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Friends and associates,

Headline crypto markets were flat over the past month, which took me somewhat by surprise so in this months market comment I conduct a brief reflection.

TLDR:

Derivative market liquidations, Evergrande fears and some regulatory fears put crypto on the back-burner. While I am reflective, I am unconcerned. Fundamentals are strong, bitcoin is deeply undervalued and risks are reasonably contained.

Full market review

On to this months note

Bitcoin is the Reserve Asset of Crypto (& more)

There is immense value in the broader crypto ecosystem of decentralised financial technologies but the bright shiny lights of the fastest appreciating token also pose a risk. Desire to beat the market can distract us. Bitcoin remains the most important asset in the ecosystem because of its resilience to external attack. Bitcoin is a reserve asset that creates a robust decentralised foundation at the centre of a new digital economy. The rest of crypto is reliant on bitcoin, but a dogmatic bitcoin-only belief is also unhelpful. There is a symbiotic relationship between the core and periphery where innovation takes place at the edges and BTC trudges on boringly at the centre.

I recently read Nik Bhatia’s excellent new book Layered Money. He provides a concise monetary history to press home his core insights. Financial systems usually pyramid layers of money on top of a stable foundation. I agree with his thesis that bitcoin will become the foundation of a future financial system and use this as an important framework in my analysis of price action and risk.

Conclusions:

• Financial systems are built in a layered structure with a stable foundation at the core

• Bitcoin already displays these characteristics as the reserve asset of crypto

• Bitcoin remains the most important asset because of its resilience to external attack

• There is a symbiotic relationship between bitcoin’s core and the crypto periphery

• I am assessing my risk allocation but always in reference to bitcoin

• The bright shiny lights of crypto can be risky, particularly if bitcoin dominance is low

Full article: https://soundmoneymacro.com/bitcoin-reserve-asset-crypto/

Wishing you a great October. Bring it home!