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- Principles, dogmatism, marathons and sprints
Principles, dogmatism, marathons and sprints
Principles, dogmatism, marathons and sprints
Friends and associates,
This month we cover the July market rebound and delve into bitcoin culture in the think piece.
July was a more encouraging month for crypto participants with a 20% rebound in the price of bitcoin, the strongest monthly gain since October 2021. ETH rallied almost 60% on the month heading into the merge (when the protocol becomes entirely PoS). Crypto required the cover of equity market strength in order to stage a recovery in July, which is a concern, but below the surface bitcoin is searching for a bottom and capitulation is underway. Speculators are betting that the bottom might already be in, and there is good reason for this position but false starts and shakeouts need to be watched out for.
TDLR
: This is a marathon, not a sprint. These are great levels for long-term investors to build allocations. However further volatility should be expected over the coming months.
Conclusions:
Bitcoin is finding support at psychologically important 2017 all time highs
Capitulation is clear in the data, suggesting that a bottom is forming
Miners are also capitulating, which tends to happen later in bear markets
The Fed is closer to capitulation but liquidity stresses are rising
Speculators could be creating a shakier foundation through overuse of leverage
On-chain demand remains weak so cautious optimism is required.
Between 2015 and 2017 there was an intense civil war within the bitcoin community over the strategic direction of the protocol. In the end, bitcoin’s protocol rules were left largely unchanged, entrenching bitcoin's principles which underpin its value as a reserve asset. But the outcome may also have entrenched militancy into the community with less positive implications. Jonathan Bier covers this important period of bitcoin’s history in his book “The Blocksize War”. I have summarized my key take-homes in this article, which includes a personal commentary on bitcoin culture. (Note: These are personal comments, stimulated from reading the book and observing bitcoin culture. The author does not conduct this cultural speculation).TLDR: Bitcoin stands for itself and it is not controlled by any single party. The blocksize war entrenched these valuable principles but also inserted militaristic dogmatism into the culture.
Conclusions:
The blocksize war was a critical confirmation of bitcoin strategic direction towards stability and security, away from flexibility & low cost payments.
The outcome entrenched bitcoin’s core principles which make it valuable.
Militancy used during the war may have generated tribalism and dogmatism thereafter.
‘Bitcoin maximalism’ has benefits, protecting newbies from scams and ponzi’s.
Bitcoin’s principles and reserve current characteristics stand for themselves.
Toxicity could hamper the adoption path, however.
Close-mindedness is undesirable - there is tones of non-bitcoin innovation in crypto.
On the personal front, I will be in London at the end of August and start of September. I am looking forward to connecting with clients, old friends, family and the London crypto community. This is a great opportunity to strengthen the sound money community and reiterate our values after many virtual meetings across the Atlantic. If you are in town, please give me a shout.
Have a great August!