Month: March 2021

Conversions between carbohydrates and lactic acid play an important role in life.  It is the basis of the cycles that operate in mitochondria.   At the end of the 1910s Otto Meyerhof mapped these conversions by measuring heat trends and oxygen consumption in frog muscles. When the muscle is working, lactic acid is formed from carbohydrates, and Otto Meyerhof showed that during recovery, this is followed partly by the oxidation of lactic acid and partly by reprocessing of lactic acid to carbohydrates.

The Embden–Meyerhof–Parnas (EMP) pathway allows the metabolic use of glucose to generate ATP, NADH, and several biosynthetic precursors such as 3-phosphoglycerate or pyruvate.

Most of the metabolic energy derived from glucose comes from the entry of pyruvate into the citric acid cycle and oxidative phosphorylation. These pathways occur under aerobic conditions. Under anaerobic conditions, pyruvate can be converted to lactate in muscle or ethanol in yeast.Among the important findings determined as part of the elucidation of the glycolytic pathway were:The finding by Hans Buchner and Eduard Buchner that fermentation, the conversion of sucrose to ethanol, could occur in the absence of a living cell.
The finding of a hexose bi-phosphate intermediate (fructose 1-6 biphos) in glycolysis
The activities required for the reactions to occur were composed of a heat-labile, non-dialyzable substance (enzymes) and a heat-stable, dialyzable substance (coenzymes).
Many scientists, including Gustav Embden, Otto Meyerhof, Carl Neuberg, Jacob Parnas, Otto Warburg, Gerty Cori, and Carl Cori, contributed to the complete determination of the pathway.
Glycolysis is formally known as the Embden-Meyerhof-Parnas Pathway.

Glycolysis takes place in the cytoplasm of the cell. The goal of the initial reactions of glycolysis is to convert glucose into fructose 1,6-bisphosphate. This traps glucose in the cell as glucose 6-phosphate and forms a phosphorylated compound (fructose 1,6- bisphosphate) that can be cleaved into phosphorylated 3-carbon intermediates – DHAP & 3PGALD. These 3-carbon units can then be used to generate ATP by substrate level phosphorylation and by making pyruvate & NADH for the citric acid cycle and oxidative phosphorylation.The first step in glycolysis is the phosphorylation of glucose by ATP to form glucose 6-phosphate. This reaction, catalyzed by the enzyme hexokinase, traps glucose in the cell.  This glucose was made by the action of sunlight on carbon dioxide and water via photosynthesis.  Our cells have to recapture the glucose so mitochondria can then strip it apart to create CO2 and water to reverse the process of photosynthesis.

What he did not know was that lactic acid concentrations vary with the free radical pulse rate of mitochondria and with the oxidation state of iron in the cytochromes of mitochondrial respiratory proteins.

Meyerhoff won a Nobel Prize for medicine in 1922 for a partial discovery of how a pathway operates related to lactic acid metabolism.  Even today the real actions of this pathway remain unknown because the biophysics of the pathway has not been studied properly.

Sunlight is a small part (visible spectrum) of the electromagnetic spectrum when one looks at it top-down. Photons and electrons make up this spectrum and their energies are the differences within the spectrum. What they both are made from, however, is identical from a subatomic perspective. Sunlight splits water into hydrogen, oxygen, and 4 electrons at a basic level. Hydrogen from water is a proton. Electrons are liberated from both atoms that make up water (I laid this out in the photosynthesis blogs at jackkruse.com). This water is used to grow all aspects of our food supply on planet Earth. Not one food breaks this rule unless man makes it.

This means our food contains information about the electromagnetic spectrum in both photon and electron and proton messages. I told you all food is broken down into electrons in our mitochondria. What I have not mentioned a lot is that long-chain fatty acids crafted from food metabolism provide our mitochondria with protons too. Protons are ripped from foods by mitochondrial dehydrogenase. The protons mitochondrial strip from foods is all protium and not deuterium. This allows the matrix to remain gel like and piezoelectric. When it is squeezed the electric charge in the mitochondrial membranes is harvest like juice is when an orange is squeezed (see my latest Quantum Health TV video for more).

Protons carry a positive charge and electrons carry a negative charge. The electromagnetic force acts with infinite power and range on all CHARGED particles in the universe. This includes your quantum cell and especially your mitochondria. This means they are under the strict control of the electromagnetic force, as electrons (NADH) are from food. These electrons enable us to electronically induce molecular changes in proteins and in our electron transport chain in mitochondria to electrify the hormone cascade in the hypothalamic-pituitary axis when sunlight enters the eye.

Nature is based on probability and not cause and effect. Why?

These electron and proton paths can and should be thought of as possible fates, or even quantum superposition to deal with multiple possible realities food faces in our mitochondria processing plant; their ultimate fates are controlled by the electromagnetic force to perform different actions within the electron transport chain.

The electromagnetic force changes as seasons change as the Earth moves around the sun. Sunlight is the lever that varies the squeeze on our colony of mitochondrial to liberate its current or redox potential. This DC current powers the energies of electrons in foods up or down depending upon the season the food grows in. It turns out this is precisely how insulin evolved and is regulated in our mitochondria by the current it releases in beta cells of the pancreas. It is tied to “where” electrons and protons are being fed into the chain. When electromagnetic energies in the environment are altered, we appear to harbor two basic possible mechanistic states that the electron transport chain can choose between based on the two states we face.

No food and a subsequent lack of electrons and increased protons from fat storage,
or an excess of food, with the result of too many electrons or too much energy from photons and a lot of protons.
Therefore the electron transport chain has to have a built-in mechanism to deal with both situations. This is just like a simple circuit being controlled on a laptop semiconductor chip. When we starve, we have poor electron flow or current, and very few electrons enter cytochrome 1. Insulin’s action would be low during this time because the superoxide pulse is linked to actions of this cyctochrome.

In the mitochondria at complex 1, when the current is low, we deliver plenty of endogenous electrons from FFA to flow through the FADH2 input at cytochrome 2. This happens through the action of an electron transporting flavoprotein dehydrogenase coming from the first step of beta-oxidation of real fats from our fat stores. For example, this could be a fatty acid like palmitic acid.

When food is sparse in winter, the current of flow is low, and it is near impossible to generate reverse electron flow through complex 1, so activation of insulin signaling is rapidly aborted by the continuing action of tyrosine phosphatase. Tyrosine is an aromatic amino acid that absorbs sunlight and acts as a semiconductor to absorb light and emit an electromagnetic pulse that signals a mitochondrion what to do next. Dr. J. Bose showed us this mechanism in crystals in the 1890s. This resonant mechanism of sunlight yokes insulin action to environmental light signals and temperatures. The photoelectric current signals phosphorylation of pathway proteins to change “where electrons” enter our mitochondria.

I told you years ago food clearly has a quantum electron effect because it contains light energy that is unaccounted for in the glycolytic pathway. Most biochemists and those in the paleosphere fail to realize the effect is tied to the electrons’ energy state and nothing else. Foods grown in longer light cycles have higher energized electrons and they are handled very differently than electrons from low light level foods because of where they enter the electron transport chain in our mitochondria. Our mitochondrial cytochromes are proteins that can decipher the differences in energies, and this why they enter the ETC at different cytochromes and provide different levels of ATP and oxygen generation. Here you can begin to see how the electromagnetic force directly impacts the proteins in the insulin signaling pathway.

What few realize:  Diabetics have a dawn phenomenon related to a lack of circadian cycling.  A lack of light cannot be fixed by adding a drug .  For prediabetes and Type-2 diabetes who regularly monitor their blood sugar, there is a well-known issue called the dawn phenomenon. It is characterized by a rise in blood sugar during the early morning hours, despite lifestyle measures and even medication.  Sunlight has massive impacts on many circadian genes that alter mitochondrial biology.  Most mitochondria in humans are in the brain, so the effect of sunlight on these genes should pay off handsomely to clinicians who understand the link. The Rev-erb gene is the gene that the electromagnetic force operates on.

A lack of AM sunlight = a lack of electromagnetic force to activate the Rev-erb gene. An altered daily rhythm of expression of the Rev-erb gene underlies the dawn phenomenon. Future investigations to reverse diabetes must be built around light and not drugs to get a full understanding of the disease. Rev-erb is expressed only during the day but not at night.  In humans, the rev-erb gene is found in GABA neurons and the gene’s expression is highly enriched in a particular brain area called the suprachiasmatic nucleus.  The SCN  is mainly composed of GABA neurons.  Humans have a photopic retina because they are diurnal.  When the body awakes and takes in food, insulin is secreted from the pancreas to signal the body to lower blood sugar. Insulin is more effective in doing this job upon waking than at other times of the day. This high insulin sensitivity is probably because the body is anticipating feeding behaviors upon waking up.  Sunlight alters the daily functioning of rev-erb gene in the brain to control insulin release and action in the gut. Neural Rev-erb must be operational to regulate mitochondria in the liver to control the hepatic insulin sensitivity rhythm.  This quantum controller operates independently of eating behaviors or basal hepatic glucose production.  In humans, we now know the Rev-erb gene in white blood cells, correlates well with the central clock function in the brain.

The nuclear receptors REV-ERB (consisting of REV-ERBα and REV-ERBβ) and retinoic acid receptor-related orphan receptors (RORs; consisting of RORα, RORβ and RORγ) are involved in many physiological processes, including regulation of metabolism, development and immunity as well as the circadian rhythm.  What does this imply?  It means there is a specific part of the AM solar spectrum diabetics lack.  Can you guess which one it is?

Nuclear receptor Rev-erb α: is a heme receptor that coordinates circadian rhythm and metabolism.

For more on that watch the video below.

CITES

https://quantumhealth.tv/programs/quantum-chronicles-episode-3-part-1

Ding, G., Li, X., Hou, X. et al. REV-ERB in GABAergic neurons controls diurnal hepatic insulin sensitivity. Nature (2021). https://doi.org/10.1038/s41586-021-03358-w

Today we begin with the lesson and then we unpack it so you can understand why some people will always be addicted to shitcoins, others will lead a fiat life until they get hit with a tsunami wave and others will understand BTC from the get go.  It has a lot to do with circadian oscillations.

Nature is a decentralized energy network and so is Bitcoin.  This means there are things in the BTC ecosystem that work like the relationship between predator and prey.  It is your job to see and understand this.  Why does this idea persist?  The algorithm that created bitcoin is really an algorithm of time.  It was created to show that timing matters a lot in the coupled system.

FEEDBACK CONTROL OF METCALFE’S LAW: The predatory Bitcoining maximalist act like the predator in this ecosystem.  They provide a valuable feedback service in this ecosytem by turning off people from buying Bitcoin.  The people turned away are non critical thinkers.  Think of them like low dopamine humans in the mitochondrial ecosystem.   People who turn away because of hurt feelings exhibit behaviors that place themselves at the back of the line and allow critical thinkers to front run them. In this way, the people turned off, the low dopamine prey,  wind up supporting the predators in this coupled system by buying Bitcoin a long time after the predator types.  They usually buy into to shitcoins or fiat games before they ever consider buying Bitcoin.  This is a key symptom in this coupled cycle.    This is how the predator consumes its prey.  As a result the price rises for all in the ecosystem.  The predators have more than the prey, but both sides of the oscillating system remain viable and healthy.  One can not exist without the other.   This tide rises all the predators boats as the process evolves and supports the ecosystem expansion.

This predatory oscillation works best on financial journalist, academics, VIPs & think tank types.  Those educated by classical beliefs often are the low dopamine prey in bitcoin.

HOW COUPLED OSCILLATIONS OPERATE IN NATURE

Connect one pendulum to another with a spring, and in time the motions of the two swinging levers will become coordinated.

This behavior of coupled oscillators is long a fascination of physicists and mathematicians also can help biologist seeking to understand such questions as why some locations overflow with plants and animals while others are bereft.   It can also help crypto owners understand why there is an ecosystem of shitcoins and fiat schemes in the Bitcoin ecosystem.  It turns out, the “prey ecosytem” strengthens the Bitcoin network long term.

In nature, we should pay closer attention to coupled oscillations because they determine outcomes.  The ecosystem provides the incentives that determine outcomes.

The basic idea of oscillating populations is not new to ecology of any system, biologic or cryptographic.

If you want to understand the complex interactions of crypto assets and fiat instruments you must understand how they work together with timing.

We know that any predator-prey system, say lions and zebras for example, shows oscillations.

If there are lots of lions preying on zebras, numbers of zebras decline; then because zebras are scarce, lions starve and their numbers dwindle, allowing the zebra population to build up again. You see this oscillation, changing on a regular basis from lots of predators with few prey to lots of prey with few predators. The pattern is like waves or pulsations.

What gets interesting is when two independently oscillating systems, such as lions preying on zebras and cheetahs preying on impalas, become connected through the invasion of a third predator” leopards, for instance.  This is what is happening to the Bitcoin ecosystem now with shitcoins and fiat instruments.

When they become connected, the situation is very much like connecting two springs together,  the ups and downs work in unison to create cyclic patterns who all have a reference to time.  This is best represented in the halving cycle of Bitcoin, the alt coin cycle, and the business cycles of fiat systems.

In the case of lions, cheetahs and leopards, bringing leopards into the system causes lion and cheetah populations to oscillate in phase with each other peaking and declining at the same time.  This is how BTC and altcoins operate in crypto ecosystems.   That works to the leopard’s advantage when both lion and cheetah populations are low, leopards can pounce on the plentiful prey. This is why Bitcoin maximalist focus on alt coins during bull market runs.  But then lions and cheetahs increase again, eventually building up their numbers and combined competitive strength enough to drive out the leopards at least until the next low point in the lions’ and cheetahs’ population cycles.

Predator-prey systems can also become coupled when a new prey species invades and competes for resources with prey species in two previously unconnected predator-prey systems. This is where fiat instruments come to play for crypto.  For example, an extremely fast antelope might begin competing with zebras and impalas for food. Even though neither lion nor cheetah is fast enough to prey on the new antelope, the antelope’s activity links the previously unconnected lion-zebra and cheetah-impala pairs. In such a case, the ups and downs of the two original prey species are thrown into chaotic but coordinated patterns.  Fiat creates the chaos that Bitcoin and altcoins require.

This process is what is known as coordinated chaos a phenomenon that occurs in some physical systems, such as lasers, but hasn’t been pointed out in crypto ecology before this blog.  By oscillating out of phase with the other two grazers” zebras and impalas” the antelope can coexist with them, prospering when their numbers are low.  Fiat instruments feed both systems during crypto bear markets.  

In living systems, considering such scenarios with the aid of mathematical simulations, the models can help address questions biologists have wrestled with for decades, such as how species that appear to be exploiting the same resources can coexist and why some predator-prey systems are particularly resistant to invaders.

In the past, ecologists have taken a traditional Newtonian view of the world, where everything comes into a nice equilibrium.  But oscillations sometimes destroy that equilibrium, by design. What I’m suggesting is that we crypto ecologists need to acknowledge the inherent oscillation in consumer-resource systems, such as predator-prey, BTC-shotcoin, herbivore-plant and parasite-host systems, and start approaching these old ecological issues in terms of coupled oscillators.  Then and only then will you see the forrest through the trees and understand the ecosystem of Bitcoin, alt coins, and fiat systems for what they are.

HOW TO MAKE SENSE OF THIS FOR BITCOIN

Why do some go irresponsibly long in #BTC? BTC is the only asset that has a Sharpe ratio of greater than 1. The Sharpe ratio describes the increased rate of return received for the extra volatility sustained when holding a riskier type of asset. To understand the Sharpe ratio, one must take into consideration the returns of holding a risk-free asset, compared to holding a riskier asset with higher returns. In this case, a risk-free asset is considered something like a US treasury T-Bill, which is backed by the full faith and credit of the US government, along with the world’s largest economy. This includes FAANG = FB, Apple, Amazon, Netflix, Google. None equal BTC Sharpe ratio.

From 2015-2019 Bitcoin’s 4-year Sharpe ratio was constantly above 2.0, and it has reached above 3.0 in 2019 and was 2.65 for 2020. So far in 2021, BTC is above 3. this defines the parabolic wall of the bull market where Bitcoin dominates as a predator should.

How to interpret a Sharpe ratio?
A ratio higher than 1.0 is considered acceptable.
A ratio higher than 2.0 is considered very good.
A ratio of 3.0 or higher is considered excellent.
A ratio under 1.0 is considered suboptimal.

The negative Sharpe ratio means the risk-free rate is greater than the portfolio’s return, or the portfolio’s return is expected to be negative.

The Sharpe ratio is the difference between the returns of the higher-returning, more volatile assets when compared to the risk-free, much lower returns of a safer asset like US T-Bills. It is important to note that Sharpe ratios only measure the returns based on the amount of risk and the ratio doesn’t actually measure the volatility of the underlying asset itself.

The Sharpe ratio filters out the noise of investor psychology to find the nuances of Bitcoin risk

The Sharpe ratio filters out the noise of investor psychology to find the nuances of Bitcoin risk and reward at different stages of its macrocycle. This can be done by using a simple rolling Sharpe Ratio that analyzes Bitcoin risk-adjusted returns over time.

Ultimately, with respect to BTC timing is critical. Timing is a key feature of coupled oscillating systems.  Correct timing matters deeply: while the individual investor may be satisfied with long-run outperformance, Bitcoin’s macrocycles urge further nuance.

Historically, the trade following the Halving represented the most attractive risk-adjusted opportunity in BTCs history. May 11, 2020, was the most recent Halving. Investors with personal savings and unconstrained time horizons will find comfort in the story of Bitcoin’s long-run outperformance. 90% of days BTC has been higher. This is an astounding ratio. Bitcoin returns are disproportionately skewed to the upside, timing matters.

Much like a call option, Bitcoin risk-adjusted returns rapidly decay or improve depending on market timing. The implication of this record? Over any rolling four-year period of BTC history, Bitcoin’s Sharpe Ratio historically outperformed virtually every other asset class. If an investor had held for at least four years during any point in Bitcoin’s history, they would have demonstrated superior risk-adjusted returns relative to almost all other investment opportunities. Nothing is better than it.  This defines predatory behavior.

Thinking about Bitcoin’s Sharpe Ratio over four-year intervals may be correct in theory, but it is limited in practice. In reality, markets are governed by animal spirits – the swings of fear and greed – This is how alt coins and fiat fears feed the Bitcoin chaos ecosystem.  This is why most “prey investors” are more likely to enter the market after periods of non-linear growth.  Altcoiners and fiat players buy after the top because they do not understand the coupling in the Bitcoin system.

BTC is like sunlight, Altcoins are like blue light, and fiat is like gold in this mitochondrial energy analogy.  Great quotes do not come from great people. They come from ordinary people who think differently about ecosystems.

Many new entrants are thus destined to enter mid to late-cycle, fated to experience grueling drawdowns after buying local or even global highs. The assumption that investors can and will HODL underwater positions for multiple years is unfeasible, especially with the prospect of underperformance relative to other asset classes. The financial and emotional burden of drawdown will likely lead many to capitulate their positions before they are able to realize an entire four-year cycle.  This is why predatory Bitcoiners feed on shitcoiners in bull runs.  It is happening as I type this in this halving cycle.

Given the path dependence of returns, the long-term Sharpe Ratio fails to adequately capture Bitcoin risk.

Oscillating around a value of 1, the one-year forward-looking Sharpe Ratio peaks at the beginning of

Oscillating around a value of 1, the one-year forward-looking Sharpe Ratio peaks at the beginning of Bitcoin’s price inception, 2012 Halving, and several months following 2016 Halving. After these three periods, an interesting dynamic at play: aggressive Sharpe Ratio decay from a high of 3 (spectacular) to a low of −1 (abysmal).

Further, examining the 1-4 year forward-looking Sharpe Ratio for Bitcoin from the Halvings (see pic above), we find a similar effect:

• Exposure to Bitcoin for 1 year after the 2012 Halving nets a Sharpe Ratio of over 3, and holding for an additional 3 years degrades this to approximately 1. From a spectacular investment to a “good” investment.
• Exposure to Bitcoin for 1 year after the 2016 Halving nets a Sharpe Ratio of over 2, and holding for an additional 3 years degrades this to less than 1. From a great investment to a sub-standard investment.

How important is market timing when managing Bitcoin risk?
Analyzing Sharpe Ratio decay gives us a powerful risk framework for BTC. Not all Bitcoin investments are made equal: Bitcoin acquired at different points in a macrocycle should be treated differently as part of a diversified portfolio. To illustrate this concept, consider the idea of “time-to-profitability” (TTP) demonstrated in the picture below:

• Bitcoin acquired at the 2011 high has a ≈2 year TTP
• Bitcoin acquired at the late 2013 high has a ≈3 year TTP
• Bitcoin acquired at 2017 high achieved profitability in November/Dec of 2020.

Not only were investors who purchased Bitcoin at these highs faced with absolute drawdown, but they were also faced with relative underperformance against worldwide equity indices (and possibly other asset classes). Bitcoin can be an excellent tool within a diversified portfolio, but most professional investors cannot simply buy and HODL for extremely long periods of time if they are likely to face both absolute and relative underperformance. Regular investors can if they can handle the tax consequences.  This idea is critical in trading within an IRA account.

The legacy wisdom of financial markets sometimes cautions investors against market timing, captured by the dominance of indexing strategies and the underwhelming reputation of the modern hedge fund. Whatever the merits of this argument in traditional markets, the wise Black Swan will find a fundamentally different heuristic exists for Bitcoin.

This doesn’t mean that other strategies like buy and HODL are not valid. They are over 4 year periods, but within the coupled system Bitcoin is very asymetric and responds to its main oscilator:  Time.

Time in the BTC system is monitored by the difficulty adjustment.  The difficulty is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target. A high difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks. The difficulty adjustment is directly related to the total estimated mining power estimated in the Total Hash Rate (TH/s) chart.

The difficulty is adjusted every 2016 blocks (every 2 weeks approximately) so that the average time between each block remains 10 minutes.  This is one of the most important vital signs I monitor in Bitcoin price.  

The difficulty comes directly from the confirmed blocks data in the Bitcoin network.  Price falls can be very accurately predicted when you understand how important timing is in this algorithm.  Just as sunlight is the key variable for life, the difficulty adjustment is the life blood of BTC pricing.  

The bottom-line explanation of difficulty adjustment is that every time a mining rig is shut down, the bitcoin protocol increases the incentive for other miners to stay online to run the network. It’s as if every time a Walmart shuts down, all the remaining stores became more profitable.

Gazed upon long enough, difficulty adjustment can take on a kind of transcendental religious quality. It’s not the reason bitcoin is useful day-to-day, but it is the reason that bitcoin (like other true blockchains, and very much unlike centralized stores) is nearly immune to true destruction, whether by state regulation or market fluctuations. It’s the reason bitcoin is superior to a centralized digital currency system like Gold, even if bitcoin is more expensive to run in aggregate. It’s what makes blockchains more persistently “real” than mere data saved to a hard drive, or even, arguably, to a Google cloud server farm.

This mining process used in Bitcoin, is formally known as Proof of Work. It is also sometimes referred to as “solving a cryptographic puzzle.” Calling this a ‘puzzle’ or ‘problem,’ though, is fairly misleading; solving a “puzzle” often relies on some sort of logical reasoning, but the solution to a bitcoin block is essentially randomly generated by the bitcoin protocol. Mining rigs are making very complicated, equation-backed guesses as fast as possible, in the hope that they’ll be the first to hit the random solution and reap that sweet, sweet, reward, a Bitcoin.

This randomness is key to understanding the difficulty adjustment, just as sunlight is key inside of cells to understand how sunlight creates order out of chaos every day to lead to circadian control of biologic processes inside of us.

Time was built into the BTC monetary network by design using the difficulty correction.   It is simply to say that for investors focused on managing risk, timing really matters in the Bitcoin ecosystem because of the difficlty adjustment in the BTC algorithm.  The difficulty adjustment mimics the role of the sun in biology.   In this way, BTC mimics the Leptin Rx.   BTC does this because Nature and BTC both use decentralized network effects to dominate their ecosystems.

A once-in-cycle trade, but don’t forget to expect the unexpected
The historical analysis of BTC behavior leads me to conclude that, historically, the best risk-adjusted entry existed at or within several months following a Bitcoin Halving. The Sharpe ratio remains at plus 3 200-400 days post Halving. Today we have 93 days left in the halving cycle.  Each day is worth a lot because the Sharpe ratio is now above three and this is where massive price gains are found.  After this time, the Sharpe ratio falls off a cliff.

How institutional investors will change this cycle is now the biggest mystery in my mind.  believe the curves will be right shifted for returns and price, just as metabolism is changed by sunlight in spring and summer.

This post-Halving window, when combined with hedging practices like protective puts or a managed stop loss, helps build a case that, on a risk-adjusted basis, Bitcoin will usually outperform other asset classes.

THE KEY PROBLEM IN THE CURRENT HALVING CYCLE:
As Bitcoin has sprung to new highs in 2021, the current reality is that investors will eventually demand exposure to this asset. Ironically, as these requests pile in mid to late-cycle in 2021, money managers and individual investors will be faced with a dicey dilemma: remain on zero as Bitcoin makes weekly headlines or enter a drawdown-prone asset at local or absolute highs. C goes up in 2021 the risk ratio rises as the market comes to a top. Rather than enter as greed floods the market (next few months), the post-Halving window (April 2020- Sept 2020) granted investors an early window to incorporate Bitcoin into their broader macro strategy. This is why the member event on July 4th, 2020 was critical. IT WAS THE BEST TIME TO GET IN.  Where are we now?  We likely are in the middle of this bull run.  I expect it to last into October of 2021 and not just July of 2021.

What drives this cycle? It is the supply and demand curves buoyed by Metcalfe’s law and sculpted by the current difficulty cycle.  I think the difficulty cycle adjustments will tell me when the top is in.  Price in the Bitcoin ecosystem is wholly determined by these two effects, but timing adjustments will define this halving’s outcome.   And the supply and demand curve has an unusual twist in this current halving due to a severely curtailed supply of BTC marked by increasing institutional demand. The current post-Halving window is upon is now as BTC#18 laid out and represents a rare time to add high expectancy, low-downside Bitcoin exposure. That window will only be open for the next few months until the Sharpe ratio begins its cyclic fall. In this cycle, based upon the historical past of BTC, that fall will approximately happen August -November of 2021.

TIMING IS THE KEY FEATURE OF NAKAMOTO PUT INTO THE BTC ALGORITHM TO DRIVE ITS VALUE

If people choose to store their wealth in a monetary good which exhibits less hardness, then the producers of this monetary good are incentivized to produce more monetary units, which expropriates the wealth of existing unit holders and destroys the monetary good’s salability across time.

This is the fatal flaw of soft fiat/gold money: anything used as a store of value that can have its supply increased will have its supply increased, as producers seek to steal the value stored within the soft monetary units and store it in a harder form of money.  In this way, over time both instruments act like a negatively yielding bond.  Your returns on value diminish by the design of the instrument.  Bitcoin solved this problem in its White paper.

The difficulty adjustment in the White paper made Bitcoin responsive to time and that set it up to be the predator to fiat, gold, and now altcoins in the current ecosystem.  This has big implications for people who do not understand it.  It has bigger implications for nations for do not accept it.

Now are you predator or prey in the Bitcoin ecosystem, right now?

Example Questions to Change Focus from FIAT TO BITCOIN

Here is a starter set of questions to help you change your fiat focus and make the most of what you can get from #BTC:

• What do I want my money to accomplish for me?
• What’s my next best move with my money given my current context?
• How can I make the most of this new monetary network in my life?
• How can I solve my fiat problems? If I knew how to solve my fiat problem, what might I do with my money?
• Who can I learn from about this new monetary network?
• Who can I team up with to maximize the use of this monetary network?
• What’s unique that I can bring to the table for my health when I use BTC?
• What’s the ideal solution in how to use this idea?  What’s the minimum solution for my applications?
• What would good look like after I use this Rx?
• What can I learn from this use case?

Change has a perspective which is relative. Close up, change appears to unfold slowly. At a distance, change appears destructive. In between the worms eye view and the birds eye view lies reality.  Changing your focus is a skill you can use to improve your results in any situation. How do you change your focus? … Change the question. It’s that simple. For me embracing Nature was a nudge to rejecting my fiat education. When I was up against a wall in my medical career or when my personal life’s was dragging me down or when I was facing the unexpected, I learned I need a way to change my focus. Asking myself the right questions was the solution. I stopped focusing in on food and biochemistry and embraced Nature’s decentalized algorithms. My life changed. In my personal life, I embraced the suck of the relationships I had created and thought about them in a different way and asked myself new questions. Why did I allow things persist this way, when I could alter them? This process works because thinking is just asking and answering questions. It forces you to stop looking at your life from your default perspective and makes you see your actions in a new way by asking new questions. If you ask yourself better questions, you get better answers. If you want to change your focus, change the questions you ask yourself.

By changing the questions, you change your focus, which improves your results.  If you just tell yourself to focus on something else, that doesn’t work. In fact, the more you tell yourself not to focus on something, the more you end up focusing on the wrong things. Instead, you can put your brain into a fully resourceful state, simply by asking the right questions. Your brain is great at solving problems, but you need to ask the right way. You’ll also find that as you improve the questions you ask yourself, you’ll improve your energy.

The ultimate cheat code of our time: having your debt denominated in fiat and your savings denominated in #BTC

This was my first crypto podcast after over 500 podcasts on quantum biology.  

Governments are massive borrowers world over. US lately talked about another $1.9T stimulus. Such massive fiat borrowing leads to rise in yields of bonds.  Stocks don’t like rising bond yields. The most expensive stocks become the most sensitive stocks to the rising yield. Those are the FAANG stocks. Yield curve control (YCC) occurs when a central bank publicly announces and executes purchases of government bonds at a specific maturity to ensure that yields are maintained at the desired level. Because bond prices are inversely related to their yields, buying bonds and pushing up their price leads to lower rates.

The Australian Central Bank just began Yield Curve Control by buying their own debt last night in 2/28/2021. By keeping yield artificially low, YCC weakens the value of a currency more drastically than QE . When YCC is placed on the bond market, hard assets and commodities usually spike. Things like BTC and gold should go up. Interestingly gold is not reacting this way, and BTC is already rallying strongly today. The longer the YCC is kept, BTC should skyrocket. The Fed is using the Central Banks of Japan and Australia as their test cases to see how markets react to these experiments. My prediction is by summer as yields rise and the cost of funding government rises, the Fed will enact YCC to cool off the risks of a higher bond yield. Real rates in the bond market are already negactive according to Black Rock’s CIO. Later in 2021 , when rates become obvious negative rates it will like pouring jet fueld on BTC price. I will bet that gold lags because it is a dead monetary system compared to the living organism that is BTC.

Collateral effects:  it’s like if they’re coordinating all around the World for the YCC so that when the worlds’ CDBC are ready and in place, they’ll drop directly to NIRP and implement depletion of your bank account if currency isn’t used before a certain date. China’s CCP has already done this with the digital yuan. Pretty totalitarian approach is what I believe governments will take. you’re not using your currency : that money will go to the gvnt accounts so they’ll pay off their debt

If you’re using your currency: velocity could kickout quickly, inflation could take off, real economy will rapidly crash/deflate and government will pay their debts off with all the confiscated money using cheaper dollar & more taxations. All nations are on schedule for the great reset using the Great Facade of COVID. COVID IS THE POLITICAL COVER TO AVOID A PUBLIC REVOLUTION.

In May of 2020 the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) approved an interim final rule that permits depository institutions subject to the supplementary leverage ratio (SLR) to elect to temporarily exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the SLR denominator. The interim final rule strengthens the ability of electing depository institutions to continue taking deposits, lending, and conducting other financial intermediation activities during this period of stress caused by the coronavirus, also known as COVID-19. The interim final rule is in effect through March 31, 2021.

Things will get more exciting this year if SLR change is not extended by 3/31/2021.  Powell announced yesterday that he will make a decision on the SLR on 3/17/21.  This is what is holding the stock market and BTC price in check for the last two weeks.

Treasuries held by US banks:

Consider what JP Morgan said recently:

I said it last year, this change in SLR and YCC will be permanent until they totally devalue fiat money and get CBDC as their currency. It will not be a temporary patch.

Why do I think this devaluation is closer than Wall Street thinks?

Gold is acting opposite to how it should. And the Fed cannot just use SLR or YCC because when employing yield curve control isn’t capable of exercising as much control as they will need with a hyperinflating currency while employment is in the tank. Why?  In the US, the Fed already owns 40% of all 10-year Treasuries. So they will have to revert to the permanent peg they used in WW2. We also have record debt (30T) and massive unemployment from COVID (30M).

Quantitative easing has either be continued for ever or the economic system including the currencies will collapse. In both cases the winner is Bitcoin. That is why I am very bullish. BTC is like the bankers in WW2. They were selling to both sides as the fought each other.

In addition to discussing SLR extension to assist the Treasury market, Zoltan Pozsar on Operation Twist or a weaker USD:

If Fed is proactive to gain control until their CBDC is ready, they might try to do another Operation Twist, where they sell some short-end Treasuries to provide the needed collateral and buy additional long-end Treasuries, within the context of their otherwise automatic $80B/month Treasury buying plan. Otherwise, we could see T-bill rates go lower or even mildly negative in the months ahead as T-bond rates continue to push up higher, and cause financial plumbing issues.

Lots of moving parts here because a TGA drawdown of this size would be a first. Operation twist ended the gold market rally in 2011. Interesting times to own Gold and BTC.

SUMMARY:

I have been in Clubhouse for two weeks discussing the issues in this blog.  The consequences of the 3/17/21 Fed decision on the SLR is massive.

The Federal Reserve can create base money out of thin air in a process they call “quantitative easing” or QE for short, but has very limited methods to inject it into the broad money supply. They can only buy bonds and certain other assets with it. They have no way to send money to real people and businesses in the economy, outside of financial markets.

The Treasury Department, on behalf of Congress and the President, can send money out to people and businesses, but needs to issue bonds associated with that spending, which just moves money around. The bonds pull capital out from one place (the lenders) and puts it in another place (where it is spent). Therefore, the government also doesn’t have many ways to directly increase the broad money supply within the context of the existing legal structure.

However, the combination of the Treasury Department and the Fed working together, with the Treasury Department sending checks out into the broad money supply and the Fed creating new base money to buy the bonds associated with that spending (rather than extracting that money from real lenders buying the bonds with existing money), outright increases the broad money supply,If the do not extend the SLR this might be our reality below.

Living the dream is not about living the fiat dream.

It’s about avoiding the fiat nightmare by banking on yourself using BTC as your bank.