'21 Crypto Newsletter: Nov 1st
Twitter CEO on hyperinflation, Bitcoin price action, Miami's new crypto, Private Parts videos
This newsletter is focused on current events in the crypto space, sharing projects and people I find interesting, and serving as a resource for upcoming crypto events; locally in Colorado and larger events across the U.S.
Howdy crypto-heads! Plenty to cover this “week” with Bitcoin recently making new all-time-highs and Miami releasing their very own cryptocurrency. Here’s the newsletter breakdown:
Jack Dorsey and hyperinflation
Bitcoin price action
MiamiCoin and civic engagement
ANN - Privacy focused video series
Upcoming Denver Crypto Group events
1. Hyperinflation soon?
Hyperinflation is typically “very high and accelerated inflation” that occurs during a period of economic instability. The most recent example is Venezuela’s Bolivar and the loss of 99.9% of it’s purchasing power to date. Another example is post-WWI Germany where people were wheeling sacks of cash to the grocer just to buy a loaf or two of bread.
Regardless of the cause, hyperinflation is a very damaging economic scenario. So when I see Jack Dorsey, the CEO of a large corporation saying that it’s coming soon to the U.S. and then on to the rest of the world, my ears perk up.
So how does hyperinflation occur and how do we tell if the U.S. is heading towards it?
According to Investopedia hyperinflation is typically inflation of more than 50% per month and it has two primary causes;
“The two primary causes of hyperinflation are (1) an increase in money supply not supported by economic growth, which increases inflation, and (2) a demand-pull inflation, in which demand outstrips supply. These two causes are clearly linked since both overload the demand side of the supply/demand equation.”
Interestingly these two causes of hyperinflation have actually been occurring in the United States recently due to the global Coronavirus pandemic.
Remember those $1200 and $600 checks we all got? Plus the additional unemployment benefits, child tax breaks and business loans? All of these programs were primarily funded by printing U.S. dollars and allowing them to enter the money supply (aka circulation) via the people who received these checks.
As you can see in this chart of the M1 money supply, from February 2020 until September 2021 the money in circulation went from just over $4 Trillion to nearly $20 Trillion! This increase of $15.8 Trillion is a large amount, and because it occurred in a small time period (less than 2 years) it means that out of all the M1 money ever created, 79% of the M1 money in circulation entered after February 2020.
Ok, so it looks like very clearly the circulating money supply has gone up, but has the economy stagnated at the same time to begin causing hyperinflation?
When we look at the chart for U.S. GDP it shows that the economy has actually made a fairly significant spurt of growth from a low in Q2 of 2020 to the most recent data point of Q2 2021. In that 1 year period U.S. GDP grew by nearly 17% which is actually quite impressive!
Unfortunately the growth in M1 money supply for that same period has been about 20 times higher, coming in at 349% from March 2020 to June 2020. It is not a good sign when the money supply grows 20 times faster than the GDP. It seems that ole’ Jack may be on to something…
For the second part of the hyperinflation catalysts, “a demand-pull inflation, in which demand outstrips supply” I will look no further than the supply chain disruptions actively affecting most countries around the world.
These logistical issues are driving commodity prices up, along with auto prices and home prices here in the United States. When it’s hard for folks to get specific items like toilet paper or bottled water it creates a scenario where the demand for an item has outstripped the ability of the market to supply it (aka one of the causes of hyperinflation).
The counterargument here is that these supply issues are only temporary, and in this case the price inflation caused by shortages of certain goods will likely return to lower levels.
So what does all this mean?
To me there are two possibilities, 1) We are going to have hyperinflation like Jacky D. is saying. 2) This is Jack’s Smirking Revenge as he politicizes an issue with no clear answer to create engagement and support for his point of view.
At the end of the day I do not trust our elected officials to efficiently manage the economic and fiscal stress caused by Covid 19. Unfortunately the incentives for many of the people making these decisions are for short time frames (election cycles, retirement kickbacks, etc) and a solution that looks forward 20-50 years is not in the conversation.
With that being said, unless we continue printing money at historical rates (and there is a chance we will) I do not believe we will enter a period of hyper inflation based solely on the current situation.
I think we will (and currently are) seeing some significant inflation in housing, food, gas and automobiles, and we are also seeing companies get clever about selling us less goods for the same amount of money to curb anxiety over rising prices. However, with the USD being the worlds reserve currency and the ability for American citizens to keep blindly consuming (pushing GDP up) I just don’t see Jack’s doomsday scenario happening.
For hyper inflation to occur I feel that we will need more money constantly entering circulation along with additional supply chain disruptions that last for a few months or more. Without the money printer brrrrrring for a few more quarters I doubt we will see hyperinflation in the United States.
2. Bitcoin makes new ATH
On October 20th the price of Bitcoin hit nearly $67,000 before falling to just under $58k a few days later. Currently we are consolidating around the $60k support/resistance level with decreased spot trading volume as speculators wait to see which direction Bitcoin moves in next.
My first thought about this recent milestone is - Huzzah!
With Bitcoin at never before seen highs it feels like the cryptosphere is coming into its own and the future has never been brighter. I am very excited by the fact that public companies (Square, Tesla, Microstrategy, etc) who had the foresight to hold Bitcoin on their balance sheets prior to this are looking like friggin’ geniuses. They have likely set an awesome precedent for their peers who previously held off and I see many more large corporations taking the plunge to secure some BTC (or ETH) for their war chests.
Adding to my excitement is the increasing retail interest in cryptocurrency based projects like NFT’s and the ridiculous meme-y dog coins like SHIB. In my opinion both NFT’s and SHIB seem more like gambling at a casino than actually investing, but you can’t argue with the fact that thousands (millions?) of new faces have been exposed to the cryptosphere through both of these channels.
Lastly we have the Bitcoin ETF’s coming online (right now it’s just futures but spot is coming *soon*) which should expose a large number of “traditional” investors to cryptocurrency as they can now participate in the market using the methods they’re used to (bring on the Boomers!).
Adding this all up I’m obviously very bullish on Bitcoin and cryptocurrency in general, especially until the end of this year. Recently I added some more DCA buys to my core portfolio of BTC/ETH/XMR (posted the ETH long chart in the Denver Crypto Group discord) and have set up my strategy to take advantage of positive price appreciation.
Please keep in mind though that I can’t tell the future and you should never put more money into cryptocurrency than you’re willing to lose.
3. MiamiCoin goes live
Back in June the city of Miami publicly announced MiamiCoin (MIA) as, “…a way for people to support the Magic City and grow its crypto treasury while earning BTC and STX yield for themselves.”
As I understand it, MiamiCoin is the first of a new type of project called “CityCoins” which are a way for municipalities to capitalize on cryptocurrency investors willing to support an entire city.
While it is possible to mine MiamiCoin using the same equipment you mine Bitcoin with, 30% of your mined MIA goes directly into the city of Miami’s treasury wallet.
The headlines around this project have been incredibly hyped up but I think it is best to take a cautiously optimistic approach to this new cryptocurrency application. I love the idea of being able to support the city I live in (or a city I love) while also profiting from this support. This project is really in a new class of “geography” cryptocurrencies that, instead of deriving their value from a technology service or securities investment, attain their value from an entire region of people and their collective successes or failures.
The downside however is just because a major city is involved there is no guarantee of success, in fact, I believe there is a TON of risk to participating in something like this.
Elected officials are not always the most tech savvy and a large pot of un-allocated funds is a great recipe for political funny business. Additionally, for hackers this is a humongous target. Imagine the payday if you got ransomware on city servers PLUS the honeypot of MiamiCoins just sitting in the Mayor’s wallet…I’m calling it here first folks!
However the story of MiamiCoin ends up unfolding though I still think the idea of using investor speculation to increase municipal engagement through cryptocurrency is a breakthrough use case. I’ll be watching the saga closely and hopefully it ends up being a successful one.
4. How well do you know your Private Parts?
As a huge proponent of a persons right to privacy (digital or physical) I am saddened by the fact that there are is a ton of amazing, open source software available that increases the users privacy but isn’t utilized.
Either the software is too difficult to install and configure or, someone who would use the software just isn’t aware that a solution for their problem exists. To this end I have been creating a series of videos with my business partner Csill called “Private Parts” where we are “Helping you put the privacy puzzle together”.
The first video in our series is focused on installing a new operating system for your router called OpenWRT. The OpenWRT software allows you to harden your router, easily manage wifi networks, set up a static IP, force all traffic to go through a VPN and other cool privacy perks. OpenWRT is also fully open source and free, and they support a large number of router models.
Private Parts: How to install OpenWRT -
Please give a subscribe or like if you enjoy the video and stay tuned for the next episodes!
5. Upcoming Events for Denver Crypto Group
For the month of November I’ve got 1 free in-person event and two paid classes (plus another class in December).
Ask the Crypto Expert! November 4th at 6:30pm: Free, in-person at Smoky Hills Library meeting room A, 5430 S Biscay Cir, Centennial, CO 80015
Trading Class 1 November 9th at 6:30pm: Paid, via zoom and signups are through Meetup -
Trading Class 2 November 16th at 6:30pm: Paid, via zoom and signups are through Meetup -
Investing Class 1 December 7th at 6:30pm: Paid, via zoom and signups are through Meetup -
That’s it for this week, stay happy and healthy and I’ll catch you soon!