If Bitcoin really is a safe-haven asset,
is it behaving like one?

The title of today’s post is not intended to be a serious question as much as it is “gallows humour”, as they say.

Since the Russian invasion of the Ukraine in early 2022, it’s been speculated that future historians may look back on that event as the beginning of WWIII. I have privately wondered (and meant to write it up in the last monthly letter, but it slipped off the radar), whether the cascading military coups throughout the CFA (Central African Franc) nations were the slow opening of a second front in what was becoming a global conflict.

As the ruling, CFA-aligned governments are being deposed, in Niger, Ghana, Central African Republic and Burkina Faso (eight coups in the past two years, so far), Russian military advisors are appearing on scene, coaching the generals. Meanwhile China is ready with infrastructure incentives and loans. That front isn’t hot – yet – but it’s – “War By Other Means”, to quote the Robert Blackwell & Jennifer Harris book by that title…

“Today, nations increasingly carry out geopolitical combat through economic means. Policies governing everything from trade and investment to energy and exchange rates are wielded as tools to win diplomatic allies, punish adversaries, and coerce those in between.”

Except for the United States, the authors lament, both of whom belong to the Council on Foreign Relations. The USA is still somewhat retrograde in that it reflexively seeks to use its military stature to either threaten or force issues – an increasingly obsolete strategy.

I’ve mentioned 5th Generation Warfare before (5GW), which is all about “war by other means” – so much so that at least one of the combatants may not even realize that they’re embroiled in a war:

“In 5GW, violence is so dispersed that the losing side may never realize that it has been conquered. The very secrecy of 5GW makes it the hardest generation of war to study. Because 5GW attacks occur below the threshold of observation, COIN in 5GW is the preemptive, system-wide, automatic degeneration of 5GW forces into more primitive gradients of warfare. The 5GW warfighter hides in the static, and the most successful 5GWs are those that are never identified.”

Abbott, Daniel H.. The Handbook of 5GW: A Fifth Generation of War? (pp. 16-17). Nimble Books LLC. Kindle Edition.

I think this has been the case in the West for decades, with the rise of far-left ideologies and bat-shit wokery permeating (infiltrating?) our core institutions (basically, Fabianism writ large).

Yet as I type this, it is still early days in a new hot war in the Middle East, which is possibly – if you listen to Patrick Byrne’s theory on how it occurred – the side-effect of a geo-economic battle between the US and Israel of all things.

What REALLY Caused Israel’s Foggy Intel? Read it Here 1st.

The MSM has the what and the why, but not the how. Let me tell you what really caused this catastrophic failure in Israeli intelligence last Saturday.

As my regulars are aware, I have spent some time this year in… pic.twitter.com/8uR0QzSupB

— Patrick Byrne (@PatrickByrne) October 12, 2023

In any case, it’s another 9/11 moment and at some point I’ll explain why I use that comparison specifically, instead of the “Pearl Harbor” references we’ve seen a lot of since the Hamas surprise attack on Israel (possibly in the monthly macro Bitcoin Capitalist if I don’t get to it here).

The mid-month portfolio review issue is intended to be a more tactical focus on Bitcoin, cryptos and the companies we own, within the backdrop of whatever is going on that affects these spaces directly.

But the dial for geopolitical tension just got ratcheted up to 11, so we have to acknowledge here that something very bad has occurred, and like it or not, it stands to become a core driver of what unfolds from here on.

Hedge fund billionaire Paul Tudor Jones appeared on CNBC October 10th, saying that it was hard to own stocks amid such geopolitical uncertainty, and citing three flashpoints: Ukraine, the Middle-East, and sooner or later: Taiwan.

In a widely circulated quote, PTJ said he liked gold and Bitcoin although he said so within the context of the two performing well in recessions, which he predicted would occur by Q1 of 2024.

I don’t necessarily know if that’s true. Bitcoin has never been in an official recession, although when we were in a “technical” one earlier this year, it was coming off the lows of a bear market nadir with a good head of steam on it, so I don’t know how much we can infer from that.

Recall, Paul Tudor Jones was arguably one of the catalysts behind “the institutions are coming” mantra of the 2020 cycle when he disclosed holding a position in it within his hedge fund.

As I’ve observed since, that wave, which included Michael Saylor, Stanley Druckenmiller and (for a while) Elon Musk, wasn’t really an institutional wave, per se – more like a vanguard of maverick billionaires. But it was a start.

It’s the inevitable, perhaps even imminent arrival of spot Bitcoin ETFs in the USA (they’ve been around here in Canada for years) that will truly lay out a carpet for institutional investors.

But the geopolitical and macroeconomic environment today is very different from anything experienced since Bitcoin emerged as an asset class.

The great bond supercycle is over, as is The Everything Bubble and likewise is the (so-called) “unipolar world”.

We’re neck deep in The Jackpot now , or what Strauss and Howe called a “Fourth Turning”.

The End of The Unipolar World (as we know it).

All bets are off, and nobody really knows what happens next. When people use the phrase “the end of the unipolar world”, they are typically thinking in terms of nation states jockeying for primacy in a presumably multi-polar world. Russia, China, Brasil, India, Turkey, Saudi Arabia, Israel… Iran – I think this is a one-dimensional view and doesn’t fully capture the shift we are undergoing.

But for my own meaning of “multi-polar world”, the potpourri of nation states vying for geopolitical “Lebensraum” is only one layer of it. Add to that non-aligned, non-national, autonomous organizations …think supra-national Borgs like the WEF, and their polar opposite: Network States and crypto-anarchist enclaves.

Some countries may coagulate into the former (like the entire G-20) while others splinter out and morph into the latter (El Salvador).

Then factor in cartels, consortiums and corporations. Terrorist cells, organized crime, hacker networks, not to mention completely artificial entities with no human agency – like smart contracts, DAO’s, autonomous 3-D printers, weaponized drones or computer viruses.

Now imagine decentralized, anonymous (and autonomous) networks of 3-D printers cranking out kamikaze drones that take them out. pic.twitter.com/kaWClCBLQx

— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) October 7, 2023

That’s the multi-polar world we are headed into, and we’re naive if we think we’re just dealing with a bunch of nationalist upstarts. In such a world, Bitcoin “the money of enemies” becomes necessity.

Where does it leave Bitcoin?

Until now it has only really had one long macro-economic cycle, with relative geopolitical stability, during which it was always theorized that Bitcoin was a safe haven asset, just like gold.

Couple problems.

One is that over the past fifteen years or so, not even gold traded like gold. It was supposed to be safe when everything else went to hell, but in the Global Financial Crisis and every other mini-crisis that tanked the stock market, gold usually tanked too.

Yes, gold took off like a rocket after the GFC bottomed, and did so a good six months before everything else. But for the most part, everything took off and highly correlated markets became the norm for the next ten or fifteen years, because “money printer go brrrr”.

That gave rise to the mantra, “it’s all one trade”. During that same cycle, Bitcoin tracked the Nasdaq for long chunks of it, and even traded like a meme stock – the right hand chart above showing correlations between BTC and Gold (top), the Nasdaq (middle) and AMC (bottom). The closer the line tracks along the top, the closer the correlation.

Now we’re in what seems like a global crisis for reals.

Bonds have had a somewhat under the radar implosion, owing to the fastest rate hike cycle in history. Stocks have done something barely recognizable, and gone down for a few months; debt is exploding at an accelerating pace, as if that was even possible; and that’s on top of: rolling energy crises, a hot war in Europe, escalating tensions between China and Taiwan and now, the Middle East erupting into war.

Gold has reacted vigorously to the Hamas attacks on Israel, and the anticipated reprisals and repercussions (a more than $60/oz move on Friday the 13th alone).

Bitcoin looked asleep, when a new hot war broke out in the Middle East. If it’s been reacting to anything since that happened it seems to be the ongoing breakdown of the bond markets. It may truly “be different this time” if the markets wake up to the reality that debt is well and truly out of control.

Granted, gold took a major dump in the weeks leading up to the Hamas attacks, and Bitcoin is still the best performing asset class of the year, so if we can infer anything, it feels like the “all one trade” correlation is starting to break down a bit.

Absent rampant money printing (on pause for the moment, to be sure), assets seem to be zig-zagging toward their own fundamental drivers and at the moment, it looks like this: fears of World War III are acting as a tailwind for gold while fears of the global financial system imploding (and possibly the inevitable arrival of CBDC’s) are what’s lifting Bitcoin.

My base case is that the latter is pretty well baked in. I’d like to hope that the former isn’t, but, as I noted earlier, we may already be past that.

My forthcoming ebook The CBDC Survival Guide will give you the tools and the knowledge to navigate coming era of Monetary Apartheid. Bombthrower subscribers will get free when it drops, sign up today.

Today’s post was an excerpt from The Bitcoin Capitalist Mid-Month Portfolio Review. TBC provides actionable intelligence on the macro forces shaping Late Stage Globalism and a tactical toolkit for growing your wealth as it plays out. Try it today here.

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The Jackpot Chronicles Scenario #4: Atlas Shrugged

It occurred to me that I never did finish the final instalment of last summer’s Jackpot Chronicles, wherein I posited four possible post-Covid scenarios.

For a quick refresher, The Jackpot is concept I cribbed from William Gibson. It’s a term he uses across a few of his near-future cyberpunk novels that describes a series of rolling global catastrophes that set in sometime around 2016 (his stories span multiverses, and timelines, but the common theme is that somewhere around 2016, some kind of irrevocable glitch in the matrix occurred that put a permanent end to normalcy as it has been understood up until that point).

If there was a Jackpot, whatever it was, it could arguably have happened at many points throughout the 20th century, or if we wanted to confine our speculation to the 21st century then, 9/11 or the GFC would do. Everything after that being symptomatic as opposed to causal.

And then… 2020 and COVID hit. That’s when the fabric of time cleaves us into the before times and The Jackpot.

The other post-pandemic scenarios from the rest of my Jackpot series were:

1. Force Majeure: The wheels come off completely and the system comes unglued. Mad Max.
2. Tin Foil Hat: It really is one Big Conspiracy and we’re into a New World Order.
3. The Great Bifurcation: The middle class gets wiped out and we get a two-tier society

I had thought the fourth scenario would be the one themed Deglobalization, and to a certain extent it still is. In the original outline I described that Deglobalization:

“Is where multi-national corporations, so shaken from this Near Death Experience, realizing their error of betting the farm on just-in-time supply chains, labour cost arbitrage and having zero buffers, begin pulling manufacturing back home.

The smart ones start building cushions and shock absorbers into their business logic, and they begin to eschew leverage after being on the wrong side of a series of cascading liquidity implosions. In other words, businesses begin to transition themselves into what I called “Transition Companies” as posited in the inaugural posting for [this blog]”.

I also went on to say that I considered this one most desirable yet least likely. My view on this scenario has changed somewhat, and I also think that the staggering government ineptitude and duplicity at all levels in all jurisdictions (with few notable exceptions) has made our regeared “4th scenario” more likely given that it’s in progress. Mass demonstrations, mass exoduses, crypto-currencies are symptoms of a Great Reject, or as I’ve renamed this scenario “Atlas Shrugged“.

The TL,DR of the novel, Atlas Shrugged is that once the institutional sclerosis of the ruling class was understood to be both incorrigible and irreversible, the only other option was a global opt-out. There was no Great Reset in Atlas Shrugged. They got The Great Reject instead.

Under the Atlas Shrugged scenario, deglobalization is just one of numerous motivating factors, but it’s mainly an outcome of a larger dynamic where all non-ruling factions in society lose faith in the prevailing structure of Neoliberal Globalism (a.k.a “Mr. Global”). With Mr. Global’s viability in question, people begin to look for the exits.

This begins to occur on two fronts. What Vilfredo Pareto called “the non-governing elites” begin to realize that the system which used to accommodate them, even rely on their tacit support, is now becoming hostile toward them. At the very least, the ruling elites are undermining their interests. This is part of the dynamic of Peter Turchin’s “elite overpopulation” that we looked at recently.

The other front is the comparatively powerless underclass, which, in pace with Pareto’s Theory of Elite Cycles, lose their moorings and standing within the system they are expected to adhere to. The social contract no longer seems to be a matter of middle-class protections and living standards but instead becomes starkly authoritarian and one-sided. What is clear is that the existing institutions are now functioning to defend the position of the overclass, not to uphold the rights and liberties of the underclass.

The culmination of multiple super-cycles (Pareto’s Elite Cycles, Turchin’s long term dynamics of sociopolitical instability, debt, a Fourth Turning, and a Maunder Minimum for good measure) combined with an accelerated onslaught of technological innovation: Internet, crypto-currencies …biotech? Nanotech? Micro nuke? Fusion? Quantum computing? We have all the necessary components for a complete breakdown of existing institutions and the total loss of legitimacy of the current governing elite class.

So it goes in our Atlas Shrugged scenario. Various interests of many forms and myriad factions, from dissident states (like Florida), to decentralized and virtual companies, emergent DAO’s, all the way to individuals and cultural tribes all begin to experience these moments of clarity in their own way. From there they will act in their own rational self-interests and cooperate with others doing the same in order to navigate the breakdown of Mr. Global.

In spite of this, Mr. Global’s prevailing policymakers and governance structures will frantically maneuver and spin narratives of fear and fantasy in order to keep the existing system on the rails.

That is what The Great Reset really is: it’s an attempt at a zeitgeist-level rationalization that doubles-down on institutional failure on the part of the entire governance structure of Mr. Global, and gives them a new lease on life to remain in charge. Reimagined by the Davos crew, amplified by the mainstream media, lubricated by Big Tech.

The antidote to all of this are crypto-currencies, smart contracts and decentralization.

That antidote also brings significant upside regardless of which one of our four possible scenarios plays out.

When I listen to people who are complete denial about crypto, I realize that there is a common thread in their objections (what made me think about all this today was listening to Michael Pento’s criticisms of Bitcoin on George Gammon’s Rebel Capitalist. Pento’s 2012 book on the inevitable bursting of the bond bubble is a must read. That book helped be form the basis on what I think is the funds flow that is actually putting a floor under crypto. I don’t begrudge Pento for not seeing it, because as I’ll explain, he’s looking at it through the wrong lens)

We could go on for hours about how most of these people haven’t really delved into the technology or what it means, how their criticisms at the defects around Bitcoin apply even more accurately to US dollars (“backed by nothing”, “infinite supply”, “uses too much energy”, et al). But what they all have in common is that they all posit that whether Bitcoin and cryptos succeed or fail is premised on whether the existing establishment will permit it.

What will the Fed do? What if the government bans it? Won’t the World Bank just create their own CBDC?

This is completely inverted. They have it backwards. It’s not up to the existing system, because the existing system is over. That’s the part they don’t get.

Nation state establishments within the twilight of a declining system should be thinking deeply about their place in the new reality of network states, not pontificating how they will lord over this new landscape. The coming system will be multipolar in not just the geopolitical dimension, but across cyberspace and the network dimensions as well.

Instead, the incumbent system is busy banning menthol cigarettes, gearing up for negative interest rates and undergoing mass conversion to a peculiar new religion called Wokeness.

It won’t work, and it brings to mind a particularly vivid example I once heard about a balloon disaster that still makes me cringe when I think of it:

A group of people were embarking on a balloon ride and as they were just a foot or two off the ground, the burner erupted into flames. The balloon pilot realized the situation immediately and he leapt from the gondola which was still only a few feet off the ground.

 

One or two of the passengers were quick witted enough to realize what this meant and followed him. This set off a feedback loop: as the fire expanded, its hot air forcing the balloon higher, combined with the weight reductions as the first few people bailed out, the situation very quickly escalated past a point of no return.

 

The balloon had accelerated very rapidly to heights from which it was no longer possible to leap safely. The unfortunates who had hesitated and were trapped in a gondola being propelled higher by a fireball, to their inevitable doom.

That’s what our entire situation feels like today. The balloon is still hanging a foot or so above the ground, the canopy is on fire, and the people who have figured out what this means are bailing out while they can and in doing so they are accelerating the ultimate burn-then-crash of the entire system.

In Rand’s book they went to a hidden valley called “Galt’s Gulch” and used their skills and their resources to restore new communities while the old systems imploded. If this scenario plays out we’d be looking for people creating a decentralized, network of gulches. Seeking each other out who are pursuing this same goals, creating open protocols to to rebuild civil societies and autonomous communities built on the ageless principles of free markets, liberty and prosperity.

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William Gibson’s most recent novel Agency, describes a type of “many worlds” tapestry of a multiverse as it exists after a catastrophe called “The Jackpot”. The main character’s POV takes place from within one of these “stubs” as they are called, which for some reason forked off from the “real” Earth timeline sometime after the 2016 US election.

Although Gibson doesn’t exactly strike me as a MAGA guy in real life, it is interesting to note that in the story, the “real” Earth timeline is one in which it’s implied that Hillary Clinton won the 2016 election (neither “Clinton” or “Trump” are mentioned by name anywhere in the book).  However, it’s also the timeline in which a global thermonuclear war erupted around the Syrian conflict.

It is this outcome which the protagonists, some of which are covert operatives from our future, are seeking to nudge the other stubs away from. In other words, it’s classic William Gibson, who’s enduring quip “The future is here, it’s just unevenly distributed” has probably garnered even more relevance of late.

In one of the early stubs, it is Trump who won the 2016 election, and although no nuclear conflagration occurred then, a series of rolling catastrophes remembered by history as The Jackpot, ensued. The Jackpot resulted in massive depopulation, the destruction of democracy globally, and a system of interlocking fiefdoms run by a new governance structure openly acknowledged to be a kleptocracy.

This idea that we were living in somebody else’s parallel universe oddly reinforced an inexplicable subconscious urge that began expressing itself in my own thoughts around the end of 2019, the idea that we were the bizarroverse that people often refer to in half-joking terms.

Somewhere, somehow, there is a much more rational reality, and we’re “The Bizarroverse” to that.

— https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpg E. Jeftovic (@StuntPope) December 12, 2019

As these thoughts expressed themselves I had some sense of this oncoming year becoming an inflection point in history, one of those years against which all future events would be retroactively measured “Pre-2020” or “Post-2020”, and for sake of expediency I’ll appropriate Gibson’s literary term for that inflection point, The Jackpot.

The Jackpot is what Chris Martenson and Adam Taggart have been converging on for years, before anybody ever heard of COVID-19. They said that the current conventional assumption, that the next 20 years would be a somewhat straight-forward linear extrapolation of the previous 20, was wrong. They didn’t know what the catalyst would be, nor did any like-minded commentators such as Charles Hugh Smith,  James Kunstler, John Michael Greer,  or even myself, when I intuited in Unicorn Winter that “Ground Hog Day was coming”.

By now it seems quite likely that the inflection point is upon us and that the Coronavirus was the catalyst to bring it on. The Great Bull https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpget of 2009-2020 or even 1982-2020, is over (each counter-cyclical bear crisis papered over by QE and ZIRP). This time, the Central Banks are out of ammo and none of the old moves are working.

The Jackpot is where we arrive when we run out of road to kick the can.

Over the next few posts I’m going to explore what various outcomes could look like after the Jackpot. These are not predictions. They are scenarios of what might unfold when certain key tenets, those articles of faith that have been taken for granted these last 20 years, break down and become irrelevant, or even toxic.

Scenario 1: Force Majeure:

In this scenario all predominant belief systems about governance and order such as liberalism, democracy, rule of law, free markets and capitalism break down. So do their accompanying institutions: political parties, nation states, currency regimes, even formal religious denominations.

This outcome witnesses the ascension and proliferation of the non-state actors. Imagine Facebook and Google having their own currencies – and paramilitary forces, while overleveraged, bankrupt nations rupture and crack up.

Countries become a balkanized hodgepodge of autonomous areas where control is contested between privately held warlords, clans or networks and remnants of regional authorities. If you want to get a feel for how the Force Majeure scenario plays out, get a copy of Neal Stephenson”s SnowCrash.

Scenario 2: Tin Foil Hats

This scenario is one where we posit (merely as a thought experiment) that the conspiracy theories around Coronavirus could be true. These range from it being a weaponized virus that either escaped, or was unleashed, to the assertion that the entire Coronavirus hysteria is a hoax, perpetrated by Global Elites (probably the Lizard People) in order to take down the economy and institute worldwide martial law.

In this scenario we might be in the early innings of World War Three, only the war isn’t being fought with bombs and bullets, it’s being fought with biological agents and weaponized financial derivatives.

Scenario 3: Mandatory Pollyana

This is where Central Bankers step in and once again save the day, injecting just the right amount of liquidity, pushing interest rates to the exactly correct level, possibly below zero. Policy makers unleash unbridled fiscal stimulus, tax incentives and deferrals, to be followed up with MMT and UBI.

In this version, global financial markets become, in the words of Ben Hunt “publicly owned utilities” – that are only permitted to go up. Short selling is banned. The world moves into a globally coordinated command economy.

Scenario 4: Good-bye Globalism

Is where multi-national corporations, so shaken from this Near Death Experience, realizing their error of betting the farm on just-in-time supply chains, labour cost arbitrage and having zero buffers, begin pulling manufacturing back home.

The smart ones start building cushions and shock absorbers into their business logic, and they begin to eschew leverage after being on the wrong side of a series of cascading liquidity implosions. In other words, businesses begin to transition themselves into what I called “Transition Companies” as posited in the inaugural posting for Out Of The Cave.

I consider this scenario to be the most desirable, but the least likely, especially if many of these corporations receive government bailouts.

Over the next days or weeks I’ll put try to find the time to flesh out each of these scenarios. It turns out that hunkering down can be a full time job unto itself, something I plan to write more about for the GC subscribers.  If you’re not already on the list and want to know about the rest of the Jackpot Chronicles and my thoughts around navigating your business through it, sign up for the list here.

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