Original Title: "Expression"

Author: Arthur Hayes

Translation: Yvonne, Mars Finance

(The views expressed in the following text are the author's personal views and should not be used as a basis for investment decisions, nor should they be considered as advice or opinions on participating in investment transactions).

It's that time of year again for skiing. I came from a mountainous subtropical region to the snowy peaks of northern Japan. Skiing in Hokkaido not only allows you to enjoy world-class snow, but also the delightful seafood. One of my favorite crustaceans is the Hokkaido king crab. Of course, you can buy frozen crabs anywhere in the world at a reasonable price, but in the hands of the chefs here, the deliciousness of the crab will make you savor every bite.

In my skiing town, there is a stubborn Australian who has been making the most delicious frozen crab legs for decades. When my friends and I first tried dining at his restaurant, things didn't start off well between him and me. A group of aggressive Hong Kong finance brothers didn't get along well with this master chef. Over the years, our relationship has improved to the point where, before COVID, I could walk into his restaurant almost any night without a reservation and find a seat for crab legs. His boiled and chilled crab legs are the best representation of this animal. Unfortunately, after COVID, he only does takeout. But I can assure you that even eating in his own little cabin, the taste is still top-notch.

What do emperor crab legs have in common with the financial market? Each ingredient or investment theme has its unique characteristics. When we think about the ongoing currency devaluation, what is the best way to profit from the demise of the dirty fiat financial system? What is the optimal form of this trade?

This is one of my favorite charts, which clearly shows that Bitcoin and cryptocurrencies in general are the best representation of currency devaluation trades. I compared Bitcoin (white), gold (yellow), the S&P 500 index (green), and the Nasdaq 100 index (red) to the balance sheet of the Federal Reserve, and indexed each currency from January 1, 2020 to 100. Bitcoin rose by 228%, leaving all other risk assets in the dust.

If the asset indexation of Bitcoin when it began trading on exchanges in 2010 is considered, the result would be more favorable for Bitcoin.

Fundamentally, why does this situation arise? Cryptocurrency represents a movement that separates currency and finance from the state. Using computers, the internet, and most importantly, cryptographic proof, we the people have created the hardest currency in history - Bitcoin; we have also created a new decentralized financial system (DeFi) supported by public blockchain networks such as Ethereum... There are others, but they are all bullshit, so I won't mention them ;). This new cryptographic financial system relies on mathematics and grassroots support from dissatisfied humans, rather than the violent coercion of the state and its banking lackeys. Capital is a simple energy conversion, and it is quietly entering the field of cryptocurrency in search of a safe haven free from depreciation. However, when measured in fiat currency, the market value of cryptocurrency is insignificant compared to the total value of all legal financial assets. This is why a small amount of capital fleeing the collapse of the fiat financial system can create such huge profits in such a short period of time.

All tokens and investment themes in the cryptocurrency industry are not the same. As the year comes to a close, I want to introduce some value traps in the cryptocurrency world. These traps are sold by both well-intentioned and ignorant people. As usual, my goal is to present different perspectives and leave readers with questions. By answering these questions, I hope you can make better investment decisions.

鸭子杰伊

translates to

Duck Jay

.

In my article "Bad Gurl", I believe that Federal Reserve Chairman Jay Powell is at best a lackey of US Treasury Secretary Yellen. At the FOMC press conference in December, he showed a clear willingness to comply with Yellen and the big boss - slow-burning Joe, the US President's broader goals. I suspect that Jay's knee pads were already worn out in the green room backstage before he gave his speech.

The financial industry's mouthpiece, "The Wall Street Journal," clearly explains the importance of Powell's pivot:

The official policy statement from the Federal Reserve shows that decision-makers have opened the door to another interest rate hike. Powell said, "It is too early to declare victory now, and of course there are risks."

However, Powell's remarks made this carefully crafted policy statement appear outdated less than an hour after its release, suggesting officials have turned their attention to interest rate cuts. "People generally expect that, looking ahead, this will be a topic for us. That is the current situation of today's meeting," he said.

Powell's speech and new forecasts show that Fed officials expect to cut interest rates three times next year, marking a clear turning point. For more than a year, he has been warning that they will raise rates as needed to lower inflation, even if it triggers an economic downturn.

The comments from Powell on interest rate cuts were surprising, as just two weeks ago, Powell stated during a speech at Spelman College in Atlanta that it was too early to speculate on when a rate cut would be appropriate.

The yield of the 2-year US Treasury bond.

The first and largest pivot point will appear in the first quarter of 2023, when the Federal Reserve and the Treasury Department jointly use the bank's regular financing plan to implement a rescue of about $4 trillion to the US banking system and bond market. Powell's recent remarks only confirm the loose monetary policy in the United States.

What changes have happened in the past two weeks?... Politics.

What is the worst thing for politicians? Not being re-elected.

What is the second worst thing for American politicians who are members of the Democratic Party? Trump's re-election along with a large number of Republican congressmen and senators.

By using these two guiding principles, the political factors behind the actions of the Federal Reserve from 2021 to the present have become quite clear.

Due to the rampant inflation caused by COVID, Fed Chairman Powell sat down and instructed to control inflation. As can be seen from the above chart, by March 2023, the US Treasury 2-year bond yield surged from the basic 0% to 5%. This is the fastest rate hike action by the Fed since Volcker's tenure in the 1980s.

Unfortunately, due to locking civilians at home and forcing them to become guinea pigs for the COVID-19 mRNA vaccine, huge amounts of money were printed to appease them; equally huge inflation was also unleashed, the largest in over 40 years. Several months of Federal Reserve tightening policies were not enough to kill this beast before the crucial US midterm elections in November 2022. It is predicted that the Democratic Party will be hit harder than Sam Bankman-Fried's son, who is staring at Caroline Ellison's photo. The Biden administration subsequently decided to deplete America's strategic oil reserves, flooding the market with oil to lower gasoline prices before election day. This is a very "strategic" deployment of scarce resources to ensure the re-election of party members. This trick worked; the red wave was blunted, and the real drama is yet to come.

It doesn't really matter which clown is in power in the United States; the reasons for the decline of the empire were written in stone decades ago due to policies enacted. In 2023, the Biden administration teamed up with "Bad Girl" Yellen to significantly increase fiscal spending and shift borrowing to the short end of the US Treasury yield curve in an attempt to put lipstick on a pig. I discussed this in detail in the article "Bad Gurl". The result was a booming US economy, with a real GDP growth rate of 5.2% in the third quarter of 2023 and an expected growth rate of 2.6% in the fourth quarter. These are impressive numbers for the world's largest economy. However, they are not enough to appease voters' dissatisfaction with Joe and his Democratic bureaucratic team's countless mistakes. Due to Biden's poor performance, if the election were held today, the person Americans fear the most - former US President Donald Trump (also known as the "Orange Man") - would defeat Biden. Oh, it's so scary. Democracy is about to disappear because most voters may decide to elect someone the establishment hates. How ironic ;).

It is necessary to prevent the "Orange People", and "Slow Joe" knows how to accomplish this task.

In order to further stimulate the economy and satisfy all financial asset holders, Powell must relax financial conditions, even if it may lead to more inflation. It is hoped that the above-mentioned inflation will come after the November 2024 election. That's why Powell's desire to maintain such "tight" financial conditions at the Fed is ambiguous. Don't forget that according to various widely recognized economic theories such as the Taylor rule, flexible average inflation target, and core CPI target higher than the Fed's 2%, the current financial conditions are not tight enough. Powell clearly stated on the podium that he is actively discussing interest rate cuts in 2024. As the Wall Street Journal said, just under two weeks ago, Powell sang a completely different tune about the possibility of interest rate cuts.

I imagine this matter in the following way.

The bad woman Yellen called her "duck" to the office and told him what was what. Powell complied... The rate cut is already on the table. Now, financial assets will rise until the US falls into recession or inflation rises sharply. Given the federal government's determination to spend as much money as possible to maintain high GDP growth, I expect there will be no economic recession in the election year of 2024. As for whether food and fuel inflation that will cause protests and instability will occur before November 2024, remains to be seen. But let's not be too obsessed with the future. Currently, leaders of the Federal Reserve, the US Treasury, and the American Association of the Great Same are all shouting "buy, buy, buy". Don't be silly, hurry up and participate in the best form of this transaction - cryptocurrency.

Other major countries or economic groups, such as China, Japan, and the European Union, will cooperate and allow the US dollar to weaken against the Chinese yuan, Japanese yen, and euro. As the US dollar weakens, everyone is a winner except for those who do not have enough financial assets to withstand the inflationary impact of currency depreciation.

In short, leave the "real" world governed by national laws to intermediaries in TradFi. They can provide more coherent and cheaper investment products to express the same themes. True DeFi projects should rely only on well-written code, not on laws that are prone to human error in judgment and interpretation.

Bitcoin ETF

Fundamentally speaking, if ETFs managed by TradFi asset management companies are too successful, they will completely destroy Bitcoin. This prediction is based on an important subtle and profound difference between Bitcoin and other currency tools used by humans.

The world's largest TradFi asset management company, Blackrock, is playing a game of asset accumulation. They absorb assets, store them in a metaphorical insurance vault, issue tradable securities, and charge management fees for their "hard" work. They do not represent clients in the use of their held assets, which poses a problem for Bitcoin if we consider a possible extreme future.

Imagine a future where the largest asset management companies in the West and China hold all circulating bitcoins. This scenario could happen when people confuse financial assets with value storage. Due to their confusion and laziness, people buy bitcoin ETF derivatives instead of buying bitcoins and storing them in their own wallets. Now, a few companies hold all bitcoins, rendering the bitcoin blockchain useless, and bitcoins will no longer move. The end result is that miners shut down their machines because they can no longer afford the energy needed to run them. Goodbye, Bitcoin!

Think about it carefully, this is really beautiful. If Bitcoin becomes another financial asset controlled by the government, it will disappear because no one uses it. The disappearance of Bitcoin creates space for the development of another cryptocurrency network. This network may be just a restart of Bitcoin, or it may be an improvement on the original Bitcoin. In any case, people will once again have a currency asset and financial system that is not controlled by the government. Hopefully, the second time around, we will learn not to give our private keys to baldies.

Therefore, when considering how to survive in the continuous devaluation of fiat currency, you must choose a side. Either trade financial assets to earn more fiat currency, or use a financial system that is not controlled by the government to preserve energy wealth. If it is the former, then feel free to trade ETFs. This is also the reason for their existence. In the latter case, you must buy Bitcoin and withdraw it from the central exchange to your own self-custody wallet.

Election Year

Since the idea of "nation-state" infected our collective consciousness hundreds of years ago, 2024 will be the year with the most national elections. Any politician seeking re-election will need to bring benefits to the people. For wealthy asset holders, this means providing them with easy financial conditions by encouraging central banks to print money. For the poor, this means giving them handouts to pay for the rising costs of food and energy, which is a direct result of policies that benefit the wealthy. For the middle class, this means giving them "democracy" and telling them to pay taxes, bow down, and be grateful for their vote. Given this, it is meaningless for politicians seeking re-election to stop the party that devalues fiat currency. The votes of those who benefit from the devaluation of fiat currency and inflation-linked handouts will outweigh the votes of those who suffer. Therefore, in 2024, the printing presses of every "democratic country" in the world will be in overdrive.

If you think today's historical moment is special, take a look at the chart above, which shows the changes in the value of gold reserves of various legal currencies around the world over time. Legal currencies always tend towards zero. No political system can resist the temptation of printing money.

The best time to buy Bitcoin and start your journey into encryption was yesterday, and the next best time is now. Obviously, the investment community recognizes the prospect of cryptocurrency fighting against the depreciation of fiat currency. Otherwise, how could talentless clowns and fraudsters like Nouriel Roubini publish articles in the Financial Times introducing their latest scam "flatcoins" in the UK? Therefore, choosing the best way to express cryptocurrency is particularly important. The country and its cronies will bring sweet and delicious candy to your children's brains. But as your parents taught you, don't accept food from strangers.

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