BTC has been recovering upward for 5 consecutive days. The recent intensive release of economic data in the United States seems to be rolling out the red carpet for the Fed's final decision to make a moderate interest rate cut at the upcoming interest rate meeting. In recent years, the global economy has been tossed around by the Fed's hot and cold regulation. If it weren't for the timely wrapping of warm clothes sent by China, many countries might have caught a cold and fever or even been sent to the ICU.
In a peaceful world, the world experiences the same cold and heat. With global economic integration and global circulation of the US dollar, all countries are like colleagues working in the same room, and the remote control of the air conditioner is in the hands of the United States. The Federal Reserve is like a sophisticated egoist who only cares about his own pleasure and ignores the feelings of others. When he feels hot (high inflation), he blows cold wind (raising interest rates and shrinking the balance sheet); when he feels cold (low employment), he blows hot wind (lowering interest rates and expanding the balance sheet). The hot and cold weather makes everyone in the room take off or put on more clothes. If you are a little slower, or your body resistance is not good, or you are too poor to have enough clothes, you will be infected with wind-heat and wind-cold (economic crisis).
In recent years, many people feel that the economic situation is bad and are very confused about the future. Entrepreneurs and bosses who stepped on the tail of the short-term debt cycle from 2014 to 2019 to raise funds against the trend and made rapid progress are now bankrupt, their debts have exploded, and they are on the list of deadbeats. The so-called middle-class workers who were highly paid in these companies that can only survive by blood transfusions have also been laid off and returned to poverty overnight.
When Jiao Lian wrote "A History of Bitcoin" in 2020, he drew lessons from history and pointed out that 2019 might be another 1929 (the starting point of the Great Depression in the United States), and this round of Kondratieff cycle would thus turn from recession to depression.
Jiaolian clearly wrote in the book that during the Kondratieff depression period, personal asset allocation should shift from offense to defense. Actively deleverage, tighten your belt and survive the cold winter.
How cold will the winter be? In the book, Jiaolian cited the tragic situation of the Kondratieff depression cycle in 1929: white-collar workers did not dare to tell their families after losing their jobs, and they put on suits and ties every day to go out and pretend to go to work, but in fact they went to the streets to pick up food from garbage cans. The whole world was suffering, and after ten years, they finally couldn't bear it anymore, so in 1939, World War II officially broke out.
The Second World War lasted until 1945, with an estimated 70-85 million casualties among the military and civilians. When the People's Republic of China was founded in 1949, the Kondratieff cycle finally saw a formal upward recovery. The entire Kondratieff winter lasted for 20 years.
From this perspective, if this round of Kondratieff depression starts from 2019, then we should be prepared to last until 2039. At the very least, we should last until 2035.
2035 is the year of recovery before BTC halving. According to the power law, it may be between 700,000 USD (low track) and 2 million USD (middle track). This year of recovery will resonate with the Kondratieff recovery.
It is now September 2024, and there are still ten years until 2035.
If the Kondratieff bottom is calculated from the World War II in 1939, then the corresponding Kondratieff bottom will be around 2029. There are still 4-5 years from now, a round of BTC cycle.
BTC has an endogenous and constant 4-year halving cycle. Taking the halving as an anchor point, the 4 years can be named "half-year halving" (0), "bull market year" (+1), "bear market year" (+2) and "recovery year" (-1).
2019 is the recovery year, 2020 is the half-year reduction, 2021 is the bull market year, 2022 is the bear market year, 2023 is the recovery year, 2024 is the half-year reduction, 2025 is the bull market year, 2026 is the bear market year, 2027 is the recovery year, 2028 is the half-year reduction, 2029 is the bull market year, 2030 is the bear market year, 2031 is the recovery year, 2032 is the half-year reduction, 2033 is the bull market year, 2034 is the bear market year, 2035 is the recovery year, 2036 is the half-year reduction, 2037 is the bull market year, 2038 is the bear market year, and 2039 is the recovery year. 5 BTC cycles.
2029 is the bull market year after BTC halving, and the power law range may be between 400,000 USD (middle track) and 1.3 million USD (high track). If this year coincides with the bottom of this round of Kondratieff depression, then it may just form a hedge and provide protection for BTC holders.
If this round of Kondratieff depression really lasts for 10 years, from 2019 to 2029, then for those who are complaining about the cold wind in 2024, I'm sorry, the next five years will be even colder.
Whenever I revisit the Great Depression chapter in “The History of Bitcoin” , I feel a special kind of happiness, the kind of happiness that when there is lightning and thunderstorm outside the window, I can stay away from work, hide in the warm quilt in the bed, and sleep comfortably.
Yes, compared to the Kondratieff depression from 1929 to 1939, at least we are only bankrupt and unemployed. At least we can still deliver food, drive Didi, and sell goods through live streaming. At least we can still eat, wear clothes, and go to school. At least, the country is strong today, saving us from the daily bombardment. At least, the world has not yet experienced the Third World War.
At least, consumption can be downgraded.
Public spending on food and drink, young models in clubs, and blood transfusion expansion are not the norm in this world, and should not become the norm. The depression is good, because it can cure the poison by scraping the bone, sweeping away the parasites and liars in this society, as well as the unhealthy industrial chain that is born from them.
Happiness is never about fine clothes, delicious food, drinking and feasting, or the illusion of power. Happiness is a life of subtraction, with no extra things outside and no extra fat on the body. Happiness is curling up in a warm bed, reading the books you love. Happiness has never been related to money, power, or desire. Happiness can be obtained without spending a penny.
Unfortunately, in this contemporary society that is brainwashed by consumerism and filled with materialistic values of worshipping money and power, many people suffer from a serious disease, which the teaching chain would like to call "happiness ED". The typical symptoms of "happiness ED" are: often anxious, slightly neurotic, unable to relax, unable to slow down, unable to tolerate people and things that are not in their own rhythm, irritable, unable to feel happiness from what they do, the people around them, and nature, as if they have lost the ability to find happiness, obtain happiness, and feel happiness. They need to find short-term pleasure from money, power (violence) - including husband's power, father's power - or the satisfaction of consumer desires. After the pleasure, the greater emptiness will continue to increase the threshold for the next pleasure, so that they will completely become "slaves" of these external stimuli and gradually alienate into a social gear that has lost its human touch.
Happiness ED is a disease. BTC is the medicine.
When we truly master the secret of hoarding BTC, we will evolve into Bitcoiners. Our values will shift from external to internal: cheap material possessions, a strong body, and a free soul free from the constraints of desire.
From an economic perspective, there are only three types of things a person does in his life: consumption, saving, and investment.
Consumption can be divided into spending money and spending time. Eating is spending money, and entertainment is spending time.
Investment can also be divided into investing money and investing time. Buying stocks is investing money, and working is investing time. Starting a business is investing both time and money (the money earned by not working is also investing money, which is the basic concept of opportunity cost in economics). Financing a business is leveraging and investing a lot of money and time.
Investing is risky. A single investment has a risk. Multiple investments have a risk squared. Adding leverage to the mix increases the risk to the Nth power.
Financing for entrepreneurship is almost like gambling. In a recession, the only way to cure the poison is to destroy the leverage of these gamblers before they can give up. Otherwise, if the economy grows by one point, they will earn ten points. Isn't it too unfair to those who are honest and do not increase leverage?
The way of heaven is to take away the surplus to make up for the deficiency. The way of heaven is to explode the leverage, that is, to make those who have increased leverage during the economic boom bankrupt, unemployed, and return to poverty overnight.
Saving is the only thing that is special. We can only save money (value), but not time. Time is like running water, once it passes, it will never come back.
However, due to the nature of finance in transferring value across time and space, we save value, just like saving time.
If we use the general theory of relativity as an analogy, time is actually space, and time and space are inherently one. Therefore, time is actually value, and value is time, and time and value are also inherently one.
If you save value, you save time. If you steal value, you steal time.
If your time is stolen, your life is stolen.
Therefore, it is important to carefully choose the “container” (asset) in which you save.
For all assets, one of the main ways that value is “stolen” is through “over-issuance”.
Houses can be built endlessly. Stocks can be issued continuously. Fiat currency can be issued continuously. Gold can be produced forever. However, the total amount of BTC is limited to 21 million.
Some people criticize BTC for not being an interest-bearing asset, with no dividends, no interest, and no value. (This is also Buffett’s main criticism of BTC)
The problem is that zero-interest assets do not really have zero interest - when the nominal interest rate in the fiat currency world cannot beat inflation or depreciation, and is manifested as an actual negative interest rate, it means that your "time" is being continuously "stolen". At this time, zero-interest assets such as BTC and gold have an actual fiat currency interest rate greater than zero, thus attracting an influx of safe-haven funds.
The safe-haven property of zero-interest assets is not to avoid volatility risk, but interest rate risk.
Economist Mises said that interest is a reward for people's patience in not consuming temporarily.
Therefore, a good savings asset should have a most basic characteristic, which is to reward the person who holds the asset rather than the person who sells the asset to satisfy current desires.
An intuitive demonstration of this reward is: a person who resisted the urge to sell 13.2 BTC in exchange for an iPhone 4s in the early years only needs to sell 0.014 BTC today to get the faster and better latest iPhone 16.
A subtle underlying detail is that when the person who hoarded 13.2 BTC bought BTC with fiat currency, he actually gave up some fiat currency at the same time. These fiat currencies did not disappear, but flowed into other people's pockets. Those who got these fiat currencies may choose to consume (such as buying a mobile phone immediately) or choose to invest (such as opening a store).
Economist Keynes said that savings is investment. Jiaolian’s understanding is that your savings will become other people’s investment. This is the logic above.
Let’s talk about the logic of the chain. If BTC is a good savings asset, it must reward savers. Therefore, BTC must be able to ensure that people who sell BTC and use your legal currency to consume will not be better off than you holding BTC for future consumption; similarly, people who sell BTC and use your legal currency to invest, on average, will not be able to outperform the BTC you hold. (Please note that it is on average)
These two inferences must be true at the same time, otherwise, today, your rational choice should not be to hold BTC, but to sell it immediately, spend it, or invest in other things.
Jiaolian summarizes this dual requirement as "savings outperform everything (consumption and investment)". Combined with the above conclusion, we get the following proposition: a good savings asset should be able to outperform everything (consumption and investment).
Does the "saving money" that ordinary people talk about in their daily lives, that is, saving legal currency, that is, using legal currency as a savings asset, meet the conditions of this proposition? No. The answer can be inferred based on the monetary policies disclosed by central banks of various countries.
Take the world’s top two economies, the United States and China, as examples.
As we all know, the Fed's public monetary policy is to maintain a moderate, long-term 2% price inflation rate. In other words, holding US dollars will inevitably underperform consumption moderately and investment (US stocks) severely in the long run.
The public monetary policy of our central bank is different from that of the United States. On October 21, 2023, at the 6th meeting of the Standing Committee of the 14th National People's Congress, the then governor of the central bank delivered a report on the financial work of the State Council [1]. The report clearly pointed out: " The prudent monetary policy is precise and powerful, strengthening counter-cyclical regulation, and giving full play to the dual functions of total volume and structure. The growth rate of broad money supply (M2) and social financing scale is basically in line with the nominal economic growth rate. "
The control of the total amount of RMB money supply does not depend on the price inflation rate like the Federal Reserve does, but on the growth rate of economic development, that is, the GDP growth.
Let’s take steamed buns as an example.
The Fed's policy is like this: one steamed bun costs $1 this year, and next year it will be controlled at $1.02. If you hold dollars, the purchasing power of your buns will shrink a little bit.
The central bank's policy is like this: this year, one steamed bun costs 1 yuan, and the country can produce 100 million steamed buns, corresponding to an output value of 100 million yuan. Next year, the country can produce 150 million steamed buns, so the money supply will be expanded to 150 million yuan, matching the growth rate of steamed bun productivity. The price of steamed buns may still be 1 yuan per steamed bun. You can still buy a few steamed buns with the money you saved. The steamed bun factory earns 50% more, and the return on investment has greatly increased.
So, what if there is a savings asset that can outperform both consumption and investment? This year's production capacity is 100 million steamed buns, and you have saved enough money to buy one steamed bun. Next year, the production capacity will increase by 50% to 150 million steamed buns, and your savings should be able to buy 1.5 steamed buns. The extra consumption power of 0.5 steamed buns is what Mises said, the reward for your patience in not consuming (not eating steamed buns) temporarily, that is, (natural) interest.
Therefore, the nominal interest or dividends of legal tender assets are an illusion. In the end, the means of living (such as steamed bread) or means of production (such as equipment) that can be exchanged for them must be taken as the basis. The real means of living or means of production are the real rewards and the real interest - not the illusory legal tender or dividend figures.
I have explained so much in detail, and I hope you understand that the transition from saving fiat currency to hoarding BTC is a real savings upgrade.
Consumption downgrade, savings upgrade - this is what Jiaolian shared today, the key to "surviving the Kondratieff depression".
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- [1] http://www.npc.gov.cn/npc/c2/c30834/202310/t20231021_432324.html
