Knowledge Node

Recently, I listened to a crash course on crypto in general from the YouTube account MoneyZG. This was a comprehensive 4 hour video but I did skip the part that weren't new to me and played it on 1.75x speed. So, it was roughly an hour and a half to finish the full course.

I gained more clarity in terms of the macro aspect of crypto, how it is a secular uptrend that experiences cycles partly due to it being correlated to the business cycle and the Fed increasing and decreasing monetary supply.

For example, during the 2020-2021 period, we saw extensive monetary expansion by the Fed (increasing M2 money supply) coinciding with crypto's dramatic bull run. And the 2022 tightening cycle more or less corresponded with significant market corrections.

The latter part on the Fed controlling monetary supply was only vaguely clear but what interested me more was when the user jumped into inflation and labeled it more or less as bad.

Of course, I didn't shake my head and tried disagreeing with him in my mind. Simply because these things can only be viewed good or bad depending on the context and he did laid a great context for it.

While monetary inflation is increasing, our purchasing power is decreasing. And one could make a good argument that the latter can't happen without the former.

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Slightly Hard Fact

But what was a bit ironic somehow is that this inflation is also contributor to the rise in asset prices, so I began to wonder when assets rise in prices, are they becoming inherently more valuable or is it just that they're pumped up by this new money supply?

Maybe, it could be both, in the sense that assets retain some of this new money supply even after the pumping episode has passed. Hence, higher lows.

On the crypto sphere, the user discussed how bitcoin is the best investment asset in terms of risk adjusted returns compared to stocks, real estate, precious metals, etc.

He affirmed that this is a fact and anyone who says otherwise is simply not looking at the historical data objectively.

Due to the risks and inherent volatility however, he advised individuals to make their own decisions based on their risk tolerance and investment timeline, since crypto requires a long-term perspective to weather the volatility.

I think knowing that it's a secular uptrend helps in this case but obviously, not every crypto asset will keep going up every cycle.

I'm personally confident in putting or rather leaving at least 50% of my wealth into crypto. Obviously, all this 50% wouldn't be volatile assets, half of that could be in stablecoins.

Money Doesn't Exist

This is a good segway into another interesting point the user made mentioning that there are only assets and liabilities, and money doesn't exist.

My attention was at 100% capacity at that point.

When you really think about it, what we call 'money' in our bank accounts is actually just a liability on the bank's balance sheet. They owe us that amount. And our physical cash represents a liability of the central bank.

Bitcoin stands apart as a pure asset, not backed by or representing any liability. This could explain why maximalist love to refer to it as 'hard money' or 'digital gold'.

I think it's one of the few monetary instruments that exists purely as an asset without being someone else's liability.

Besides, when it comes to value storage, particularly from a long term investment pov, liability-free assets could represent the truest form of ownership in our financial system.

So, why settle for a chain of liabilities when I can own pure assets? That's the math I'm trying to solve for my future self.


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