Good Afternoon Decentralized Way subscribers!
It has been a longer stretch than normal without an article hitting your inbox so let’s recap a few of the most important things that have been on my radar in the last month and talk about why they matter in a few words - I promise this is a quick read.
And with that in mind, there are a number of topic deep dives coming soon that are worth the wait.
In the meantime, this article will take us from Bitcoin to crime to social security to housing and back again!
And with that, let’s hop right in.
Bitcoin is down… And I’m excited!
Investments are the only things on the planet that people run from when they’re on sale. If the dress store put all of the wedding dresses at half price, it would be mayhem - Think Black Friday sales at Walmart. But the more an investment goes on sale, the further people run. And the more it goes up, the more people want it. It’s backwards because it’s emotional.
And the decisions made in bear markets separate the emotional investors from the ones that create generational wealth.
So let me ask you a question - If you own Bitcoin (which I hope most of you reading do), why did you buy?
Did you buy because your neighbor did? Or did you buy because you believe in the fundamentals of a revolutionary technology? At the beginning of any new technology there are always naysayers, and they were right about the internet just being a fad… Right? Notice the logarithmic scale on the right hand side of the chart.
If you bought for the first reason, you may be sweating a bit looking at the candles hover around 30k.
But if you bought for the second reason, you’re ecstatic because you recognize that it’s simply on sale.
Bitcoin at 30k, or 20k, or 10k is a generational opportunity to own the most sound form of money ever invented. The only money in the entire history of the world that cannot be inflated or manipulated by human policy (see: selfishness or greed).
Of the roughly 750 currencies that have existed since 1700, only about 20 percent remain, and ALL of them have been devalued. Source: Page 132, The Changing World Order, Ray Dalio.
Bitcoin is the only exception to this. Its programatic monetary policy is immutable and impervious to external forces. Maybe marking the first time in US history that the military is useless against what could be seen as a threat by the incumbents - perhaps because it is seen as freedom by others.
Much more to be said here, but I’ll leave you with this meme below. Do your research (maybe starting with an article I wrote back in October 2021) and know why you’re buying. I promise it will make all the difference when making calculated decisions, not emotional ones.
Criminals love the dollar
I’ve heard the argument ‘crypto is used for illicit activities’ many times, but it’s simply not true. Here’s why.
Chainanalysis, a leading crypto chain analysis company (hence the name) conducted research to discover the ‘illicit share of all cryptocurrency transaction volume.’
Their conclusion?
Transactions involving illicit addresses represented just 0.15% of cryptocurrency transaction volume in 2021. Source.
Global transaction volume was up to $15.8 trillion, meaning illicit activity came in at ~$14 billion of that.
Compare that to fiat currencies. According to the United Nations…
The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Source.
To level the playing field, if crypto had the same transaction volume as global GDP, roughly ~$75 billion would be represented as illicit activity. A far cry from the estimated $800 billion - $2 trillion transacted in fiat currencies.
“I fear [Bitcoin] is often [used] for illicit finance” - Janet Yellen, US Secretary of the Treasury
To which I point out…
US banks have racked up over $334 billion in fines since 2000. Source.
Seems like our regulators should maybe spend more time worrying about the largest, repeat offenders (For example, Bank of America has violated laws 264 times resulting in $84 billion worth of fines), instead of the new kid on the block.
But why is illicit activity so much lower in crypto? Simply put, the blockchain is a public ledger that tracks every transaction. There is no hiding, only accountability as you will leave a trail of breadcrumbs that even Hansel and Gretel could follow.
Crypto is the last place you want to conduct illicit activity. Dollars, however, are intentionally opaque. What better place to conduct crime?
Myth debunked. Let’s move on.
The Social Security Trust Fund will run out of money by 2035
Not clickbait.
According to a BofA study, the United States Social Security Trust Fund will run out of money by 2035.
And our Government Social Security website (not so) simply states…
Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits. Source.
To summarize what they’re saying… Hey ladies! It’s your fault for not having enough kids! Obviously.
But more than that, they’re simply stating that benefits will be reduced while hinting at the possibility that social security may just go *poof*. None for you if you’re under the age of 53!
The United States (and nearly every other country in the world) has a demographics problem that ties in almost all of the problems you’re seeing today from currencies to political unrest to just monetary policy. A Decentralized Way article on this is coming soon and here’s a sneak peak.
Simply put, the countries of the world cannot sustain themselves as populations age. For the next 7 years in the United States, an average of 10,000 people will turn age 65 every single day and be eligible for Social Security benefits. With a workforce below them that - demographics wise - looks like a pyramid flipped on its head and is simultaneously battling with being the most indebted and, by all metrics, poorest generation ever - There is only misplaced faith in the rapidly failing and insolvent systems left to fill the gap.
Am I saying that everyone paying into Social Security today isn’t going to see a dime when they’re of retirement age? Maybe.
Betting on broken social support systems to exist when you reach retirement is a dangerous bet, and not one I’m willing to make. You’ll notice that’s been a theme since the very first Decentralized Way article.
More on this soon, but let’s move on for now.
The home ownership American dream is just a dream
There’s only a few sentences in this section so read these numbers carefully…
In Jan 2021, the 30-yr mortgage rate was 2.65% and average new home price in the US was $401,700.
Today, the 30-yr mortgage rate is 5.23% and average new home price is $570,300.
Assuming a 20% down payment, that's a 94% increase in the monthly payment, from $1,294 to $2,514.
Americans are now having to use nearly 40% of their income to cover housing costs, the highest levels since August 2007.
But to just look at it through a nominal (numbers) lens would be inaccurate.
The cost to purchase a home is up 94% YOY before adjusting for inflation, which stands at 8%+ (officially) and 15%+ (unofficially). So as prices are rising, your dollars are simultaneously worth less.
To summarize - It’s the worst of both worlds and is likely unsustainable - Something will likely break and bring a halt to this trend. What will break is now the remaining question.
And that does it for a more unconventional Decentralized Way article, I hope you learned something new to tell your friends this weekend and we’ll see you next time!