Time will tell...
Friday September 23, 2022 - Issue # 23
Happy Friday!
Did you catch Jerome Powell’s remarks after another 75 bps rate hike decision on Wednesday? If not, I’ll save you the time — he transformed into whatever bird is bigger/meaner than a hawk and repeated over and over again that the Fed will do whatever it takes to bring inflation down to their target of 2%.
The vibe check on Twitter from the illustrious Fed watchers is that of fear about previous QE (money printing) and tightening phases — the Fed will once again go way too far, way too fast and break something before having to reverse course.
As much as it sucks thinking that something could break and drum up some nasty repercussions; there’s a part of me that’s anxious to see what happens. If we’re definitely headed in that direction then let’s just get it over with!
This is how I’ve been feeling on Bay St. lately:
Now that Ethereum has appeased the Net-Zero crowd by transitioning to PoS, I’ve been noticing an accelerated attack on Bitcoin’s merits as the King of Crypto.
“Now that ETH has made this transition to be 99.9% more energy efficient, does this start to be a problem for Bitcoin?”
“If you’re an institutional investor and you’ve got Ethereum, Solana, and other PoS projects that use a lot less energy, can you justify having a Bitcoin holding?”
“When will Bitcoin respond to it’s competition and lower its energy use per transaction?”
Unfortunately for Greta and her followers, but fortunately for the sake of the entire crypto ecosystem (and some might argue, humanity), Bitcoin doesn’t have a leadership team that can make adjustments to solve for now. It doesn’t care about competition, in fact, it doesn’t even have any competition left after the Merge, in my opinion.
By now, if you cannot see a path where Bitcoin becomes a catalyst that accelerates the move to more efficient energy sources then you have simply not done the work. One of the things to keep in mind is that the more expensive it becomes to mine BTC the more it becomes infeasible to use marginal energy consumption. For example, back in the day you were able to mine BTC using electricity from your home. A more recent example is the effects that rising gas prices have had on most miners. Those miners will have to pack up their rigs and move to places where renewable energy sources are available and cheap — think hydro dams, nuclear power plants, geothermal energy.
The game theory is such that if the price of BTC appreciates high enough it actually accelerates us to renewable energy sources. As the price of BTC rises, so does the demand to mine it. Successful miners will be those that have access to the cheapest power sources. The cheapest power sources are and will be renewable.
Very simply, the answer to the world’s energy crisis is abundant nuclear power. The problem: politics. In our politicized world, leaders go back and forth arguing all day long about going green, getting to net-zero, blah blah blah…and it takes forever to come to an agreement on a path forward. It takes years to build a nuclear power plant and bring it online so sitting around and waiting for the greenlight does not seem wise.
Capitalism > Politics
If Bitcoin’s value becomes high enough, you will have thousands of miners knocking at every country’s door with the offer to move to and invest in that country if they put up a nuclear power plant. Some countries will welcome the offer and put up a nuclear power plant and we will start to see a global market for cheap energy develop which will result in more nuclear power plants spinning up in competition.
If you can adjust your time horizon out 10-20 years I believe there’s a strong case that Bitcoin can accelerate us to renewable energy sources by forcing the free market into action.
Anyway, my gf says that sometimes these pieces are too long so I’ll stop here and leave you with Jamie Dimon switching back to his original stance on Bitcoin in the last bear market:
lol…have a nice weekend!