bitcoin’s daily supply is so scarce, it’s immediately swallowed by just two buyers. Grayscale alone purchased 77% of newly-minted BTC in the third quarter of 2020. What happens if that number goes above 100%? One single buyer taking all the bitcoin off the market? And what do you think happens when the supply gets cut in half again in the next halving? There is no limit to how much people will be willing to pay for bitcoin if demand gets this big.

The actual amount of ‘available’ bitcoins left on the market for everyone else is very, very small. What happens if every high-net-worth individual decides to buy a bitcoin next week? What happens if more billion-dollar companies start buying bitcoin for their balance sheets? What happens if nation-states start adding bitcoin to their national reserves?

There simply isn’t much left to go around.

Simple economics tells us that only one thing happens if demand outweighs the supply. The price goes up.

This is the catalyst for astronomical price appreciation. Remember, humans value scarcity. We pay millions of dollars for rare Picasso paintings. We pay millions for prime New York real estate. How much do you think the rich will pay for a single bitcoin in the future? Owning one bitcoin will be a status symbol.

Bitcoin as a store of value

Why do I care so much about bitcoin’s scarcity? Because that’s what makes it a ‘store of value.’ Throughout history, scarce assets like gold have a track record of holding their value over time because they can’t be inflated. We call this ‘sound money’ or ‘hard money.’ It’s just basic math. Infinite dollars pouring into an asset with a fixed supply — the price is engineered to go up. Or at the very least hold its value. If it can’t be inflated, it can’t be devalued. Bitcoin is mathematically designed to protect the value of your hard-earned money.

Why a robotic supply is the perfect global reserve system

Although we’re all here for ‘number go up’ technology, there’s something much bigger going on here. This fixed supply is what makes bitcoin the perfect global reserve currency.

You can’t fuck with it. The supply is robotic, algorithmic. No human can control it. Impartial, neutral, predictable, no matter what is going on in the world. Bitcoin’s supply isn’t subject to human emotions like greed or fear or self-interest. It just… exists. One block every ten minutes with a predetermined number of new BTC. No government can tweak the supply for its own advantage. No bank can manipulate it.

In every monetary and banking system on the planet, humans are the weak point. By taking the human out of money, we create a truly neutral and impartial system.

In a word, it’s fair. The perfect independent currency for the global economy.

And as we learned in 2008, the same year bitcoin was created, the current system of money is anything but fair.

Chapter 5:

The Big Short

Grown men were crying. One by one, the bankers poured onto Wall Street in disheveled suits, heads down, holding their sad little cardboard boxes. Lehman Brothers was bankrupt. It was September 2008. The housing market just collapsed and the banks were going up in flames. The entire global economy was falling, like a house of cards. And it was the banks’ fault.

“You know what? I’m pissed off! American people are getting screwed by the big banks. And I am getting madder and madder.”

Michael Baum, The Big Short

I saw it happen to my own family. I watched them lose their homes. In 2007, my mother owned several properties and ended up going through bankruptcy. The banks were selling her these ridiculous ‘jumbo loans’ that were way bigger than she could pay back. It just ran away from her and spiraled out of control. My aunt and uncle defaulted on their mortgage. I mean, this is as close to home as I can tell you. I was desperately trying to help my family out, help pay their mortgages where I could. Trying to keep people from being blown out. This is why I’m so convicted on bitcoin. I watched the traditional banking system ruin my own family. From that period onwards I knew there had to be an alternative. We just can’t do that to people again.

It was just like the Big Short movie. You know the scene where the stripper owns five homes and a condo on the beach, all with sketchy mortgages? My family was living it. And this wasn’t their fault. Banks and lenders were handing out way too many risky mortgages to people who couldn’t afford them. The snake-oil mortgage broker in the Big Short summed it up. “My firm offers NINJA loans — no income, no job. I just leave the income section blank if I want. Corporate doesn’t care. These people just want homes, you know, and they just go with the flow… I was a bartender. Now I own a boat.” Oh and I had one of these snake-oil NINJA broker guys in my family too.

My cousin got into the mortgage business with no background at all. The guy bought a Mercedes and a new house, just flipping mortgages. Nobody had to verify their income. They were giving out mortgages as fast as they could. No experience, they just set up mortgage shops, flipped the contracts out, got their compensation. They didn’t care one bit about the fact they were selling toxic paper to people without the ability to pay them.

And it wasn’t even the brokers’ fault, it was the big banks. This whole time, Wall Street was hounding these brokers and buying all the toxic mortgages they were selling.

“If I write a loan on Friday afternoon, big bank will buy it by Monday lunch.”

Big Short mortgage broker

Here’s how it worked. The banks packaged these mortgages into ‘bonds’ and sold them to pension funds and investors. They started out as high-quality investments full of solid mortgages. “Your original mortgage bond was simple. Thousands of triple-A mortgages bundled together, guaranteed by the US government… [But] the modern ones are different.” When they ran out of high-quality mortgages to put in the bond, they started adding layers of risky ‘subprime’ mortgages like the ones they sold my family. “Somewhere along the line, these went from a little risky to dog shit.”

And then Wall Street got even greedier. They started slicing and dicing the bonds up into an even riskier investment called CDOs.

“So the mortgage bonds are dog shit but the CDOs are dog shit wrapped in garbage?”

Michael Baum, The Big Short

These things got so complicated the banks didn’t even know who owned the properties. When my aunt and uncle defaulted on their house, they carried on living there for a year without paying. The banks literally couldn’t even figure out who owned the paper. The loan had been chopped up and sold on so many times.

The banks gobbled up these CDOs and a whole alphabet soup of bullshit investments. Wall Street made a killing selling them to unsuspecting investors. And almost no-one noticed because bonds are boring as hell.

“Pretty soon stocks and savings were almost inconsequential to the big banks. They were doing 50, 100, 200 billion in mortgage bonds every year”

The Big Short voiceover

But when people could no longer pay those sketchy mortgages, the Jenga tower started to fall. Behind the scenes, the Federal Reserve was slowly raising interest rates. Monthly mortgage repayments went up. People were already scraping to pay their mortgages, now they flat-out couldn’t afford them. Defaults started rising. When the default rate tipped over a certain threshold, all those dog-shit mortgage bonds failed.

By 2008, the whole thing came crashing down and it wiped out the entire economy like a tsunami. Three million homes in America were foreclosed on. Unemployment doubled. Young people got punched in the gut. Many graduated into a decimated jobs market, forced to move back home with their parents. They watched their family lose their jobs, their homes. It was brutal. And you wonder why millennials are skeptical of the banks.

The banking system was exposed as a failed, greedy, rigged system… and then they all got bailed out. With our money.

A month later, bitcoin was born.

Long bitcoin, short the bankers

Just a month after the Lehman Brothers’ collapse, someone with the username Satoshi Nakamoto logged into an obscure cryptography mailing list and wrote publicly for the first time: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

The timing is not a coincidence. Bitcoin emerged from the ashes of a broken banking system. A new digital form of money that operated outside of banks, governments, and any other third-party. A truly global and open currency. A revolution against everything that caused the 2008 collapse. And just in case you still think it’s a coincidence, Satoshi Nakamoto left us a message inscribed in the first-ever bitcoin block: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

You could argue it’s just a timestamp to prove he mined the first block on January 3rd. But the message is pretty obvious: bitcoin is here as a ‘screw you’ to the traditional banking system. A new form of money designed to cut out the banks.

The money in your bank is not your money

Here’s the worst part about the 2008 crisis: the banks created this entire mess by using your money. Most people don’t realize this. When you deposit your savings at Bank of America or Citi, the bank takes that money and loans it out to other banks. And those banks loan it out again. And again.

Think about how much money is in your savings account right now. To keep it simple, let’s say it’s $1,000. That money doesn’t actually exist at your bank. There’s no vault with your name on it and a stack of notes inside.

The bank is only required to keep around 10% of your money in its reserves. That’s $100. They take the other $900 and loan it out to another bank. That bank keeps 10% in reserve and loans out the remaining $810 to another. And on and on and on. If we all went to the bank right now and demanded all our money back, they literally couldn’t give it to us. There’s only 10% there.

This is fractional reserve banking. And it’s why the banks nearly blew up in 2008. They lent out your money to risky borrowers, inflating the biggest credit bubble in history, and then it burst when no-one could pay it back.

Satoshi knew exactly what was going on. In one early conversation when describing bitcoin he said, “Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”

Like I said, they’re fucking with your money. Satoshi wanted to take that power away from banks. So he created an ingenious system:

Bitcoin is magical internet money

We joke about it, but bitcoin really is magical internet money. Bitcoin wasn’t the first internet currency… it’s just the first one that actually worked. Geeks and cryptographers had been trying to invent digital currency since the internet was born. But they all failed because of one thing: the ‘double-spend’ problem. Here’s Harold and his purple crayon to explain.

Harold explains the double-spend problem

Harold draws a computer. Then he draws an mp3 music file — C.R.E.A.M. by WuTang because, who doesn’t like WuTang? Harold wants to send the song to his friend, Sarah, so he draws up an email, attaches the mp3 file and sends it to Sarah.

What actually happens here? The file duplicates . The mp3 file doesn’t actually leave Harold’s computer, it’s replicated. Harold still has the song on his computer and now Sarah owns it too.

You can’t have a digital currency like this. If money worked in the same way, Harold would send Sarah $5 but he’d still have the duplicate $5 on his computer too. Harold could spend it twice, hence the ‘double spend’ problem. He’d basically be printing money.

Normally, this problem is solved by the bank.

Image: Ruxandra Șerbănoiu

Harold draws a bank. Then he draws the bank manager. The bank manager has access to all the accounts for its customers. This is called a ‘centralized’ system — only the bank manager can see Harold’s money and move it around. If Harold wants to send $5 to Sarah, the bank manager removes $5 from Harold’s account and credits it to Sarah’s account.

But what if the bank is shady and starts moving the money to different places? (This is exactly what they do, as we discovered). Satoshi Nakamoto wanted to cut out this shady “third party.” Cut out any central authority. The problem in all of these systems is that you have to trust someone or some company to do the right thing with your money. And they rarely do.

But who would verify Harold’s $5 transfer if there’s no-one in charge? Satoshi finally figured it out: everyone could verify it.

Imagine if the bank spreadsheet was public. What if everyone could see it?

Image: Ruxandra Șerbănoiu

That’s effectively what Satoshi did. He gave everyone access to the spreadsheet of accounts and transactions. Like a shared Google doc. All of a sudden, everyone can see all the transactions and make updates in real-time. The spreadsheet no longer exists in a ‘central’ place, it exists on millions of computers all at once, open to anyone. It’s ‘decentralized.’

By the way, this means every transaction is visible on the Bitcoin blockchain. It’s not ‘anonymous’ as many people think. Your name and personal details are all obscured by cryptographic code, but I can still see the flow of BTC, preserved forever on the blockchain.

This time, Harold wants to send 5 BTC to Sarah (he suddenly got really rich). Harold sends the bitcoin from his wallet to Sarah and the transaction pops up on the big Bitcoin spreadsheet. This time there’s no single banker checking the transaction. Hundreds and thousands of people are checking the transaction right there in the spreadsheet. I’m one of them. My computing rig at the energy plant is verifying bitcoin transactions all day long. Does Harold have enough money in his wallet? Yes… Okay, approve the transaction. But Harold is sneaky. He tries to send another 5 BTC to someone else right afterward. This time, everyone can see that Harold doesn’t have 5 BTC so they refuse to verify it.

Again, no-one can fuck with your money with bitcoin. If anyone tried something shady, thousands of computers would notice and refuse the transaction.

This is why bitcoin matters. It takes the power out of the hands of banks and gives it back to the people. If you own bitcoin, and hold it in your own digital wallet, you truly own it. No fractional reserve, no shady lending, no central bank manager. It belongs to you.

“This is robbery”

If you need another example of why the money in your bank account is not really yours, ask the people in Cyprus. Their government literally stole the money out of their bank accounts overnight.

In March 2013, a protest broke out in front of the Bank of Cyprus. Families were terrified, banging on the bank’s windows, desperate to get their money out. One man showed up with a bulldozer, threatening to break through the glass doors.

Days earlier, rumors began to swirl that the Cypriot government was considering a “one-time tax” on bank deposits, a ‘bail-in’ that would take money right out of their account. Cyprus never really recovered from the 2008 crisis and desperately needed to come up with €7.5 billion as part of a bailout package. If they didn’t, the island’s banking system would go bust. This was their only option.

And then the announcement came. Wealthy savers at the main Cypriot banks would get 47.5% of everything over €100k confiscated. Roughly €4 billion was snatched from the Bank of Cyprus accounts overnight. They were replaced with worthless shares in the bank itself. Another €3.4 billion was swiped from depositors at Laiki bank — the second-largest in Cyprus.

The government literally took money out of people’s bank accounts to fund its own debt. Just think about how crazy that is for a minute. You wake up one morning, check your bank balance, and your savings have been taken away.

A British expat who had moved to the island to retire told the BBC it was pure robbery. “We retire and bring our savings to a bank in Cyprus and they can just take our money away without permission and then say we have shares in a bankrupt bank.”

I’ll say it again. The money in your bank is not yours. It can be confiscated overnight if the bank or the government needs it. They can take your money to pay back their debts.

Even when the Cyprus banks did open, there were new rules. Limits on credit card transactions. Daily withdrawal limits — no more than €300 cash per day. Restrictions on sending money overseas. If you want to transfer €5,000, you need permission from the central bank.

This is not some rogue state or dictatorship. This is a European Union country, telling you that you need permission to move your own money.

The price of bitcoin soared when this happened.

At the beginning of the Cyprus crisis, BTC was trading at $47. It hit $88 by the end. Trading volume at bitcoin exchange Mt. Gox almost trippled in the space of a few weeks. Cypriots were desperate to move their money into something that couldn’t be confiscated by their government. Something that was outside the crippled banking system.

It was Bitcoin’s first real-world test and it worked exactly as designed. A parallel financial system, outside the broken fractional-reserve banks. When people needed it most, they finally had an alternative. Bitcoin was there for them.

It was a breakthrough moment.

I know some of you reading this will be thinking: that would never happen in America . It could.

In 2010, right after the banking crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Act. It introduced a new safety net for the banks called “statutory bail-ins.” If there’s another crisis, the banks are now allowed to use your money to restructure themselves. In normal language, that’s a Cyprus bail-in. The bank can take money out of your account to rescue themselves.

Shah Gilani — former hedge fund manager wrote a piece called Why I’m Closing My Bank Accounts While I Still Can where he explained what’s going on: “It is entirely possible the next banking crisis that depositors in giant ‘too-big-to-fail’ banks could have their money confiscated and turned into equity shares… to try and keep the bank from failing.”

Even today, the biggest US banks owe hundreds of trillions of dollars in derivatives — just like the ones that caused the 2007 collapse. According to the legislation, if the banks go bust, those debts get paid before we do. And they can take the money from your account to pay it.

So, yeah, it could happen.

Anyway, back to 2008. The banking crisis didn’t just expose all the shady stuff happening on Wall Street. It was a huge turning point for another reason. This was the moment they fired up the money printer… and they’ll never turn it off.

Chapter 6:

Here’s How the Money Printer Actually Works

“We need $700 billion and we need it in 3 days.”

Federal Reserve Chairman Ben Bernanke

With Wall Street on fire, they needed a way to put it out. They needed to stop the banks blowing up and the only option was a bailout. The US government would have to buy all the toxic mortgages from the banks. And taxpayers would have to foot the bill. Get them off the balance sheet, whatever the cost.

Panic was the key word. Treasury Secretary Hank Paulson told Congress the global economy would collapse in “24 hours” if they didn’t act. Federal Reserve chairman at the time Ben Bernanke reportedly came up with the $700 billion figure. But it was pretty much plucked out of thin air. “[$700 billion] isn’t based on any particular data point. We just wanted to choose a really large number,” said a US Treasury spokeswoman.

Yep, that’s a real quote from the Treasury back in 2008. It took a couple of votes to make it happen, but the bill eventually passed. $700 billion to rescue Wall Street. That’s $4,635 per working American — more than the median life savings of an American household at the time.

And this was just the start.

Most people think the bailout ended with this $700 billion package. A one-time hit to keep the economy going. But it got worse, so much worse. As Matt Taibi put it in an infamous Rolling Stone article, “We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.”

We didn’t just bail out the banks once. We gave them a blank check, forever.

Behind the scenes, the Federal Reserve started lending money to the banks, in secret. And when I say ‘lending,’ I mean ‘printing money.’ Again, I’m not exaggerating. Here’s how Bernanke described it: “It’s much more akin to printing money than it is to borrowing… The banks have accounts with the Fed, much the same way you have an account at the commercial bank. To lend to a bank, we simply use the computer to mark up the size of the account they have at the Fed.”

Bernanke printed $7.7 trillion in emergency loans for the banks in just a couple of years, in complete secrecy. That’s ten times more than the original bailout. If people knew this was going on, there would have been riots. It would have made Occupy Wall Street look like a sewing circle.

By the way, you should know that Bernanke was obsessed with this concept of printing money. Before any of this happened, back in 2002, he gave a speech where he boasted: “The US government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost.” And he knew exactly what this would do to the dollar. “By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services.” This is a good thing, he said, because it allows them to achieve inflation.

Money printer go brrr

So you shouldn’t be surprised to hear what Bernanke and the Federal Reserve did next: quantitative easing (QE), aka “large-scale asset purchases”. It’s a complicated way of saying ‘money printing’. So whenever you hear the words ‘quantitative easing’ or ‘QE’ just think ‘printing money.’ Here’s Harold to explain.

Image: Ruxandra Șerbănoiu

Harold is now chairman of the Federal Reserve. In his new role, Harold isn’t allowed to literally print new dollar bills and give them out. That would be too suspicious. Instead, he logs onto the Fed’s computer and buys billions of dollars worth of government Treasury bonds. He buys a few billion dollars’ worth of those sketchy mortgage-backed security bonds from the banks, too. Harold is effectively pumping new money into the system by buying debt.

And where does he get the money to buy all these assets? Well, that’s where the ‘money printing’ part comes in. Harold literally just increases the number of dollars on the screen at the Federal Reserve. A couple of clicks.

Harold hasn’t technically created new dollar bills. But he’s increased the total dollar supply and flooded the banks with liquidity. And if Harold’s explanation still sounds confusing, here’s Congressman Keith Rothfus grilling Bernanke himself about it:

Rothfus : “Where does the Fed get the money to buy [these assets]? Do you create the reserves?”

Bernanke : “Yes.”

Rothfus : “Are you printing money?”

Bernanke : [Pauses] “Not literally.”

Over the next four years, the Fed turned on the tap and increased its balance sheet by more than $3 trillion. So, get this. You already paid for the first bailout with your own taxpayer money. And you’re still paying for it now, every time they print new dollars and devalue your cash savings.

The money printer went brrr. The Fed printed trillions of dollars out of thin air to save the banks. And right at the same time, in that obscure corner of the internet, Satoshi Nakamoto created bitcoin: a new, scarce, digital money with a hard supply, slowly ticking away, one block at a time.

Banks versus bitcoin.

21 million BTC versus infinity dollars. Who do you think wins?

But, wait. How exactly does money printing destroy our currency? To understand that, we need to wrap our head around inflation.

Chapter 7:

“Bitcoin Saved My Family”

Every Wednesday, Bloomberg sends one of their reporters into a small bakery in Caracas, Venezuela to buy a coffee. And every Wednesday, the reporter sends back the price in bolivars, the local currency. The numbers are added to a chart. They called it the Cafe Con Leche index, and, after four years, here’s what it looked like.

Image: Bloomberg

The price of a coffee went from 450 bolivars to 35 billion within a few years. This is the insane effect of hyperinflation. Prices across Venezuela have become absurd and the money is effectively worthless.

Local economist Carlos Hernández is too scared to hold his savings in the local currency. “I keep all of my money in bitcoin. Keeping it in bolivars would be financial suicide.” Whenever he needs to buy something, Hernández converts a small amount of his bitcoin into bolivars to go shopping. One morning, as usual, he switched about $5 of his bitcoin savings into bolivars and left the house. “I went out for milk. I went to every one of the stores within walking distance of my house… Not one of the 20 had milk.”

Hyper-inflation doesn’t just destroy the money, it destroys the economy. Shops in Venezuela can’t get hold of basic essentials. They are left empty. But Hernández couldn’t go home yet. The value of his money was literally wasting away in his pocket. “I had to buy something, anything, before my bolivars lost value.” Shops didn’t even use price tags anymore. Things were going up so fast, Hernández would go up to the cashier and they’d calculate it on the spot. Even then, they were just guessing.

Venezuela is an extreme example, but the same thing is happening (at a much, much slower pace) in the US, Europe, and everywhere else. Your money is slowly wasting away while everything around you gets more expensive. This is the basic concept of inflation. And it’s all linked to money printing.

What is inflation?

Inflation is when prices go up, like a coffee in Caracas.

That’s the official definition, anyway, and you’ve probably experienced this too. Candy bars are more expensive now than when you were a kid. It costs more to fill up your car with gas (although that’s another story altogether). Medical care is getting more expensive.

We track this with something called CPI — the consumer price index. It measures the average price of goods and services we use on a daily basis — food, TVs, train tickets, hair cuts, education. It’s supposed to represent the average household spending. Makes sense. So inflation is the price of day-to-day things going up, right?

WRONG

This isn’t really inflation.

It goes much deeper than this. Inflation is actually the increase of the money supply itself. Think of it as money inflating , not prices.

Milton Friedman famously said: “inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced by a more rapid increase in the quantity of money.”

What the hell does that mean? It means inflation is caused by printing money, by increasing the money supply. Rising prices are just a byproduct.

Think about Venezuela again. The crazy coffee prices in Caracas weren’t caused by greedy baristas putting the prices up. It was caused by insane money printing by the Venezuelan government. They flooded the country with cash, making the bolivar worthless, forcing the barista to charge higher prices.

Harold explains inflation

Harold is a barber. He draws his little barbershop and he works hard everyday cutting people’s hair. Then he draws his savings account. It has $5,000 in it. All of a sudden, the Federal Reserve prints $3 trillion out of nowhere. They ‘inflated’ the money supply. Now Harold’s savings account doesn’t look so good. He now owns a much smaller portion of the money in circulation. He just got poorer, overnight, in relative terms.

Image: Ruxandra Șerbănoiu

And that $3 trillion didn’t trickle down to him. It went into the banks and big corporations. Harold notices that rich guys from the city start coming into his barbershop with fresh new suits and Rolex watches. They’re talking about their latest pay rise. So what does he do? Harold draws a sign on the front of his barbershop window. He puts his prices up. He’s not being greedy. He’s just trying to keep up.

The guy next door to Harold — a gun store owner — notices. He puts his prices up too. The guy next door to him raises his rates too… and so on.

Rising prices are a byproduct of the inflated money supply. It’s a bait and switch. The government talks about inflation like it’s just a ‘thing’ that happens to prices. No. They are creating it on purpose.

Things should be getting cheaper

The natural path of prices is lower. In September 2020, Elon Musk shocked everyone by promising an even cheaper fully-autonomous Tesla within three years. There’s no way this should be possible. Inflation means prices should go up! Cars should be getting more expensive!

But here’s the problem. Technology naturally makes goods and services cheaper . Technology triggers the opposite of inflation: deflation . The first portable IBM computer cost the equivalent of $41,970. Now you can buy a laptop for a few hundred dollars. It used to cost $20 to buy a DVD. Now you can pay Netflix $8.99 a month and watch thousands of movies instantly. The first Tesla cost $109,000. Now they’re working on a $25k model.

Computers, smartphones, audio equipment, photography equipment, internet services are all getting cheaper.

Image: US Bureau of Labor Statistics / Statista / Business Insider

Technology massively reduces costs for companies as well. Blockbuster used to employ 60,000 people and pay for 9,000 real-world locations. Netflix only has 8,600 employees and just 18 offices. Even clothes are getting cheaper because automation makes it more efficient.

The world’s gravitational force is deflation . And the Fed is fighting it by printing money. Totally unsustainable. We live in a deflationary world with an inflationary money system. It’s like pushing the same ends of a magnet together. It just doesn’t work.

But what if there was a disinflationary money system? Where the rate of issuance slows down over time to match the natural gravitational pull of cheaper prices? Something like bitcoin? Yet another reason why bitcoin is the perfect money for a digital economy.

Here’s the worst part…

There’s a hidden side-effect of inflation that almost no-one talks about: inequality. Inflation is the single biggest cause of wealth inequality in America and around the world. Here’s what I mean. Inflation doesn’t only seep into consumer prices. Guess where else the inflated money supply goes?

Image: TradingView

The stock market. The S&P 500 is up 441% since they turned the money printers on in 2008. And check out this chart below. This is the median price of a house in San Francisco. It’s doubled in less than ten years.

Image: Zillow

Here’s the price index for blue-chip works of art. It’s even outperforming stocks:

Image: Artprice

This is what no-one talks about. A tsunami of those freshly-printed dollars goes into assets. Only a small trickle actually goes into consumer prices. It’s called asset price inflation.

So when you hear people say inflation is only up 1.3% this year, they’re wrong. They’re talking about consumer prices. The real inflation happened in assets. And guess who’s holding assets? The wealthy (the rich get richer while the poor get poorer).

The average guy on the street doesn’t own a massive portfolio of stocks. He doesn’t own real estate, or rare Porsches or gold or bonds and he sure as hell doesn’t own any art. He’s working his ass off to put food on the table and pay his bills. You think he’s bidding for Picasso paintings or NFTs on Nifty Gateway?

The guy’s holding a little bit of savings in his bank account in case his beat-up Honda Civic breaks down. And just a reminder what happened to his cash savings in the last ten years. It’s down 20%.

Image: Official Data Foundation

The rich got richer, the poor got poorer. And then there’s the cost of things that really matter. Here’s the price of a knee replacement compared to the ‘reported’ inflation rate. Healthcare costs are rising way faster than average prices.

Image: Kaiser Family Foundation / Truven MarketScan data / Health System Tracker

And here’s the price of a private college education. It’s inflating much faster than a public education.

Image: Statista

We always think of inflation as the rising costs of milk and bread. But here’s where it really gets you: house prices. Here’s the purchasing power of the dollar compared to consumer goods (-35%) and then real estate (-53%).

Image: Thomas Financial

In other words, home prices are inflating much faster than the average consumer prices. Think about what this actually means for you. You need twice as much money to buy a home as you did 20 years ago. Or, worse, you need to borrow twice as much and bury yourself in more debt (a banker’s dream!)

And finally here’s the cost of rent compared to the average consumer price inflation. It’s running away.

Image: Bureau of Labor Statistics / St. Louis Federal Reserve / Mother Jones

For the poor and even the middle class, you’re on a treadmill, racing to catch up with a life that’s always getting more expensive.

But wait, don’t wages rise with inflation, too?

Sure, for the wealthy.

Image: US Bureau of Labor Statistics / PEW Research Center

Here’s the chart. Since 2000, wages have soared for the 90th percentile and risen steadily for the 75th percentile. But everything below the median is completely flat for the last 20 years. Salaries for the lower and middle class haven’t budged. Those rich guys in Harold’s barbershop? They’re on inflation-adjusted salaries and they’ve often got stock options. Their income actually moves higher in line with inflation.

What this comes down to is, there are two types of people in America. The first guy is wealthy. He owns stocks, bonds, a nice home and some rental property — all of them rising faster than inflation. His wage is adjusted for inflation so he gets a decent pay rise each year. And his healthcare costs are covered by his employer.

The other guy is struggling to get by. He’s working two jobs but his wage hasn’t gone up for twenty years. Everything around him is getting more expensive. His landlord made a killing over the last decade and keeps putting the rent up. His mom needs a knee replacement but the costs are astronomical. He can barely afford his car payments. And his little girl wants to go to NYU one day. He keeps watching the college fees rising every year in horror. He can’t even imagine how much it will cost when she’s old enough to go. He asks his boss again for a pay rise. Doesn’t get it. And to make this ten times worse, the little bit of money he’s got saved in the bank is devalued every, single, year.

The rich get richer, the poor get poorer.

And how’s this guy even supposed to know what’s going on? They don’t teach this stuff in school. They don’t tell you how inflation really works. Or even explain what an asset is.

I’ve been on both sides of this. I was the poor guy struggling to get by. I still get triggered if I see a car broken down on the side of the road. That used to be me. Now, I fully admit that I benefit from inflation. I own businesses and venture investments, rare sports cars, blue-chip art, and real estate. Most of my net worth is in assets. I own bitcoin.

But that doesn’t make it okay. The whole system is broken. I used to think it was just the banks’ fault, but it’s not. It’s the money . As long as money can be inflated, inequality will keep getting worse.

That’s why I buy bitcoin.

How does this happen?

There’s a phrase for it: the Cantillon Effect .

Think of a water fountain surrounded by thirsty people. Whoever is closest to the fountain gets the most water. They take as much as they can for themselves, gulp it down, and then later pass it along through the crowds. The people at the front get gallons of it, the people at the back are lucky if they get a trickle.

Money works in the same way. The people closest to the money fountain get the most cash. In this scenario, the Federal Reserve is the money fountain, and guess who’s closest to it? The banks.

Banks get first access to the newly created dollars. Remember what Ben Bernanke said? “The banks have accounts at the Fed… so to lend to a bank we simply use the computer to mark up the size of the account… it’s much more akin to printing money.” When the Federal Reserve increases the money supply, they don’t hand it out equally to everyone in America. They’re not ‘marking up the size’ of your account. They ‘loan’ it to the banks. And the banks are supposed to lend it out to us. The ‘trickle-down economy’. But that money doesn’t trickle down to the guy working two jobs trying to pay for his mom’s healthcare.

The banks loan it to public companies, like airlines who buy back their own stock to make themselves richer. So inflation pours back into the stock market. The banks loan it out to real estate developers who purchase more property and put the rents up.

This is what the banks did in 2008. The trillions of dollars of fresh QE money didn’t make its way into the hands of Americans. Most of it just sat there in the bank reserves.

Image: Federal Reserve Statistical Release

So whenever you hear about inflation, don’t think about consumer prices like milk or bread. Think about the supply of dollars getting bigger. Think about the Federal Reserve “adjusting the account balance” of the big banks. Picture that water fountain with money making its way into stocks and bonds and home prices — making them even more unaffordable — before it ever trickles down to you.

Or you can think of it in terms of time . Back in Venezuela, here’s what happened when inflation spiraled out of control. It previously cost 15 minutes of a professor’s salary to afford two pounds of beef. By 2017, he’d have to work 18 hours to afford the same cut of meat. A car used to cost a year’s salary. In 2017, our professor would have to work for 25 years.

It’s happening on a smaller scale here in America. If you want to buy a house, you need to work twice as long to afford it as you did in 2000. Inflation doesn’t just steal your money, it steals your time.

You can probably feel this happening, even if you don’t know exactly what’s going on. That’s why your parents could buy a house for $50,000 when they were your age. Or get a college degree for $10,000. But that feels impossible for some young people now.

Cash becomes a “wasting asset”

Your biggest financial goal right now is to beat inflation.

If you can’t make money faster than inflation, you’re going to have a long, hard life. The dream house and Ivy League education will get more expensive and that cash in your bank account is going to waste away. If you understand this, you’ll get richer. If you don’t, you’re stuck on a treadmill going backward for the rest of your life.

This should scare the hell out of you.

For people in America, it’s happening slowly — you’re losing 1-2% of your dollar value every year (and that’s if you compare it to consumer prices, it’s way more if you compare it to asset prices).

For people in Venezuela, like Carlos Hernandez, his wealth disappears every time he takes bolivars to the shop. This is happening all over the world as central banks fuck with the money. It’s easy to ignore this problem if you live in America and Europe. But the inflation rate in Argentina is 55%. It’s 16% in Nigeria — the biggest economy in Africa. It’s 12% in Turkey and rising fast.

Bitcoin might seem volatile to you or me, but it starts to look pretty solid when your own currency is devalued 50% every year. Here’s what the bitcoin chart looks like when priced in Argentine pesos. Looks like a good store of value to me.

Image: CoinGecko

In fact, 73% of Argentines say bitcoin or cryptocurrencies are the best form of savings for them in the current climate. And it’s why Venezuelan Hernandez calls it “financial suicide” to hold fiat currency. Holding dollars in the US isn’t exactly suicide, but it’s a slow, painful bleed into life-long hardship. As billionaire Paul Tudor Jones put it: “If you own cash in the world today, you know your central bank has an avowed goal of depreciating its value 2% per year. So you have, in essence, a wasting asset in your hands.”

Billionaire Ray Dalio was even more blunt: “cash is trash.”

This all happens because the Federal Reserve and central banks inflate the money supply by printing money. And it needs to end.

This is why bitcoin matters. No-one — absolutely no-one — can fuck with the supply. No-one can inflate it beyond the 21 million cap or create more BTC each day. No-one can take your money away through inflation. It’s the first digital thing designed to store value, to store wealth.

Gold, masterpieces and mansions

Most investors already know what’s going on. They know the dollar loses value, so they’ve got a bucket of assets to protect against inflation. CNBC’s Jim Cramer calls it the inflation handbook: “Buy gold, buy masterpieces and buy mansions. Those are the three things.” Now we can add bitcoin to the list.

Gold is the classic inflation hedge — an asset with a fixed supply (well, almost) and a history of holding its value. Blue-chip ‘masterpieces’ or artwork also have a history of holding their value or going up in price. And we’ve already covered how ‘mansions’ or real estate hold their value against the dollar.

They’ve all got one thing in common: scarcity.

Gold is naturally scarce. Blue-chip paintings are scarce (there are only a limited number of Picasso paintings). And real estate has a scarcity factor (there are only a certain number of available properties in San Francisco).

I own all of these assets. I think bitcoin is superior to gold in almost every way, but I still own some gold. And I own a ton of real estate. I actually started my medical business by purchasing a post office and turning it into a healthcare facility. And I became the biggest buyer of old Blockbuster stores across America. FastMed was a medical company, but on paper I was a real estate business.

I still hold some cash, too. Cash is still useful for investors. You need to have some liquidity on hand so you can move fast on investments. You’ve got to buy the bitcoin dip when you get the chance. But I hold a lot of it in digital dollars or crypto stablecoins where I can get 8% interest instead of money markets at the bank where I get 1%.

Bottom line. Don’t let inflation steal your money. Don’t let it waste away in your bank account. You’ve got to have assets that hold their value and ideally appreciate.

Bitcoin as a store of value

By definition, a ‘store of value’ is something that doesn’t depreciate over time against your native currency. It’s typically scarce and can’t be easily devalued or taken away from you. This is why bitcoin’s narrative has evolved into a ‘store of value’. Forget payments for a minute. The best thing you can do with bitcoin right now is hold it. Protect yourself against inflation. It’s all about holding something scarce when the money supply is infinite.

Say what you want about bitcoin’s volatility, but if you zoom out, bitcoin has held its value (and actually increased dramatically) over the last ten years.

Image: Ark Investment Management LLC / Coin Metrics

While the value of a dollar looks like this.

Image: Official Data Foundation

We’ve always had gold and real estate to store value. But we’ve never had something as hard and scarce as bitcoin. We’ve never had something digital. And we’ve never had something so far out of reach of governments and other central authorities.

It’s the best store of value ever invented. And people are starting to take notice. This is what I mean when I call bitcoin ‘hard money you can’t fuck with.’ The current financial system runs on printed cash. They are screwing with the money and it’s hurting you and your family. That’s why people buy bitcoin. To opt out of this ludicrous system that devalues your money, steals your wealth and charges it to our future generations.

2020 was the tipping point. As a result of all this insane system, companies started buying bitcoin.

Chapter 8:

How to Buy $425 Million of Bitcoin

How the hell do we buy $425 million worth of bitcoin?

Michael Saylor had been watching this whole thing play out for a decade. The 2008 crash, the money printing, the zero interest rates, the 2020 crisis. And he was nervous. His company MicroStrategy was sitting on half a billion dollars in cash at the bank. As he described it, “a $500 million ice cube that’s melting.”

Seriously, how do we buy almost half a billion dollars of bitcoin? Saylor sat in his boardroom after making the most savage decision in the history of bitcoin. He was about to convert almost his entire company’s cash balance into BTC. And this is no mom-and-pop business. We’re talking about a publicly-traded tech company with major shareholders to answer to. It had never been done before.

But they still had a problem. You can’t just load up the Coinbase app and buy $425 million worth of bitcoin. You’d move the market, like a whale splashing into a paddling pool. They’d have to be smarter than that.

So instead of a whale crashing into the market, Saylor nibbled away like thousands of small fish. “When I’m in the market I’m buying Bitcoin four days in a row, every minute,” he explained. Saylor was buying 0.19 BTC every three seconds, or about $39,414 of bitcoin per minute every day for four days. Saylor bought one batch using this method in August 2020 and did the whole thing again in September. In total, he made 167,005 small transactions across those two months.

Saylor was watching and executing the whole thing himself just in case there was a 2% fall in price. If that happened, he was ready to deploy $30-50 million at once. “I control it all,” he said. “If it’s worth doing, do it yourself.”

By the end of the week, Saylor and MicroStrategy had bought 0.18% of the entire bitcoin supply. They made history. They were the first publicly-traded company to add bitcoin to their corporate balance sheet.

But let’s go back a step. Why would a billion-dollar software company take such a big risk and convert almost all its cash to bitcoin? The same reason I’m writing this book: inflation. “We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting.”

MicroStrategy had $500 million in cash at the bank. In the past, that was a good thing. The company had enough spare money in case of a crisis or a strategic buying opportunity. Saylor could park that money in a bank account and get a 5% return from the interest. $25 million per year for nothing. But not anymore.

Since 2008, the Federal Reserve has slashed the base interest rate to zero. That $500 million in the bank is no longer generating any interest. In fact, it’s losing value. Remember, central banks have a target of 2% inflation each year. And that’s just CPI. If you judge inflation by asset prices, it’s even higher. And if you judge it by the money supply, Saylor estimates he’s losing 10-15% annually. Everything around us is getting inflated, but Saylor’s cash pile isn’t growing. To paraphrase Saylor himself, imagine having $500 million in cash in the back garden. Every year, someone comes along and burns some of it. That’s what he’s dealing with.

Saylor told his board it was their duty to shareholders to do something about it. They looked at all the options. They could buy back their own stock, but Saylor calculated it would take four years to make a dent in the $500 million pile. They could buy a bucket of strong tech stocks, but Saylor didn’t like the risk-return profile. Amazon could probably grow 50% from here, he figured, but in the current market it could also fall 50%. He wanted something with 10x potential if he was going to take on that much risk.

Then there’s the traditional inflation hedges: gold, real estate, artwork. Saylor worked through them all but didn’t like what he saw. Bitcoin was the best option. It had the scarcity factor that made it a good hedge against inflation. But it had the 10x growth potential of a good, early tech stock.

Saylor gave his board “homework,” to devour all the information they could about bitcoin. Watch every Andreas Antonopoulos video, listen to every podcast, read The Bitcoin Standard . Many of them already owned bitcoin privately, and they came to the same conclusion. They had to do it.

It’s hard to explain how big a deal this is. It’s not that long ago that people thought bitcoin was criminal money for the dark web. Now, a listed company has put it on their balance sheet as an inflation hedge.

Next comes bitcoin’s ‘game theory’ aspect. As Saylor put it, MicroStrategy just broke the four-minute mile. They proved it was possible, and others will follow.

Square commits 1% of balance sheet to bitcoin

A couple of weeks later, Square, a payments company founded by Twitter boss Jack Dorsey, made an announcement: “On October 7, 2020, Square, Inc. purchased approximately 4,709 bitcoins at an aggregate purchase price of $50 million.”

Image: BitcoinTreasury.org / Coin98 Analytics

A second public company put bitcoin on its corporate balance sheet, Jack Dorsey committed 1% of Square’s total assets to bitcoin. Although this was a smaller amount than MicroStrategy, this was an even bigger deal. Square has a market capitalization of $83 billion, larger than Goldman Sachs. It’s a rapidly-growing payment disruptor, headed by a much more high-profile CEO. Even Saylor admitted it: “I think it’s more important. Jack is such a leadership figure. He’s a worldwide leader.” Dorsey has been a long-time bitcoin advocate, too. There’s only one word in his Twitter bio: “bitcoin.” In the past, he said, “I think the internet warrants a [...] native currency and [...] Bitcoin is probably the best manifestation of that thus far.” Square is also a big player in the bitcoin space. Square’s Cash App has allowed users to buy bitcoin since 2018, and Dorsey previously launched Square Crypto — a group of developers and designers focused on improving the open-source bitcoin ecosystem. If anyone was going to add bitcoin to their balance sheet, it was Jack Dorsey and Square.

Square’s 1% shift to bitcoin was framed within the company’s mission to build a better global monetary system. But there was still a nod to inflation in the press release, citing, “Unprecedented uncertainty from a macroeconomic and currency regime perspective, we believe now is the right time for us to expand our largely USD-denominated balance sheet.”

Read between the lines. They’re nervous about holding a cash balance sheet in dollars.

This is the start of a new bitcoin era. Almost $7 billion worth of bitcoin is now held on public company balance sheets, if you include investment firms and mining companies. That’s nearly 3% of bitcoin’s total supply sitting on the balance sheet of listed firms. Think how far we’ve come.

It also confirms bitcoin’s narrative as a store of value. A few years ago, bitcoiners were desperately trying to convince public companies to accept bitcoin as payment . It never really happened. Now they’re putting tens of millions worth in their treasuries. Follow the money. Don’t buy coffee with bitcoin, treat it like a treasury asset. As Michael Saylor said, “I didn’t buy it to sell it. Ever.”

Who’s next?

After Square’s announcement, Jack Dorsey said: “More important than Square investing $50mm in Bitcoin is sharing how we did it (so others can do the same).” He published a white paper explaining how they bought $50 million worth of bitcoin, and how they custody and protect it. So who’s next?

As this book went to press, I had to keep updating this section to keep up with new companies allocating capital to bitcoin. A few weeks after the Square news, a UK listed fin-tech company called Mode Global Holdings announced a “significant purchase” of BTC. The firm said it would convert up to 10% of its cash balance into bitcoin to “protect investors’ assets from currency debasement.” Mode also blamed the UK’s 0.1% interest rate — “the lowest level in the Bank of England’s 326-year history.” The tidal wave is coming.

So who’s next to convert their cash into a better store of value? In case you’re wondering, there are 41,000 public companies around the world. They control around $80 trillion of value. And about $5 trillion of that is in liquid assets, much of it in cash, wasting away in bank accounts. In the US alone, the S&P 500 companies have $2.3 trillion in cash on their balance sheets. If they all moved 1% to bitcoin, that’s a tsunami of new capital.

This balls-out move from Microstrategy has other advantages for bitcoin. The liquidity alone marks a big evolution for bitcoin. Just think about what happened here. Saylor bought $425 million in bitcoin, he didn’t bid up the price against himself, and no-one even noticed until he announced it afterward. People used to complain that bitcoin was too volatile, but gigantic buyers like Saylor smooth out the volatility. And all he could think about the whole time was who was crazy enough to sell to him. “Who are these people that are selling [bitcoin] to me? I can’t believe someone is willing to sell it to me.”

There’s another huge bonus too. Saylor and MicroStrategy have effectively put a legal and regulatory moat around bitcoin. Critics always laugh bitcoin off, claiming it will eventually be outlawed by the government. But even if governments could shut down bitcoin (they can’t), now they really can’t. Guess who MicroStrategy’s biggest investors are? BlackRock and Vanguard. Swan Bitcoin explained, “BlackRock is the largest asset manager in the world. Vanguard is the largest provider of mutual funds in the world. Together they own over 25% of MicroStrategy. They likely had prior notice. If so, these two financial behemoths just essentially approved a massive $BTC buy.”

BlackRock and Vanguard have hundreds of thousands — maybe millions — of individual investors to answer to. They are the backbone of Wall Street. MicroStrategy shares are also held by countless pension funds. If the U.S. government tried to ban bitcoin now, the shareholder backlash would be enormous.

What’s amazing about Saylor’s move is that seven years ago, he completely dismissed bitcoin. In 2013, he tweeted: “Bitcoin’s days are numbered. It seems like just a matter of time before it suffers the same fate as online gambling.”

Now he’s all-in. This is how bitcoin gets you. Slowly, then all at once.

If you ask me, this moment defines bitcoin’s fourth ‘cycle’ or ‘stage’. This magical internet money, supposedly only used by criminals, gamblers and speculators, has now been adopted as a financial reserve asset by a publicly-traded company. Welcome to the big leagues.

Chapter 9:

Bitcoin’s ‘Number Go Up’ Technology

If you zoom out, you can clearly see a pattern of four cycles or ‘stages’ through bitcoin’s history. Each cycle propels the price and adoption higher than the last. The cycles appear to be triggered by the halving — when bitcoin’s daily supply is cut by 50%. It’s ‘number go up’ technology. After the 2020 halving, when MicroStrategy executed its bitcoin purchase, I believe we entered stage four — where bitcoin finally established itself as a treasury reserve asset. A true store of value and a legitimate inflation hedge, worthy of a place on public company balance sheets.

Image: Coin Metrics

The cycle of peaks and troughs last roughly four years. The peaks end in wild euphoria, like the Lambo-fueled bubble of 2017, and the troughs bottom out in a depressing storm of “bitcoin is dead” articles on Bloomberg.

But notice how each peak is higher than the last. And each dip forms a new floor for the price, significantly higher than before. This marks the beginning of a new stage.

Each bubble peak is a giant marketing campaign for bitcoin. Some bitcoiners might hate the idea of “marketing’ but these hype cycles are exactly that. As the price goes up, the bitcoin headlines get bigger. People start talking. The YouTube videos get more hyped up and greedy. The price keeps rising. Everyone boasts about their big gains so their friends start buying too. It’s a virtuous cycle. It’s on daytime TV. Then it’s your uncle, then your cab driver. It gets everyone talking. Each bubble brings in a flood of new money and investors. Many of them are just riding the wave, trying to get rich quick.

And then the bubble pops. The early investors take profits off the table. Miners sell their stash to secure their business expenses for the next couple of years. The price begins to fall and we go into another dark crypto winter where bitcoin sheds 70-80% of its value.

Most of the get-rich-quick speculators disappear. But some of them stick around. Maybe they read more about bitcoin and start going down the rabbit hole. They learn about the four-year cycles and why bitcoin matters. Even as the price goes down, they get more conviction. Maybe they start adding more BTC to their stash. At the same time, all the hardcore bitcoiners who have been through this cycle before are accumulating as the price drops.

You can see it happening in the data. With every big drawdown, bitcoiners start scooping up more bitcoin. The money is transferred from ‘weak hands’ to rock-solid hands like Michael Saylor… and me. It creates a new floor on the price of bitcoin, higher than the last, strengthened by a new wave of ‘hodlers’. The hype cycle works.

Each bubble attracts more hardcore bitcoiners. More talented people quit their job and move into crypto, strengthening the ecosystem. This is another thing that tipped me over the edge into bitcoin. I couldn’t believe how many smart people were giving up their cushy jobs in Silicon Valley and Wall Street to devote themselves to cryptocurrency. I’ve never seen a brain drain like it. Trust me, the smartest people in the world are working in crypto right now. Developers, investors, traders, journalists, entrepreneurs. Every cycle attracts a new crop of talent to build the next cycle. Here’s how it has played out so far:

- Stage 1: Libertarians, cypherpunks and drug dealers

- Stage 2: Silicon Valley tech crowd

- Stage 3: Early retail speculators and early institutions

- Stage 4: Corporate treasury adoption

- Stage 5: Nation-state adoption?

As public companies like MicroStrategy start adopting bitcoin as a reserve asset, it’s a good idea to look back on how BTC has evolved, and how far we’ve come.

Stage 1: Libertarians, cypherpunks… and drug users

“I was at a party one night and someone was telling me about this thing called Silk Road and bitcoin and how you can order essentially anything you want online… I bought my first bitcoin, I went on Silk Road and ordered some ecstasy from Europe… Lo and behold, two weeks later, it shows up in this unmarked envelope. I was just blown away. Blown away, completely floored. I just sat back, literally in awe.”

Anonymous Silk Road user, speaking on the Tales From the Crypt podcast

This is the story that defines bitcoin’s first phase. The Silk Road was an infamous dark-web marketplace where you could buy drugs, weapons and various criminal services with relative anonymity. It was only accessible by routing through the secretive ‘TOR’ network and you couldn’t pay with dollars. Only bitcoin.

The website blew up in mid-2011 when Gawker published an article titled “The Underground Website Where You Can Buy Any Drug Imaginable.” The author described it as “Amazon, if Amazon sold mind-altering chemicals.” It was the first online black-market. You could scroll through pages of drugs and weapons — acid, cannabis, cocaine, steroids, AR-15s, Glock 19s — and add them to your digital basket. Every seller had a rating, and buyers left helpful reviews under each product. “It was a lot like eBay,” the anonymous Silk Road user explained. “It was actually a pretty good user experience.” Better than buying from a sketchy dealer on the street.

Until now, bitcoin was just an experiment for cryptographers and cypherpunks. All of a sudden it had a use case, and demand for BTC exploded. In 2011, two years after bitcoin was created, the price shot up to its first big bubble of $31. Imagine looking back and thinking $31 was a bubble!

The Silk Road, like bitcoin, was a fiercely libertarian idea. The website’s founder Ross Ulbricht said, “Silk Road was supposed to be about giving people the freedom to make their own choices, to pursue their own happiness.” Early bitcoiners shared this libertarian ideal. They thought governments should get out the way and markets should be free and open. So when bitcoin — this stateless cryptocurrency beyond the reach of governments — came along, it clicked immediately.

Another early adopter, Erik Vorhees — who now runs ShapeShift, one of the biggest crypto exchanges out there — summed it up. “It just became really obvious that government should have nothing to do with money whatsoever… The government would never give up the control of money.”

Back in this first phase, bitcoin was a scrappy and experimental thing. And the narrative was all about payments . Early adopters wanted to prove that bitcoin could be used like real currency. You’ve probably all heard the story of Laszlo Hanyecz — the guy who bought two pizzas for 10,000 bitcoin. In May 2010, Hanyecz logged onto the old Bitcoin Talk forum and wrote: “I’ll pay 10,000 bitcoins for a couple of pizzas.. like maybe 2 large ones so I have some left over for the next day. I like having left over pizza to nibble on later.”

Someone accepted the offer and this became the first commercial bitcoin transaction. “That was the original use case,” he later said, “a payment system.” Flash forward to today and those 10,000 BTC would be worth $110 million. Hanyecz basically bought the most expensive pizza in history.

This is one of the key things I want you to take away from this book. Bitcoin’s main use-case is not payments… yet. The best use-case for bitcoin right now is holding. It’s an emerging ‘store of value.’ We are still early. I believe there are decades of price appreciation ahead of us as bitcoin evolves into the next global reserve currency. And these things take time. Don’t be the guy that threw away 10,000 BTC on a pizza.

When bitcoin’s narrative as an anarchist payment system fizzled out, people began to think of it like gold — a scarce store of value.

Bitcoin’s second cycle — early Silicon Valley crowd

“Our thesis at the time was that it was going to disrupt gold. And gold has a market cap of $7 trillion today, so if bitcoin’s going to be worth $7 trillion or more, this is a cheap asset.”

The Winklevoss Twins

In 2012, Cameron and Tyler Winklevoss were cooling off in Ibiza trying to figure out what the hell to do next. It was four years since they settled a lawsuit with Mark Zuckerberg for $65 million over the Facebook debacle. If you’ve seen The Social Network, you know how that played out. Back at college, the 6ft 5in twin rowers hired Zuckerberg to work on their project HarvardConnection before he ghosted them and quietly built thefacebook.com, a social network suspiciously similar to HarvardConnection. The twins sued Zuckerberg and settled for $65 million in cash and Facebook shares.

Cameron and Tyler took that money to Silicon Valley and tried to break into the venture capital world. But they burned out. Not a single start-up in San Francisco would take their money. Ben Mezrich, who wrote Bitcoin Billionaires explained, “Nobody wants their money because everyone’s endgame is to sell their company to Facebook, and because Zuckerberg hates the Winklevoss twins so much, that becomes an impossibility.”

Tech founders literally turned down their checks and canceled meetings with the Winklevii. The twins were feeling pretty broken. Back in Ibiza, at the Blue Marlin beach bar, buzzing with celebrities and millionaires, one man sat next to the Winklevii and started blabbering about some digital internet currency. Bitcoin. They tried to ignore the guy at first — just another chancer trying to pitch ideas at the beach bar — but something caught their attention. Maybe this was it. Maybe this was a new route for them. “We were super fascinated with it,” Tyler later explained. “This was money that works like an email. That was the ‘a-ha’ moment for us.”

Cameron knew that it was super risky, but it could be huge. “This is either the next big thing or total BS.”

Legitimizing bitcoin

From the swanky offices of Silicon Valley, the Winklevii suddenly found themselves in a dusty basement in Brooklyn, New York, where an excitable 22-year-old was running the most important company in bitcoin: BitInstant. Charlie Shrem founded BitInstant as a quick way for Americans to buy bitcoin. Until now, US citizens had to wire money to a sketchy exchange in Japan called Mt. Gox. It took days and you never knew if your money would get there safely. Super complicated. BitInstant acted as a middleman between Mt. Gox and US buyers. Shrem would purchase a ton of bitcoin with his Mt. Gox account and sell it to Americans directly.

By Shrem’s side was Erik Vorhees, the libertarian early adopter, who came on board as head of marketing, while Roger Ver watched over it all as an early investor. This was a scrappy, libertarian clique trying to build a parallel financial system. A “complete Wild West,” the twins later said.

And in walks the Winklevii. Harvard-educated Olympians in suits. The elite. The ‘man’ that these libertarians hoped to dismantle. But money is money and Shrem needed the cash to keep the company going. The twins invested $1 million in BitInstant and by 2013 Charlie Shrem’s startup was handling 30% of all global bitcoin transactions. This is another common theme for each of bitcoin’s cycles. Every parabolic bubble is triggered by a new wave of liquidity — an easier way to buy bitcoin. In bitcoin’s second cycle, that was BitInstant and Mt. Gox.

At the same time, Cameron and Tyler were plowing their settlement money into bitcoin itself. They bought up 1% of the entire BTC supply, starting when the price was around $8-9.

They even set up an elaborate ‘cold storage’ system to hide their new digital wealth. They smashed all the computers they used to purchase bitcoin, wrote the private keys on pieces of paper by hand, cut them up, and placed them in different safety deposit vaults in banks around America. Back then, we didn’t have the fortress of bitcoin custody solutions we have now.

Over the next couple of years, a small handful of Silicon Valley investors started to take notice. Secretive ‘Bitcoin Anonymous’ groups popped up, with early adopters like Naval Ravikant — a now-famous tech investor, Peter Thiel and Max Levchin from the PayPal mafia, Balaji Srinivasan — the future Coinbase CTO, Chamath Palihapitiya — Facebook’s user growth guru, and a host of engineers and developers. These guys were buying up huge chunks of bitcoin’s supply, pushing the price up to $1,000 by 2013.

The Winklevoss twins set about trying to legitimize bitcoin and dust the libertarian and drug-dealer stories under the rug. They’d groan every time libertarian Roger Ver (aka Bitcoin Jesus) said something controversial in public. They set up meetings with prominent investment firms. They lobbied the Senate for sensible bitcoin regulation. They started working on a bitcoin exchange-traded fund (ETF) which would allow Wall Street to invest.

The second cycle also attracted a bunch of new developers and entrepreneurs. Among them was Vitalik Buterin — a socially-awkward Russian teenager who hung out on bitcoin forums and wrote laser-sharp articles on crypto technology. He founded Bitcoin Magazine and, two years after that, he would publish the Ethereum white paper and launch what became the world’s second-largest cryptocurrency.

Like I said, every cycle draws in new talent and gets them hooked. They quit their jobs, go all in, and build the foundation of the next phase for cryptocurrency.

Bitcoin’s second phase blew up in spectacular fashion. To explain why, we need to come back to the ‘Amazon of drugs,’ Silk Road. In October 2013, Ross Ulbricht — the libertarian founder of Silk Road entered a public library in San Francisco and opened his laptop. A quiet and friendly 29-year-old, Ross sat in the sci-fi section near a window and saw a message pop up on his screen. Hey, can you log in to Silk Road and check something for me?

Ross thought the message was from an employee, known on Silk Road as ‘Cirrus’. What Ross didn’t know was that Cirrus was an undercover Homeland Security agent. The FBI had been tracking Ross and the Silk Road for months. They’d infiltrated his inner circle and now they were watching his every move. The FBI suspected he was the mysterious kingpin, using the pseudonym ‘Dread Pirate Roberts’ online. Every time Ross opened his laptop, the Dread Pirate Roberts appeared online. Every time Ross closed his laptop, DPR logged off. It all matched up. All they had to do was catch Ross with his computer open. “Fingers on keys,” they call it in cybersecurity circles.

They also had to be quick. A loud SWAT team would be a disaster. Ross would see them coming. He could log out, delete everything. Smash the laptop. This was a delicate operation. And they only had one chance to catch him in the act.

As soon as Ross logged on to check the technical issue, Cirrus tipped off two agents who were waiting outside the library. They entered in plain clothes and began shouting at each other. “Fuck you!” the female agent screamed right behind Ross’ table. The male agent grabbed her by the collar and threatened to punch her. It was a staged fight. When Ross looked up, another planted FBI agent swiped his laptop and passed it to a fourth agent, Tom Kiernan. Kiernan had been given just one job by his superiors: “Get the laptop. That’s why you’re here. Get the laptop. And keep it alive.” Ross grabbed at the computer but it was too late. He was arrested and cuffed on the spot.

Now they had all the proof they needed to convict him. On the laptop, they found the Silk Road backend where Ross was logged in as /Mastermind — proof that he was running the website. They found financial accounts going back to 2011, hundreds of chat logs and other incriminating evidence. And, crucially, they discovered a stash of 144,000 bitcoin which was quickly routed into FBI-controlled wallets. They threw Ross into the back of a cop car and posted a big FBI notice on the website. This Hidden Site Has Been Seized. The Silk Road was over.

The bitcoin price tumbled more than 20% on that day.

Ross’ arrest was never really about the Silk Road. It was about the authorities fighting bitcoin and sending a message. This black-market currency is not acceptable. This will be a recurring theme through bitcoin’s history. They will fight it, and fight it, and fight it until they finally give in. Unfortunately, along the way, there will be some casualties. The first through the door gets shot, right?

Ross Ulbricht took the fall. He got a double life sentence, plus 40 years, with no chance of parole. The harshest possible sentence. To this day, he’s still campaigning for his freedom.

Over the next couple of months, bitcoin’s price actually soared from $110 to a high of $1,242. If anything, all the Silk Road media attention got people more interested in bitcoin. The second major bitcoin bubble was in full swing.

“Where is our money?”

Then Mt. Gox was hacked. Gox was the biggest bitcoin exchange on the planet, handling up to 70% of all BTC transactions at the time. It was another scrappy bitcoin company that got in way over its head. I mean, the website was originally set up to trade Magic: The Gathering cards. The name Mt. Gox literally means Magic: The Gathering Online eXchange . When bitcoin started going parabolic for the first time, it was turned into a bitcoin exchange. Totally unprepared for what was coming.

Right at the top of the bubble, Mt. Gox was hacked. All withdrawals were frozen. People flew to the Tokyo offices and protested with signs — “where is our money?” Some had lost hundreds of thousands of dollars. Then the website went dark. Gox admitted they had lost 750,000 customer bitcoins, and another 100,000 of its own reserves. That’s about 4% of the entire bitcoin supply, vanished.

The second bitcoin bubble popped; the price fell from $1,132 in December 2013 to $500 in February.

It wasn’t just Mt. Gox either. There was blow after blow for bitcoin in those few short months. The Silk Road was taken down. Bang. The Chinese government banned financial institutions from banking bitcoin companies. Bang. The IRS declared bitcoin would be taxed as property which meant huge capital gains bills for traders. Bang. And then China actively closed bank accounts related to bitcoin companies. Bang, bang, bang.

Bitcoin bled out for another 18 months before bottoming at $221.

383 bitcoin obituaries

At the time of writing this book, bitcoin has been declared ‘dead’ 383 times by the mainstream media. There’s a website dedicated to tracking the obituaries. In the darkest pits of bitcoin’s cycles, critics love to pile on and trash it. These ‘bear markets’ are painful, but they’re also necessary. The tide has got to go out sometime. We’ve got to wash away the tourists, the speculators, the weak hands. As Warren Buffett says, you’ve got to let the tide go out and see who’s swimming naked.

Bitcoin’s bear markets are when money is transferred from weak hands to rock-solid hodlers. Bitcoin grows stronger and scarcer in these down cycles because bitcoin transitions to the hardcore believers. They accumulate at cheap prices. And they don’t sell.

This is also when we build. The bear markets are a gift for anyone building in the bitcoin space. All of the mainstream attention disappears. All the speculators vanish. You can get your head down and work hard while no-one else is watching, build the infrastructure and get ready for the next bull run. Like the seasons of the year, bitcoin’s time comes around again.

After the 2013 bubble burst, the next bear market got pretty dark…

Bitcoin’s third cycle — the traders and speculators

“[Bitcoin] has failed… The fundamentals are broken… I will no longer be taking part in Bitcoin development and have sold all my coins.”

Bitcoin developer Mike Hearn

If you thought the 2018/19 crypto winter was tough, go speak to anyone that was around in 2014 and 2015. That thing was brutal.

The biggest bitcoin exchange had just blown up, prominent OG bitcoiners were in jail, China had effectively banned crypto, and the community was deeply divided over how to move forward. Mike Hearn, one of bitcoin’s most important developers, quoted above, rage quit and publicly called bitcoin a failure.

This is when I started taking bitcoin seriously. Looking from the outside in, it looked like a dumpster fire. And a civil war was brewing. The war revolved around scaling. The Bitcoin network is the most secure and robust network ever created, but it’s slow. The Visa network processes an average 1,700 transactions a second. Bitcoin can do seven.

Bitcoin was designed like this on purpose. Think of it like a tank: heavily armored and impossible to penetrate (it’s never been hacked, remember), but that armor weighs it down and makes it sluggish. Visa is more like a motorbike — fast and nimble but more likely to crash. Easy to steal. Bitcoin is supposed to be a tank. Where would you rather store your wealth, in a tank or on a motorbike?

Satoshi coded Bitcoin this way on purpose. He put a one-megabyte limit on each Bitcoin block — no more than 1mb of transactions will fit inside — which takes ten minutes to process. Satoshi did this to protect the network from spam and denial-of-service (DDOS) attacks. That limit worked just fine in the early days when bitcoin was a play-thing for cypherpunks. But if bitcoin was to grow into a global money network, the small blocks would quickly get full of transactions and backlog the entire thing. Fees would go sky high. You can’t pay for a coffee with bitcoin if it costs $5 in fees and you have to wait half an hour for your transaction to go through. (As you know, you shouldn’t be buying coffee with bitcoin anyway).

So what’s the answer? Lots of people in the community wanted to increase the block size. Makes sense, right? Bigger block size, more transactions per block, faster execution.

Problem is, if you increase the block size, it gets much harder for the average person to run Bitcoin. You need much more computing power. This is important. Bitcoin is supposed to be decentralized. It’s supposed to be downloaded and run by millions of people across the world. The more decentralized it becomes, the more democratic and secure the network.

It’s not supposed to be controlled by a handful of big players with access to data centers. That would be the exact opposite of why bitcoin was created.

So others argued to keep the block size, but develop a faster ‘second layer’ on top of Bitcoin. Back in 2010, bitcoin pioneer Hal Finney saw this coming and suggested something similar. “Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the blockchain. There needs to be a secondary level of payment systems which is lighter weight and more efficient.”

New innovations like the “Lightning Network” are now being built on top of Bitcoin. The lightning network allows you to send small amounts of BTC instantly with almost zero fees. The transaction itself is batched with others and later settled on the Bitcoin blockchain. In other words, Bitcoin is the slow, steady, secure, reliable, settlement layer. A strong, impenetrable fortress. The foundation. And faster payment networks can be built on top of it.

Still, the debate raged. And because there is no bitcoin CEO, there was no-one to make the final call.

A fight for bitcoin’s future

Looking back, this wasn’t just a fight over block size. It was a fight over Bitcoin’s entire philosophy. Should Bitcoin be the ultra-secure, foundational layer of the future digital economy? Should it be the tank, open and decentralized for anyone to download?

Or should it be a super-fast payment network right now? Many wanted the latter. They wanted bitcoin to be fast and cheap. They thought bitcoin was useless unless you could buy coffee with it, unless it competed with Visa.

But ‘fast payments’ isn’t the revolution here. We already have fast payment systems today. We’ve got Venmo and credit cards and easy money. We don’t have a scarce, independent currency, backed by the most secure computing network in all of history that can’t be fucked with.

As Saifedean Ammous later wrote in 2017: “Using Bitcoin for consumer purchases is akin to driving a Concorde jet down the street to pick up groceries: a ridiculously expensive waste of an astonishing tool.”

Bitcoin isn’t designed for buying coffee. It’s designed to be the next global reserve currency. And that means building a fortress. A global settlement layer where the bitcoin transactions are ‘giant container ships, not emails’ as Castle Island Ventures’ Nic Carter puts it. In October 2020, someone sent $1 billion in a single transaction over the Bitcoin network. And it cost them just $3.54 in fees. There is no other money network on the planet that can do this. The average bitcoin transaction is about $155,000. This is not designed for buying coffee. It’s for settling gigantic payments on the most secure network ever invented. It’s designed to be a global reserve currency layer.

The faster payment network can come later.

In mid-2017, the disagreement tore Bitcoin in two. A new version of Bitcoin was launched called Bitcoin Cash — hellbent on payment adoption with bigger blocks. Bitcoin Cash was a ‘hard fork’ of Bitcoin — it shared the same blockchain history but then ‘forked’ off to create a new chain. Like a railroad splitter with two tracks going off in separate directions. Miners and investors now had to choose which version of Bitcoin to follow.

Image: CoinCentral

The best thing about bitcoin is that the market decides. There is no central authority or CEO; people vote with their money… or their mining equipment. After the hard fork, bitcoin cash traded at $240. Bitcoin held steady at $2,700. The market was pretty clear.

The world doesn’t need another super-fast payment system. We have Visa, Venmo, Cash-app, Mpesa. The revolution is bigger than that. We need a whole new system of money — one that’s fair and transparent and open to everyone, censorship-resistant, scarce and deflationary.

The community rallied behind this bigger goal. As I write this today, bitcoin trades more than 55x higher than bitcoin cash.

Bitcoin is the tank. Don’t fuck with it.

Most of you know what happened next. The 2017 Lambo bubble. Bitcoin broke into all-time highs at the start of the year, and then it just went off like a rocket. You could feel something crazy was happening. Complete greed and FOMO.

A lot of it was driven by the rise of Ethereum — the second-largest public blockchain and cryptocurrency. Ethereum isn’t like bitcoin. It’s not trying to be hard money. It’s more like… the internet. Ethereum is programmable, which means you can build things on it. Just like you build an app on the internet.

Ethereum is a very cool project. But it was mostly used for one thing: to create new cryptocurrencies. A tidal wave of new cryptos appeared. Hundreds and hundreds of them. And many launched initial coin offerings (ICOs). Basically, a new way to invest in crypto projects. But instead of traditional investing, with all the rules and regulations, you’re buying a token on a new blockchain. A total wild west.

I’ve been investing for decades and I can’t describe how insane this was. The numbers we were seeing were beyond ridiculous. $152 million for a cryptocurrency project called Bancor… in one day. Just for comparison, Uber’s seed round raised $200,000. AirBnB was $620,000. And here I was watching millions flow into totally unknown crypto projects with nothing but a website and a copy-pasted white paper.

Pomp and I talked it through and we stayed the hell away. I’ve been an investor for a long time, and it’s never easy to sit on the sidelines while everyone’s making a ton of money, but this didn’t feel right. The numbers kept getting higher. $157 million for a blockchain phone project. $232 million for Tezos. $320 million for a project called Dragoncoin. And then even after the bitcoin bubble burst, investors were still throwing money at these ICOs, desperately searching for the ‘next bitcoin’: $4 billion (yes, billion) for something called EOS — bigger than any stock market IPO that year.

We were out. Absolutely no way. These things were obviously overvalued and we were pretty sure they’d get shut down by regulators eventually. We hugged our bitcoin tight and rode it out.

But even the bitcoin bubble went on to eclipse our craziest predictions, topping out at $20,000 in December 2017. I knew it was getting crazy because hackers were coming at me non-stop. I got sim-swapped. I got my mining operation hacked. And, like I told you in chapter two, I had the FBI on my back. It was pretty wild. Even obscure relatives were coming out of the woodwork: should I buy bitcoin? It was on day-time TV. Cab drivers were showing me their Coinbase accounts. YouTubers were showing off their Lambos paid in crypto. Even bitcoiners were getting caught up in the hype. Big names were making $100,000 price predictions. $250,000. $1 million. Everyone kept saying the same thing: ‘the institutions are coming’. The Chicago Mercantile Exchange was about to launch a bitcoin futures exchange. Everyone thought they had front-run Wall Street and got in first. People were selling their homes to buy more bitcoin. Everyone thought they were going to be rich. But if you know, you know. This was the time to get out of the market. Like JFK’s father always used to say, when the shoe-shine boy starts giving you investment tips, you run the hell away.

And then… finally… the bubble popped.

$20,000 to $7,000 in just over a month. Down to $3,000 by the end of 2018. Absolutely brutal.

As always, things recovered. Everyone forgot about bitcoin for a while, but we didn’t stop building. So what comes next?

As I write this, stage four is just getting started. This is where bitcoin establishes itself as a true store-of-value reserve asset. This isn’t just a play-thing for traders and speculators anymore. We survived the 2017 bubble and came out stronger. We survived the 2020 financial crash and came out kicking. Bitcoin has arrived as the most important asset class on the planet. It’s digital gold, on steroids. A hard asset sucking in all the value from infinite fiat currencies. MicroStrategy and Square kickstarted this cycle by adding bitcoin to their treasury as an inflation-resistant reserve asset. Next? Nation-states… but we’ll get to that.

Chapter 10:

The Investment Case for Bitcoin

Anyone who’s been in the bitcoin space for five minutes knows the name Nouriel Roubini, an economist with the nickname “Dr. Doom.” Roubini is one of bitcoin’s loudest and most aggressive critics. He called crypto the “mother and father of all scams” in a statement to Congress. And he loves to gloat when the bitcoin price goes down. “BTC is a shitty shitcoin hedge” he tweeted after an 8% fall. “A rigged, totally manipulated, whales-controlled market… Massive pump & dump, spoofing, front running, wash trading! Total Scam!” He tweeted after a 15% down day.

When he’s not trashing bitcoin or predicting recessions, he comes after me and Pomp directly. One angry day, he slammed us for working out of a Starbucks. “Their office is appropriately located in a Starbucks restroom, one step up from that shitcoin stinking cesspool.” He blocked me on Twitter. Still makes me sad to this day. Maybe he will unblock me once bitcoin moons.

He thinks it’s an insult, but we really did build our fund out of a Starbucks in North Carolina. And we’re proud of it. We might be the only people to deploy tens of millions of dollars from a coffee shop. By now, the fund was focused mainly on companies in the bitcoin and blockchain space. We invested in Coinbase, BlockFi and Bakkt. It was an infrastructure play. Our goal was to help build the foundations of a new financial system.

But we had big dreams of bringing institutional money to bitcoin. We had a pure and convincing thesis, but you can’t get traditional investors to allocate money from a Starbucks. There’s a process for wooing them. An etiquette. That’s where Mark Yusko came in.

While me and Pomp were working out of a coffee shop, Mark Yusko was in a palatial office in Chapel Hill, North Carolina. The man is professional to a tee. And he’s been in the game a long time. Former senior investment director at Notre Dame, chief investment officer at University of North Carolina’s Endowment. $5 billion under management.

Best of all, he was a bitcoiner.

Pomp laid the groundwork with a couple of meetings and then the three of us met. I think Mark was about ready to turn and leave when he saw me. I came straight from the PRTI plant — construction boots, high-vis jacket, big beard, tatted-up. Who is this guy? We might come from different worlds, but Mark understood the bitcoin thesis. He’d been investing in disruptive tech his whole career — a big deal for the conservative university endowments he ran. He also knew what was going on at central banks. Money printing, QE. He always talked about zombie companies in the stock market, propped up by free-flowing credit. Mark got it.

Together we set up Morgan Creek Digital. Finally we had a way for institutions to invest in a bitcoin fund. Mark introduced us to some of his traditional investor clients and we worked on messages they would be receptive to. “Don’t say bitcoin will take down the traditional financial system. These guys made all their money from the traditional financial system. Tell them it’s an uncorrelated asset with the best returns of the last decade that will create a more attractive risk-adjusted return.”

That last bit is hard to ignore. Bitcoin is the best performing asset in the last five years, the last ten years. Up 4,000% since 2015. Up 16,666,566% in the last decade. Holding bitcoin for a year during almost any part of its history has produced positive returns.

And you don’t need much to make a difference. According to a Bitwise study in 2020, a 2.5% allocation to bitcoin over the last six years boosts the cumulative returns of a traditional portfolio (60% stocks, 40% bonds) from 26.2% to 44.9% (and barely alters the overall volatility). Make it 5% and the cumulative returns jump to 65.1%.

The risk-return profile is unlike any other asset class I’ve ever known, too. If you’ve got a 1% allocation, your risk is very low. Sure, there’s a tiny chance bitcoin goes to zero and you lose 1%. Annoying, but not the end of the world. But that small bitcoin position has the potential to 10x, 100x over the next decade, maybe more if I’m right about the global reserve currency thing. We call this ‘asymmetric returns’. Chance of a small loss but insane upside. Investors measure this risk-return rate by a ‘Sharpe ratio’. Bitcoin’s Sharpe ratio is the highest of any asset class. Ever.

And it’s not correlated to anything else. This is an investor’s dream. Portfolio managers love assets that aren’t correlated. You want your portfolio to weather different storms. You don’t want all your assets going down at the same time. Bitcoin has almost zero correlation to stocks, gold, bonds, commodities… anything. It’s a whole new asset class.

Image: Charts.woobull.com

If I walk into a meeting and tell an investor I’ve found the best-performing asset on the planet, with the best Sharpe ratio in history, totally uncorrelated to anything else in their portfolio, they’d bite my hand off.

And then I tell them it’s bitcoin. They go quiet.

Come on. How long can investors keep ignoring all this before their clients fire them?

We started going into meetings and boldly telling money managers that it was irresponsible not to have exposure to bitcoin. I’m talking about heavyweight institutions. Pomp would absolutely hit them with: “It’s your fiduciary responsibility to have a position.” And that was back when we used to push for 1% allocation. Our pitch was ‘get off zero’. Even if you’re not fully confident about bitcoin yet, zero is the wrong number. You got to get some exposure, just in case.

Now, we’re even more convicted. Now I tell people 1% isn’t enough. 1% isn’t financially responsible. Keeping an outsized position in cash isn’t responsible. And even Wall Street is coming around. Fidelity now recommends a 5% portfolio holding of bitcoin. Even JP Morgan analysts caved in and recommended bitcoin to its clients. They say it could triple in price and challenge gold. I feel pretty vindicated when these guys finally show up. So, why am I so convinced?

Forget all the macro stuff for a minute. Forget money printing and inflation. The simple reason for bitcoin’s inevitable price rise is what I keep coming back to: 21 million. The fixed supply. The algorithmic schedule. The halving.

These are the built-in features that make bitcoin go up.

The simplest asset on the planet

People think bitcoin is complicated. They think economics is complicated. It’s not. It’s all just supply and demand.

Think about it. The halving cuts bitcoin’s supply in half every four years. A monster supply shock. Put that in perspective for a second. Imagine if the world’s oil giants cut production in half overnight. What would happen? There’s still the same amount of demand. We still gotta fill our cars up with gas. But now there’s less oil available. The price has got to go up.

Let’s bring Harold back to explain in simple terms again.

Harold draws a pizza cart. Harold can only draw and serve 100 pizzas per day, but there are 1,000 hungry customers lined up. There isn’t enough pizza for everyone. So what happens? Someone in the queue shouts through the crowd. He’ll pay double for a slice because he’s really hungry. Harold sells him a slice for $10 instead of $5. Someone else shouts out. “I’ll pay $10 too!” Someone else jumps in. “Me too!” When demand is high, it pushes prices up. Harold quickly scrubs out the $5 a slice sign and makes it $10 across the board. Now someone else in the crowd shouts. “I’ll pay $15!” Now Harold increases the price to $15… and then $20. All of a sudden, a $5 pizza slice has quadrupled in value to $20. This is the free market at work. A limited supply and lots of demand means the price goes up.

But in most markets, the supply changes to meet the demand.

Harold would call up his buddies and get them to come help. They’d ramp up the supply of pizzas so they could feed the 1,000 hungry people. Maybe other pizza carts hear about the demand and come running. All of a sudden, there’s plenty of pizza to go around and no-one’s willing to pay $20 for a slice anymore. Pizza is back to $5 a slice.

It’s the same in big businesses. If demand for iPhones goes up, Apple ramps up the supply chain to make more. If demand slows down, they reduce the supply. Same with oil, same with gold, same with dollars and every other fiat currency. They print money to meet the banks’ demand for liquidity.

Bitcoin doesn’t work like this. Bitcoin is like Harold’s first pizza cart. There’s a fixed supply no matter what. Just like Harold can only make 100 pizzas per day, the Bitcoin network only mints 900 BTC per day. We literally cannot create any more. If thousands of people show up to buy bitcoin, they’ll be forced to pay more.

And then the halving kicks in. Imagine that Harold’s pizza supply gets cut in half. Now he can only make 50 pizzas per day. But there’s still 1,000 people queuing up to buy. Or imagine if demand increases . What if there’s now 2,000 people queuing up? Everyone heard how great the pizzas are. The demand ratio is even higher. Now people are shouting even louder. “I’ll pay $30 a slice!” “I’ll pay $40!” Harold ramps his prices up even more.

With bitcoin, this will compound over decades and decades. Demand for bitcoin will rise exponentially while the daily supply will always decrease. It’s designed to pump forever.

Here’s how it plays out in reality. In early 2020, Square was buying up 20% of all the newly-minted BTC for the CashApp. In May 2020, the halving kicked in. But Square’s demand stayed the same. Now they’re buying 40% of all new BTC. Pure and simple economics. If supply goes down, and demand stays the same, the price goes up. That’s why bitcoin is the simplest asset on the planet.

But... this same system also means bitcoin will go through brutal crashes.

In the harsh depths of bitcoin pizza winter, when all the hype and excitement about Harold’s pizza has gone, his cart keeps on pumping out the same number of pizzas every day. Only, there are fewer people around to buy them. Now there’s more supply than demand. Pizzas are sitting on the side going cold. Harold just wants to get rid of them and break even so he starts accepting a lower price. A few opportunistic people gather around the cart and buy six pizzas at a time for $5. This is the “accumulation” phase that happens during bitcoin winters. Whales stock up at low prices so they can sell higher when the hype comes back.

This is how bitcoin hype cycles work. We get big, parabolic bubbles as people are willing to pay ridiculous prices to get the limited supply of bitcoin. When the hype dies down, the price dumps and forms the trough until the next cycle of interest comes around again.

It’s volatile. But it makes bitcoin the most simple asset on the planet because only one thing matters: demand.

It’s really that straightforward. As an investor, you only have to ask yourself one question. Do you think demand for bitcoin will be higher in 5-10 years? If yes, then the price will go up. Do you think demand for bitcoin will decline? Then just don’t buy it. It’s the simplest investment thesis on the planet.

You can’t say this about any other asset.

Take oil. Let’s say I think demand for oil will be higher in 5-10 years. I can’t automatically assume this means the price goes up. Even if I’m right and demand goes up, Saudi Arabia and Iran and Russia could ramp up the supply and flood the market with oil. Sure, demand has gone up, but so has supply. So the price stays the same, or maybe even falls.

Same with gold. I’m pretty sure the demand for gold will go up in the next 5-10 years. But if the price goes up, gold miners go into overdrive and start increasing the supply of gold. Or what if we figure out a new way to retrieve gold from the ocean? That could push the price back down again.

Same with stocks. Maybe I think demand for Tesla stock will increase in 5-10 years. Price goes up, right? Not necessarily. Elon Musk can easily issue more shares (more supply) and dilute my holdings.

Same with dollars. Same with every currency on the planet.

With every other asset, you’re always trying to analyze this balance between supply and demand. Not with bitcoin. Bitcoin is easy. The total supply is strictly fixed and the daily supply is robotic. Algorithmic. It’s fuck-you economics. The supply doesn’t move no matter what is going on in the world. It doesn’t move or mold itself around the demand. It just is. 6.25 bitcoins every ten minutes until 2024. And then 3.125 bitcoins every ten minutes until 2028. And on and on. Bitcoin’s supply is a rock. A dam.

Waves of demand will crash up against the dam and then go back out again. When the waves of demand are big and heavy, the price goes up into bubbles. When the waves go out, the price goes down into deep winters. It’s pure and transparent. A truly free market at work.

All this only works because of bitcoin’s 21 million hard cap. Like I said, it’s hard to overstate this. The revolution is digital scarcity. So there’s really only one question to ask yourself if you’re an investor. Do you think demand for bitcoin will rise from here in the future?

In February 2019, our bitcoin thesis convinced two major pension funds to allocate capital, Fairfax County’s Virginia’s Police Officer’s Retirement System and Employees’ Retirement System. We also attracted investment from a hospital system, private foundations, insurance companies and university endowments. It had never been done before.

And I think we were the only team in the space that could make this happen. Mark — the gray-haired veteran with all his professionalism and experience. He normalized us in a way that we could never have done on our own. Pomp — the hype-man, a natural marketer and prominent voice in the space. And me — the engineer who built a mining rig at the power plant. We had all the bases covered. We could answer every question and settle all the concerns. We could pitch bitcoin and digital assets as a legitimate investment from every angle.

But we still get one question over and over again...

How to value bitcoin?

Me, Pomp, and Mark were visiting another fancy office with two guys in suits on the other side of the table. I know for sure they’re not about to allocate any money to bitcoin. We’re only here because their boss heard about the crypto bubble and wants to make sure they’ve taken a meeting. But we pitch it like we always do. Groundbreaking technology play, digital scarcity, fixed supply, uncorrelated asset, asymmetric returns, inflation hedge, digital gold, and investment in infrastructure.

Every now and then you see the lightbulb click. They get it, but they still won’t take the leap. They’ve got clients to answer to, a boss above them. They’ve got a good job with a good salary, it’s too much career risk for them. They’ll wait for someone else to break the trail. The first guy through the door gets shot, remember?

And then we get the question we always get. “Bitcoin isn’t backed by anything. There’s no intrinsic value. How the hell do we value it?”

I bite my tongue and try not to shout the dollar isn’t backed by anything! Instead I tell them we’ve come a long way since the early days of bitcoin, and we have plenty of real ways to value bitcoin. “Fundamentals” as traditional investors call it. And almost all of them point to significantly higher prices in the next decade.

Image: PlanB 100trillionUSD

Stock to flow

In early 2019, another anonymous character entered the bitcoin community. With the Twitter handle @100trillionUSD and a simple name, PlanB, he published a paper called Modeling Bitcoin Value With Scarcity. He used a mathematical model based on bitcoin’s scarce supply to calculate a median $1 trillion market cap for bitcoin in the next cycle — about $55,000 per bitcoin.

As Plan B has pointed out, bitcoin has historically overshot the median mark on the model, so the price could go much higher. The hype cycles tend to slingshot the bitcoin price beyond the model before snapping back. The stock-to-flow model line has acted like gravity.

The model is based on something called “stock-to-flow ratio’, which is often used to measure the scarcity of other hard assets like gold and precious metals. Plan B wasn’t the first to apply this to bitcoin. Saifedean Ammous talks about it in his book The Bitcoin Standard. Any object with a high stock to flow ratio has been a good form of money throughout history. It’s why gold has held its value so well. It has the highest stock to flow ratio on Earth.

The “stock’ in the equation is the existing amount of bitcoin in circulation — 18.5 million. The “flow’ is how much new bitcoin is minted each year (currently 328,500). The equation gives bitcoin a stock-to-flow ratio of 25. In other terms, it would take 25 years of production to get to the current bitcoin stock. That puts bitcoin’s scarcity somewhere between gold (SF64) and silver (SF22).

Somewhere around 2022, bitcoin’s stock-to-flow ratio will rise above gold, making it the world’s scarcest asset.

Plan B mapped out this stock-to-flow ratio over bitcoin’s price history and found a “statistically significant relationship” with around 95% correlation. He believes the natural scarcity and programmed supply of bitcoin has a direct influence on the price. The value steps up after each halving as the stock-to-flow ratio grows higher.

Plan B later introduced a second model, the Stock to Flow Cross Asset model (S2FX) which extrapolates a BTC price of $288,000 in the next cycle. This model removes time and adds gold and silver to the equation.

Here you can see four “clusters’ or phases of bitcoin. The first cluster is bitcoin’s early proof of concept phase. The second is bitcoin’s narrative as an electronic payment when BTC hit $1. The third is bitcoin’s narrative as digital gold when 1 BTC almost hit one ounce of gold. The fourth is bitcoin’s emergence as a financial asset as it hit $1 billion daily transactions. According to Plan B’s model, bitcoin will soon shift into the fifth phase where it will emerge as a macro asset like silver and eventually gold. The S2FX model has a 99.7% fit to the data. Pretty compelling.

Image: PlanB 100TrillionUSD

Image: PlanB 100TrillionUSD

I should point out that even Plan B admits that “all models are wrong, but some are useful.” There’s obviously no guarantee that bitcoin will hit $288,000 in the next cycle. The S2F models simply track bitcoin’s historical price action against supply and extrapolates what happens if the model continues.

The S2F model has drawn some criticism. Castle Island Venture’s Nic Carter has probably the soundest critique. Since bitcoin’s supply schedule is already known centuries in advance, he says, it’s unlikely that it has any power to shock the market or trigger price action. “Bitcoin’s supply schedule has been known since inception, which simply rules out the claim that issuance changes are the main causal driver behind price action.” It’s not the supply that affects price, he explains, it’s purely demand.

Still, it’s the first real quantitative model we have to measure bitcoin’s price, a fundamental way of calculating bitcoin’s value. And if he’s right, $288,000 is a monster price target for the next cycle.

On-chain fundamentals

The guys in suits across the table from us claimed that bitcoin isn’t backed by anything. I’d argue the opposite. It’s backed by thousands of miners securing the network. The swarm of cyber hornets. It’s backed by millions of active users storing their wealth in BTC and millions more transacting back and forth. You can measure and quantify all this with “on-chain’ data. And almost every metric is bullish.

Hash rate measures the amount of computing power being used to secure the network. A high hash rate means the Bitcoin network is more secure because it’s harder to initiate a 51% attack and gain more than half the network’s mining power. Hash rate is at record highs. We already know that Bitcoin is being the most secure computing network on the planet, so extra security is undeniably bullish.

Image: Blockchain.com

Hash rate is also becoming more dispersed between different mining groups over time — an even better indicator of security and decentralization.

Since we know that bitcoin is a store of value, we should also measure how many people are using it to store their wealth. The number of bitcoin addresses with a non-zero balance is now more than 30 million, eclipsing the peak of the 2017 bubble. The number of bitcoin addresses holding at least 0.1 BTC is over 3 million — a record high. And the number of “whales’ with over 1,000 BTC has swelled to highs of over 2,000. There are more people opting to store their wealth in bitcoin than ever before, validating its thesis as a store of value.

This data is important for another reason. A high hash rate and more bitcoin addresses means the system is working as it was designed. Bitcoin is becoming more dispersed and more decentralized. And that’s crucial for building a new global economy. If bitcoin was becoming more centralized and controlled by small entities, I’d be concerned. But that’s not happening.

There’s an entire world of bitcoin “on-chain’ analysis from companies like Coinmetrics and Glassnode. I suggest diving in and learning more about this. I guarantee it will keep your heart rate steady even when the bitcoin price is volatile. As long as you can see mining activity increasing, real transactions, and more value being stored on the network, you’ll sleep better at night.

The mining floor

There are other theories that support bitcoin’s inevitable climb higher. Some say that bitcoin has a “price floor’ based on the breakeven cost of mining. It makes some sense. Mining bitcoin costs a lot of money: huge electricity bills and massive equipment costs. If the bitcoin price falls below a certain level, mining becomes unprofitable.

Satoshi said it himself. “It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold… I think the case will be the same for Bitcoin.”

At my mine at PRTI, I’m not paying for electricity, but I’m still paying the operating costs of running the power plant and all the equipment. If the price of bitcoin or ether falls below a certain level, I start losing money. This is fine for a while. I can hedge it with futures contracts or I can operate at a loss for a few months if I think the price will go higher again later. But if this goes on long enough, miners start turning off their rigs. Maybe I sell my energy to the grid instead of mining crypto.

Only the most efficient miners can keep going when BTC falls. And that forms a natural price floor at their lower possible operating costs. When all the weakest miners have “capitulated’ and the strongest can mine at near break-even costs, the bitcoin price finds a bottom and stabilizes.

Because of the halving, that breakeven cost shifts higher every four years. The halving cuts the daily supply in half, which means miner revenue gets cut in half. The breakeven price floor has to move higher. One study found that bitcoin’s historical price action was 81% accurate with the marginal costs of mining production.

Or you can use the 200-day moving average. I’m not a trader, but it’s hard to argue with this. BTC has never dropped below the 200-day moving average which is currently sitting around $7,000. You can think of this as another floor for the bitcoin price.

However you value it, bitcoin is still the best-performing asset of the last decade. And even a small allocation to BTC has the potential to produce massive overall returns. Great for large investors. Life-changing for younger investors.

Image: Plan B 100TrillionUSD

I think it’s fair to say we’ve established bitcoin as a strong investment asset. But how do we get from here to global reserve currency? To figure that out, we need to go back into the history of money. This is going to get deep. But what we’ll discover is that bitcoin isn’t just digital money, it’s the best form of money ever created. And its place as the global reserve currency is almost inevitable.

PART 2:

A BRIEF HISTORY OF MONEY

(AND MONEY PRINTING)

Chapter 11:

If Ramen Is Money, So Is Bitcoin

Gustavo “Goose” Alvarez was serving a six-year prison sentence when a riot broke out in his cell block. He was trapped. Gang members were breaking down the door and these guys were fired up. Goose knew that racial tensions and gang affiliations were supercharged in prison. He was scared. He and his cellmates made makeshift weapons from anything they could and tied towels around their neck to protect from knives.

When the door finally broke, the ‘bloodthirsty’ inmates rushed in. This was it for Goose. He said a few prayers and braced for a massacre. Suddenly, out of nowhere, two guys came to their rescue. After a long talk back and forth, they somehow convinced the inmates to calm down.

How did they do it? The answer was money.

Well, prison money. They slipped the attackers a packet of ramen.

A few hours later, Goose was cooking noodles for the gang members as if nothing had ever happened.

Jail economies have always run on their own currency, usually cigarettes. But since 2004, when tobacco was banned from Federal prisons, the currency of choice became instant ramen packets, referred to in prison as “soups”.

“You can tell how good a man’s doing [financially] by how many soups he’s got in his locker. ‘20 soups? Oh, that guy’s doing good!’ … Prison is like the streets—you use currency for everything. In here, it’s soups.”

Inmate

Ramen has become the major currency in US federal prisons. It’s used to buy candy, clothing, cosmetics and other food items. Inmates use ramen to pay for services like laundry or bunk cleaning, even security from other inmates. They play poker using ramen packets as chips. If you’re locked up, ramen is more valuable than the dollar. “I’ve seen fights over ramen… People get killed over soup,” Alvarez said.

An entire financial system has sprung up around instant noodles. In some prisons, inmates build up large ramen reserves and lend them out to other prisoners. They even have a credit rating system. If you regularly pay back your soups, you can borrow more. And then of course, there are ramen debt collectors.

Back when cigarettes were the major prison currency, inmates would ‘pay’ the guards in cigarettes for special benefits. The cigarettes were a form of tax paid to the higher powers.

Even if prisoners hate instant noodles or cigarettes, they stockpile as much as they can, so they can trade them later on — a form of prison saving and investing. The soups can even go up in value. Alvarez explains, “I remember in ‘92, you could get them for 20 cents a ramen. In 2013, the last time I was in prison, they were equivalent to $1 a ramen, sometimes $2.”

In some prisons, two soups can buy a $10 sweater, showing the power of appreciation. Goods and services are also denominated in food packets. You want your bunk cleaned? That’ll be two soups. You want protection for a week? Five soups.

Ask any economist, this system satisfies all the main functions of money:

1. It’s a store of value

Inmates stockpile soups to build wealth.

2. It’s a medium of exchange

Prisoners exchange the soups and use them as payment.

3. It’s a unit of account

Goods and services are denominated in ‘soups’.

Anything can be money

The reason I’m telling you about ramen is because it proves one big thing: anything can be money. Money does not have to be issued or controlled by a government. Money is anything that other people, or other groups, decide is valuable and are willing to exchange. Throughout history, money is simply something you owe to someone else. As Jacob Goldstein put it: “the true story of a made up thing.”

The founding father of economics, Adam Smith, said, “All money is a matter of belief.” If we all agree that something has value, it can become money. So if ramen can be money, then so can anything. So can bitcoin.

This is the mental leap we need to make as we get deeper in this book. The cash in your bank account today is not the only option. If we agree that anything can be money, the next logical question is: what makes a ‘good’ money?

Let’s go back to noodles again. Ramen actually has all the qualities of a good money.

1. It’s durable (instant noodles don’t perish.

2. It comes in a standard unit.

3. It’s ‘fungible’ (each packet of ramen is identical and therefore equally valuable as another).

4. It’s light and portable.

5. It’s non-forgeable (you can’t recreate a packet of ramen).

6. It’s desirable, it has intrinsic value (inmates want to eat it because the main prison food sucks).

Prison ramen has another good quality, one that modern, government monies have abandoned: scarcity . Ramen is valued in prison because it’s relatively hard to get your hands on. And here’s where it gets interesting. If you eat one of your ramen packets, the total supply of ramen in the prison goes down. In economic terms, ramen is a deflationary monetary system. You eat one, that makes them even more scarce, and therefore more valuable. It’s like bitcoin. If someone loses a bitcoin, it’s gone forever. One of the 21 million is basically burned, making all the others more valuable.

I actually think prison ramen is better money than the dollar. I know that sounds crazy, but when you look back through history, it makes sense.

The next few sections get pretty deep down the rabbit hole of money, but there’s one thing I want you to think about as we go through. For most of history, good money has been like prison ramen and bitcoin — scarce.

Our current dollar system has abandoned scarcity in favor of money printing. And every time something like it was tried through history, it failed. Really badly. We’ll discover that bitcoin is actually just a return to good, hard, scarce money.

Bitcoin isn’t the crazy experiment here. The dollar is.

Chapter 12:

Ancient Money Printer Go Brrr

There’s a temple in Indonesia where long-tailed macaques monkeys ‘accumulate’ human trinkets like sunglasses, cameras, hats and wallets. And they only give them back, or ‘exchange them,’ for food. For most tourists, it’s a funny story to tell. But this is the most primitive form of money: barter. The monkeys are bartering with us.

This is the origin of money, according to most economists.

Even as cavemen, we had an innate desire to collect and hoard things, especially rare items like flint, animal teeth, skins. They were passed down through generations and exchanged in rituals. We made necklaces and pendants, and gave them value. This is one of the things that separated us from primitive versions of man. And it’s how all good money begins: collecting something valuable.

Within tribes, the economy mostly ran on gift-giving and favors. “I owe you some fish for the bread you made last week.” But what happens if you want to trade with another tribe? That’s how barter developed. We would exchange flint or skins with another tribe for something else of value, maybe fruit, grains or cattle. This was the earliest system of trade. And it triggered the start of the human race as we know it. For the first time, humans could co-operate outside their family group.

Slowly, tribes began to anticipate what other tribes might want in the future, just like the macaques monkeys in Indonesia. So they would ‘accumulate’ items they think others will want. Communities near the sea would accumulate fish reserves to barter with inland tribes who wanted the fish. Some anthropologists say this was probably more of a credit system, especially among friendly tribes. In Mesopotamia, they created an early credit system with clay coins. A ball of clay with five circles on it meant “I owe you five sheep.”

This is game theory. We collect ‘things’ we think will be valuable to others in the future. By the way, this is why so many people are accumulating bitcoin now. We hoard it now, anticipating that it will be worth more to others in the future as a form of trade. By accumulating early, you give yourself an edge in the future. Collecting and storing value is the starting point of all good money through history.

The problem with barter comes when one group doesn’t want what the other is offering. You can’t trade with the fishing community if you decide you don’t want fish anymore. And you can’t trade with your enemies, either. You can’t trust them to give you the fish or honor an IOU.

Now we need a currency. Something that both groups agree is valuable.

The earliest form of currency was pretty similar to prison ramen. It was barley. Like ramen, barley has the properties of good money: durable, light, uniform, fungible, desirable, and relatively scarce. As more people agreed that barley was good money, trade exploded. Think about it. You can now trade with anyone, even your enemies, so long as they believe that barley has value. Just like “Goose” Alvarez could make temporary peace with his prison enemies using ramen, early tribes could even trade with rival groups.

The only problem with grain money is that it’s difficult to transport in large quantities. You can’t drag huge barrels of barely to the market every time you want to buy something. So it was eventually replaced by ‘portable’ coins.

Chinese communities were the first to create a coin in 770 B.C. And each coin was ‘backed’ by a real-life scarce object — a tool or a weapon. About 100 years later, a region of Turkey began ‘minting’ coins from gold, a naturally scarce metal. They even had different values. Coins were stamped with lions, snakes and owls to denominate different amounts.

In both cases, trade exploded in these regions.

This happens a lot through history. When a new form of simple currency is adopted by a large group, it triggers insane growth and development in those regions. That region in Turkey briefly became one of the richest empires in the world.

Since then, gold, silver and other precious metals have always been considered ‘good money’ and formed the basis of most currencies, in some form, up until 1971. Like ramen and barley, gold has all the practical features of good money. But most importantly, it’s incredibly scarce. Gold is one of the rarest assets on Earth. And it’s difficult to get out of the ground — it requires work. As we know, humans gravitate towards scarce items, which is what made gold the basis of money for centuries.

Ancient money printer go brrr

Around 1500 years later, roughly 800 A.D., everything changed.

The Chinese Tang dynasty invented the first-ever paper money. Fed up of dragging large chunks of metal across the empire, the government issued ‘flying cash,’ a paper note that could be redeemed for gold in China’s capital. Shopkeepers nicknamed it ‘flying cash’ because it kept blowing away in the wind.

Again, trade exploded across the empire. No-one actually bothered to swap their flying cash for the gold reserves, everyone accepted the paper as a form of currency. Each note also came with a warning: “Those who are counterfeiting will be decapitated.” They weren’t joking. One guy was sentenced to death for printing thousands of fake bills.

This also became the first real ‘government money’. All other forms of currency were banned. For the first time, a government forced its citizens to use the same money, instead of letting the free market decide what to use. At this point in history, Confucian scholars made the most accurate prediction of all time.

They rebelled against this ‘government paper money’ and warned that it would lead to governments printing and weakening their own currency. They argued that money should be left in the hands of the private market, which would make sure it stayed competitive and held value.

They basically predicted the future.

Still, at this point, at least you could go to the capital and swap your notes for an equal amount in gold or silver reserves. Every note was ‘backed’ by the same amount of real metal.

This went on for almost 400 years, until the incoming Chin Dynasty got greedy. They stopped backing the paper currency with gold and silver reserves. They just printed more out of thin air. Ancient money printer go brrr. The Confucian scholars were right.

For the first time in history, hyperinflation happened.

As the supply of paper notes soared, their value decreased. Prices rose dramatically and there was an explosion in credit and borrowing. The following Yuan Dynasty did the same thing. In a period of 50 years, the currency depreciated by almost 100%. Just put that in perspective. Centuries of trade were destroyed in 50 years because of money printing.

By 1455, merchants refused to accept the paper money because it was effectively worthless. The Yuan Dynasty realized their mistake and paper money was eliminated. China went back to a silver economy until the 20th century.

This is the first time the world learned the difference between ‘hard money ’ and ‘soft money ’.

Hard money — like gold which is scarce and difficult to obtain — holds its value much better than ‘soft money’. Soft money, like paper which is artificially created and unbacked by hard assets, is abundant and so it inevitably loses its value over time.

It’s hard to overstate this. Scarcity matters when it comes to value and money. Without scarcity, money becomes worthless over time. And that’s why bitcoin is the best money ever created. It’s the first truly finite asset on the planet.

Chapter 13:

How Scarce Is Bitcoin, Really?

Here’s another question I get asked in investor meetings all the time. “Can’t someone just change the 21 million bitcoin cap? It’s just code, right? Code can be changed.”

So, is bitcoin really as scarce as we think? We say that bitcoin’s 21 million supply is ‘hardcoded,’ fixed and finite. But can someone change the algorithm or tweak the software? Can a hacker manipulate the supply?

It has been suggested.

In 2019, Matt Luongo, who works on a handful of crypto projects, called for a discussion on raising the 21 million cap. “I was the guy that said we might have to one day raise the Bitcoin supply cap. Fight me.”

Why would anyone suggest raising the cap and kill bitcoin’s scarcity? Well, it all comes back to mining. The number of bitcoins minted is cut in half every four years. And that means bitcoin miners get their revenue slashed by 50% after every halving. Eventually, in 100 years, there will be no new bitcoin reward at all. Miners will get paid only in network transaction fees.

Some say this won’t be enough to incentivize miners to keep the network running. If miners stop powering the system, we lose security, Bitcoin grinds to a halt. That’s the theory, anyway. Luongo suggested we might need to raise the 21 million cap so we can keep the bitcoin mining reward in place for longer.

So yes, bitcoin’s supply could be increased, in theory . A group of bitcoin nodes could agree to change the cap and run the new software with a new supply schedule. In reality, this is never going to happen. Just look at the backlash Luongo received from the community. “There will only ever be 21 million bitcoins. If you have a problem with that, get the fuck out of our community because you aren’t welcome” said CobraBitcoin.

Throughout bitcoin’s short history, any attempt to change Satoshi’s original principles have been met with a vicious response. Previous Bitcoin ‘forks’ have tried to alter Bitcoin’s features or philosophy. Every single time, the market has rejected them. Bitcoin Cash, Bitcoin SV, Bitcoin Gold, the list goes on. Hundreds of coins have ‘forked’ off Bitcoin in an attempt to improve it. The community has always rejected them.

The 21 million supply cap is probably the most sacred feature of all.

I will argue the 21 million cap is Bitcoin .

If some miners did alter the supply cap, it would no longer be Bitcoin. It would be a new coin and a new chain. And the community would viciously reject it. The original Bitcoin chain, with the 21 million hard cap, would continue. And value would stay there, as it always has done.

The 21 million cap and the supply schedule is so intrinsic to Bitcoin, it will never be compromised. Nic Carter explains it best: “The supply schedule is intrinsic to the protocol, asset, and system. It’s one of the very few features that Satoshi clearly stipulated and encoded in the original design with no ambiguity. And in the eyes of the broader community, the 21m cap is perceived as inherent.”

Satoshi specifically mentions a “predetermined number of coins” in the white paper. And he referenced 21 million coins on the bitcoin.org website when it launched. As Carter explains, those working on the Bitcoin protocol hold these early documents as sacred. A change to this core part of Bitcoin will simply never be accepted.

Take it from Andrew Poelstra, director of research at Blockstream, a company built specifically to support the development of the Bitcoin protocol. In a recent interview, he said: “The point of Bitcoin is to be sound money… we care about scalability, we care about privacy, but soundness always comes first.” Poelstra is one of the key members of Bitcoin’s development community so you can believe him when he says the 21 million cap is sacred above all else at the core level.

But what about the practical issue of diminishing mining rewards? Bitcoin researcher and educator Andreas Antonopoulos has a pragmatic answer: “Nothing magical happens when block subsidy drops to zero. It’s a very gradual and predictable change that happens over a period of 120 years. It’s already happening and every day [miners] make their decisions.”

Miners already adapt to huge supply shocks every four years when their revenue is cut in half. They know the supply schedule 120 years in advance, and they are prepared. They wouldn’t be in business otherwise. We hear the same doomsday arguments every time the halving rolls around. Critics say Bitcoin will go into a mining ‘death spiral’ every time the reward is cut in half. It never happens.

If Bitcoin’s core feature (hard-coded, digital scarcity) is ever changed or compromised, it will not be Bitcoin anymore. The whole thing will have failed.

So, can the 21 million supply be changed? Yes. Will it happen? Not a chance.

Bitcoin is scarce. Bitcoin is finite. That’s why it exists.

What about other cryptocurrencies?

Here’s another criticism I get all the time . “But anyone can create a cryptocurrency. There are 3,700 cryptos listed on CoinMarketCap. This isn’t scarce. Another crypto could easily replace bitcoin.”

I tell them three things:

One, Bitcoin not crypto . The revolution here is Bitcoin. The 21 million hard-cap. The strongest computer network in the world with only one job: protecting sound money. Other cryptocurrencies aren’t designed like this. They’re tech projects — some of them are super interesting — but they’re just not the same bucket. There is nothing else out there designed to be hard, digital money. Nothing. Cryptocurrencies aren’t scarce, but BTC is and always will be.

Two, Bitcoin has been tested… and tested… and tested. At this point, it’s almost impossible that another cryptocurrency overtakes bitcoin. Back in 2016 and 2017, people tried to attack Bitcoin and change it and twist it. We had Bitcoin Cash, Bitcoin Gold, Bitcoin Private. They all failed. Bitcoin has survived a financial crisis. It’s been banned and attacked and come out stronger. Bitcoin has been battle-tested unlike any other cryptocurrency. Unlike any asset in history, actually. I can’t think of a single financial asset that has been attacked as viciously as Bitcoin and still survived.

Three, Bitcoin had an ‘immaculate conception.’ It wasn’t built for profit or power. It was built on the quietest corner of the internet as an experiment for cryptography geeks. And its adoption was completely natural and organic. No marketing campaign, no advertising budget, no CEO, no headquarters. Bitcoin was worth zero for 18 months after it launched and people still mined it because they believed in it. Just a pure thing that spread like wildfire. You can’t engineer a network effect like that. Tech companies spend billions trying to recreate what Bitcoin did from nothing. No cryptocurrency will ever replicate its immaculate conception or the powerful army of bitcoiners that defend it.

Four, money is a winner-takes-most technology. You don’t go to Walmart and choose between different currencies. You use the dollar (for now). The dollar dominates most of global trade and global reserves. Winner takes most. It’s the same in the cryptocurrency market. Bitcoin is the largest and dominant cryptocurrency, by orders of magnitude. It’s more than six times bigger than Ethereum, which isn’t really ‘money’ and it definitely isn’t ‘hard money’. The closest real competitor is Bitcoin Cash, which is 55 times smaller than Bitcoin. Would you call a social network a ‘threat’ to Facebook if it was 55 times smaller? No. There is no competition for Bitcoin.

Even our modern tech world is winner-takes-most. There is no rival to Google’s search engine. There is no other YouTube. No credible rival to Facebook or Amazon. There’s even a chance that BTC is winner-takes-all in the world of money. Like the internet swallowed everything . There is no ‘other internet’. It just… is . Bitcoin could be the same.

So, yes, bitcoin is still scarce and the 21 million cap is safe. And always will be.

Chapter 14:

Colonial Money Printer Go Brrr

So far our entire history of money happened before America, as we know it, even existed. So how did the dollar end up becoming the world’s global currency? First, the US had to go through the whole long process of money discovery itself. Here’s how it played out.

There’s a scene in Disney’s Pocahontas where John Smith arrives in America and tries to explain gold to Pocahontas, but she has absolutely no idea what he’s talking about. Obviously, the Pocahontas movie is not historically accurate, so take this with a grain of salt, but this scene does describe what happened when the first European settlers tried to trade gold with the native Americans.

Pocahontas: Gold, what’s gold?

John Smith: You know, it’s yellow, comes out of the ground, really valuable.

Pocahontas: Oh, here, we have lots of it. She hands John an ear of corn.

John Smith: No, no. Gold is this. He hands her a gold coin.

Pocahontas: There’s nothing like that around here.

Mika the raccoon bites the coin and throws it away.

The Europeans had spent centuries building an entire financial system on gold coins. The British had even established banks. But when their ships arrived in New England in the 1500s, the native Americans weren’t interested in using it as money. Gold was worthless to them because they didn’t share a belief in its value. The Colonists were stuck. They couldn’t trade with the locals.

Instead, the native Americans used animal skeletons and wampum — a type of clamshell. They stored them as beads on a pendant. If you want to pay someone, you took a few wampum beads from your pendant and swapped them with someone else.

Just like all good monies we’ve discussed, wampum had all the right qualities. Durable, light, portable, fungible, standard units, difficult to forge, scarce . The settlers were forced to put their gold aside and trade with wampum. It became the legal tender of New England. Trade boomed.

But then the money-killer came back: inflation.

Shells were relatively scarce on land, but the European settlers realized they could dredge the ocean to find more. More and more boats arrived with better technology to harvest shells. Europeans used their manufacturing technology to mass-produce wampum. The settlers became outrageously wealthy in clam-shells, but they flooded the market, effectively destroying the value.

Like every other time in history, America moved back to a scarcer money: gold coins. This is where the phrase “shelling out” came from. Everyone was forced to “shell out” and switch to gold coins.

Wampum was still used in some parts of America up until the 20th century but its value had inflated 100x. Another lesson in what happens when you flood the supply of money. It kills currency. Despite the early lesson in inflation, it wasn’t long before America began experimenting with paper money.

Colonial money printer go brrr

In the late 1600s, Hannah Duston and her six-day-old baby were captured by native American soldiers. Her home was burned to the ground and they dragged her and the child through frozen winter conditions back to Canada. On the way, an Abenaki warrior lost his temper and smashed Hannah’s baby’s head against a tree, killing it instantly. In a haze of revenge, Hannah later slaughtered nine of her captors in their sleep. She scalped them all and returned to Massachusetts to collect a scalp bounty.

This is how vicious the King William’s War was. Soldiers fighting in this battle were subjected to gruesome deaths, surprise massacres, scalping and low pay in the frozen fields of New England.

And then the money ran out. The Massachusetts Treasury was almost empty of gold coins and the state ran up enormous debt. Without pay, the soldiers were close to mutiny.

The colonial authorities did the only thing they could think of: print paper money. The state of Massachusetts needed a quick way to pay soldiers, so they issued IOUs on paper. The first-ever American money printer went brrr.

The notes began to lose value almost as soon as they were printed. No-one trusted the state to redeem each IOU in the future. Within a year, the notes had depreciated 40%. Within a couple of decades, the money was completely worthless. America’s first money printing experiment failed.

But the precedent was set, and the money printer was too tempting to ignore in times of war.

Next time America turned it on, it was big: the Revolutionary War. This time, they printed a total of $200 million notes called “Continentals” to defeat the British and declare independence. This currency died even faster than the one before it. It wasn’t backed by gold or silver, and they printed so much, it was worthless within five years. People refused to accept it.

By the 19th century, America, and most countries around the world realized that good money had to be backed by hard assets. Around 50 countries adopted a ‘gold standard’ with the British pound acting as the dominant global currency. Paper money was commonplace but every note was backed by an equal amount of gold held in a country’s reserves.

It’s no coincidence that this period of time is when the Industrial Revolution took place. The single biggest economic leap forward in history happened when most of the world’s money was backed by a scarce asset: gold.

As you can see, history is littered with short eras of money printing. And it always ends badly. When it failed in the past, we came back to gold. We always returned to ‘hard money’.

Today, we’re in another era of insane, experimental money printing. Like all others in history, it will be brief, and it will end badly. But when this one fails, we won’t go back to gold. We’ll turn to bitcoin. In almost every way, bitcoin is harder and better money than gold. We’ve just never had it before. This is another criticism I get all the time when pitching bitcoin to investors. If bitcoin is so much like gold, why don’t I just buy gold instead? Why don’t we use gold as currency?

Why? Because bitcoin is 100x better than gold.

Chapter 15:

Gold vs Bitcoin: Why Investors Are Almost Right, but Not Quite

In the middle of the 2020 crisis, everyone was looking to Warren Buffett. The man is considered one of the best investors in history, famous for “buying when there’s blood in the streets.” He’s the guy that walks into a burning house and starts negotiating with the owner to buy it. Back in the 2008 financial crisis, he waited until Wall Street was on the brink of collapse, then strolled into Goldman Sachs to strike a deal. He’s the coolest head in the investing world.

So when the sky was falling in 2020, everyone waited to see what the Oracle of Omaha did next. There was plenty of blood in the streets. Stocks were falling. The Fed was printing money like there’s no tomorrow. What was Buffett going to buy? For a long time he did nothing, keeping everyone in suspense. Then he made his move.

Gold. Well, a gold mining company — Barrick Gold.

This was a big deal. Buffett famously hates gold — a useless “cube of metal” as he called it. “[It] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”

But all of a sudden, Buffett wanted some kind of exposure to gold. And he cut some of his investment in the banks to free up the money. It hardly makes Buffett a raging goldbug or a bitcoiner (he hates bitcoin, too), but you can read between the lines. He’s hedging himself against inflation and all the money printing in 2020.

Buffett wasn’t the only famous investor running for gold during 2020. Billionaire Ray Dalio, who managed the world’s largest hedge fund, fully understood what was going on in 2020. “Do not think that cash is a safe investment,” he warned during the crisis. “Cash is a seductive investment because it doesn’t have as much volatility, but it taxes you and your buying power about 2% a year.”

So what did he do? He bought more gold. Dalio plunged $400 million into it during the second quarter of 2020, bringing his total exposure to more than a billion dollars. In fairness, Dalio has always loved the shiny metal. “If you don’t own gold, you know neither history nor economics,” he once said.

I put Warren Buffett and Ray Dalio in the bucket of “almost right, but not quite.” They got almost everything correct in 2020. They understood history. They knew that central banks would never turn off the money taps and that it would weaken the dollar. And they wanted some protection. But they came to the wrong conclusion. Instead of buying gold, they should be buying bitcoin.

I’m not just saying that because I’ve got skin in the game. Bitcoin is better than gold in almost every measurable way, both as money and an investment asset (we’ll go through them in a minute). And bitcoin is dramatically undervalued in comparison. Bitcoin’s market capitalization is $280 billion. Gold is $9 trillion.

Why bitcoin is better than gold

“Gold is not going to get a million times smarter in the next ten years.”

Michael Saylor.

The chart below sums up the key properties of money and how bitcoin compares to gold and fiat. In his brilliant essay The Bullish Case For Bitcoin, Vijay Boyapati does a good job of ranking the two against each other. I’ll also throw in ramen, too, just to keep it interesting.

Image: Vijay Boyapati

Can it be fucked with?

Boyapati calls this ‘censorship resistance’ in his chart, but this is what it really means, and I still think it’s the most important quality in money. Can people take it away from you, stop you from using it, or manipulate the supply? Gold can definitely be fucked with. In 1933, President Roosevelt confiscated people’s gold, made it illegal to own, and then literally changed the price from $20 per ounce to $35 to benefit themselves. As for the supply, gold miners can ramp up the production or slow it down whenever they like. They can search for new supply and find new reserves. Gold can also be stopped and seized at a border, so it’s not a whole lot better than fiat for moving internationally. As for fiat itself, we already know the dollar is fucked with on a daily basis. Unfortunately, ramen isn’t great here either. The prison guards could easily confiscate the ramen, ban it from the jail shops or increase the ramen supply. Bitcoin is the only money ever created that cannot be fucked with. Anyone can use it, no-one can confiscate it, no-one can inflate the supply.

Portability

Gold is heavy, cumbersome, difficult to store and ridiculous to send to other people (you probably need to hire an armored vehicle to move large amounts). Bitcoin is the most portable form of money ever invented. Hands down. I’m going to steal another one of Boyapati’s quotes: bitcoin is gold with magic teleportation properties . Gold is terrible for portability. We started using paper currency specifically because gold is heavy and useless for large exchanges. Even now, we hardly ever move gold physically. It all sits in safety deposit boxes, we just change the ownership on a computer. Ramen’s not bad, either, but it’s not easy to shift a lot of noodles. Bitcoin moves across the world instantly. It’s the most fluid form of money in history.

Divisibility

Bitcoin is a digital thing so it can be divided infinitely. I still hear people saying “I can’t afford a full bitcoin,” which is crazy. You can buy tiny amounts. The smallest bitcoin denomination is a ‘satoshi’ or a ‘sat’. That’s a hundred-millionth of a bitcoin. When 1BTC is eventually worth $1 million, a sat will be equal to a penny. If you’ve heard the phrase ‘stack sats’, this is where it comes from. Gold is pretty terrible in this department. You can’t cut up a gold bar or snap a coin in half. The smallest real denomination of gold is a troy ounce which is worth about $653 — useless for any form of commerce. The dollar is pretty good here, divisible down to pocket change. Ramen? Not so much, I don’t think prison inmates are snapping their ramen into smaller pieces to make micropayments.

Scarce

You know this by now. Bitcoin has a 21 million hard-cap, can’t be changed. The daily supply is programmed and grows scarcer with every halving. Gold is definitely scarce, but the total supply is still unknown. As for dollars? “THERE IS INFINITE CASH AT THE FEDERAL RESERVE.” Ramen is pretty scarce in a prison situation, which is why it works well in a jail economy, but not so much in the real world.

Verification

Another huge win for bitcoin. Bitcoin exists on a completely public database, verified by millions of computers every minute of the day. You can prove you own bitcoin with a cryptographic signature. It’s easy and costs almost nothing to do it. And because the network is so secure, no-one has ever successfully counterfeited a bitcoin. Gold is also difficult to counterfeit, but not impossible. And it’s very expensive to verify. Another fail for gold.

Where gold wins

Don’t get me wrong. I do like gold. I own some gold, and it’s still got the edge on bitcoin in a couple of ways.

Durability

Gold is hard to beat in this department. Gold coins have survived for centuries and still have value despite the fall of governments and empires. As we’ve seen throughout history, people have always come back to gold when fiat money fails. It’s physically durable and historically durable. The problem with fiat money is that it’s only as durable as the government that issues it. Most fiat currencies have eventually fizzled out. I’d argue that bitcoin is pretty durable — the network has never been hacked — and it’s endured through every major attack so far. But, in fairness to gold, it wins this round.

Established history

As we’ve seen in our dive through history, gold has been valuable since the earliest days of trade. We can’t compete with gold’s long history of value. Bitcoin has only been around since 2009, so it’s still early. This thing could still fail, although I don’t think it will. Every day it doesn’t die makes it increasingly likely to survive. This is called the Lindy Effect — the longer something has been around in technology, the more likely it is to be here in the future. Ramen has been around since the 1660s and it’s definitely not going anywhere either.

Fungible

Gold has got bitcoin beat on this one too, but only just. ‘Fungible’ means every unit is equal to another unit. If you melt down gold and make coins of equal weight, they’re all worth the same. Bitcoin is similar — one BTC is always worth one BTC. But there’s a catch. Because all bitcoin transactions are public on the blockchain, we can trace the history of some coins. Coins used on the Silk Road or other sketchy activities could theoretically be blacklisted somewhere, giving them unequal value. Dollars are the same. Tainted or marked bills can be confiscated. Ramen? Pretty fungible! One packet of ramen is equally valuable to another.

Gold’s only redeeming feature over bitcoin is time. It’s been around longer. But gold has one huge problem. It can’t evolve. Gold isn’t going to get smarter or harder or better. But bitcoin is. Because bitcoin is digital, it is constantly evolving and growing, getting ever harder and more durable. MicroStrategy’s Michael Saylor puts it best in one of my favorite ever paragraphs about bitcoin.

“[Bitcoin is] the hardest currency because it’s getting continually, exponentially harder… This entire thing is its own ecosystem… It’s a living thing, which means that the miners are going to keep upgrading their equipment, the developers are going to keep updating their development. The nodes are going to change. Every part of the ecosystem is going to change. And they’re changing in this terrifying, Darwinian, capitalistic, libertarian, aggressive, winner takes all, hold no bars [way].”

Every day that bitcoin survives, it grows stronger. The network becomes more secure. The supply gets more scarce. Bitcoiners get more convicted. Just look at the hash rate protecting this thing. Even when the price goes down, the amount of computing power securing the Bitcoin network is at record highs.

Sure, gold is hard money. But bitcoin is hard money that grows exponentially harder every day.

Image: Glassnode

Gold: a bet against human ingenuity

There’s another problem with gold. If you buy gold, you’re betting against humanity. You’re betting that we can’t figure a way out of the problems we’re facing. We’ve got to go back to rocks instead . I think differently. I trust humanity to come up with new solutions. I trust technology and human innovation. I trust there’s a better alternative out there, like bitcoin.

And it’s more literal than that, too. We already know the gold’s supply isn’t finite. There are untapped gold reserves in the ocean and in space. I trust that humans will figure out a way to get it. I trust that Elon Musk will probably take us to Mars and start mining gold up there. I trust that we’ll develop better technology to dredge the ocean of gold. It’s just human ingenuity. And if that happens, the price of gold gets pushed down.

The same thing happened with oil. Everyone thought we had drilled all the available oil wells. And then engineers figured out fracking. It trebled oil production in ten years. If there’s a way to do it, humans will eventually figure it out.

Instead I trust in hard code. I trust that bitcoin’s 21 million hard cap is rock solid. Unfuckable. That’s why bitcoin is better than gold.

Bitcoin is optimistic. Gold is pessimistic

This last point isn’t exactly scientific, but I think it’s important. Gold is a relic of the past and it’s a pessimistic solution for a new digital era. Goldbugs are a grumpy bunch. Go listen to a Peter Schiff podcast, you’ll see what I mean. Bitcoiners and goldbugs mostly agree on the problem — money printing, devaluation and central bank control. But we disagree on the solution.

Goldbugs want to go back to a version of the past. It was better in my day! They think the whole system is doomed and want to return to a gold standard where everything is backed by a shiny rock.

Bitcoin is optimistic. It’s a new version of the future that fits in our new digital world. It’s an open financial system that empowers people no matter where they live. Millions of ‘unbanked’ who can’t access a traditional bank account can use bitcoin. Migrants can send money back home across borders. Families in inflation-ridden countries can store their wealth in a safer financial system. And, eventually, countries can trade with each using an independent and neutral currency. Bitcoin is fair, open, peaceful, and digitally-native. Bitcoiners are pretty grumpy sometimes too, but we definitely have a more optimistic view of the future.

Goldbugs want to preserve the past.

Bitcoiners want to actively build a better future.

Gold isn’t a 10x opportunity

Lastly, as an investment asset, there’s just no way that gold can compete. Bitcoin has the potential to massively appreciate in price. Gold doesn’t. Let’s go all the way back to the valuations. Bitcoin is measurably better than gold in almost every single way, as money and as an investment class. Bitcoin is built for the future digital era while gold is stuck in the past.

Yet gold’s market capitalization is $9 trillion.

Bitcoin’s is $280 billion. Bitcoin’s value could double, triple, 10x and it still wouldn’t overtake gold’s market cap. To equal gold’s value, a single bitcoin would be worth about $500,000 — a 34x opportunity.

Bitcoin is objectively better than gold in almost every way. So its price will eventually grow to reflect that. Gold has probably already reached close to its ‘total addressable market.’ Bitcoin is just getting started.

Anyway, now we’ve established that bitcoin is better than gold, let’s get back to the history of money. We know that infinite money printing destroys currencies through history. So why do they do it? There’s one big reason that comes up time and time again: war.

Chapter 16:

WAR: What Is It Good for?

Printing Money

One day in Germany, 1923, a man sat down for a coffee in a Hamburg cafe. He ordered his first coffee, costing him 5,000 German marks. Half an hour later, he ordered a second coffee. The price had gone up to 9,000 marks. It almost doubled while he sat there. “What’s going on?” he asked.

“Sorry,” the waiter replied. “The price went up while you were drinking the first one.”

Germany was suffering from insane hyperinflation of its currency after the first world war. Deutsche marks were losing their value every minute of the day. Waiters stood on tables every half hour to shout out the updated menu prices.

Employees took their worthless salary banknotes home in wheelbarrows. Kids were playing on the streets with paper chains made of Deutsche marks. Money was used as wallpaper. Life savings were wiped out in less than a year. All of a sudden, $1 was equal to 4,200,000,000,000 marks.

When hyperinflation hits, it hits fast. At the start of 1923, there were 8.6 billion Deutsche marks in circulation. By the end of the year, it was 40 quintillion.

What the hell happened?

World War I.

There’s one common theme in history when the money gets screwed up: war. Just like the brutal King William’s War in early America, World War I was expensive, and the only way to pay for it was printing money.

Before WWI, Germany’s currency was fully backed by gold, just like most currencies around the world at the time. But now they had to pay for military action. Germany decided to break the link between gold so they could print more money and borrow like crazy. They defended the decision by calling it an “economic necessity.”

“As things stand, the only way to finance the cost of fighting the war is to shift the burden into the future through loans,” said economist Karl Helfferich, 1915. It would be worth it, right? When Germany secured victory over Europe, there would be an economic boom. They’d rule over resource-rich nations and charge reparations to the countries they defeated. This is the lie governments tell themselves when they print money to fight wars.

Again, there were plenty of rebellious voices at the time. Eduard Bernstein warned in 1918, ”There is a point at which printing money affects purchasing power by causing inflation.”

But no-one listened.

All the countries fighting in World War I dropped the gold standard. Britain — with the world’s dominant currency — started borrowing money for the first time.

Germany lost the war and the economy was crippled. Worse, they had to pay reparations, 132 billion gold marks (about $33 billion or 100,000 tonnes of gold at the time). On top of the black hole of debt they built up during the war, Germany now had to borrow even more to pay the reparations. It was a chokehold on the German economy and people lost all faith in the currency.

Like the death of all currencies, it happened slowly at first. 50% devaluation in a year, gradually becoming 50% a month, then 50% a day. Then it was worthless. Guess what happened next? Germans began demanding food and real resources as payment instead — sausages, eggs, coal.

When currencies fail, humans seek out real assets. It’s the ramen economy.

The poor and middle class are hit the worst. As we know, inflation absolutely ravages the poor and middle class. The rich get richer, the poor get poorer. The German middle class who saved marks their whole life for retirement were destroyed in less than a year. The poor who were already struggling to get by? They couldn’t even afford to buy eggs because the little money in their pocket was worthless. Franz Geyer, a mayor in the region said, “Never in my life have I seen such swarms of starving people wandering about.”

But the rich did just fine. They weren’t holding much cash. They owned assets — houses, factories, farmland. And they financed it all with debt. When the currency hyper-inflated, that debt was now almost worthless so they could pay it off in a flash. Lion Feuchtwanger wrote about the inequality he saw across Germany at the time. “Farmer Greindlberger drove from the grimy village street of Englschalking to Munich in an elegant limousine complete with a liveried chauffeur, while he himself was dressed in a brown velvet jacket and a green chamois-tufted hat.”

This savage inequality led to a rise in populism and anger. And we know what happened next. One historian wrote, “[this hyperinflation] made Hitler possible.” I’m not exaggerating when I say money printing leads to wars.

For centuries, Europe had been home to the world’s dominant currencies. The Florentine Fiorino, Portuguese and Spanish currencies, the Dutch guilder, the French franc, the British pound. But after World War I, and World War II, that all changed. They drove their currencies into the ground by printing money.

Here comes the dollar.

Chapter 17:

How the Dollar Became the Global Reserve Currency

“Do you know there’s gold under here?” My buddy pointed down to the sidewalk right in the middle of Fulton Street, New York, back before 9/11.

“Under the ground?” I almost laughed at him.

“Yeah, somewhere under the Twin Towers, there’s a secret vault with, like, half the world’s gold in it. They store gold for different countries. That’s the rumor, anyway.”

That rumor turned into a full-blown conspiracy theory when the Twin Towers collapsed. Did the attackers mastermind the whole thing to destroy or loot half the world’s gold reserves? There were stories of armored trucks weaving through underground tunnels to move millions of dollars worth of gold bullion while the towers burned.

It turns out the story is half true. There really was a gold storage vault under 4 World Trade Center but it never held national gold reserves. It belonged to the Bank of Nova Scotia, and it held gold for traders and investors. Reports appear to confirm that an armored truck did go in to retrieve some of the gold from the rubble. From here on out, things get into sketchy conspiracy theories so we’ll leave that there.

As for the rumor about the world’s gold reserves? That’s also half true. There really is a gigantic storage system under Manhattan that stores gold for nation-states, but it wasn’t under the Twin Towers. It’s up the street at the Federal Reserve building.

The vaults are 80 feet below ground level, sitting right on the bedrock of Manhattan island. The facility holds somewhere between a fifth and a quarter of the entire gold ever mined on Earth. Each vault belongs to a different country and there really are gold bars stacked up inside. Workers move the bars from vault to vault at the end of each year to balance the books, but the vaults aren’t marked, so they don’t know which country’s gold is being moved. It’s a secretive operation.

The rest of America’s gold is held at Fort Knox, a military base outside Louisville Kentucky. It’s one of the most guarded and secure places on the planet, home to 50% of our nation’s gold reserves, and it’s carefully guarded. The base is surrounded by a minefield and razor wire, flanked by four machine gun towers. Inside the underground facility, the vault door is almost two feet deep and weighs 22 tons. The door itself has a 100-hour time-lock and no single person at the facility knows how to open the vaults.

Hidden in those vaults is 147 million troy ounces of gold, or about 4,580 metric tons. But back in 1941, Fort Knox held four times that much, 649.6 million ounces.

This is how America became the world’s monetary superpower. It accumulated most of the world’s gold.

While Europe was busy destroying itself (and debasing its money) through two horrific wars, America acted as the bank. The US government sold weapons and supplies to Britain and France and loaned them money to fight World War II. Most of it was paid for in gold. By the end of the war, America had amassed two-thirds of the world’s gold reserves.

If you’ve got all the gold, you’ve got all the power.

This was a sneaky and brilliant move by the US. The world was in chaos, so America accumulated as much wealth as it could in ‘hard money’ terms: gold. When Europe’s paper money imploded, everyone turned to America for help.

By the way, this is why I believe governments around the world will soon begin stockpiling bitcoin — an even harder asset than gold. If the money printer destroys the dollar, we’ll be looking around again to see who’s holding all the real value and power in bitcoin and gold. That country will be the next global superpower.

Bretton Woods

In July 1944, a delegation of 44 countries arrived at Bretton Woods, New Hampshire with their tail between their legs. America sat on its gigantic pile of gold and declared the next era of money: a global dollar system.

Most global currencies would now be linked to the dollar. And the dollar would be backed by gold. A kind of global gold standard. America became the bank of the world. Nations would deposit their gold at the US Federal Reserve and load themselves up with dollars. They’d buy US debt in the form of Treasury bills.

And it worked relatively well. There was stability around the world with gold and the dollar acting as a secure peg. And it was one of the most prosperous times in history. It’s known as the Golden Age of Capitalism. The post-war boom.

And it’s because of the dollar. The world finally convened around a new global reserve currency, backed by gold. Trade flourished. As we know through history whenever rival tribes or countries agreed on a new universal form of scarce money — whether it was barley or gold coins or wampum, the economy boomed. As bitcoiners say, fix the money, fix the world.

… Well, until there was another war.

How the Vietnam war broke the dollar

In February 1965, the US quietly launched a bombing attack in North Vietnam. For the next three years, American forces pummeled the Ho Chi Minh Trail with bombs through Operation Rolling Thunder. US troops descended on the beaches of South Vietnam.

The Vietnam war was longer and bloodier than anyone expected. Which means it was also more expensive. America began borrowing money at a ridiculous pace. And when that wasn’t enough, they started printing dollars. Other nations got nervous about the American economy. They panicked and demanded their gold back from the US.

France’s Charles deGaulle was one of the most aggressive. He converted $150 million of dollar reserves back to gold and threatened another $150 million. He was furious at America and reminded the world of how important independent, hard money was. “We consider it necessary that international trade should rest, as before the two world wars, on an indisputable monetary basis having the mark of no particular country. What basis? Indeed there can be no other criterion, no other standard than gold.”

DeGaulle basically triggered a bank run on Fort Knox. France and other nations pulled their gold out of the US. The dollar supply was increasing, but America’s gold reserves were going down.

The US was making the same mistake as Germany and Britain before. They printed money and ran up debts to pay for a war that nobody wanted. It put the entire dollar system at risk.

The end of the gold standard

In August 1971, President Richard Nixon addressed the nation and changed the nature of money forever. “We must protect the dollar as a pillar of monetary stability around the world…Accordingly, I have directed Secretary Connolly to suspend temporarily the convertibility of the dollar into gold or other reserve assets.”

Nixon officially pulled the dollar off the gold standard. America’s money — and the world’s reserve currency — was no longer backed by gold.We already know what happens when a nation stops backing its currency with hard assets: massive devaluation.

But Nixon promised this wouldn’t happen. “Let me lay to rest the bugaboo of what is called ‘devaluation’… If you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.”

He was dead wrong.

That ‘bugaboo’ of devaluation hit hard. Within a decade, the dollar lost a third of its value. The money supply in 1971 was $401 billion. It’s now $18 trillion.

The Bureau of Labor Statistics has some hard numbers on this. Consumer prices today are 540% higher than they were in 1971. And here’s a chart of the purchasing power of the dollar since Nixon’s announcement in 1971.

Image: Official Data Foundation

Why don’t we learn? This happened in China back in 1100AD. It happened in the US back in the 1700s. It happened in Europe in the 1900s. It happens every time. If you print money without a hard asset backing it, you destroy the value of your currency over time. It’s that simple.

In every single case through history, the dominant currency was eventually replaced when they turned on the money printer. And right now, we’re printing more money than any time in history.

Do you really think this time is different?

This does not end well.

Chapter 18:

WTF Happened In 1971?

We need to spend a little more time on this section. Nixon promised that coming off the gold standard wouldn’t lead to the “bugaboo” of inflation. But now we know that it did. And that’s not all.

Two bitcoiners, Ben Prentice and pseudonymous ‘Heavily Armed Clown,’ started a website called WTF Happened in 1971 and it tracks all the economic and social trends that started after Nixon started fucking with the money. None of them are good. Not for the average person, anyway.

Here’s a starting point. The economy continued to rise at the same pace, but wages instantly flatlined, barely budging since 1971. Money printing and inflation pumped up asset prices and business interests. But it didn’t trickle down to everyone else.

Image: Economic Policy Institute / WTF Happened in 1971

Income gains soared for the 95th percentile. But they’re flat for the middle class and lower-income families. Money printing is a hot air balloon for the wealthy but a sinking ship for the average guy. Income inequality is now heading back to levels last seen in the 1930s. And guess where the tipping point is? 1971.

Image: Bridgewater Associates / WTF Happened in 1971

And about that ‘bugaboo of inflation. Yeah, not so much. Between 1910 and 1971, cumulative inflation went up a steady 306%. In the fifty years since Nixon took us off the gold standard? 2,326%.

Image: inflationdata.com / WTF Happened in 1971

House prices have soared. The cost of essential goods has soared. Education, medical costs. Sky-rocketed. And this isn’t just America-centric. Nixon’s move basically cut the cord between gold, the dollar and all the global currencies anchored to the dollar. Fiat regimes exploded. And then came the currency crashes. A record spike of international currency crises, triggered almost immediately after 1971.

And then there’s debt. The US deficit is off the charts. In the 70 years leading up to 1971, the US accumulated less than $500 billion in debt. In the 50 years since? $27 trillion. And what about buying assets? For most of the 20th century, you could buy the S&P 500 with 31 hours of work. Today it’s 120 hours. Remember, as soon as you start thinking about inflation in terms of time, it gets pretty scary. The average household saving rate is down too. Decades of low-interest rates have wiped out any incentive to save money.

And then there’s the indirect consequences. As equality got worse, the political system got more divided. Here’s the ideological position of Republicans and Democrats.

Image: WTF Happened in 1971

The number of 25-29-year-olds living with their parents is back at World War II levels. The tipping point came in 1971, almost on the dot.

Here’s the incarceration rate per 100,000 people. It’s off the charts since 1971. You can argue that correlation doesn’t equal causation, (and I agree there are other factors at play in the jail system) but the trend here is pretty obvious. Abandoning the gold standard triggered money printing. Money printing leads to inflation. Inflation causes inequality. Inequality triggers social unrest. Anger and despondency in our communities leads to jail time.

Image: WTF Happened in 1971?

Young people are hit hard from fiat systems. Home prices and asset prices are running away from them while wages are stuck. So they’re delaying marriage. The American family unit is weakening.

This is all connected. Our lives revolve around money. And if you fuck with the money, you fuck with our lives. That’s why bitcoin and hard assets matter so much. Fix the money, fix the world.

This is all just another reminder that the last fifty years are a blip in monetary history. Infinite fiat currencies are not the norm. The dollar, since 1971, is just an experiment. And it’s not going very well. Bitcoin sounds crazy to most people, but it’s actually just a return to hard money principals we’ve had throughout history.

The question I keep asking myself is: why do they do it? Printing money clearly destroys currencies over time through inflation. It kills purchasing power and creates devastating inequality. It leaves a crippling debt for our kids in the future. Why?

Obviously, war is one answer, but there must be something else. The reality is pretty simple: we are now addicted to it. Once you start printing, it’s really hard to stop. It’s like a drug. Our entire monetary system is a junkie, desperate for the next hit of money printing.

There are three more reasons why we’re addicted to the printing press, like a zombie junkie craving another high. One, the government wants you to spend as much as possible. Two, it makes the $27 trillion debt pile look smaller. And three, it makes international trade more competitive. Let’s take them one at a time.

Chapter 19:

“Choose a Big Fucking Television” — Why Governments Will Always Devalue Your Money

“Choose a life. Choose a job. Choose a career. Choose a family. Choose a fucking big television. Choose washing machines, cars, compact disc players and electrical tin openers... Choose DSY and wondering who the fuck you are on a Sunday morning. Choose sitting on that couch watching mind-numbing, spirit crushing game shows, stuffing junk food into your mouth.”

If you haven’t seen the movie Trainspotting, I recommend you go watch it now — just for this amazing speech in the intro. It’s a vicious takedown of consumer culture, credit cards and eating trash food.

I’m exaggerating a bit, but this is the kind of consumer culture the government wants. Spend, spend, spend. Doesn’t matter what you’re buying. They just want you to get the credit card out. If you want to save money, they actually punish you.

Think about it. What’s the interest rate on your savings account right now? I looked up the best savings account interest rates I could find in the US at the time of writing.

- Citi: 0.7% APY

- Marcus by Goldman Sachs: 0.6%

- USAA: 0.12%

- Amex: 0.6%

- And just to compare, here’s a shameless plug for BlockFi and the crypto dollar GUSD: 8.6% APY!

So you’re getting 1% at your bank (if you’re lucky!) But goods and services are rising 2% every year. And it’s way more than that if you measure it by asset inflation. If you leave your money in one of these savings accounts, you are losing money every year, in real terms.

The math is so painfully obvious I can’t believe there aren’t riots in the street about this. So why would they do it?

Because they want you to go buy a big fucking television!

The government wants you to go out and buy cars and TVs and washing machines and electric tin openers. Anything to keep the economic gears turning. And it’s a brilliantly evil psychological trick. Here’s how it works.

By slashing the interest rate to zero, they discourage saving, on purpose. There’s no incentive to keep your money at the bank . If you save all your money in a bank account, you’re not spending it. I am getting 8.6% APY interest on my cash accounts now, by holding GUSD (a digital dollar or stablecoin) at BlockFi. Compounding interest like this is a psychological dopamine hit. Every month you get a ‘ka-ching’ of new money. You don’t want to spend it because you’ll miss that monthly dopamine hit. That’s gone forever in traditional banking. Some millennials have probably never, ever felt it. They’ve never been rewarded for saving.

At the same time, the Fed is aiming for 2% inflation. Everything around you is getting 2% more expensive every year, and you’ve got no incentive to keep money in the bank. That triggers something psychological in your brain. You gotta buy it now . If you wait ’til next year, it’s going to be more expensive. And if you can’t afford it? Better get a credit card or finance it.

So the Fed cuts interest rates to get everyone spending, and prints money to hit that 2% inflation target. But there’s a problem. These central bank tools are only supposed to be used to get us out of a crisis. Back in 2008, after the financial crisis, we were all scared to spend money. We were in a recession. So the Fed did its psychological trick to get us spending again. Low-interest rates. Money printing. Kickstart the economy. Fair enough.

But governments got hooked on it, just like the heroin junkies in Trainspotting. They get their own little adrenaline rush as the economy goes back up. So they keep printing, they chase that next hit. They want you to buy a brand new Cadillac on credit. New clothes, expensive watches, fancy restaurants. Put it all on a credit card. Buy it with debt. This is the illusion of wealth.

As spending goes up, so does the country’s GDP. So does tax revenue — sales tax, VAT, income tax, etc. It also makes the ‘economic data’ look good. The junkie adrenaline rush goes into overdrive. And then it gets political. Presidents with a strong economy always get re-elected, so the president pushes for more spending, more growth . It’s a four-year cycle of destruction. Another reason why bitcoin’s halving brilliantly coincides with election year.

Savers are punished, on purpose. The dollar is devalued, on purpose. It’s a terrible store of value, on purpose, because it’s designed for spending. Fiat money, therefore, fails the first criteria of good money through history — it’s not a store of value. The dollar is a ‘medium of exchange’ and, admittedly, probably the best one on the planet. It’s super-charged for spending and exchanging but it’s absolutely terrible for building wealth for the future.

So if you’re wondering why the interest rate at your bank is so low, this is why. Absolutely zero incentive to save your money. You might as well spend it instead.

Negative Interest rates

If you think 1% interest at your bank is bad, you should ask the Germans and Swiss how they feel. Interest rates are currently negative in Europe and Japan. Some customers are paying the bank to hold their money. In Switzerland, the wealthiest depositors pay the bank 0.6% a year if they’ve got more than €500,000 in their account. This is insane. Absolutely insane. It wipes out the incentive to save money. And they do it on purpose. They don’t want your money sitting in the bank account, doing nothing. They want you to spend to stimulate the economy. To boost that GDP number.

It works the other way too. In Denmark, 2016, Hans Peter Christensen checked his mortgage statement one month and found a $38 interest payment from his bank. That must be a mistake, he thought, until he realized the bank’s new mortgage rate was -0.0562%. In the upside-down world of negative interest rates, Hans’ bank was paying him interest for taking out a mortgage. “My parents said I should frame it, to prove to coming generations that this ever happened,” he joked. The real joke is that future generations will probably never know a world without negative interest rates unless we escape to a bitcoin system.

Low and negative interest rates are also designed to encourage borrowing. They want you to run up the credit card bill, buy that new car on finance, and take out a bigger mortgage. In Denmark, they’ll actually pay you to borrow money.

Even the banks realize how crazy this is. Jyske Bank in Denmark, which offers negative mortgage rates, has an FAQ section which includes statements like “Yes, you read that right” and “How is that possible?” It’s possible because the government wants you to buy things at any cost. Even if it means paying you to take out a mortgage.

They want you to invest

It’s not just spending. A weaker currency is designed to make you invest — to spur the economy. Think about it. If you’re only getting 1% at a bank or money market accounts, you’re going to look somewhere else for a better return. Maybe you take that riskier loan and invest in some real estate. Maybe you buy some stocks. Maybe you take a big loan and start a business.

By the way, none of these are bad things. I’ve started businesses, I’ve borrowed money, I hold a lot of real estate, I invest in startups. Investing is good. But it shouldn’t be a substitute for saving . We shouldn’t have to take this much risk just to save some money. We go to work every day, we spend 40+ hours away from our family every week, we grind it out and save some money. That should be enough.

Now, everyone is forced to come home from their jobs and be an amateur stock analyst just to get ahead. You can’t just keep some dollars in the bank, you’ve got to beat that 2% inflation, so you’re checking Robin Hood on the weekends and after work. Crazy.

And if you don’t? Well, your dollars are going to sit in the bank account and lose purchasing power. You’re punished for saving.

This is why stocks can go to record highs even during a crisis like 2020. People aren’t buying stocks because they think the economy is booming. They’re buying stocks because they haven’t got any other choice. They can’t generate any interest on their dollars, so they turn to riskier investments.

Again, this is what the government wants.

They punish you for holding cash, on purpose , so you invest it in companies, real estate, etc. And just a reminder that this is all political. If the stock market goes up, the president gets re-elected.

This is happening in every developed nation on the planet. A global competition for economic dominance. They’re flexing their GDP and powering it all by money printing. But there’s an even scarier reason for the money printer. And it’s the reason I know they’ll never turn the money printer off again: the $27 billion pile of debt.

Chapter 20:

The $27 Trillion Problem No-One

Is Talking About

$27 trillion.

That’s the US debt as I type these words. The biggest debt of any country on the planet. It’s up more than $4 trillion this year alon e, and by the time you’ve finished reading this chapter, the US debt will have gone up another $15 million.

This is a problem. US debt is now running higher than GDP. Translation: we’re spending more money than we’re making. Every household knows this is a disaster waiting to happen. What happens if you spend more money than you make? What happens if you keep loading up the credit card? You blow up your finances. I’ve literally pulled myself up from the gutter to get where I am. The first rule I live by is don’t spend more than you make. It’s just plain simple. You don’t do it.

It’s easy to ignore this big debt figure, but think of it like this. If you live in America right now, your share of that debt is $82,000. How would you feel if you had $82k on your credit card? By the way, that’s every person in America, not just taxpayers. Every baby is born with $82k debt. If you’re a working taxpayer, that figure is over $200,000 each.

The interest payments alone are terrifying. $340 billion a year and rising. It’s the fourth largest item on the budget, right after military spending. Don’t pretend like this doesn’t exist. When you pay your tax bill at the end of the year, you’re paying for this.

America isn’t any different from a family household or a company. You can’t run a country like this forever. Some people will tell you that “we owe that debt to ourselves” so we don’t have to repay it. Bullshit. Two of the biggest holders of US debt are Japan and China. If they start worrying about our ability to pay that back, they could start selling. And that would send a ripple effect through the whole system. Or they demand more interest for their risk.

But it’s worse than that. Guess where else we borrow the money from? Social security. Every single president has dipped into America’s retirement fund to borrow more money. Just imagine doing this at a household level. Imagine taking money out of your retirement fund just to keep going. It’s a last resort. That money has to go back in the pot or we can’t pay people’s retirement.

Don’t get it twisted. We have to pay back the debt. Or at least stay above water and prove we’re good for the money. Look, I don’t mind debt. Debt can be a good way to drive growth. It’s how I built my business. But borrowing more money than you make is insanity. It’s got to be manageable.

We’re running at 128% debt-to-GDP as I write this. Historically, anything over 77% slows down growth according to the World Bank. And anything over 130% is game over. In the last 200 years, 51 out of 52 countries defaulted when they went over 130%. Either a ‘hard default’ or a massive currency devaluation. We are right on the cliff edge. Macro investor Lyn Alden compares it to the Titanic. “It’s like the Titanic hitting an iceberg; once struck, the outcome of sinking became almost inevitable, and yet the ship persisted in a state of being afloat and slowly sinking for quite a while. It became a question of timing, and most importantly, acquiring lifeboats.”

Bitcoin is the lifeboat this time around.

Why? Because… think about how this plays out. When the debt is this high, there are only three options:

1. Raise taxes

Tax revenue is the only thing that physically pays down the debt. We’ll have to tax the next generation into oblivion just to pay the interest.

2. Cut spending

We go into what’s called ‘austerity measures’. Cut unemployment benefits, delay retirement age, cut wages for federal employees. Tighten the belt, basically.

3. Default

If it goes on too long, people stop trusting the US economy. They stop lending us money. We can’t service the debt and we default. Complete economic destruction.

Think of it like your family finances. If you’re in over your head, what are your options? Make more money, stop spending or go bankrupt. But there’s a problem with these options at government level… they’re incredibly unpopular. No president can get elected on a manifesto of taxing people into oblivion. No-one can get elected by promising to slash retirement benefits. And no president will ever let the country default under their watch. It would be the worst legacy in US history.

So what can they do?

Print more money

“You never have to default because you print the money.”

Donald Trump

America has a fourth option up its sleeve. The money printer. By increasing the money supply, we can effectively make the debt disappear. Well, at least appear smaller.

Again, think of it like your family finances. Let’s say Harold has $50k of credit card debt. But his net worth is only $40k. He’s underwater. The interest is unmanageable. Harold is living month-to-month in a black cloud of debt. But what if Harold could draw some more money? What if he could double the money supply (just like America has in the last couple of years)? Harold draws thousands of dollar bills. Now he’s got an $80,000 net worth but his credit card debt is still the same. Like magic. Now he can pay back the interest and breathe again. It’s still the same amount of debt, but it’s easier to manage. This is exactly what’s happening in the US.

And this is the real reason why the money printer is never going off. We have to keep printing money and lowering interest rates to dilute the debt. If we don’t, we’ll default. And they can never let that happen. Every single major economy is playing this game of devaluing the debt. And debasing your money at the same time.

But make no mistake. We will pay for this through currency devaluation in the future. Printing money debases the dollar. It’s just kicking the can down the road. And it will go on forever because no president will grab this problem by the balls and take action.

With debt now running over 100%, Americans will start to take notice. They’ll run to ‘hard’ money and assets. And that rabbit hole only leads to one place: bitcoin.

And just a reminder. The debt went up $15 million while you read this chapter.

Chapter 21:

Currency Wars Lead to Real Wars

To sum it up, the government wants a weaker currency. It’s in their interest. I’m not exaggerating about this. Donald Trump said it himself back in 2019, “As your President, one would think that I would be thrilled with our very strong dollar. I am not!”

Trump was so desperate for a weaker dollar, he reportedly asked his aides to look into new ways to artificially lower its value, relative to other currencies. I’m not trying to make a political statement about the Trump administration here. Every president wants a weaker currency. Democrat presidential candidate Elizabeth Warren also said we should “actively manage” the dollar during her 2020 campaign. This is happening on all sides of the political spectrum, and in every major economy around the world.

It’s funny. Before Trump was elected, all of this international money fuckery happened quietly, behind closed doors. But Trump blew the doors off and showed everyone what was really happening. In July 2019, he went on Twitter and called out China and Europe for deliberately weakening their currency, “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA.”

Then he publicly called for America to do the same. “We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games — as they have for many years!”

In this one tweet, Trump revealed how fiat currencies work. Every major economy on the planet purposely devalues its currency to stay competitive.

Competitive currency weakening, explained with Lamborghinis

Imagine Lamborghini needs to import some engine parts for the new Aventador. They’re looking around the world to find the best place to buy. If the euro is weak, German exports are cheaper, so Lamborghini goes shopping in Germany. But now China wants a piece of the action so they start weakening the yuan. Now China’s exports look even cheaper than Germany’s. Maybe Lamborghini starts importing engine parts from China instead. Now the US gets angry. They want to supply Lamborghini too so they devalue the dollar to compete. Japan does the same. Then Britain.

You see how this goes on.

It’s a race to the bottom. Weakest currency wins. Economists call this a “beggar thy neighbor” policy — nations make economic decisions that actively hurt their neighbors because it’s in their national interest. Problem is, you quickly run out of ways to weaken the currency. So you get more and more bizarre policies, like quantitative easing. Like negative interest rates in Japan and Europe.

We’re now balancing a very, very dangerous tightrope. Every major economy is carefully trying to lower their currency enough to stay competitive, but not so much that they trigger runaway inflation and spiral out of control. At some point, one of the nations will go too far. The euro, the dollar, the yen, the yuan, I don’t know. One of them will push too hard and trigger uncontrollable inflation.

This has been going on for years. Every president since Nixon came off the gold standard has tried to weaken the dollar. But I don’t think any of them have been as bold and public as Trump. Just take a second to let this wash over you for a minute. This is the president of the United States, declaring on Twitter, to 80 million followers, that we should debase our own currency.

It’s no surprise that all the top replies to his currency tweets are from bitcoiners. Under one of the tweets, Ikigai fund manager Travis Kling said, “Goodness gracious this is mind-numbingly bullish Bitcoin.”

He’s right. The president is telling you, loud and clear, that he will dilute your savings. Smart investors are now looking around for assets that will hold value. Why would they hold on to dollars when they know, for certain , the dollar will lose value?

The first place they look is gold. The perfect hedge for an asset with infinite supply is one with a scarce supply. Ditch dollars, buy gold. Maybe some real estate. Some will buy stocks — assets that appreciate in value relative to the dollar. But as we’ve explained, these aren’t really ‘store of value’ assets — they’re ‘business risk’ or investing assets.

But now we have bitcoin. It couldn’t be a better set-up.

The dollar has infinite supply and the US government has told us loud and clear, the supply will increase exponentially. By the way, just as this book was going to press, Joe Biden won the 2020 US election. Just to be clear, none of this changes under Biden or any other president. Trump and Obama both added trillions and trillions of dollars to the deficit. Both printed obscene amounts of money during their time in office. Biden will be no different. Red or blue, it doesn’t matter. The value of the dollar will go down over time. As certain as gravity.

Bitcoin is the escape hatch. Unlike the dollar, bitcoin has a hard, fixed supply and its daily outflow will gradually decrease over time. It’s mathematically designed to hold its value. I can’t guarantee that bitcoin will go up, but I can guarantee the dollar will go down.

It’s the perfect hedge. The perfect alternative.

Bitcoin is savings technology

I like the way Pierre Rochard puts it: Bitcoin is savings technology. It’s not a business or a stock. It’s not a bond — you’re not lending money to anyone. It’s not a commodity — it isn’t used in industry. It’s simply a form of saving, with an asset that’s mathematically designed to hold and accrue value.

We work hard for our money, grinding ourselves to the bone for most of our lives. Saving money should be enough. You shouldn’t have to take on business risk with stocks or other investments just to keep up with inflation. There should be a thing that saves your money behind the strongest computing network of all time, and makes sure its value keeps up with inflation. That thing is bitcoin.

When you fuck with the money, it can lead to war

We’re in a currency war. We can pretend like we’re not, but Trump admitted it. Every major country is racing to devalue their money so they can compete globally. And they’re competing for trade.

But when one country can no longer compete, a currency war turns into a trade war. We saw this play out in 2019 through 2020 as Trump declared a trade war with China. “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

And trade wars can quickly turn into real wars. There’s a famous quote from French economist Frédéric Bastiat: “When goods do not cross frontiers, armies will.” World War II was triggered partly because of a currency war that went too far. It started in Weimar Germany as they devalued the Deutsche mark. France, Britain and America all devalued their currencies to stay competitive. Then came the trade war. US president Herbert Hoover slammed huge tariffs on foreign imports. Others followed. All of sudden, we saw a wave of nationalism and populism that lead to World War II.

It’s simple. When you fuck with the money, it can lead to war.

This can never happen with bitcoin. The common denominator in all this money fuckery is people. Politicians and central bankers who are greedy and power-hungry. They weaken the currency for their own power games. And we never know what’s going to happen next. We are constantly guessing about future monetary policy.

I’m not saying bitcoin would stop wars… or maybe I am. Wars are financed on printed money. If you can’t inflate the money supply, it’s much harder to start a war in the first place. And if the world ran on Bitcoin, no-one could weaken the currency for their own trade agenda. There’d be no currency war, no trade war… and a much lower chance of all-out violent warfare.

The beautiful, predictable bitcoin policy

The most comforting thing about Bitcoin is that it’s completely predictable and self-regulating. It’s not just the 21 million hard-cap. It’s the steady supply schedule. 6.25 BTC every ten minutes, no matter what. Every four years it gets cut in half. That’s it. Block by block, tick-tock, tick-tock. No-one can fuck with it for their own power games.

And it’s completely free from human emotions. No matter what chaos is going on in the world, the bitcoin supply schedule will never change. It takes the human element out of money supply decisions. We know humans are irrational and emotional. Humans make decisions based on fear and greed. They compete with rivals. They go to war. But with Bitcoin, the algorithm rules. You can’t increase the supply during times of fear. You can’t tighten supply in times of greed. It’s steady and predictable. Deal with it.

And it’s completely neutral and impartial. Bitcoin doesn’t care about your trade war with China. Bitcoin doesn’t care about your export policy or your re-election campaign. It doesn’t care if you’re Republican or Democrat. It’s an independent financial rail, open to everyone. It’s just… fair.

Again, this is brand new. No asset like this has ever existed. Bitcoin is the most transparent, predictable, reliable form of money that has ever existed. Nic Carter put it best when he said bitcoin “removes monetary arbitrariness.” Almost every other form of money on the planet right now suffers from ‘monetary arbitrariness’. Governments and central banks have complete control over the supply. And they wield that power to print money based on their arbitrary personal or political agenda. “Monetary arbitrariness … allows elites to plunder a torrent of new issuance for their own gain.”

It happens time and time again through history. When a person or small group has control over the money supply, they almost always use that power to help themselves. It’s happened since 1971. It happened in 2008. And it happened again in 2020. And guess who gets screwed over? Anyone trying to save a few dollars.

Our current money system is cruel.

This is why bitcoin matters. Bitcoin takes the greed out of monetary policy. It takes away the arbitrary decisions of humans. Robotic, predictable. Hard money you can’t fuck with.

Bitcoin is money

We’ve been on a journey. The history of money is long and dense but I think we proved a few things.

1. The best money evolves naturally.

All the hardest forms of money grew naturally, without government interference. Shells, barley, gold, ramen, etc. They started out as collectibles and grew into mainstream use based on pure market demand. Bitcoin also emerged naturally and grew according to market demand. It wasn’t introduced by a government or forced on anyone. It had an “immaculate” conception. It was ‘collected’ by early cryptographers, and the market slowly gave it more value over time.

2. Good money begins as a store of value.

All the strongest monies through time, like gold, started out as a store of value. We accumulated and hoarded items so that we might exchange them in the future. This is where bitcoin is right now — the game of accumulation. We hold it as a store of value, anticipating that it might be worth more in the future and that it will eventually evolve into a medium of exchange.

3. Good money has a natural scarcity.

All forms of good money through history had an element of rarity or scarcity that gave them an intrinsic value. We know that bitcoin is the most provably scarce asset ever created.

4. Good money evolves slowly into a medium of exchange.

When enough people have hoarded their ‘store of value’ monies, they start to exchange them naturally. The price stabilizes and it becomes an efficient form of day-to-day money. Bitcoin isn’t at this point yet, but it will come with time. As bitcoin’s adoption grows, its price fluctuations will stabilize and more people will use it to pay for goods and services.

5. Government ‘fiat’ money will always be devalued over time.

The infinite money printer is just too tempting for governments to ignore, especially in times of war or greed. The constant battle to compete on the global stage means central banks will always manipulate the currency lower in their favor. And if you’re holding dollars, you’ll keep getting screwed. Bitcoin is completely immune to this. Its supply is hard-coded at 21 million. Its output schedule is decided centuries into the future. It cannot be manipulated by governments, central banks, or anyone else. It cannot be artificially devalued.

6. Global reserve currencies don’t last forever.

Every dominant global currency has eventually been replaced. Cattle, barley, shells, gold, the Dutch florin, the British pound. The world shifts. Nations lose their power. Currencies lose their dominance, especially when they lose their scarcity. The dollar is coming to the end of its dominance. I believe bitcoin is poised to fill the gap.

So, no, bitcoin isn’t just magical internet money. It has all the qualities of a good money throughout history. Actually, it’s better. It’s the hardest, most advanced form of money ever created. And it’s fully digital.

The next question is, how do we go from this point in time to bitcoin becoming the next global reserve currency. Well, 2020 was the trigger point.

PART 3:

HYPERBITCOINIZATION: HOW BITCOIN BECOMES THE NEXT GLOBAL RESERVE CURRENCY

Chapter 22:

“Hell Is Coming” — The 2020 Crisis

It was like 2008 all over again. The bankers spilled out onto Wall Street with their cardboard boxes and disheveled ties. Another fresh batch of unemployed suits. Deutsche Bank just announced 18,000 layoffs, and one picture captured the whole thing perfectly.

Image: Reuters

Among the chaos, a man in a suit left the Deutsche Bank headquarters, holding a bag that read “Bitcoins.” Twitter exploded. A former banker, kicked onto the street, leaving the office with a bitcoin bag? It was too perfect. The collapse of one financial system and the start of a new one. What a protest.

It turns out it was all a coincidence. The man wasn’t a fired banker, but a tailor who was visiting the Deutsche Bank managers that day. By the way, let’s not skip over the irony of bank managers getting fitted for fresh suits on the same day they announced 18,000 layoffs.

Still, the image defined everything that was about to happen. The picture was taken back in July 2019, months before the crash happened, but it was an eerie premonition. Something was wrong at the banks. These mass layoffs on Wall Street were a big clue about how precarious the whole system was.

I wish I could tell you I saw the 2020 crisis coming. Like anyone who buys bitcoin, I knew something was wrong with the financial system. The mountain of debt, the money printing, the currency wars, the greed. None of it is sustainable. But I can’t predict the timing of these things. No-one can. And don’t believe these doomsday guys like Peter Schiff who are always yelling about a stock market collapse and recessions. They’ve been saying the same thing for ten years. Of course they’re right eventually. How much money did they miss sitting on the sidelines?

No-one could have predicted the way this played out. No-one. I couldn’t have imagined what was about to come next.

“Hell is coming”

I was in Peru for my birthday in early 2020, joking around and surfing, when we started to hear news stories about a new virus in China. The coronavirus. The entire city of Wuhan was locked down and there was a hotspot growing in Italy. But I had no clue about the scope of this thing. We were laughing and joking, making TikToks on the beach. Then my phone started blowing up. The virus was spreading to New York.

And then the stock market blew up. On March 9th, the Dow fell so much it triggered the circuit breakers. The biggest intraday fall in history. Trading was halted. Pure panic. A couple of days later, the same thing. President Trump banned all travel from Europe. Stocks crashed straight into the circuit breakers within 15 minutes of the market opening. It was happening. The financial system was collapsing in front of us. It was like the final scene of Fight Club where the skyscrapers come falling down. I kept thinking, what happens to bitcoin in this situation? I checked my account. The BTC price was falling too, but I just kept buying more. When the financial system is crumbling, get into the lifeboat. Time to escape.

Things started to get serious at the airport on the way home. President Trump declared a national emergency and Peru was about to go into lockdown. We were almost trapped there. Got out with a day to spare. And we landed back home to complete chaos. New York was about to go into a full lockdown. The financial capital of the world went silent. Times Square was empty.

Back home in North Carolina, I watched it all play out in shock. Billionaire investor Bill Ackman was on CNBC warning that “hell is coming” as the stock market staged its fastest crash in history. It was a bloodbath.

And it kept getting worse. 10 million people lost their jobs in those first few weeks. Businesses that had survived decades were forced to close their doors to protect from the virus. I was getting calls from my tenants. “We can’t pay the rent this month.” And we had to shut the energy plant down. The whole thing was heartbreaking.

They couldn’t let it crash

The panic on the face of Jerome Powell was obvious. The chair of the Federal Reserve knew exactly what this meant. There’s too much debt in the system. If the markets keep falling, the banks would seize up. There’d be another financial crisis, ten times worse than the last one.

They did the only thing they could. Money printer go brrr. Powell slashed interest rates down to zero and flooded the system with money. $1.5 trillion in short term loans. A $500 billion asset purchase in one afternoon. Another $1 trillion in commercial paper lending.

By the end of March, the Fed had pumped $4 trillion of new liquidity into the banking system. It didn’t work. The markets kept falling and the banks were seizing up again. Problem is, we’re addicted, remember? The economy is a junkie, addicted to printed money and cheap debt. We’ve been feasting on fake money since the last crisis. And just like a junkie, the market needed more and more drugs to get high. Back in 2008, it took $3.5 trillion over six years to save the economy. In 2020, they blew that much in a month. And it still didn’t work.

In April, Powell threw another $2.3 trillion at the markets. The Fed was buying everything: Treasury bonds, mortgage-backed securities, ETFs, junk bonds! Anything to keep the money flowing. Then they did something they’d never done before.

One morning, when traders woke up to another bloodbath on the markets, Powell came out again. This time, he promised to buy assets indefinitely, with no limit, until the crisis was over. In other words, “QE infinity.” Just think about what that means. The Federal Reserve basically promised to prop the markets up… forever. The money printer was on auto-pilot.

It’s bigger than America, too. Remember, the dollar is the world’s reserve currency. Everyone wanted dollars during this crisis. Every nation, every investor, every company. Just get safely into cash and ride it out. The Fed wasn’t just printing to keep America going, it was printing for the whole world. They had swap lines with almost every central bank on the globe, pumping dollars through the world’s financial plumbing pipes. Flowing like water.

The Fed printed more US dollars in those two months than it did in the first two centuries of America’s existence. Seriously. More money printing in a few weeks than almost 240 years. The balance sheet swelled to almost $7 trillion.

And finally, finally , it started to work. Banks began lending again. Stocks began to recover. The crisis was over.

26 million unemployed

But that’s not how it felt to most people on the street. Daniel Victory is a 42-year-old bar owner who lost all his business overnight. “The outbreak totally shut me down. I just don’t see how we’ll be able to recover… I have two kids, so it’s difficult — I haven’t had a paycheck in a month and a half.”

Stanley Chen is a car mechanic who’s worked for 30 years. “This is the first time in my life in America that I’ve had no job. We don’t really have enough [money] right now.”

Karen Switzer is a small business owner and a single mom, desperately trying to keep enough money coming in. “I applied for unemployment a couple times and I still haven’t gotten any money. I’ve gotten a debit card, but I’ve been approved for zero dollars.”

Most people in America were hurting. None of that $7 trillion ‘brrr bucks’ trickled down to them. In the coming months, tens of millions of Americans lost their jobs. Some of them got fired twice as we tried to re-open the economy and then closed down again. We were on the verge of an insolvency crisis. Thousands of mom-and-pop businesses were about to go bankrupt. Those brrr bucks stopped the banks from going under, but it didn’t put food on the table for the average person.

In fact, all it did was make inequality worse.

If you’re a wealthy guy with most of your money in assets, the Fed literally just pumped them back up for you. Job done. If you’re in the middle-class, maybe you held onto your job, worked at home for a few months on Zoom. Your 401(k) took a hit when stocks fell but it quickly recovered thanks to the money printing. Maybe you even saved some extra cash by not going out to restaurants and bars. Tough, but you got through it.

But what about our man in the Bronx working two jobs, struggling to pay his mom’s healthcare costs? His little girl still wants to go to NYU one day. He got fired. Twice. The employment checks kept him going for a while, but eventually he wiped out his savings to feed his family.

The Fed was adamant that inflation was in check. But food costs went up 4.6% in 2020 — the biggest rise in a decade. Medical care up 5%. Rent up 3%. All the things he needed right now got more expensive. And even if he could get a job, wages got absolutely crushed. Low-wage workers saw their salaries fall 16% in 2020. High wage salaries stayed flat.

You could feel the inequality widening. There was tension in America like I’ve never felt before. Riots in the streets. Anger, fear, resentment. It was like a pressure cooker about to explode.

The Federal Reserve knew what was happening. Their brrr bucks had saved the financial system. The banks were okay. Assets were up again. But it wasn’t trickling down to people that need it. The next threat was insolvency. When people lose jobs, they stop paying their rent, they default on the mortgage. Forget about car payments, not gonna happen. Small businesses make it work for as long as possible, but eventually they’ll bleed out and shut down. This is the Jenga tower, falling one by one. The money doesn’t trickle down, but defaults do trickle up. We saw that in 2008. When people stop paying their mortgages, the whole thing eventually comes down.

The Fed was panicking. They did everything they could for the banks, but they couldn’t force their brrr bucks down to the people. It was all getting stuck in the banks and stocks. On top of all that, people were angry. Riots in the streets. People needed help or there was going to be a full-on revolution.

So the government did something it had never done before.

Helicopter Money

“[We’re going to] send checks to Americans immediately… The president has instructed me we have to do this now.”

Treasury Secretary Stephen Mnuchin

They cut a $1,200 check to almost every adult in the country and $500 to every child. Congress passed a $2 trillion stimulus package to help individuals, small businesses, and… the airlines.

Helicopter money arrived in America.

‘Helicopter money’ means giving the public free cash to keep the economy going, like dollar bills falling from a helicopter. The term was coined by economist Milton Friedman, but it was money-printer Ben Bernanke who made it famous. He put it on the table as a last resort option in 2002, giving him the nickname Helicopter Ben. It seemed laughable at the time.

Now here we are, and no-one’s laughing. People needed help. Daniel Victory and Stanley Chen and Karen Switzer needed money to feed their kids. My tenants and employees needed a lifeline. I don’t think anybody with a heart has a problem with helping these people.

But here’s why it’s scary.

How do we pay for it?

“How do we pay for it? We print the damn money.”

Paul McCulley, former chief economist at Pimco

All this money has to come from somewhere. And if you’re still reading this, you already know the answer. They created it out of thin air. The government doesn’t have trillions of dollars lying around in tax receipts. We’re already $27 trillion in debt.

So they create it from nothing. Here’s exactly how it works.

1. Congress passes the $2 trillion stimulus law.

2. The Treasury then issues bonds to fund the spending.

3. If investors and other nations don’t buy enough of the bonds, the Federal Reserve steps in.

4. The Federal Reserve presses a button to increase the money supply.

5. The Federal Reserve buys the bonds.

6. That’s it.

Technically, we haven’t paid a real dollar to fund the stimulus out of our own pockets. We didn’t raise taxes. But we’ll sure as hell pay for it later. This is the drug hit. A short-term high and trust me there will be a soul-destroying comedown. We are all going to pay for this in the future, with higher inflation, bigger inequality… and probably higher taxes. Remember, there are only three ways the debt goes away — inflation, higher taxes or a default.

This is a freaking scary situation.

We already know how much this process devalues the dollar. Method Man’s “dollar dollar bill” lost 50% of its value in 30 years. Now they just printed more money in two months than almost 250 years. What happens to the value of your money next?

Chapter 23:

The Bitcoin Halving

May 11, 2020. You couldn’t have scripted it better. The money printers were in overdrive around the world. Central bankers were panicking, desperately trying to flood the system with money. Politicians were freaking out. Among the chaos, Bitcoin quietly produced block number 630,000. The halving arrived. The daily supply of bitcoin was cut in half.

It gives me goosebumps just thinking about it.

Right when the supply of dollars was going infinite, the bitcoin halving took place, making the supply more scarce, overnight. You already know how important this is. We’ve been through the history of money in this book together. We know that good money is scarce. And right as they were printing the dollar into infinity, bitcoin got scarcer.

This is the moment that everything changed. This is the exact moment the dollar era started to end. There’s no way back from this. Infinite money printing always leads to the collapse of currencies. “There is infinite cash at the Federal Reserve.” They’re not even hiding it anymore. And here was bitcoin, ticking away, tightening the supply, getting more and more scarce every day. The ‘hard money’ lifeboat in a flood of fiat.

In a throwback to Satoshi’s first-ever message on the Bitcoin blockchain, miners left a new message in block number 629,999 — the last block of the halving era: NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue

It was too perfect.

Back in 2009 when Satoshi left that first message about the bailout, bitcoin was just an idea. It had no price, no adoption. A decade later, bitcoin is a $280 billion asset class with millions of users.

And we’re still just getting started.

How did bitcoin react during the crisis?

I’m getting all philosophical about bitcoin here, but it wasn’t exactly a fairytale through 2020. On March 12th, bitcoin collapsed along with the rest of the financial markets. It fell 50% IN A DAY. I was in Peru, on the beach, surfing, and my phone was blowing up. People were freaking out. Even Pomp — the biggest bitcoin hype man I know — was shook. So many times he’s talked me off the ledge, and so many times I’ve psyched him up again too. That’s one piece of advice I’ll give to you if you’re getting into the bitcoin space. It’s really important to have a friend or a wingman. This ride is emotional.

Pomp and I talked it through. We closed our eyes and followed our plan. We bought more bitcoin. That was our thesis, right? Think long-term. Buy the dip. Well this was the mother of all dips. Go big or go home. I bought more bitcoin, closed my phone, and went surfing.

Plus, when we talked it through, we knew what was going on. This wasn’t about bitcoin. This was a liquidity crisis. What happens in a liquidity crisis is that investors sell everything, everything , so they can pay back their margin calls. Investors have been gorging on cheap debt for a decade, making trades with borrowed money. Huge margins. Way over-leveraged. When the crisis hit and stocks started to fall, they had to pay that back. Fast.

So they sold everything they could get their hands on. Anything liquid and easy to sell. Stocks, bonds, ETFs. Bitcoin. When a liquidity crisis hits, the air gets sucked out of all assets. All correlations go to one in a crisis. Even gold — the safest ‘safe haven’ out there — fell 12% in mid-March.

Bitcoin’s unfuckable nature actually made BTC’s drop more painful. Unlike the traditional markets, bitcoin trades 24 hours a day, seven days a week. No breaks for the weekend. No open and closing times. And no circuit breakers. No Federal Reserve to pump the price back up. A pure, free, open market. It makes bitcoin the easiest thing to sell. And no central bank to step in and halt it.

That sounds like a negative, but it’s not. This is what markets are supposed to look like. Transparent, global, free and open. When bitcoin finally bottomed and started to recover, you know it’s real. There’s no-one behind the scenes manipulating it. It’s a free market at work.

No government stepped in to stabilize the bitcoin market on March 12th. No-one halted trading or juiced the supply. It was just pure market forces. Buyers and sellers giving the true, fair price of bitcoin.

It’s hard to explain how important this is.

A financial system built on top of Bitcoin would be a truly global, free market. No manipulation, no Federal Reserve, no zombie companies propped up with debt, no-one to bail out the bad actors. Pure and simple free markets.

Bitcoin is the fastest horse

While all this was happening, one legendary investor wrote a letter to his clients and rocked the entire financial world. Paul Tudor Jones bought bitcoin. To put that in context, Jones manages a $9 billion hedge fund. He’s an old-school, conservative investor. When he makes a move, the entire industry takes notice. This was huge.

And his reason for buying bitcoin? Inflation. He wrote, “We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money unlike anything the developed world has ever seen.” He said he considered every option to get through the crisis. Gold, Treasuries, currencies, commodities, stocks. But nothing was as promising as bitcoin. “The best profit-maximizing strategy is to own the fastest horse,” he said. “If I am forced to forecast, my bet is it will be bitcoin.”

So far, he’s bang on.

By October, bitcoin was trading 160% higher than the March crash. Nothing else came close. Gold was up 30%. S&P 500 was up 55%. Even the Nasdaq, which blew out all expectations, was up 67%. Bitcoin was the fastest horse. It’s that simple. In the new world of money printing and the ‘Great Inflation,’ bitcoin is the best-performing asset on the planet.

And then there was Stanley Druckenmiller, another legendary billionaire investor of the legacy finance world. Maybe the best hedge fund manager on the planet. It took him until November, but he came around too. “Bitcoin could be an asset class that has a lot of attraction as a store of value to millennials and the new West Coast money, and as you know, they’ve got a lot of it… I own many, many times more gold than I own bitcoin but, frankly, if the gold bet works, the bitcoin bet will probably work better, because it’s thinner, more illiquid and has a lot more beta.” Translation: bitcoin has all the properties of gold, but it’ll shoot out of the gates way faster.

Bitcoin hit all-time highs… in these countries

This played out even bigger outside America. We often get distracted thinking about the US, but this crisis is global. Almost every country fired up the printing press and slashed interest rates to keep their head above water. And guess what happened to bitcoin?

Brazil

Brazil injected about $150 billion into the economy through cash handouts to families and businesses. It totaled about 18% of its entire GDP. And here’s what happened to bitcoin. The price is at an all-time high against the Brazilian Real.

Image: XE.com

Argentina

Argentina also ramped up the money printer to inject $12.9 billion into the economy — about 2.9% of GDP. Bitcoin has been carving out new all-time highs against the peso for months. You can barely even see the 2017 ‘bubble’.

Image: XE.com

Turkey

Turkey pumped $15 billion into the economy through 2020. By August, bitcoin had eclipsed the all-time high against the Turkish lira.

Image: XE.com

You could have bought bitcoin at the very peak of the 2017 Lambo bubble in these countries, and still be in profit today. And that’s just the start. Bitcoin hit all-time highs in Russia, Venezuela, Sudan, Angola, Suriname, Zambia through 2020. And more currencies came really close — the Russian ruble, South African rand, Icelandic krona, Pakistan rupee, Columbian peso. That’s the power of this store of value for the people who need it most. These people have had their savings and purchasing power destroyed by inflation and currency crises. Bitcoin is there for them.

It’s sometimes hard to explain bitcoin to someone in the US. But if you go to Argentina and tell them you’ve got a currency that can’t be devalued or inflated or seized from them, they get it.

If you still think bitcoin isn’t a store of value, you’re not looking hard enough. For some people it’s more stable, secure and valuable than their own currencies, especially during the 2020 crisis. Peer-to-peer bitcoin trading volume also hit record highs in India, Ghana, Philippines, Mexico and Egypt during 2020. The demand for a hard currency is off the charts. People in these countries don’t have a broker account with Goldman Sachs. They can’t buy stocks or gold or artwork or some other inflation-resistant asset. But they’ve got a mobile phone. They can buy bitcoin.

Bitcoin isn’t just the best store of value on the planet, it’s the most accessible. It’s the first asset in history where a guy in Caracas can front-run Wall Street. You can get in ahead of the biggest players.

So, what happens next?

Running out of ammo…

The scariest thing about this downturn is we’re running out of ammo. The interest rate is already at zero. They mailed people checks. Where do you go next? What can the Fed do if this crisis drags on?

Negative interest rates?

Probably. Rates are already negative in Japan and Europe. And the Bank of England governor wrote to all the British banks in 2020, told them to prepare for negative rates. It’s coming. And this will come for America too. If you think the interest at your bank is bad now, wait until they start charging you to hold your money.

When Bank of America starts taking money out of your account, you better believe you’re going to look for somewhere else to put your money. Nic Carter wrote: “Savers may not panic at negative 1%, reasoning that the bank is providing a useful service, after all. They may grumble at -3% and start to wonder if their monetary overlords really have it all figured out. At -5% — they pile into gold and start to wonder about that Bitcoin thing.”

We’re not just guessing about this either. Here’s a chart that tracks the volume of negative yield debt around the world against bitcoin.

Image: Bloomberg

What do you notice? The price of bitcoin is pretty damn correlated to negative yields. When bonds go negative, bitcoin goes parabolic. Get out of fiat currency. Get into hard currency.

Negative yield bonds are just the start. Your savings account is next. People don’t notice when their money is stolen through inflation. It’s invisible. Your purchasing power goes down over time, but it’s gradual so you don’t really notice. It’s a whole other thing when you literally watch it disappear from your bank account every month, like clockwork.

Bitcoin starts looking pretty good at this point.

Let them go bankrupt

Here’s another reason why I think bitcoin became really important during this crisis. What we saw play out in 2020 wasn’t a free market. This wasn’t how money should work. Investors and big corporations have feasted on cheap debt for a decade. They were over-leveraged, over-risked and greedy. And they got away with it because they knew the Fed would bail them out if it went wrong. But that’s not how it should work.

Let them fail. As Buffett said, sometimes you’ve got to let the tide go out and see who’s swimming naked. Let the bad actors get washed away. Let the good companies fight fairly and come through stronger. 19% of all US firms are now ‘zombie companies’ (a record high). They’re so indebted, the cost of servicing their debt is higher than their profits. They’re literally propped up by the banks. Let them fail.

Airlines spent the last decade buying back their own stock to enrich their exec board instead of building an emergency fund. Let them fail.

Markets are supposed to be about fair competition and capitalism. Howard Marks said: “Capitalism without bankruptcy is like Catholicism without hell. Markets work best when participants have a healthy fear of loss. It shouldn’t be the role of the Fed or the government to eradicate it.”

You need to let the tide go out once in a while. If you keep rescuing the bad actors with brrr bucks, the system never fully deleverages. You’ve got to let that debt drain out of the system. It’s like putting a bandaid on a broken leg then getting up and playing football again. No. Let it heal. Think of the long game. Let the inefficient companies go bust. The economy might slow down for a short while, but competition would kick back in. Stronger companies would move into place and a real recovery could begin.

Governments and the Fed won’t let this natural business cycle happen anymore. The president wants to get elected again in four years, so he does everything he can to keep the economy going. The Fed is terrified of deflation, so they keep the money printer going.

We’ve been patching up the ship for so long, it’s now impossible to let any part of it fail. We patched it up in 2000. We patched it up big time in 2008. We never let the cycle fully run its course. Now it’s too big. Too much debt. Too much printing. They literally can’t let those companies go bankrupt because they know what happens next. A tsunami of defaults. Big banks in crisis again.

And here’s the scariest reason. If they let it fail, we’d fall into a period of deflation . That means prices rising and the value of the dollar going up. And if what happens, the relative value of that $27 trillion debt pile goes sky high. Then we have to start talking about the US defaulting. Unthinkable. They’ve got to pump.

The US economy is no longer a free market. When it all goes wrong, everyone goes running to the Fed for another handout. Meanwhile, the people who need help the most are getting screwed.

A system built on Bitcoin wouldn’t allow for this. There would be no inflation of the supply. No devaluation, no Federal Reserve to bail you out. It would force companies to be sharper, stronger, and act in the best interests of their customers. The tide would go out and sweep the bad actors away. And, yeah, it’s painful sometimes, but it makes the economy stronger and more secure.

What would happen under a Bitcoin system?

Let’s think of this in terms of war again for a minute. What do you think would happen if George Bush stood up in 2003 and said: “I need to raise $2 trillion in taxes to go fight a war in Iraq.” There would be a chorus of hell no . What if Lyndon Johnson came out and asked for almost a trillion dollars in tax money to fund a war in Vietnam? Hell no.

Throughout the 20th century, wars were fought on printed money and debt. No-one asked your permission to do it. They promised a quick, cheap invasion (Bush estimated $50 billion for Iraq). They printed the money, loaded up the deficit and went off to war. The costs always spiral out of control (Iraq ended up costing at least $2 trillion), but Bush never came back and asked you to approve the next check. They just printed more and added trillions to the national deficit. Future generations will pay it back, right?

Under a bitcoin system, none of this would be possible. You can’t just print more bitcoin to raise a war chest. You’d have to go out and directly tax it from the people… or at least get agreement from the public to borrow it. If Bush burned through the first $50 billion for Iraq, he’d have to come back to the public and ask for more. What do you think they would say? Hell no.

If politicians had to do this to fund wars, they probably wouldn’t start them in the first place.

The same thing applies to the financial bailouts. You can’t print more bitcoin. There’s no central bank to inject trillions in liquidity. No ‘buyer of last resort’ to bail you out. So the first thing that happens is banks and companies would act more responsibly in the first place. Live within your means. How hard is that? You and I do it every day of our lives. The banks wouldn’t be so over-leveraged or feasting on crack cocaine liquidity if they knew no-one was coming to save them. Under a bitcoin system, there are consequences for acting irresponsibly. No money printer to bail you out. Banks, companies and governments would be better capitalized. Just like you’ve got an emergency fund for your family, institutions would be forced to run their books with a stronger emergency fund. It’s not much to ask.

But what if there’s a freak crisis like the coronavirus? Completely unpredictable. No-one’s fault. A Black Swan event that wipes out families and businesses. What happens when you need to help people?

That doesn’t change under a bitcoin system. We could still mail checks to families that need it. We could still agree loans to companies to keep people on the payroll. We could even bail out the banks if we wanted.

The difference is… the people would have to say yes.

No-one asked you if the Fed should pump $4 trillion into the banks this year and devalue your money. They just did it. They fucked with your money without asking. On a bitcoin system, no-one would have that power. Printing money is not an option. So the government would have to put it to the people. Look, this is a tough situation. We need to help people, we need to rescue businesses, we need some money to keep the banks lending. Do we all agree to raise taxes for a year or increase debt in the short-term to get us out of this hole?

Consult the public before you fuck with their money.

A bitcoin system would be more democratic. In emergency situations like Covid, I think most people would agree to help where they can. Sure, let’s take on some debt this year to help out people who lost their jobs.

There’s no problem with manageable debt. You’re supposed to run a tight ship during the good years so that you can tap the debt in an emergency situation. But instead of running a tight ship during the last ten boom years, governments, banks and companies got greedy on their cheap, printed, borrowed money. No emergency fund. When shit hit the fan, they just collapsed.

If we had to raise the money by direct taxation, it’s more likely to go to the right places, too. We’d actually get money to people who need it, rather than just boosting asset prices for the wealthy by printing money. There’s no way the public would approve bailouts for the rich at the expense of those struggling to pay rent. A bitcoin system wouldn’t just be more democratic and responsible, it would be more peaceful.

Obviously, I’m describing a utopian vision here. There will always be politics and power and disagreement, but at least a system built on bitcoin would be fair. A bitcoin system is simple. Don’t spend beyond your means, think of the long-term instead of short-term election cycles… and ask the public before you fuck with their money.

As I write this in 2020, the future is still uncertain. It’s been six months since the crisis started. Things are nowhere near back to normal. Almost a million people are still losing their jobs, every week. I have no idea what happens to the economy next. No-one does.

But I do know they’ll keep printing money. The floodgates are open. That money will never go back in the box. The Fed said they’re “not even thinking about thinking about raising rates.” Powell said he’ll let inflation run higher than normal to get things back on track. They’re not even hiding it! They’re going to keep printing money and debasing the currency.

It doesn’t end. People are already demanding more stimulus. More checks in the mail. Helicopter money for everyone. More bailouts for the rich. Once you start giving people free money, they start to expect it. It’s the new normal. Even when there’s a 2% drop in the stock market we start getting calls for more stimulus. I don’t know exactly how this plays out, but I know the US dollar supply is bigger than ever. And I know that eventually… maybe next year, maybe the year after, maybe the next decade, this catches up with us. And it’s going to hurt like hell.

Chapter 24:

The End of the US dollar?

This is a good moment to remind you that global reserve currencies always end. Every time. No exception. Every major currency in history was eventually replaced. The Dutch florin, the British pound, the French franc, even gold was replaced. If you think the dollar is any different, you’re not looking hard enough. Currencies change. Twenty years ago, people in Germany still used the Deutsch mark. The French still had a franc. The Italians had the lira. Now they all use the euro.

Image: JP Morgan, Hong Kong Monetary Authority, Erste Group Research

Just look at the chart of global reserve currencies over time. Since 1400, we’ve had six global reserve currencies — from Portugal, Spain, Netherlands, France, Britain and the US. Each lasting about 100 years and each tied to the world’s biggest trading nation at the time.

It will be gradual, it will take time, but it will happen. The dollar will be replaced. Our billionaire friend Ray Dalio is worried it’s already happening.

Bloomberg anchor: Is there a real threat right now to the US dollar’s status as the world’s reserve currency?

Ray Dalio: Yes, there is a threat. It’s an evolutionary type of process.

The massive amount of money printing and debt creation in 2020 could be the tipping point. Like a man who’s been shot in the stomach, he’ll survive a little while longer, but there’s no going back now. It’s a slow, painful bleed until death.

The central bankers know it…

“Even a passing acquaintance with monetary history suggests that this [dollar] center won’t hold.”

Former Bank of England governor Mark Carney

It takes a lot of balls to stand up in front of the world’s most important central bankers and say the dollar should be replaced. But that’s exactly what Mark Carney did in 2019. He was the former Bank of England governor, and right before he left, he dropped the mic with a bombshell speech at the Federal Reserve’s Jackson Hole meeting — the Woodstock of central bankers. He said the dollar wouldn’t hold its place as the dominant currency for much longer.

It was a long and winding speech, but here’s the gist. The dollar is too big. Almost every country in the world holds dollars in its reserves. About two-thirds of them anchor their currency to the dollar. So if the American economy suffers, the whole world suffers. When the Fed prints more money, it devalues the whole planet. We saw this play out in 2020. If there’s a crisis, the whole world needs dollars fast and the Fed has to print like crazy. It’s a liquidity shock. And it’s all tied to the US economy.

If only there were some kind of neutral, independent reserve currency that wasn’t tied to one single nation… but we’ll get to bitcoin later.

Back to Carney’s speech. He pointed out that the American economy is relatively small compared to the dollar’s power over the world. The US only accounts for 10% of all world trade and about 15% of global GDP.

Image: Bank of England

But the dollar is used in 88% of all the world’s currency transactions. It dominates 79% of all inter-regional trade payments. Half of all global trade invoices are priced in dollars. It doesn’t add up.

Think of it like this. The Fed isn’t just supplying America with dollars. It’s supplying the whole world. We’re funding the world on an increasingly small engine. Totally unsustainable.

What will take the dollar’s place?

“The most likely candidate for true reserve currency status [is] the Renminbi (RMB).”

Mark Carney

China.

We already know that global reserve currencies are historically tied to the biggest trading nation. Well, America isn’t the world’s biggest trading nation anymore. China is. And the yuan (renminbi) is becoming more common in global trade. China started pricing oil futures in yuan in 2018 and it’s already overtaken sterling in the oil trade. The yuan is gaining share in trade finance too. More and more invoices are executed in renminbi.

A Chinese currency could go global. They already have a deep presence in Africa, and their Belt and Road infrastructure project will weave through Asia and into Europe. They’re building a global economy with a new global currency. In late October 2020, China made a bunch of regulatory changes aimed at ‘internationalizing’ the yuan. This is the next big battle for global money. “The initial building blocks are there,” Carney said, although he admitted it’s a long way from playing out. These things take decades. Just enough time for bitcoin to embed itself, instead.

But you can already see the shift happening in global reserves. Look at the share of dollars held in national vaults. It’s down from 66% in 2014 to about 62%.

Image: IMF / WolfStreet.com

While the amount of Chinese yuan held in global reserves has doubled to 2% in the same period. It’s a small number, but it’s growing. Morgan Stanley thinks the yuan will reach 10% of global reserves in the next ten years, making it the third-largest holding. More and more countries will have to add yuan to their reserves to do business with China.

There’s another clue, too. Guess what China is desperately adding to its national vaults? Gold. China has quadrupled its gold storage over the last 20 years.

They’re hoarding it… just like the US back when the dollar emerged as the new global currency. Russia is stockpiling gold like crazy too. They know what’s going on. They’re bracing themselves for a decline in the dollar and positioning themselves with a stronger store of value. If you’ve got all the gold, you’ve got all the power.

There’s a huge showdown coming. The world will be split, forced to choose between the dollar and the yuan for trade. And guess how the two superpowers will compete? By devaluing the currency to make it more attractive. This cycle does. not. end.

Image: China’s gold storage over the last 20 years. TradingEconomics / World Gold Council

We know what happens next...

You’ve already been on the journey through the history of money with me. You know how this plays out. Infinite money printing eventually brings down the dominant global currency. The Fed isn’t just printing to save the US economy anymore. They’re printing to save the whole dollar system. They’re just trying to keep dollars flowing around the world. None of this happens overnight. But in the long-term, the time bomb is already ticking.

Thank God we have bitcoin

In a world without bitcoin, the Chinese yuan would probably become the next reserve currency. Nothing against China, it’s just… the yuan has the same problems as the dollar. It’s still a fiat currency that can be printed, manipulated, controlled and fucked with. As Dalio says, there’s no obvious candidate to replace the dollar because “the three major reserve currencies all have the same basic problem.”

But we have bitcoin.

Bitcoin is slowly ticking away in the background, block by block, gathering more value, security and strength every day. A neutral global currency that can’t be inflated into oblivion and can’t be controlled by a single government. No politics, no bullshit. A currency that isn’t tied to one economy, that can’t destabilize the whole planet at once. A currency that allows nations to trade on neutral ground, with fair, hard-coded rules, without choosing sides between the US and China. It feels inevitable, doesn’t it?

An epic battle is coming

But I’m getting ahead of myself. It’s still too early for bitcoin as a global reserve currency. The seed is planted and its time will come. But before we get there, there’s a hell of a battle coming. China and the US will issue their own ‘digital currencies’ in the coming years to fight for monetary dominance. And another player just entered, too. Facebook.

Chapter 25:

Central Bank Digital Currencies Are Coming… and They’re Terrifying

“There’s bitcoin and then there’s shitcoin. Are you familiar with that phrase?”

Congressman Warren Davidson

I couldn’t believe what I was hearing. I almost choked my drink out. Congressman Warren Davis was on the floor of the US House of Representatives and he just used the phrase, “There’s bitcoin and then there’s shitcoin.” I rewound it to make sure I heard it right. Yeah, he really did say that. Those six words are now in the official Congressional records.

It was 2019 and Facebook just announced it was creating its own cryptocurrency called Libra. All hell broke loose in Washington DC. For the first time in decades… centuries… government money was being seriously threatened. They can ignore bitcoin for a while, this weird internet money created by cypherpunks. But they can’t ignore Facebook. This was too big. Here was a new form of money that Facebook could instantly hand out to 2.7 billion people around the globe. It could change everything.

Bitcoin opened up the door… What if money wasn’t issued by a government? And Facebook smashed right through it. What if money was issued by a private company?

Congress was scared. And they should be. Remember, money is just a belief system. Anything can be money if enough people believe it. Facebook has the power to make half the people on the planet believe in a totally new form of digital money. Lawmakers immediately called a two-day hearing on Capitol Hill and savaged Mark Zuckerberg. They threw every threat they could. It was brutal… and it made bitcoin look good.

I couldn’t stop watching. And the best thing about all of this was all the bitcoiners coming out of the woodwork. Congressman Warren Davidson got it.

Davidson: “Is there a central authority that can dilute the value of bitcoin?”

Meltem Demirors (Bitcoin advocate): “No.”

Davidson: “Is there a central authority that can filter transactions of bitcoin?”

Demirors: “No.”

Davidson: “All these features are different to many of the things people call, colloquially, shitcoin, because the value can be distorted by a central authority.”

This was crazy. Lawmakers in Congress were defending bitcoin — a currency designed to exist without governments. Congressman Patrick McHenry got it too. “There’s no capacity to kill bitcoin,” he said during the hearings. And Federal Reserve chairman Jerome Powell proved that he at least understood bitcoin’s main use case. It’s not so much a payment system, he said, but “an alternative to gold…a store of value…a speculative store of value.”

I can’t describe how far we’ve come. I used to sit in meetings with smart tech guys who didn’t understand what cryptocurrency was. And here I am listening to old, gray lawmakers discussing the nuances of bitcoin.

And I knew why this was happening. They might not like bitcoin, but they hated the idea of Facebook’s currency. Bitcoin looks GOOD compared to a currency controlled by Mark Zuckerberg.

The government could shut down Libra, they concluded. “You can kill off something that is not a true open distributed ledger,” McHenry said, referring to the idea that Libra isn’t ‘decentralized.’ The plan is for Libra to be ‘governed’ by a circle of big tech companies and backed by a basket of currencies including the dollar, euro, yen and sterling.

But wait, is Libra a threat to bitcoin? Not even close.

Libra is still incredible. If they ever launch it, it will probably be the world’s best ‘medium of exchange.’ Lightning-fast digital payments via Instagram, WhatsApp and Facebook, to any of the 2.7 billion global users.

But we already know that’s not bitcoin’s use-case. Bitcoin’s sweet spot isn’t digital e-commerce. Bitcoin is an unfuckable store of value — the complete opposite of Libra. Libra is not decentralized. Your Zuck bucks will be seized or blocked if Facebook doesn’t like who you’re sending money to. And it can still be devalued because it’s backed by dollars and euros and yen. It’s not scarce and it’s no better ‘store of value’ than the dollar. It can definitely be fucked with.

But that’s not even the point. The only reason Facebook has the balls to invent a new form of money is because bitcoin exists. Bitcoin broke the door down. Now the fight for money begins. Like I said, the dollar era is coming to an end. And the successor will be natively digital. Facebook’s Libra is just the start. Every central bank and every government in the developed world is now looking at building a digital currency. This is the biggest change in money since the dollar itself. And I think this happens fast.

“First they ignore you, then they laugh at you, then they fight you, then you win.”

I love this quote. It captures bitcoin perfectly. For most of bitcoin’s life, everyone ignored it. Then they laughed, compared it to beanie babies or tulips or some other bubble. Traditional bankers, investors and governments mocked it the most.

Now they’re desperately trying to fight it.

JP Morgan boss Jamie Dimon

First they laugh at you: “[Bitcoin] is a fraud… It’s worse than tulip bulbs. It won’t end well… [If I caught an employee trading bitcoin] I’d fire them in a second.” JP Morgan CEO Jamie Dimon

Then they fight you: JP Morgan creates a digital coin for payments in 2019.

Facebook

First they laugh at you: Facebook bans all cryptocurrency adverts in 2018.

Then they fight you: Facebook launched its own cryptocurrency, Libra, in 2019.

European Central Bank

First they laugh at you: “Cryptocurrencies or bitcoins, or anything like that, are not really currencies… Who is behind the cryptocurrencies? So they are very, very risky assets.” Mario Draghi, former ECB president

Then they fight you: “The ECB is very seriously looking at a digital [euro].”

IMF

First they laugh at you: “Internet-based currency such as Bitcoins is not electronic money because it does not meet the definition of currency.” IMF report

Then they fight you: IMF publishes ‘The Case for New Digital Currency.’

US government

First they laugh at you: “I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.” President Donald Trump

Then they fight you: “[The Federal Reserve will] build and test a hypothetical digital currency oriented to central bank uses.” Federal Reserve Board Governor Lael Brainard

Governments ignored and laughed at bitcoin for as long as they could. Until they realized that bitcoin is a swarming, evolving fortress that can’t be killed. Bitcoin threatens to take power away and give it back to the people. So they quietly began working on their own digital currencies to tighten their grip on money. And believe me when I say, it’s terrifying. You do not want a central bank digital currency in your wallet.

Back in the Senate, Mark Zuckerberg was the one who pointed out the biggest threat of all: China’s digital currency DCEP. Zuck warned Congress, “If America doesn’t lead on this, others will.”

The terrifying era of national digital currencies is coming

“The year is 2040 and cash is gone. The money you use on a daily basis has fully transitioned into a tool of surveillance and control.”

Alex Gladstein

Imagine the government could track every payment you make and create a profile about your spending habits. Imagine they could block you from buying airline tickets because you spread fake news online. Or freeze your cash for a day because you walked your dog without a leash. Maybe they catch you jaywalking on CCTV and then ban you from making certain payments.

Imagine they could automatically take tax out of your wallet without asking. No more IRS or tax returns. The government knows your business expenses and income because they’re tracking it. You just get a bill and then they deduct it right out of your account.

And then there’s the whole new possibility for printing money. Imagine the government could issue stimulus checks, in seconds, directly into your electronic wallet. Digital helicopter money. Imagine it morphs into a universal basic income (UBI) which airdrops money to citizens every month. Sounds great, until they withhold it one month because you dropped litter. Or freeze your account because you donated money to a cause the government doesn’t like. Imagine a world where cash is illegal. Everything, even a small purchase at your local store, is tracked and added to your personal citizen profile.

This is the world under a central bank digital currency. This is not like the electronic money in your bank account right now. It’s digital money, issued and controlled directly by the central bank. You might not even have a bank account in the future. You just have a digital wallet linked straight to the Federal Reserve. Complete government control. Terrifying raw power and surveillance. Zero privacy. Absolutely dystopian.

It’s money that can be fucked with… in more terrifying ways than we ever thought possible. And it’s already happening in China.

‘One day everyone will use China’s digital currency’

China’s Digital Currency Electronic Payments (DCEP) currency is already rolling out in phases. Many are now getting their wages in DCEP. It’s accepted in Starbucks and McDonald’s in Chengdu and Shenzhen. And they just ‘airdropped’ free money to a select group of citizens, $30 worth of DCEP each in a lottery system to spend at local merchants.

Soon, the currency will be rolled out through WeChat Pay and Alipay — the country’s biggest payment providers. This is a big deal. The Chinese pay for everything with their cell phone. Even street buskers hold out QR codes to accept tips. Together, WeChat Pay and Alipay are used by almost 2 billion people every month. To put that in perspective, they process more monthly transactions than PayPal did in the entire year of 2017. Huge is an understatement.

And it will be tightly controlled. The People’s Bank of China has forced all merchants that accept digital payments to accept DCEP. If they don’t, they could lose their business license. China already has a strict ‘social credit’ system, too. You can have certain transactions blocked if you jaywalk or play music too loudly on the subway. But the system is currently run by local governments. With a digital currency tracking everything, it will go national… maybe even international.

We can’t ignore this. China’s DCEP currency is an attempt at a new global reserve money. The country fast-tracked the whole operation when Facebook announced Libra. Beijing analyst Linghao Bao said, “The People’s Bank of China is under a lot of pressure to accelerate the development because they do not want to be in a world where Libra becomes the global currency.” Libra could potentially be rolled out to 2.7 billion people, with the dollar as its largest underlying asset. Libra would probably strengthen the dollar’s place in the world. And China doesn’t want that.

China acted fast and now this could go global. There are at least 39 million Chinese people living abroad who will quickly have access to DCEP. And the foundations have already been laid. You can already pay with Chinese finance apps in 175,000 locations in the US. Check it next time you go into Walgreens. You can pay with Alipay. Then there’s China’s ‘Belt and Road’ initiative, an infrastructure project that weaves through Asia, into Europe and Africa. China’s influence is growing and they’ll push DCEP through these communities. Many don’t even have bank accounts yet. But they’ve got a cell phone and Alipay. China’s influence in Africa is already huge. In a few decades, you could see the entire Nigerian economy running on DCEP, using Alipay and WeChat everywhere.

In Mark Carney’s ballsy 2019 speech, he said, “History shows that the rise of a reserve currency is founded on its usefulness as a medium of exchange, by reducing the cost and increasing the convenience of international payments.” China is about to do this on a global scale. They could have complete power and surveillance over half the world’s population.

The US and Europe will fight back. The Fed is now working on a ‘digital dollar’ that could have all the same surveillance and power built into it. This is an arms race. China’s DCEP threatens to alter the balance of global power, so the US has to respond. The Fed mentioned China directly when they rolled out their recent plans, “China has moved ahead rapidly on its version of a central bank digital currency [CBDC],” and so America must “remain on the frontier of research and policy development” if the dollar is to remain dominant. They’ve laid the groundwork, too. The US government quietly changed regulations to allow banks to custody digital assets. This future is coming.

They’ll frame it as a way to help Americans. To cut down crime and money laundering. And after the Covid crisis, they might even use it to distribute stimulus right into your pockets. They’ll say cash is dangerous, it spreads the virus, so they ban it. Again, that sounds good, right? But now they’ll know everything about your money. And they’re not even hiding it. The General manager of the Bank for International Settlements said, “In cash, we don’t know who uses a $100 today, with a CBDC the central bank will know everything.”

Even worse, they can ‘program’ it. What if your stimulus money disappears on a certain date if you don’t spend it? What if you can only use it to buy certain products? What if your funds are frozen because you donated to a cause the government doesn’t like? What if they mandate another lockdown and certain businesses are literally frozen out of the payment system? A digital dollar is just more power and control over your money.

And it’s easier to print. Your digital wallet will be plugged straight into the Federal Reserve. No need to lend it to the banks first. The Fed can print money and send stimulus right where they want it.

As Bitcoin investor Dovey Wan put it when describing China’s DCEP, “In the future, [we’ll see] targeted stimulus policy, helicopter money, brrrrrr in a much more granular level, an easy seizure of your personal wealth (for fair causes like anti-corruption, or can be exploited for corruption itself..) can all happen with a few lines of codes.”

If you think this isn’t happening, open your eyes. In October 2020, PayPal announced support for buying, selling and storing bitcoin and cryptocurrencies. But hidden in the press release notes was a second agenda: “The shift to digital forms of currencies is inevitable… [allowing] governments to disperse funds quickly. We are eager to work with central banks and regulators around the world to offer support . ”

PayPal isn’t just getting ready for bitcoin. They’re getting ready for central bank digital currencies.

By the way, this is bullish as hell for bitcoin. First, it normalizes the idea of digital currencies and electronic wallets. People have always struggled with the idea of bitcoin as a digital currency — But I can’t touch it? Is it real money? It’s not backed by anything . In five years, that won’t be a problem anymore. Digital money will be standard.

Second, it builds the infrastructure for bitcoin adoption. Banks and PayPal are all building the rails for digital assets. Regulation is being re-written. Laws are being changed. Bitcoin will get swept up in this new wave, making it easier than ever to buy and custody.

Third, all the education around these digital currencies will reference bitcoin. It’s the one that started it all. It’s all based on blockchain technology (although it doesn’t really count if it’s controlled by a government) which can’t be explained without talking about Bitcoin. Look what happened to Libra in Congress. All they could talk about was bitcoin. This is a mass education campaign. How many people do you think start asking questions and going down the rabbit hole?

Last, these digital currencies are the antithesis of bitcoin. The exact opposite. No freedom, no privacy, no decentralization. These spyware currencies will push more and more people towards a better alternative.

This is all happening in Europe too. Christine Lagarde, head of the European Central Bank (ECB) said, “We should be prepared to issue a digital euro.” And by October 2020, the ECB announced a ‘digital euro for a digital era’. In the UK, former Bank of England governor Mark Carney went even bigger. He called for a new digital global reserve currency backed by a basket of fiat currencies. Like Libra on steroids. In the next three-five years, he said we could move away from the dollar to a single digital currency, backed by a group of nations.

And think about what that would mean. The nations could collectively expand their balance sheets and print more money, together. They could weaken the entire fiat system all at once.

Like I said, central bank digital currencies are terrifying.

So who do you think wins? The Chinese DCEP? The digital dollar? A digital euro? A basket of currencies? Facebook’s Libra? They’re all centralized ‘shitcoins’ with immense power and surveillance.

Or could it be something different? Something that can’t be controlled or surveilled. Something that can’t be seized, with no central authority to ban your payments. Something naturally scarce that can’t be devalued or inflated. Something digitally native and global by nature. A true money for the people. Something like bitcoin?

In this nightmare future world of spyware currencies, I think people will opt out. They’ll choose bitcoin instead. They’ll choose a parallel financial system — one that doesn’t monitor their every payment. One that doesn’t tax them without asking. One that doesn’t freeze their account for jaywalking. And one that can’t be devalued by money printing.

They’ll choose the digitally-native cryptocurrency. The one born naturally on the internet with an immaculate conception, not twisted and warped from a broken fiat system. They’ll choose the one backed by the strongest computing network on the planet, with no central authority.

All I see is fiat currency getting worse. More control, more surveillance, bigger supply, devaluation. And I see bitcoin getting better. More scarce, more secure every day, more stable and reliable, more global. More privacy features being built in at the base level and through the Lightning Network.

There’s no choice here. People will choose bitcoin.

This is how bitcoin eventually transitions into a medium of exchange

There’s one big reason why bitcoin hasn’t evolved into a ‘medium of exchange’ yet… because we don’t need it. Our day-to-day currencies are fine for small payments. I don’t need bitcoin to buy coffee at Dunks. It’s five bucks. I just need something quick. The dollar is fine. Venmo is fine.

That’s going to change. Because all of a sudden, that coffee at Dunks could cost me a whole lot more than five bucks. It costs me my privacy. How much information are we willing to give up to buy a coffee? How much power will we give up to fill the car up with gas? And what happens if I’m blocked from buying coffee at Dunks for some minor offense? Maybe I start using bitcoin instead. We’re about to find out what happens when government’s have even more control.

Right now, it makes no sense to spend bitcoin. This thing could 10x, 100x from here, why would you spend it? But eventually, when the bitcoin price has stabilized at a higher level, and people are tired of the government tracking and controlling their money, I think they start spending bitcoin instead. I think they switch to a parallel financial system. That ‘store of value’ slowly begins to morph into a ‘medium of exchange’.

This is how hyperbitcoinization begins. And it’s bigger than just bitcoin. We are on the edge of a generational shift in the world. You can feel it, can’t you? Bitcoin is right at the heart of it. This is about to get interesting.

Chapter 26:

The Fourth Turning —

A New Era Begins

There’s a book called ‘The Fourth Turning’. It describes how generational cycles change the world over time. Every hundred years or so, there’s a crisis — the ‘fourth turning’ which completely reinvents society. The authors call it the “seasons of history.” We’re heading towards that fourth turning now. The world is about to change like we’ve never seen. Here’s how the phases play out over time:

1. The High

This started in the post-World War II era. The ‘Golden Age of Capitalism’. Society was strong and united after the war. The economy was booming.

2. The Awakening

Just as everything looked perfect, people began to demand their individualism and push back against institutions. Activism started creeping into society. Think of the 1970s student protests and counter-culture.

3. The Unraveling

Individualism took over and people began to distrust authorities. Culture wars flared up as people demanded more freedoms. Society became more divided and polarized over political issues. You probably felt this happening over the last 20 years.

4. The Crisis

An ‘era of destruction.’ The divisions in society become so wide that the dominant nation is threatened. We could argue this began happening after the 2008 crisis, but the 2020 crash really pushed us over the edge.

We’re heading into the crisis phase again. I don’t know exactly how this plays out — no-one does — but we’re on the edge of something. You can feel it. Riots in the streets, inequality worse than ever, more division, more anger at institutions, fake news, distrust of the media and ‘elites’, more populism, more nationalism, rising power in China. Something big is happening.

And people are rising up. They’re pissed off and they should be. Wealth is concentrated at the top instead of flowing down through the system. History tells us this leads to breaking points. Look at the last time inequality was this wide… the 1930s — exactly the moment of the last ‘fourth turning’.

Image: Bridgewater Associates

Inequality builds over decades because of the broken system of money. Then people fight back. Populist politics takes over, a backlash against the elite. This played out in America with the rise of Donald Trump and Bernie Sanders. The Occupy Wall Street movement. The extremes of left and right politics. It’s happening in Europe with Brexit, a backlash against the growing European government. More extreme political parties are cropping up in Germany, France, Italy.

None of this is about left or right. It’s about people wanting power back. Ask any Bernie or Trump supporter — both sides are fighting against the elites, even if they disagree on how to do it.

Again, you can feel this happening. And it feeds back into the global economy. Trade wars with China. Ripping up global agreements. Rolling back globalization and free trade. Nationalism. Global trade seizes up and crisis explodes.

This all happened in the last ‘fourth turning’ in the 1930s. But this time I think it plays out differently.

This time, the people have all the power

Another book captures this perfectly: The Sovereign Individual . The Sovereign Individual also predicts a shift into a new era, but this time, governments will have much less power. Thanks to the internet, authority has begun to shift away from ‘nation-states’ to the ‘sovereign individual.’ People have all the power now. The book reads, “The Information Revolution will destroy the monopoly of power of the nation-state as surely as the Gunpowder Revolution destroyed the church’s monopoly.”

We live in a global, digital world that goes beyond borders. The internet is out of the box. It won’t be rolled back. It’s not getting any smaller. Now we have infinite information and opportunity at our fingertips. We can communicate with almost anyone in the world, instantly. We trust individuals on Twitter and YouTube more than institutions. We have more power than ever.

And now we have bitcoin too. Not just free information, but free money. Global, borderless cash that gives people complete ownership of their own finances. No need to trust a bank or the national currency. Governments are losing their grip. The Sovereign Individual even predicted bitcoin ten years before Satoshi created it. The authors wrote that a “new digital form of money” or “cybercash” would rise up and “reduce the capacity of the world’s nation-states… Unique, anonymous, and verifiable, this money will accommodate the largest transactions. It will also be divisible into the tiniest fraction of value. It will be tradable at a keystroke in a multi-trillion-dollar wholesale market without borders.” Sound familiar?

It’s playing out exactly as they described…

This monumental shift is already happening. We already live in a borderless, digital world thanks to the internet. And now we have bitcoin. The perfect form of borderless digital money for this new era of digital individualism.

The debt cycle is ending

These generational shifts all line up perfectly with something else: the long-term debt cycle. We already know about the $27 trillion debt pile. But in percentage terms, we haven’t had debt this high since the 1930s — the exact point of the last ‘fourth turning.’

History tells us that when the debt-GDP ratio gets this high, it ends badly. Remember, we’ve got to deleverage somehow. We’ve got to let that debt drain out of the system, but the Fed keeps pumping it back up. We’ve already had three test-runs in the last twenty years — the dot-com bubble, the 2008 financial crisis, and now the 2020 coronavirus crash. We keep saving ourselves with more and more money printing. More debt. More and more devaluation. Kicking the can down the road.

At some point, all of these things come together and trigger a huge revolution. A complete generational shift in society, government and the financial system. Bitcoin is a generational tsunami that will wipe out the old, broken, traditional system and usher in a new era. The demographics alone make it inevitable…

Chapter 27:

Only “Dumb, Inexperienced Kids” Buy Bitcoin

There’s only one person who hates bitcoin more than Nouriel Roubini (he blocked me on Twitter claiming I ran our fund, Full Tilt Capital, out of a Starbucks’ bathroom), and that’s Peter Schiff. He’s a goldbug, angry and bitter that he missed out on bitcoin’s insane returns over the last ten years. My friend Max Keiser put him on Bitcoin at around $1.00. He didn’t buy it. And he rips into bitcoin whenever he gets the chance. One of his most brutal (and totally ridiculous) comments was this gem from a 2019 conference debate, “A bunch of young, inexperienced kids are going to be dumb enough to buy bitcoin… As they get older, they’re going to learn better.”

He couldn’t be more wrong. These ‘young, inexperienced kids’ are exactly the ones who will turn bitcoin into the world’s next reserve currency. There’s a generational tide turning that will change everything. Sat opposite Schiff during the debate was Barry Silbert — the head of Grayscale, an investment trust with $8 billion in crypto assets. He hit back pretty hard, “There’s a generation shift in investor mindset happening. Over the next 25 years, $68 trillion of wealth is going to be handed down from boomers… it’s not going to stay in gold.”

A lot of it will go into bitcoin.

Millennials’ share of wealth is predicted to quadruple by 2030 and they’ll eventually be the richest generation on the planet. Paul Donovan at UBS explains, “It’s worth pointing out that the millennial generation, which we’re all wringing our hands about — these poor people not able to own houses! — This is going to be the wealthiest generation ever that we’ve experienced.” Much of that money will gravitate to bitcoin over other currencies and assets.

Younger generations are digitally native and truly global. My kids won’t know a world with paper notes and cash. Their entire world exists online. Today’s teenagers grew up on the internet. Their best friends live in different countries with different cultures. They don’t care about borders and arbitrary rules that separate us around the globe. A global generation will demand truly global money.

And check this out. In 2018, Piper Jaffray (an investment firm) polled teenagers about Christmas presents. Guess what they wanted? Fortnite V-bucks. Seriously. It came in above cash. Teenagers wanted a made-up digital gaming currency more than dollars . They don’t care about George Washington’s face on a dollar bill. They’ll use whatever is digitally native.

On top of that, Millennials don’t trust the existing financial system. They came of age during the 2008 banking crisis. Watched their parents get wiped out. Graduated into a recession. Moved back home with Mom and Dad. Their younger Gen Z siblings watched it all happen. Now the younger generation are inherently skeptical of banks and desire privacy. It’s built into their psyche. Studies show that Millennials trust tech companies more than banks to hold their money. We’ll see a wave of young people moving to digital wallets, powered by Facebook and Square and Alipay. And they’re statistically wary of investing in the stock market (even though the last decade has delivered unprecedented returns). What are they drawn to instead? Bitcoin.

And just wait until they inherit their parents’ money. Where do you think that money goes? They’re sure as hell not going to buy gold.

One by one, drip by drip, the millennial and younger Gen Z age groups will grow up and control a bigger share of the world’s wealth and power. They’ll allocate that money to bitcoin, slowly stealing market share away from gold, and then bonds, and then stocks, and then dollars themselves.

They’ll graduate to positions of power

It’s not just about money, it’s about influence. We’ll soon have bitcoiners in every company and at every level of government. And they’ll graduate into positions of incredible power over time. These younger regulators will intuitively green light bitcoin innovation.

It’s already happening slowly. There’s ‘Crypto Mom’ Hester Peirce over at the Securities and Exchange Commission (SEC). She’s a younger rising star at the SEC and the only real advocate in the building, but there will be more in the lower ranks. Eventually, we will get a bitcoin ETF approved by the SEC. Trump recently nominated Brian Brooks as the administration’s top banking regulator. He’s a younger guy openly bullish on blockchain and crypto. And the newest chairman at the Commodity Futures Trading Commission (CFTC) is practically a crypto nerd already. This is a guy that said: “Let me just basically say how impressed I am by Ethereum, full stop, period.” And he’s actively packing the CFTC with crypto experts. “One person in our office as well as one of our division directors came from a cryptocurrency exchange. Finally, we just hired one of the few PhD Ivy League economists in the world with a background in crypto. So it’s really important that we have those people in the agency.” And we already know there are bitcoiners in Congress.

The generational tide is turning. Younger people are growing into positions of power and they’ll streamline the new digital era. The demographics are moving in bitcoin’s favor.

The pension crisis

There’s another huge demographic trend coming: the pension crisis. I don’t want to go too deep into this — it could be a whole book on its own. But let’s try keep it quick. We’ve got an aging population in America. 75 million people are about to hit retirement age, and many will go on to live until they’re 90 or 100. And the pension system can’t handle it. There’s nowhere near enough money in pension funds to pay out what they promise. Actually, they’re about $1.6 trillion short of what they owe to pensioners.

On top of that, the economy will start slowing down. It’s just math. Less people at working age, less tax revenue, lower spending. And what happens if they start selling all their assets? Boomers will soon start selling their stocks to pay for retirement.

I’ve sat in those meetings with pension fund managers. They’re panicking. They’ve got to hit 7% return every year just to stay on track. They’ve got to get close to 10% if they want to make up the shortfall. They’re looking at the cash in their portfolio, wasting away because of inflation. They’re looking at their bonds yielding zero or even negative interest. How the hell are they going to hit 10% return?

Bitcoin.

They’re going to start buying bitcoin. Like I said earlier, we were the first at Morgan Creek Digital to convince major pension funds to allocate to bitcoin, but we won’t be the last. There is no other asset class with the potential to return 10x or 100x in the next decade. Nothing. Bitcoin is the best-performing asset on the planet and pension funds literally cannot ignore it anymore. They’ve got a fiduciary duty to do the best for their clients. And if they don’t, the whole pension system will literally fail.

Actually, if they don’t, the government will step in to prop it up. And you know what that means. Money printer go brrr. All roads lead to bitcoin.

Peter Schiff is dead wrong. This isn’t just dumb, inexperienced kids buying bitcoin. This is one of the smartest generations on the planet, choosing a new financial system to escape the failing banks. It’s a flood of money, flowing from boomers to millennials as we sleepwalk into a pension crisis. It’s time for Peter to admit he was wrong, suck it up, and get a Coinbase account.

So, we know there’s a demographic wave pushing us towards bitcoin, triggered by the 2020 crisis. But what exactly is the tipping point for bitcoin? At what point does bitcoin become the global reserve currency?

Chapter 28:

Hyperbitcoinization

“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

Friedrich Hayek, 1984

This is how bitcoin becomes the global reserve currency. Quietly, slowly, slyly… and then boom. All at once. Bitcoin will never impose itself on people. It will never demand you switch from dollars to BTC. People will just quietly opt out of the fiat system, drip, drip, drip, slowly accumulating bitcoin, until the levee breaks. Until the balance tips towards bitcoin and the whole world changes.

You can use any metaphor you like. My partner, at our fund Morgan Creek Digital, Mark Yusko calls it a phase shift, like water turning to vapor. The water gets quietly warmer and warmer until it starts bubbling and then, boom, it turns into steam. Phase shifts are all about the quiet build-up.

Like the internet. You can’t point to a particular moment or date that the internet suddenly dominated the world. It happened gradually over time. Now we’re all carrying supercomputers in our pocket. It’ll be the same with bitcoin. There won’t be a single overnight moment where the world switches from dollars to BTC.

Daniel Krawisz describes it as a “series of individual acts of entrepreneurship.” One by one. Like Paul Tudor Jones putting 1-2% of his net worth in bitcoin. Like Michael Saylor converting $425 million of MicroStrategy’s treasury reserves into BTC. Like Carlos Hernández deciding to ‘opt out’ of Venezuela’s currency and put all his savings in bitcoin. Like Jack Dorsey putting 1% of Square’s reserves into bitcoin and committing money to fund Bitcoin development. Like any genius developer who chooses to work at Coinbase instead of Facebook. Like the young regulator at the CFTC who pushes for bitcoin-friendly legislation. Like the tailor who carries his ‘Bitcoins’ bag into Deutsche Bank to fit suits.

Thousands of small (or gigantic) acts of entrepreneurship will eventually tip the balance until a flood of money exits the fiat system into Bitcoin. Drip, drip, drip… and then a tidal wave.

People often talk about hyperbitcoinization as an ‘end-state’ — the goal we’re moving towards. Like one day there’s a switch. But hyperbitcoinization is actually the process . Remember, we’re talking about a new form of money evolving. We’ve been through the history of money — we know it will take decades to grow and develop. But how does it play out? The simple version looks like this:

1. Store of value

Bitcoin spends the next 5-10 years swallowing trillions in wealth, growing into an established store of value, pushing the BTC price up until it stabilizes.

2. Medium of exchange

When the price is sufficiently stable, bitcoin becomes convenient as an exchange currency. People use it to opt out of spyware national digital currencies. Rogue nations use it to fund imports and exports. Eventually, it morphs into a day-to-day currency across the planet.

3. Unit of account

When bitcoin becomes the global reserve currency, we start to price everything in BTC. Bitcoin is officially the world’s reserve currency.

Game Theory

This whole future rests on bitcoin growing as a store of value until it becomes relatively stable. No-one’s going to use bitcoin to buy coffee at Dunks until the volatility is ironed out and the price is stable over time. And for that to happen, we need the price to go up. A lot. We need more liquidity, more money in the system. Trillions of it. Tens of trillions. Bitcoin is still a little tug boat at the moment, thrown around by the wild violent sea of markets. We need bitcoin to grow into an ocean liner. A monster asset that can sail gently through choppy seas. We need size.

So how do we get there? Easy. Game theory.

Game Theory is basically… chess. It’s about predicting what your rivals will do, and beating them to it. Like collecting wampum because you think will be valuable to others in the future, and doing it before anyone else.

Bitcoin has Game Theory built in, because it’s scarce. It’s literally a game of accumulation. Who can stockpile the most bitcoin? This triggered the earliest investors. The Winklevoss Twins wanted to own 1% of the supply, Pomp and I aspired to do the same, anticipating that it would give them (and us) a powerful position in the future. Game Theory.

And now it’s happening on a monster scale with public companies and nation-states. A battle royal of Game Theory to accumulate magnificent power and wealth. Here’s how it plays out over the next few years.

Individual investors

It’s hard to overstate the Paul Tudor Jones news. The man put 1-2% of his multi-billion wealth into bitcoin, and it will trigger a flood of new money from individual investors. And then there was Stanley Druckenmiller. People worship these guys, and follow them religiously. Get ready for a ton of high-net-worth investors to quietly start building positions. I guarantee the phones are ringing off the hook at family offices. What is this bitcoin thing that Paul Tudor Jones is buying? They start taking more bitcoin off the market, raising the price floor and adding a new generation of die-hard holders. Bitcoin becomes a status symbol for high-net-worth individuals. Accumulating 100 or 1,000 BTC is a power grab. A game-theoretic chess move to one-up their rivals. No-one wants to be last. Eventually, only the mega-wealthy can afford one bitcoin.

Institutional investors

Wall Street finally arrives. A few hedge funds ‘dabbled’ in the 2017 bubble, catching the momentum on the run-up. But now it’s a different ball game. Bitcoin has emerged as a true inflation hedge. It gets put in the inflation bucket at Fidelity, Goldman Sachs, Black Rock. It just takes one firm to take the plunge and the game theory kicks in. Everyone on Wall Street, and I mean everyone, is obsessed with their annual return. Investors are watching the ‘fastest horse’ leave the stable without them. How long before their clients start demanding they buy bitcoin? At Morgan Creek Digital, we got the first few pension funds to put money into the space, but more are coming. Those conversations are getting easier. If you thought retail FOMO was strong in 2017, wait until you see what institutional FOMO looks like. Again, this is just game theory. Someone needs to go through the door first and the rest follow.

Infrastructure

Bitcoin gets easier to buy in every single cycle. Now we’ve got Square’s Cash App selling bitcoin. They’re making so much revenue from this move that others start taking notice. In October 2020, PayPal bit the bullet and started offering bitcoin too. Game theory . PayPal did this because they’re scared of Square getting ahead. Who’s next? The same thing is happening on Wall Street with institutional infrastructure. It’s now easier than ever for Wall Street to buy and store (custody) digital assets. First Fidelity launched institutional-grade custody and trading for BTC. Now the rest of Wall Street is desperately trying to find custody solutions for bitcoin. Game theory .

Regulation

Bitcoin will get more and more green lights in this coming era. And it’ll happen on a global scale. China launched a ‘blockchain’ campaign in 2019 to pave the way for its digital currency. The US has to take notice and innovate to keep up. Game theory . Eventually we’re going to get a bitcoin ETF approved because of the sheer embarrassment of being left behind — and it’ll be the easiest possible way for investors and institutions to get exposure to bitcoin.

Corporate treasuries

MicroStrategy was the first public company to add bitcoin to its treasury. Literally weeks later, Square followed. Game theory . Now everyone is talking about Square’s bitcoin bet. They’re watching the bitcoin price go up. They’re watching Square’s stock price go up. They see MicroStrategy making $100 million in a couple of months from it. And now they want some for themselves. They don’t want to get left behind. Maybe just a 1% allocation, to test the water. Then more, then more. A handful of forward-thinking tech companies add bitcoin to their reserves in the next two-five years. Maybe we even get a really big name like Facebook. And that’s just the public companies. Private companies are quietly adding BTC to their reserves too. They don’t need to convince thousands of shareholders, it’s just a few boardroom decisions. This is already happening quietly.

On top of this battle royal of game theory accumulation, the whole culture around digital currencies is becoming normalized.

Digital currencies are normalized

In October 2020, JP Morgan’s cryptocurrency called JPMCoin went live. It’ll standardize digital currencies across the banking system. Maybe Facebook’s Libra launches in the next couple of years. As I write this, WhatsApp just launched a watered-down version of the payment system to users in India. But soon, everyone will have access to a digital wallet through Facebook, WhatsApp or Instagram. People get comfortable with the idea of digital money and start to move more of their cash out of the banks. In China, DCEP will roll out on a much bigger scale with Alipay and WeChat dominating the space. By the 2022 Winter Olympics in Beijing, everyone will use DCEP to transact and cash will almost completely disappear. None of this directly boosts bitcoin, but suddenly everyone is familiar with digital currencies. All of it is framed in comparison to bitcoin. Education around crypto grows and more people test the water.

And on top of that, natural demand for bitcoin will grow in developing nations with failing currency regimes.

More currency regimes topple

The ripple effect of Covid and money printing will spread around the globe in the next five years. More nations spiral into high inflation as they try to tackle the crisis. Turkey will be the next major country to see runaway inflation and citizens will flee to bitcoin to protect their savings. Brazil is edging closer to another currency crisis. Ukraine, Russia, Venezuela, Pakistan and Nigeria will also see big devaluations and a surge in bitcoin volume.

And back at home, people will get really worried about the debt.

US debt spirals out of control

In 2021, US debt will rise above 100% of GDP for the first time since World War II (for a full fiscal year). In other words — the debt will be bigger than our annual economy. This gigantic, psychological number will lead even more people to question what the hell is going on with the dollar. And that question always leads to bitcoin.

The wave of demand coming to hit bitcoin in the next decade will make 2017 look like a ripple.

Where are we in bitcoin’s monetary evolution?

We’re still in the ‘store of value’ stage. Big players are accumulating bitcoin and storing it for the long term. Just like cavemen stored shells and necklaces they thought would be worth something to other tribes in the future. Just like the US hoarded gold before becoming the world’s dominant monetary power. People are storing wealth and power for the future. But now it’s happening at a global scale — public companies, billionaire investors. Bitcoin won’t evolve into a ‘medium of exchange’ yet, but the foundation of wealth is being built.

Oh, and there’s one more major bitcoin buyer on the horizon we haven’t even talked about yet. The nation-state.

Chapter 29:

Nation-States Are Hoarding Bitcoin

Things happen fast. Just as I was about to finish this book, this happened.

A news report revealed that Iran was stockpiling bitcoin. Well, they didn’t exactly say it out loud, but there’s no other way to read this. Iran changed its law to allow crypto miners to sell to the central bank. Actually, it requires them to. Iran is forcing crypto miners to sell them bitcoin (at who knows what price). And here’s the even bigger catch. The bitcoin can only be used to fund imports by the Central Bank of Iran.

Translation: Iran is hoarding bitcoin… and intends to use it as a global trade currency.

This makes a lot of sense. Iran’s economy is being choked by sanctions. More than $100 billion of Iranian money and assets are frozen around the world. And Iran isn’t allowed to sell oil abroad. All of this happens because of the dollar. America can block transactions or threaten sanctions on countries that do business with Iran.

Iran literally can’t use the dollars it holds in reserve. But they can use bitcoin. It’s money you can’t fuck with. No-one can stop them buying, storing and trading with bitcoin. Bitcoin allows Iran to kickstart a parallel economy, where they can export oil without getting shut down by sanctions.

And Iran isn’t the only one.

In 2019, an obscure Russian economist came out and made a bold statement: “[The] Russian government is about to make a step to start diversifying financial reserves into bitcoin.” Vladislav Ginko went on to make various claims about Russia dumping the dollar for bitcoin as a way to avoid US sanctions. The guy doesn’t seem to have too much credibility, so take all this with a grain of salt. But this is where we’re heading next. Nation-states adding bitcoin to their reserves.

The Russia claim is pretty ‘out there,’ but if you look closely, it’s not impossible.

Look at this chart. In 2018, Russia dumped almost all of its US Treasuries. $81 billion dollar’s worth in a couple of months.

Image: US Treasury Dept. / WolfStreet.com

Guess what they’re buying instead? Gold. Since 2000, Russia has trebled its reserves of gold. They’re dumping dollars and loading up on ‘hard’ money. Would bitcoin be such a big stretch? We already know bitcoin is better at being gold than gold itself.

It gets more interesting, too. Russia is desperately looking for something other than the dollar to trade with. Putin’s not even hiding it. He openly said he wants “alternative reserve currencies and [to] create a financial system independent from the dollar.” He’s slashed the amount of trade executed in dollars. In 2014, 99% of trade between Russia and China was executed in dollars. Today it’s just 33%.

Russia is avoiding the dollar like the plague. Putin has good reason to find another trade currency. If the US tightens sanctions on Russia, they might not be able to export. Just like Iran. “Any wire transaction that takes place in the world involving US dollars is at some point cleared through a US bank. That means that the US government can tell that bank to freeze certain transactions,” explains Dmitry Dolgin, ING Bank’s chief economist for Russia.

Image: Bank of Russia / Bloomberg

Russia is desperate for an independent currency to avoid US rules. Would bitcoin be such a stretch? A truly independent, global, decentralized currency that can’t be seized or sanctioned?

We already know Vladimir Putin is a cautious fan of crypto, too. He spoke to Ethereum creator Vitalik Buterin and praised blockchain technology. And in 2020, Putin signed a law that gave legal status to digital assets. Russia is building… something… related to crypto.

Do North Korea and Venezuela already hold bitcoin?

And then there’s North Korea and Venezuela. Experts at the UN Security Council estimate that North Korea holds $670 million in bitcoin and cryptocurrency reserves. Some believe Kim Jong-Un has direct control over it.

Venezuela has nationalized cryptocurrency mining pools, which means the government controls any income from mining activity in the country. And they’re now running tests to figure out if they can hold bitcoin in its national reserves. The trajectory here is pretty obvious. Just like Iran, they’re going to funnel bitcoin from crypto miners into the central bank reserves. We also know the state-owned gas company PDVSA holds bitcoin. Again, all of this bitcoin activity is being used to sneak around US sanctions.

Does this remind you of anything? It’s the Silk Road… on a global scale.

More specifically, the Silk Road of oil barons. Because oil is priced in dollars, Iran, Russia and Venezuela can be sanctioned. But what if they traded with something else? Like bitcoin?

The first nations to adopt bitcoin are the rogue states. They use it because of bitcoin’s unfuckable nature. No-one can stop them buying or holding it. They can use it to export goods and skirt the dollar system. It’s exactly like drug users using bitcoin on the Silk Road. A dark web market at the global level. So who else is on the sanction list? Syria and Cuba are up there. And then there are targeted sanctions on Belarus, Nicaragua, Sudan, Iraq, Libya, Russia, Yemen, Zimbabwe, Hong Kong, Democratic Republic of Congo, Mali, Somalia, Burundi, Balkans. All these countries have reason to hold bitcoin as a way of avoiding sanctions.

But we already know that the Silk Road and black-markets didn’t define bitcoin. This isn’t just a dark web currency. It started out that way, but it evolves. Now we have legitimate companies like MicroStrategy holding bitcoin as an inflation hedge.

So who’s the nation-state equivalent of MicroStrategy? Who’s the first to announce a bitcoin reserve as a legitimate inflation hedge against the dollar?

I guarantee someone out there — a president or central banker or treasury secretary — is nervous about their country’s fiat currency reserves. Nation-states are just a group of people. If you and I are worried about fiat devaluation, then so is someone in power. It’s going to happen. One day, a legitimate nation-state will announce a bitcoin reserve and it will shock everyone. Remember, there’s a huge first-mover advantage here. MicroStrategy’s bitcoin investment triggered a $100 billion profit in just a few months. The first legitimate nation-state to adopt bitcoin as a reserve asset will reap the rewards.

So who will it be? It’ll probably be a small country, fed up with battling inflation and currency crises. They’ll be forward-thinking and have digital infrastructure ready to go. Somewhere like the Ukraine. The Ukraine has battled with currency crisis and devaluation for years. And they are one of the most digitally advanced societies in the world. They’ve got a government department called the Ministry of Digital Transformation which aims to create a ‘state in a smartphone’. In other words, they’re making everything digital. And they just launched an e-residency program aimed at attracting tech geniuses to live in the country. There’s a big startup scene, lots of blockchain developers and a digitally-native population.

Or maybe Kazakhstan. You think I’m joking, but Kazakhstan is one of the most quietly tech-savvy nations on the planet. They are digitizing the entire government and building smart cities. And on top of that, inflation runs pretty high. The perfect sweet spot for a legitimate bitcoin nation-state.

I mean, who really knows? But it won’t be the US or China or the UK or Germany. It’ll be a country like the Ukraine. Nothing to lose. A fuck it let’s try something different hail Mary. A bit like MicroStrategy itself. It was never going to be Facebook that added bitcoin to its reserves first. It was always going to be the quiet underdog. The forward-thinker looking for ways to break through and innovate.

And then game theory kicks in again. The fear of being left behind or losing global dominance. This is no longer just about investors or companies getting rich. It’s about nation-states accumulating power and wealth through bitcoin. No single country can control bitcoin, but they can grow powerful by owning a larger percentage of the supply.

Let’s say Ukraine is the first to add bitcoin to its national reserves. It gets the ‘MicroStrategy’ effect and profits almost immediately. On the back of their new power, they expand their military and technology prowess. Do you think Russia watches quietly? No way. Russia and Ukraine have a fierce rivalry. So Russia starts accumulating more bitcoin than Ukraine. Like an arms race. And do you think China sits quietly while Russia grows rich from bitcoin? No way. China starts accumulating. And if China starts building a bitcoin reserve, then America gets involved. And then there’s only two options. Ban it or start accumulating.

You can play out this game theory from almost any country on the planet. Let’s say Venezuela announces an official bitcoin reserve. Venezuela is an oil-rich country. Do you think the other oil nations sit quietly while Venezuela grows rich and powerful from bitcoin? Of course not. This trail leads us to Iran, Russia, China and, of course, the US.

Maybe it’s Turkey, run into the ground by rapid inflation. Turkey has geopolitical rivalries with Russia and in the Middle East. If Turkey starts accumulating bitcoin, it triggers a currency arms race in these regions. And all roads lead back to the US.

Like I said, no-one knows how this will play out. Not a single person I know in this industry predicted that MicroStrategy would add half a billion dollars worth of bitcoin to their reserves. It came out of nowhere. But someone will be the first. And remember, demographics are on our side. We’ll soon have millennial heads of state and millennials running central banks. It won’t seem like a crazy idea in ten years. It will feel inevitable.

Trade settlements in bitcoin

Back in 2010, Laszlo Hanyecz made history when he bought the two infamous bitcoin pizzas for 10,000 BTC. The first-ever commercial transaction in bitcoin. Nine years later, Argentina and Paraguay took it to the next level. The two nations settled an international trade export of pesticides in bitcoin. It was only $7,100 worth of product, and the money was converted back to the local currency immediately. But it proved the Bitcoin network could be used for international trade. It was faster and cheaper than the traditional SWIFT network.

This is the future. Bitcoin isn’t just the best reserve asset, it’s the perfect currency for global trade. Remember way back in our history of money? Money was invented so that rival tribes could exchange without having to trust each other. That’s why gold became the world’s main currency. You can’t have an IOU with your worst enemy — you might never see them again and you certainly can’t trust them to pay you back. But if you have an independent hard currency, like gold or bitcoin, you can trade with your arch-rival without needing to trust them. There’s no IOU, just a pure exchange of something you both agree has value.

That’s not really how money works anymore. Now you have to trust the country that issues the reserve currency. Russia, China, India… they all have to trust the dollar system. If they trade in dollars, they have to trust the US banks and the US Federal Reserve. But we already know that America can fuck with the money. They can devalue it and censor global trade by using sanctions. Every global trade is political, because of the money.

Russia and China are already fed up. They switched to using the euro for exports, but now they have to trust the European Union and the European Central Bank, who can also fuck with the money. The whole thing is political. Every nation has rivalries and alliances and power games. Choosing which currency to trade in has massive consequences.

Eventually, some will get so fed up, they start using something completely neutral and non-political: bitcoin. The Bitcoin network will become the ultimate global settlement layer of the new digital economy. No more power games and politics. It’s neutral and impartial, settled in hard currency, not credit or an IOU. No politics, no sanctions, no allegiances. It’s fair and transparent. A financial system that even enemies can agree has value. They can still convert back to their own currency at the other end. It’s the unfuckable Bitcoin rails that matter.

Again, this will start with small, rebel countries. It looks like Iran will use bitcoin to settle imports. Maybe another rogue state settles an arms trade via Bitcoin. Just like bitcoin on the Silk Road back in 2013, the first big use-case on the global trading scale will probably be uncensorable exports for things like oil and weapons.

Maybe it gets bigger than that. We already know that China and Russia have moved away from the dollar for trade. But there’s still a power game. Do they use the yuan? The Russian ruble? Or something like the euro? In the absence of anything else, maybe they can agree to settle on neutral ground — bitcoin.

This all sounds inevitable, but there’s still one problem with this theory. None of it will happen without a fight.

Get ready for the “War on Bitcoin”

“History teaches that the transition to a new global reserve currency may not proceed smoothly.”

Mark Carney, former Bank of England governor

Unfortunately, there’s not much chance of any of this happening peacefully. If the US or China feels their power slipping away, they’ll do everything they can to stop it. There’s a theory by Eric Voskuil that outlines a “war on bitcoin” scenario. He thinks there are four stages in the fight for money:

1. Honeymoon

The US cautiously allows bitcoin activity (current state).

2. Black-market

The US gets nervous and bans bitcoin activity.

3. Competition

The US caves in and starts competing. They mine bitcoin and try to control it.

4. Surrender

They finally give up and accept bitcoin as a competing reserve currency.

We’re in the honeymoon phase now. We’re all still free to buy bitcoin, make transactions and mine crypto. Governments regulate it tightly — especially the exchanges, but they’re not too worried, yet. But what happens if bitcoin starts becoming a real threat to the dollar? What if more rogue nations add bitcoin to their reserves? Or use it as a global trade currency to avoid sanctions? At some point, America will hit the brakes. Maybe they ban bitcoin transactions and mining. Maybe they fast-track the digital dollar and force it on the world.

As we know, you can’t fuck with bitcoin. You can ban it, but you can’t kill it. It’s like a cockroach. If you wipe out all the miners in America, they’ll move to China. If China bans mining, they’ll go somewhere else. Some country in the world will put up a flag as the ‘bitcoin-friendly’ nation to lure miners with tax incentives. Many already have. The Philippines, Belarus and Georgia (the former Soviet country, not the state) have already set up ‘free economic zones’ to entice crypto exchanges and mining companies. It’s a game of whack-a-mole. No doubt the bitcoin price would take a hit if the US or China banned it, but the network keeps ticking. One block at a time. Every ten minutes.

Eventually, governments realize they can’t wipe it out. Miners keep mining, developers keep building, people keep accumulating, and more people use bitcoin as a way to avoid the super-surveillance currencies — central bank digital currencies, Libra, DCEP, Fedcoin, JPMorgan Coin, Digital Euro — whatever else they come up with.

So the governments start competing. America or China starts mining bitcoin. They try to gain more than half the hash rate and launch a 51% attack. They try to censor or control transactions on the Bitcoin blockchain. But it won’t work. America has to mine at a loss — you don’t get any fees when you try to fuck with transactions. Plus, the Bitcoin network is too big and too decentralized. No country can gather enough hash power to bring it down.

Finally, they surrender. They accept that Bitcoin will coexist on the global stage. It becomes a global reserve currency, up there with the dollar, the yuan, the euro, the yen. Now it’s just a question of choice. Do you use the fiat currencies? Politically motivated, tied to a single economy, destined to devalue over time, easy to censor and confiscate, with hyper-surveillance properties built in?

Or do you use bitcoin? Money that no-one can mess with? Independent and neutral from any political regime or economy, naturally designed to accrue and hold value, impossible to manipulate or confiscate, with faster, cheaper rails, protected by the strongest computing network in history?

You choose bitcoin.

Chapter 30:

You Are Still Early

If this version of reality plays out like many bitcoiners believe, we are still incredibly early in the process. Don’t worry about missing the boat.

Trace Mayer is a bitcoin investor who calls himself the ‘hodler of last resort’. He’s holding forever. He was one of the bitcoin OGs, first buying when it was less than a dollar. After the first big run-up, when BTC settled around $3, he told investors they might be too late, at least to capture those early gains.

Imagine looking back at bitcoin and thinking that $3 was ‘late’.

Everyone thinks they’ve missed the boat when they first get into bitcoin. I started mining seriously in 2015 and I thought I was late. Bitcoin was trading around $300 at the time. I look back and can’t believe you could ever buy a whole bitcoin for $300, let alone $3. Trust me, if you’re reading this in 2020, 2021, 2022, 2023, 2024…. you are still early.

This is a long game. Decades. Generations. Centuries. Expand your time horizon. We’re talking about the next global reserve currency of the world. We’ve got a long way to go. And the price needs to go way higher, way higher, before we get there. Let’s just put it into perspective, based on some visuals created by Visual Capitalist.

Here’s bitcoin:

At a $280 billion market capitalization, it’s one small dot (and a bit more) on this scale. So how does it compare to the world’s wealthy? Jeff Bezos, with a net worth of $190 billion could buy almost the entire bitcoin supply. Warren Buffett could buy half of it… in cash. Buffett has $137 billion sitting in cash at Berkshire Hathaway. Obviously neither would be possible, it’s just for perspective. Here’s the total wealth of the world’s billionaires in comparison — $8 trillion. What happens if one of these little blocks moves to bitcoin?

And here’s gold. $10.9 trillion.

We already know that bitcoin is better at being gold than gold itself. $10.9 trillion is bitcoin’s first big target. Overtaking gold is just a matter of time. If that happens, one bitcoin would be worth about $500,000.

Here’s the Fortune 500.

Lots of investors are using the stock market as a ‘store of value’ right now. That’s not what it’s designed for. Bitcoin could easily bite into this market in a big way. Move two of those squares to bitcoin and what do you think happens next?

Here’s the entire stock market. $90 trillion dollars. Bitcoin will steal value from here too.

Now here’s where it gets interesting. Here’s the money supply. M1 is ‘easily accessible’ money like notes, coins, checking accounts (about $35 trillion). M2 is ‘broader money’ like savings accounts and money market funds — together they make up $100 trillion.

Bitcoin will eat into M2 first as it grows as a store of value. Eventually, it will eat M1 as well as it becomes a ‘medium of exchange’ and day-to-day currency. If bitcoin became the dominant form of money and displaced this entire money supply, one bitcoin would be worth $4.7 million .

And we’re still just getting started. Let’s talk about debt. The total amount of debt on the planet — between households, governments and corporations is $253 trillion. Denominated in bitcoin, that’s almost $12 million per BTC .

What about real estate? Bitcoin will start eating into this soon. Most people think of real estate as buying a home, but, ask any wealthy person, they use real estate as a store of value. There’s a street in London called Billionaire’s Row. A third of the mansions on this road are empty — $450 million worth of real estate with no-one living there. Real estate is just a store of value for wealthy families. Imagine if they start moving some of that to bitcoin instead — a superior store of value. The world’s real estate is worth $280 trillion. The chart is so big I can’t even fit it in the book. Even a tiny percentage moving into bitcoin would send the price into orbit.

Put together, the world’s total wealth is $360 trillion. If all of this were denominated in bitcoin, we’re looking at $17 million for one BTC .

And we’re not still not done. Guess how much the world’s derivatives are worth? I’m talking about things that represent some underlying value. They’re used in financial markets, like futures contracts, options, and those ridiculous collateralized debt obligations that triggered the 2008 collapse.

All that is worth… wait for it… $1 quadrillion.

If all that was denominated in bitcoin, we’re looking at a $47 million bitcoin . And that’s on the basis of bitcoin’s full 21 million supply. We know that 4 million are lost forever. If we take that into account, it’s closer to $59 million per bitcoin .

Or to put it in more simple terms, just less than a dollar per sat.

So, yeah, if you’re reading this, you’re still early.

Chapter 31:

The End (Don’t Buy Coffee

With Bitcoin)

The point of all of this… the whole book… is to understand where we are in bitcoin’s story. I hope you go away thinking that bitcoin is more important than ‘fast, global payments’ or magic internet money. This isn’t a new fin-tech app for buying coffee.

It’s so much bigger than that. It’s a whole new form of money. A new financial system. A parallel universe that lets you escape the broken world around you. It’s a scarce asset, slowly sucking up value from all the infinite currencies around it. A new financial system that can’t be controlled or manipulated by politics or human greed. A fair and transparent money for a divided world.

It’s a lifeline for people in Venezuela and Argentina who are forced to watch their governments print their money into oblivion. It’s a new ‘savings technology’ for our guy in the Bronx whose daughter dreams of going to NYU. It’s an escape from the inevitable hyper-surveillance digital currencies that are coming for us.

I mean, seriously, just don’t buy coffee with bitcoin. This thing has the potential to change the world. And if we’re right, bitcoin will swallow quadrillions of dollars in value. You really want to give up your share of this scarce asset to buy a cup of coffee at Dunks?

There’s a meme of Neo and Morpheus from the Matrix. Neo asks Morpheus, “What are you trying to tell me, that I can trade my bitcoin for millions one day?” Morpheus replies, “No Neo, I’m trying to tell you that when you’re ready, you won’t have to.”

Bitcoin will gorge on the world’s ‘store of value’ assets until it is a monster of its own — bigger than gold. The ultimate store of generational wealth, protected by an army of relentless computing power. Bitcoin’s price will stabilize over time and become a global reserve asset. The perfect intermediary for international trade. Independent financial rails with no politics or agenda or bullshit.

And one-by-one, people will opt out of the spyware digital currencies forced on them by their governments. They’ll reject infinite money printing, the relentless debasement of their money and the inequality it causes. They’ll convene around one, neutral, independent currency, with fair rules for all. No more devaluation. No more confiscations or censorship. The ultimate digital money for a new digital world.

The people will choose bitcoin. Hard money you can’t fuck with.

About the author…

Jason A. Williams is co-founder Morgan Creek Digital Assets. Bought and sold some cool companies. Follow him on Twitter @GoingParabolic or YouTube.

Early reviews for Jason’s work

“[Jason’s] office is appropriately located in a Starbucks restroom, one step up from that shitcoin stinking cesspool.”

Nouriel Roubini (New York University’s Stern School of Business)

“Where is that dickhead [bitcoin] maximalist that was bragging about his 12 yo kid spending all her money on BTC last week? … Fucking melt.”

Satoshi Nakameowdough (keyboard warrior)

“[Bitcoin is] immoral… I think the people pushing it are a disgrace… It’s a scumball activity.”

Charlie Munger (Berkshire Hathaway)

“[Bitcoin is] a fraud… Worse than tulips.”

Jamie Dimon (CEO JP Morgan)

“[It’s] rat poison squared… It doesn’t do anything. It just sits there. It’s like a seashell or something.”

Warren Buffett (CEO Berkshire Hathaway)

“This is a bubble. It’s a cult… It’s a natural Ponzi scheme.”

Peter Schiff (CEO Euro Pacific Capital Inc.)

“I think it’s one of the silliest ideas I’ve heard in a long time… Utter and complete nonsense.”

Dennis Gartman (‘Commodities King’ investor)

“Hope you and your family get fucked.”

@awyeedeaterbob (another keyboard warrior)

Table of Contents

PART 1: WHY BITCOIN MATTERS NOW

Chapter 1: Money Printer Go Brrr

Chapter 2: A Brief Run-in With the FBI

Chapter 3: Magic Internet Money

Chapter 4: Bitcoin Is Scarce… Really Scarce

Chapter 5: The Big Short

Chapter 6: Here’s How the Money Printer Actually Works

Chapter 7: “Bitcoin Saved My Family”

Chapter 8: How to Buy $425 Million of Bitcoin

Chapter 9: Bitcoin’s ‘Number Go Up’ Technology

Chapter 10: The Investment Case for Bitcoin

PART 2:A BRIEF HISTORY OF MONEY (AND MONEY PRINTING)

Chapter 11: If Ramen Is Money, So Is Bitcoin

Chapter 12: Ancient Money Printer Go Brrr

Chapter 13: How Scarce Is Bitcoin, Really?

Chapter 14: Colonial Money Printer Go Brrr

Chapter 15: Gold vs Bitcoin: Why Investors Are Almost Right, but Not Quite

Chapter 16: WAR: What Is It Good for? Printing Money

Chapter 17: How the Dollar Became the Global Reserve Currency

Chapter 18: WTF Happened In 1971?

Chapter 19: “Choose a Big Fucking Television” — Why Governments Will Always Devalue Your Money

Chapter 20: The $27 Trillion Problem No-One Is Talking About

Chapter 21: Currency Wars Lead to Real Wars

PART 3:HYPERBITCOINIZATION: HOW BITCOIN BECOMES THE NEXT GLOBAL RESERVE CURRENCY

Chapter 22: “Hell Is Coming” — The 2020 Crisis

Chapter 23: The Bitcoin Halving

Chapter 24: The End of the US dollar?

Chapter 25: Central Bank Digital Currencies Are Coming… and They’re Terrifying

Chapter 26: The Fourth Turning — A New Era Begins

Chapter 27: Only “Dumb, Inexperienced Kids” Buy Bitcoin

Chapter 28: Hyperbitcoinization

Chapter 29: Nation-States Are Hoarding Bitcoin

Chapter 30: You Are Still Early

Chapter 31: The End (Don’t Buy Coffee With Bitcoin)

About the author…