Tail that wags the miner's dog

Hopefully you recall my oil rig analogy vs price fluctuations and how its similar dynamic in crypto mining world. So with increasing mining footprint comes higher accountability standards and herein we are already seeing minister of energy of Kazakhstan stipulating a few ground rules

Given this pseudo-cap on miners, supply chain disruptions and pretty sizeable short put positioning occurring on BTC derivatives; I am wondering if there is a supply shock narrative incoming

Gensler's aisle 3

FTX International's annualised funding rate has been 7% for 95% of nearly past
2 weeks. On-the-other-hand, Coinbase offered 4% for USDC but SEC wasn't so happy with that idea, so Coinbase went to Fixed Income market and closed 2 deals.

• 7-year, $1.0bn @ 3.4%
• 10-year, $1.0bn @ 3.6%

Appetite is clearly there however one must wonder if same FI participants couldn't have gotten that 0.4% extra if only SEC let Coinbase borrow against USDC (that's a lot of money left on the table). Furthermore, whats keeping same FI managers from going directly into crypto ecosystem?

Few thoughts...

I was introduced to Bitcoin in 2011. I hated the technical explanations being spoken and didn't find it enticing enough or rocket science. I however did see the passion with which folks would explain or defend it. Without reading anything more technical, I asked myself, will I regret it if I didn't buy a bit of it and it went parabolic (admittedly, had never heard of tulip mania at that time)?

This is similar to current thoughts that folks are having with regards to hedging their bets by having at-least 1% of their portfolio in bitcoin. So I decided it might be stupid idea but I don't wish to have regrets so I learned the technical hoops needed to buy it myself...rest is sort of history as I lost 99% of it on mtgox in 2014.

2011 onwards - the narrative was folks have lost trust in tradFi (due to global financial crisis + all regional crises in Eurozone etc).

2012 / 2013 - I saw the use cases of blockchain technology and agreed it made sense. However, I still found the bitcoin explanations rather unpolished - nevertheless, saw the market was providing many opportunities for those willing to learn and play a role - e.g. automated market making.

Late 2013 / early 2014 - the collapse of MtGox (biggest bitcoin exchange by far) led to many folks becoming disillusioned and leaving the space altogether. This woke up many sleepy regulators to consumer protection implications. Folks were loudly asking is it really a commodity or not.

2015 - I took my time to recover thoughts, learn the technical underpinnings, actually read the bitcoin whitepaper in greater detail (instead of just glossing over). Personally, there are only 2 research papers that I have ever found
illuminating from potential use case perspective:

• the bitcoin paper of Satoshi, and
• the research paper titled The Anatomy of a Lorge-Scale
  Hypertextual Web Search Engine by Larry Page and Sergey Brin aka google

Slowly, I got around to understanding the passion of diehard fans of bitcoin by realising that at bitcoin's very heart it doesn't enforce its utilisation to only be a payments network. It can be leveraged for other use cases e.g. you could theoretically build a notary system on top of it and its as secure as your current online banking. Essentially early-bird fans were right but not explaining things properly or were being too utopian in their explanations.

2016 onwards - there is slow uptake in additional thoughts of tradFi aspects such as IPOs - why must start-ups have to raise (beg at times) money from funds/VCs when we can go direct to the market via crypto avenues thus the boom of ICOs etc. Thats when regulators began to take notice of a new dynamic.

2017 - many old "bitcoin" folks exited major percentage of bitcoin positions and started to think about coming decades (I am ignoring here the "influencers" and their internal fights like Roger Ver etc). Herein, I sensed the dynamics slowly shifted from passing of baton to those who wish to be thought leaders as well as newer generation that grew up in the online world. I sometimes feel I belong to the old "bitcoin" group largely because of how crazy privacy oriented (or as my partner says "paranoid") I am. In my defense this might be largely related to my upbringing in 3ed world where sometimes its prudent to not be overt about aspects of your life or wealth. This is also the first year I publicly mentioned bitcoin amongst colleagues. Until this year it didn't seem socially responsible or acceptable to speak of this topic.

2018 - regulators became more vocal in their pronunciations especially against
ICOs and how these clearly are securities violations. This was a welcome change however I noticed some prominent pro-bitcoin folks pushing against it. Bitcoin at its core is also cryptography community - a group that doesn't like it being monitored so its understandable how every inch given to regulators feels like a defeat. Nevertheless if the aim is to provide a borderless, sovereign, permission-less, censorship resistant form of "money" to world's general population then there must be acceptance of rules that govern societies; albeit, those rules certainly need to be updated. This regulator spotlight put further impetuous into deFi efforts to ensure truer form of decentralisation.

2019 - silent running teams building out deFi protocols / tools / markets including NFT + gaming concepts.

2020 - the same thoughts of 2019 are now in public sphere where they are being expounded upon and show casing new aspects of our "online" culture. Additionally, the covid crash questioned to what extent is bitcoin decoupled from tradFi ecosystem.

2021 - the biggest takeaway is the thinking of the key crypto players, like FTX's Sam. Folks have realised there will always be ups/downs however if the crypto narrative is to stay then the brands must be in public life. To that end, all the various sponsorship deals; naming rights, M&A activities being conducted are to ensure this story continues to assimilate itself with the general public; especially the younger crowd who live & breathe their lives through electronic forms of media.

Now to narrative understanding:

Bitcoin is technology yet its narrative can be moulded depending on how its
utilised. Allocating 1% of bitcoin now is not same as those who did that in early 2010s - in absolute terms the price must move substantially now for investors to feel they are making gains; nevertheless, the volatility of the asset is beauty for those who delve in such complex trading strategies.

Personally, I feel the entrants to GBTC holdings must have done some sort of due diligence (e.g. Morgan Stanley's various funds) in order to hold / accumulate such large positons (since GBTC flipped from being at premium to discount relative to BTC spot). This trade feels more of a 3+ year game plan than a short-term strategy.

As data centers become efficient and increasingly incorporate renewable sources of energy for mining there is a case to be made for ESG compliant digital "gold" as opposed to physical one.

The changing narratives in bitcoin & ETH world show that its technologies that are still largely nascent and are actively looking for where they belong as opposed to having found their "calling". I feel bitcoin (and by extension ETH) belong to ground zero of new "online" culture.

• e.g. internet is a complex set of protocols that we currently don't ever talk about as normal users - we just open a browser and visit whatever website we wish to visit; similarly, bitcoin / ETH are divergent yet similar layers for a new ecosystem - some call it web3 others sometimes like to use the word metaverse - irrespective its new exploratory world

Will they survive next 100 years? Hard to say however we as humans live on hope and in some ways the pricing of these new "assets" is our aspirational value.

Lastly, as retail, its easier to put $10k into ETH/SOL/UNI etc than in BTC. Thereby, naturally, the next evolution of BTC should be crypto exchanges
offering BTC in units of Sats (i.e. satoshis - https://www.investopedia.com/terms/s/satoshi.asp). Until than; current "fomo" is by entities & individuals belonging to
(U)HNW bracket who must learn to stomach the 30% gyrations in price or go yield shopping via derivatives.

Post-amble

Governments by their very nature are lovers of control via regulations. Governments' fascination with CBDCs will continue to increase as they realise they will have greater means of control over their policy implementations; thus by extension over their populace. This is already being seen in some debates in UK as well as some leaked plans on China's "programmable" money.

Herein bitcoin has a role to play (over coming decades) if cards are played right. It provides a means to be self sovereign - a narrative that it's always had and which has a potential to garner further public support over coming years. So in some weird way this is a play on public policy hedge - or a long term geopolitical game theory of sorts for wealth preservation.

Interesting Reads / Listens:

Here is the link to US Sentencing Commission's copy of Satoshi's whitepaper with a glossary of terms which is helpful - https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf