Good Morning Everyone,
The price of Bitcoin at the time of writing this is $47,136 when priced in melting USD ice cubes.
From the low in January 21 to now, price is up approximately 69%
From Low to high price rallied 147% in 2021
Lets compare that to major market indicies…
The Nasdaq (NQ1!) which is predominantly comprising of tech & financials, is up 31%, with the S&P (SPY) up 31% for the year. Both have printed new all time highs in the month of December, and look set to print new monthly closing all-time highs while Bitcoin is currently lagging and continues to consolidate sideways in a range.
Gold (GLD) is down 7% but has been ranging and consolidating since printing a high in August 2020. Current price of gold is down 12% from the highs. Silver is looking far weaker down 31% from its highs in the same month.
Oil (USOIL) was a star performer in 2021 up 79% from top to bottom, and continues to look extremely powerful into 2022.
You will notice that i choose not to get too distracted by short term price action in these letters, as i think it is far more valuable to focus on the developments on and around the protocol and to maintain a low time preference in relation to price relative to the US Dollar.
This is primarily due to my overarching thesis that over time, the USD as the unit of account (UOA) will change, and the most critical measurement from the perspective of UOA is the number of sats, or bitcoin. 1 BTC = 1 BTC
If everything else is essentially leaking value, or melting, while BTC over time retains it, then to measure your wealth in anything else makes little sense in my mind.
The 3 core pillars for something to function as money are:
SOV, MOE, UOA
Store of value. Medium of Exchange. Unit of Account.
Bitcoins initial widely accepted, beyond being something to speculate on is as a store of value. Thought of by many as digital gold - despite my belief this comparison falls well short of the true reality, for many its a useful analog to help people in developing their understanding of the asset.
As a medium of exchange the USD is far and away a better tool as MOE for now. But over time, this is likely to change. Whether it be to bitcoin or a variety of different currencies or monies.
Bitcoin is primarily addressing the properties needed to make it functional as a medium of exchange in higher layer solutions, like the L2 scaling solution, the lightning network.
But in my opinion where the rubber really meets the road, is where Bitcoin becomes widely accepted as a unit of account. Where other items are measured against the perceived value of BTC as a preference to other ‘monies’ because its a better proven SOV. It’s not commonly discussed or really acknowledged, but this process has already begun within the crypto space with other tokens and ‘assets’ being measured in both USD terms, and BTC terms.
Vijay Boyapati discussed this recently in an awesome podcast with Stephen Livera.
Money is very special. And, and the reason it has this premium is because people value it for the functions of money that it provides society that we really need. We really need the function of a store of value, really need the function of a medium of exchange. We really need the function of unit of account. and I think that the importance of that insight, is that money doesn’t get its value from its utility.
Once you make this change in your mind, the reality of what is happening around you becomes much clearer. It’s easy to accumulate things in USD terms (or fill in the blank with any political money), because they are melting ice cubes, but it becomes clear that it is far more difficult to accumulate relative to BTC as the annual compound growth rate of the asset is so powerful. Or atleast it seems so, when everything else around it appears to be depreciating at such a rate.
It is still early days for this nascent asset, as the worlds population grapple with trying to understand it and how best to treat it. If you are reading this, you’re already ahead of the wave that is coming. Despite the price in USD terms, it is still very early days in my opinion and there is a ton of work to be done.
I could not be more optimistic for a future with bitcoin in it, and feel deeply privileged to be alive during this mammoth transitional phase. 2022 is going to be the year that many people are forced to reconsider their preconceptions in relation to this asset, and I look forward to welcoming them into the community.
I appreciate you all.
Happy new year!
I’ll chat to you in 2022
-AK
