The Macro Dragon: When Money (Fiat) Ceases to Be Money | Why Bitcoin Ascends in a Sinking Ocean of Fiat Inflation & Fiat Surveillance + Control ????

They say if you have a short amount of time, you write something long… if you have a lot of time, you write something short. Clearly some of the KVP + Ascent Capital - Strategic Investment Advisory posts seem to imply that he's had a lot of time… when paradoxically that is not the case ??

This post will ideally be one of the shorter & more kryptonite pieces. ?? It’s a simple reflection that KVP has had in the back of his head for years; yet was only recently spurred post the last crypto-focused jam with the always astute Peter Guy , part of “The Close”’s team from Radio 3 RTHK . He had asked a question that if KVP has a Satoshi for every time he heard it, he’d have about 888 Satoshi.

A lot of folks—especially in TradFi or non-crypto native circles—refer to crypto as “cryptocurrencies,” a misleading term if there ever was one. Not to say it’s as bad as “military intelligence,” “honest politician,” or “a banker who cares,” but it’s definitely up there on the list.

So, when you start with a reference that buckets all of crypto in the FX / currency bucket… the next natural line of thought is, well these things are not money, so what are they for?

From an economics standpoint, money is usually defined by three pillars:

1. Medium of Exchange: A widely accepted form of payment for whatever good or services that one may require. Let's say back in Racho de KVP, there is a trip of pygmy goats.

Now let's assume KVP can finally get back to the MO of sipping on rosé & whiskey sours, yet no one is willing to barter with KVP on the ratio of 8 bottle of the good stuff for two baby pygmy goats. Hence a medium of exchange is needed to… take out the friction.

2. Unit of Account – which is academic for saying, whether you want to do an exchange that has a value of 10M or 1, that it can be facilitated into a number of bigger or smaller elements. In other words, it has to be divisible. I.e. no baby pygmy goats were cut in half. This divisibility aspect once again takes out the… that’s right friction!

3. Store of Value: implying that individuals who use money, as a transition of one form of value (say, house) to another (say, Tesla stock), are also happy to keep a portion of their wealth in the form of money – be that physical cash, or digital cash in their bank. This store of value aspect takes out the headache & friction of needing to shift one asset of your wealth, immediately into another asset/s.

We’ll circle back to these 3 shortly & explain why in theory they sound great, but in the real world they fall apart quicker than Kamala Harris without a script or a Joe Biden resignation.

So, at this point, folks like to point out that Bitcoin fails on all these accounts. One then proceeds to school them with the following #facts.

Bitcoin As a Medium of Exchange ????

Bitcoin has been accepted as a means of payment for well over a decade. Just because you, your cousin, or your goldfish don’t accept it doesn’t negate the fact that over 200M Bitcoin wallets exist, that there was over 300M transactions in 2023 & that the value of all Bitcoin today is at around $1.2 Trillion. If you crash in the Amazon jungle & find a tribe that has no interaction with modern society, your USD, EUR, JPY, CNY, or MWK or BTC will be worth zero to them.

It's worth also bearing in mind that even a fiat currency does not gain global dominance & wide acceptance overnight... like any idea & belief system - which is what legal tender & any value is at the end of the day - ... it grows.

Today this is less of a surprise, yet there are still sapiens out there who have no clue that you can buy/invest/pay in Bitcoin (& other crypto) in taxes, property, jets, cars, ownership stakes, luxury items, everyday items, post collateral, etc. In fact, Bitcoin has a LOT less friction that the fiat world – because all one needs is a smartphone, internet connection & a wallet address or email or mobile number to send any amount of Bitcoin they want (Whether thats $10 worth of Bitcoin to $1 Billion worth of bitcoin). It is a level of seamlessness that the traditional banking & fiat world can only dream about, as form of medium of exchange.

Not to mention (circling back to the three pillars that comprise money) – if one happens to be domiciled, born & bred, etc. in Russia, Iran, Syria, Cuba, Venezuela, Palestine… good luck being able to participate in the fiat world of the USD (read: SWIFT) as a medium of exchange globally.

This is because fiat, is now more than ever being used as a carrot & whip… its been fully & crudely weaponized. This was one of the biggest precedent risks set at the start of the Ukraine (NATO) / Russia conflict, the lines of seizing a sovereign nation's assets (one of the most powerful at that) & confiscating them is "all well & good". Yet, you forever send the signal that your fiat, be it the major reserve currency in the world or not, can never be trusted to hold a nations sovereign wealth - let alone any credible wealth from the citizens of those countries.

If you are born & draw the wrong cards of having the leaders of your country (rightly or wrongly) disagree with the US (& thereby the vassal state that is the EU), then tough luck, cause clearly you are part of the “axis of evil”.

Why are 145M Russians / 80M Iranians / 30M Venezuelans being punished for the actions of a small ruling elite who likely number under 100?

Advantage? Crypto.

Bitcoin checks & crushes pillar one’s requirement for a medium of exchange.

Almost the vast majority of any significant fiat currency in the world today, does not even qualify any longer for the first pillar of being an open medium of exchange. What was once a step towards frictionless commerce, has now been weaponized as a control, monitoring & surveillance system - by definition reintroducing friction.

This is beyond futile... you are going against the entropy of technology, which by its very nature is an exponential acceleration of seamlessness that has no limit. There is only one final destination & that is the final upgrade.

One of the core tenants of House Ascent is: Never Short Tech. Its the GOAT of GOATS

Its literally undefeated & akin to trying to hold back time.

Bitcoin’s Divisibility: Unit of Account ??

Then folks say, well if you want to buy or pay in a Bitcoin you have to do it increments of $60,000 or $50,000 or wherever its trading. You then explain that Bitcoin can be divided by 100M units, with each of those units being a Satoshi. So, 1 Satoshi = 0.00000001 BTC. This actually allows one to do micro-transactions that most fiats would only dream of, as most fiat systems only go out so many decimals' points. For a wrap-up of this context, when (not if & likely there by year end or latest 2Q25) Bitcoin goes from these current $60K levels to $100K- 100M satoshis = 1 bitcoin or $100K. 10M satoshis = 0.1 bitcoins or $10K. 1M satoshis = 0.01 bitcoins or $1K. Hence if you can't stack your bitcoin, well "stack your sats".

Bitcoin passes the second pillar with flying colors.

Store of Value: Debunking Volatility Claims ??

Here folks will tell you, well how can Bitcoin be a store of value, when it's so volatile. After all, you don’t see the USD, the Euro, ???????????????????????????? , or the GBP making crazy intra-week moves of plus or minus 10%?

Now this is valid point, on the face value of it. Yet let us dig deeper… & standardize a few things here.

How old is the USD? Any guesses?

Its inception is from the Coinage Act of 1792, implying that it's been around for over 230yrs. @bitcoin on the other hand, saw its Whitepaper published to the world in Nov 2008 at the midst of the subprime crisis. The first transaction (medium of exchange) was in Jan 2009, yet here we are 15 years in & we are just getting started.

So, we know its young & just like any young tech, young venture or even child, there are always higher levels of volatility in the beginning, which will structurally fall as its adoption increases & the space matures.

Now let's look into the pillar # 3, store of value.

Let's look at inflation on the USD from the US government’s own statistics site, from Jan 2009 to Jun 2024.

Let's work out what $1M worth of USD today, was equivalent to back in the start of 2009. Then work in the other way around, what $1M worth of USD in Jan 2009, is equivalent to (i.e. buying power).

• From today to the past: $1,000,000 today was the equivalent of $672,000 in purchasing power
• From the past to today: $1,000,000 in the past, needs to be the equivalent $1,487,972 to standardize for purchasing power

Now here is the scary thing, this is roughly ‘only’ a 3% decline in your purchasing power… the actual level of inflation (ex. government CPI basket, which they tweak in their favor) is much higher… talk to anyone in the US who has had to pay for school fees, healthcare, insurance, rent. A conservative KVP est. would be min. 2x to 3x the official line – so if the real cost to your fiat is 6% to 9% a year… just the S&P doing +10% a year on average, barely breaks you even on your hard earned (& taxed, sometimes twice) income.

So, the question is, is your house really appreciating in value, or is your fiat depreciating in value? What's the value of your house in Bitcoin just 10yrs ago, compared to today, vs. the value of your house over the same timeline in your underlying fiat currency.

The paradox here is that fiat – through unprecedented & unrepentant fiscal + monetary spending – basically does not even qualify as money on the store of value front, let alone the medium of exchange front.

Why is this a big problem? ????

Well, if you have $100M worth of property, you are hedged… you have hard assets that tend to protect you against inflation. You of course cannot understand why everyone is so lazy & doesn’t own property like you do.

Yet the structural issue is, most people, don’t have hard assets of any significance. Now imagine how their paycheck has stacked up. This is the structural issue globally.

Folks are not voting for the likes of Trump because they believe him to be the panacea, they are voting against what they see as the establishment that has gotten them into this catch-22 paradox of, somehow the harder they work, the less it seems to matter, so why work at all. You are seeing cultural currents of this frustration, anger, disillusionment, depression, hopelessness across all walks of life from China’s tangping generation to the Meme zeitgeist in crypto. Lastly, yes Bitcoin has been volatile – yet check out this table in regard to its performance vs. other asset classes over the last 13yrs – nothing else even comes close (slide 14, Bitwise Research Bitwise Asset Management ).

Money is no longer money ????

Why? Because of the state & concentrated private interests in the financial system getting involved in regard to wanting to maintain their status quo, their power, their influence, their status, their relevance & their control. The elite want to stay the elite, it is encoded into our Sapien DNA. It is a bug, not a feature.

What about CBDCs? Central Bank Digital Currencies... ????

CBDCs are touted as a solution, but as long as money is state-controlled, it will always be in a form of structural decline.

For instance, during Covid over 40% of USD supply was printed in under 2yrs, we will continue to have indigestion of that printing for years to come, perhaps decades. So many of China’s issues today, stem from them printing 14% of their GDP during the GFC. Japan is never ever going to be “normalizing”, with the structural issues today linked to their insane central bank driven bull market of the 1980s.

Picture Jabba The Hutt or Fat Bastard from Austin Powers sitting at an all you can eat 24/7/365 buffet & you can start to get a grasp of our how policy makers have been printing money… because they will not have to bear the consequences of their actions.

The only structural solution is a separation of money from the state, just like how we had religion separated from the state in the Middle Ages in Europe.

Whilst CBDC have the advantage of being able to use the blockchain (take out friction, the tax, the time + costs of bottle neck middlemen) & every taxpaying citizen should likely have a direct account with their sovereign government, for subsidies (i.e. c. $300B was stolen during the covid relief aid), tax payments, deductibles, etc.

These benefits are likely to be overshadowed by the control that will seep into the rest of the banking system – you can see this with measures taking place within the EU, on how everyone should have their assets declared. This surveillance & control, again break pillars one (medium of exchange) & two (store of value). It has become commonplace today for a bank to block the transfer of your own money to an investment that you trying to make (especially if it's in crypto), if it's not deemed fit by their compliance. We are not even talking about sanctions countries here; we are talking about you being sanctioned from the allocation of your own monies.

Just like AI (Read: Hive Speaks ??) there will only be two types of sovereigns + individuals here: ?????

The minority who are proactive & start creating strategic reserves for their countries & themselves in the likes of Bitcoin & implementing accountability mechanics in the constitution of their nations, on how to be fiscally responsible in their investing & spending, not to mention governance, accountability & transparency (i.e. cannot spend more that tax receipts, inception from zero based account, none of this Pentagon $800B blackhole). These minority are quite to be far & few between, they will be branded heretics & lunatics today, yet when Hindsight Harry comes around, 10yrs from now, they will be crowned pioneers & visionaries.

The vast majority, including likely 90% of the folks ingesting this reflection & think piece, will be reactive… waking up the same treadmill, wondering why they seem to have less sovereignty than they did just a few years ago, despite them doing everything right. Most sovereigns will be blindly na?ve & uncoordinated.

How about some bold predictions KVP, if you are going to get things wrong, you may as well get them fabulously wrong. ????

In closing some bold predictions:

1. A Trump <> Vance presidency, whilst inheriting a lot of the structural issues that took decades in the making & will take decades to be solved (if ever), could be a huge meta step in regard to slowly started to the process to both separate money from the state, as well as introduce more accountability & transparency to the state. Just a sovereign Bitcoin reserve for every US citizen would be colossal in the signal that it would send globally.
2. The sovereigns that will set the bell-curve on this, are likely to continue to come out of the ‘emerging” markets, shout out to El Salvador. When El Salvador or KVP says something… most folks are like “meh” … when Uncle Sam, or China or Russia or Larry Fink or Jamie Dimon says something… the weight & ripples are different. & yes, we are already seeing moves out of Russia, that folks would have thought impossible just a few years ago, as there is now signed legislation for the advancement of the use of crypto in international commerce (read, bypass the monopolistic bridge that is the USD SWIFT).
3. At some point it will be a Satoshi race, as sovereigns scramble to purchase Bitcoin ahead of one another… & we will enter a phase that will be the inverse x 10,000 of the liquidations we’ve seen of late from the likes of Mt. Gox, Jump Trading, etc. In this phase, Bitcoin which today sits at around $60K - & has been in a $50K to $70K range for most of the year – will be seeing 5 figure to eventually 6 figure moves. At some point in the future, perhaps 20-30yrs from now, there will come a point at which no individual will be able to buy a single Bitcoin, because the price will have appreciated so much. Your descendants will be flexing how many Satoshi's they bought, rather than how many Bitcoins.
4. From c. #460 to top 10: Micro Strategy’s Michael Saylor – who’s personal net worth is estimated at $4B to $5B today - will eventually be in the top 10 richest Sapiens on the planet, which will almost certainly need him to worth over $150B to $300B ?to crack that in the future, given that just today to make it to the top 7 you need at least +$100B.
5. Every Major central bank will eventually have Bitcoin & potentially other deflationary crypto assets on their balance sheet, as part of their reserve asset requirements. There will soon be universal quoting of Bitcoin on prices across the world… be you in Argentina, Zimbabwe, Japan or the US… you’ll see your coffee quoted in local & plummeting fiat, with another price in universal & rising BTC. BTC price will be synonymous with every other main financial metric price… i.e. oil, gold, S&P futures, US Treasuries, DollarYen, etc.
6. Corporate treasuries will realize that they have been failing abysmally at their fiduciary duty to optimize use of capital. It will be commonplace for the balance sheet of a corporation to have 10-25-50% of its excess cash, or portion of free cashflow sitting in Bitcoin. To those that jump at this being speculation, understand that being 100% in fiat, where we have seen literally multiples of expansion on the supply, is the definition of speculation.
7. There will be PE & Venture structures who will literally only be buying simple, solid, cash generating businesses & basically turn as much of that FCF as they possibly can to buying bitcoin. If anyone, is long the capital & seriously wants to take a stab at this, KVP has been itching to do this for 8yrs now… LFG!
8. Fiat systems that don’t adapt & change, will be work until they don’t, yet their fall & demise will be at an unprecedented pace compared to the historical rise & fall of global reserve currencies that takes decades, if not hundreds of years in the making. The thing that the establishment & sovereigns don’t understand is that digital sovereignty is the future, it cannot be controlled, contained, eliminated or destroyed. So, the ability to flow & move capital out of “physical” sovereign boundaries to “digital” spheres has never been easier, it also starts to solve for the issue of TINA.

-KVP

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