Blain’s Morning Porridge, 14 Nov 2024: Bitcoin? Musk & Boeing? US Defence Pick?
“Life would be terribly dull if we knew everything…”
Questions, questions, everywhere this morning! Bitcoin has staged a spectacular rally since the US election. I am assured – by crypto-shills – this makes it a proper financial asset. Oh, here was me thinking it was money. Nope. It’s an asset. Really? Also, a podcast on why Musk should buy Boeing. And what does the new US defence secretary likely mean for the US military and the future of NATO-CANZUS.
Before I launch into today’s Morning Porridge – which this morning is an abject surrender on Bitcoin (not!) – some quick comments on Boeing and The US Department of Defence.
Boeing:
I did a podcast yesterday with Addison Schonland of AirInsight, one of my go-to-contacts in aviation, on my off-the-wall idea that Elon Musk should buy Boeing. Great fun to do and allowed me to rant and run over the concept. Please give it a listen: Should Elon Musk Buy Boeing? It would very much fit in with the de-governmentisation of the US Economy that Musk and his sidekick President Trump seek to achieve. Could Boeing’s price be at the bottom of its “despondency curve”?
Pete Hegseth: Does anyone read history books in Florida???
Pete Hegseth has been appointed Secretary of Defence by Trump. He is a Fox newscaster, ex-soldier, and a very bad axe-thrower. Read about him in the FT. Can you imagine what the defence departments across Europe are thinking this morning, and what they are telling their political masters this appointment means? It is likely to reinforce the worst fears of Trump v2.0’s intentions in Europe and CANZ – the de-alignment of the Western alliance.
Under the banner of “de-woking” US defence, what Hegseth proposes is the naked politicalisation of the military. It’s a clear signal to the officer corps their futures and careers are linked to their support for political thinking and policy. At a time of immense geopolitical tension and conflict threat, this is a stark warning to the military to toe the political line – from a “soldier” with very limited command experience, (if any), and a president with a noted disdain for service. How long before US officers start sporting Trump buttons to their promotion boards?
Because of the 30-year career cycle of the officer corps, this will likely create a long-term internal culture where the promotion of conservative, non-challenging officers willing to impress their political masters by allegiance to political preferment becomes more important than thier effectiveness or the constitution. It could diminish the services and detach them further from the liberal half of America. It could discourage the promotion of talented, out-the-box thinking officers open to radical new strategic tactical thinking to take advantage of the possibilities of tech in modern warfare – unless they are seen to dance to the right tune. It’s like something out of a bad military-sci-fi novel. (By-the-way: in terms of wokery, the Amazons may be mythical, but the Spartans and the Sacred Band of Thebes are historical evidence gay-warriors are among the most cohesive units in military history.)
If I were Musk, Thiel, Andreesen et al.. I would be very concerned about this development. If they harbour plans to re-equip the US military with the latest in private sector defence tech, de-bureaucratise the Pentagon, and reform procurement, then they should be blocking this as a retrograde step. Or do they expect it all handed to them on a plate? Is that the plan?
Bitcoin. Blain succeeds in staying poor….
Hurts to say, but Bitcoin broke $90,000 y’day. Dang. Missed that one…
Lots of Bit-people are very, very pleased. One chap in the yacht-club very proudly showed me his Coinbase wallet last week. He’s a bona-fide financial genius having turned £30,000 into £70,000 since January. He’s a believer. I’m happy for him (and very jealous.) He’s not the only one. Today I will get a predicable email from my mate Craig asking what its’ like to be poor. Yes, I went into the election short bitcoin. Ouch. Poor but pure.
Bitcoin has rallied 36% since the US election. How much higher will it go? $100k looks nailed on according to the crypto-shills. Apparently, (and I regard anything I read in the crypto-press to be unfounded speculative BS presented as irrefutable truth): “substantial leverage opportunities, derivatives activity, open interest and implied vol analysis” all point to “upwards positioning for a scale breakout.”
Give over… the market has rallied solely on the expectation of major crypto deregulation on Trump’s Election win, and because Trump has chosen to surround himself with very rich Tech barrons who are all-in on Crypto. Trump demonstrated he understood the mindset of Crypto – attending the critical conferences. Harris did not. The Trump family are now all-in on Crypto with Melania’s baby, Barron, set to head up the operation – because he’s a crypto-genius, according to his dad.
But I have to wonder what will drive further upside? The whole Crypto market was 100% behind Trump’s B/C promises before the election and fully invested…. So… Who is still to buy? Crypto was already positioned, meaning the rally is late-comer driven, which translates into a speculative rally fuelled by late arriving greater fools. Time to take profits?
I am being told I can still redeem myself by going all-in on DogeCoin. How many tulip bulbs can I buy with a meme-coin?
However… I will pass no judgements on the why the voting machine that is the market is willing Crypto higher. Instead… I am going to admit it is now treated as a financial asset. Really?
Let me steal some thoughts from my mate Will Nutting… a former Jedi padawan apprentice who crossed over to the darkside of Bitcoin some time ago.. (I still love him, and read his NutStuff commentary religiously).
Will points out Bitcoin is now the 8th Largest Asset on financial markets. Its booming even faster than he expected, supported by paradigm shifts in the regulatory world and Trump’s concept of a Strategic Bitcoin Reserve. He points out the recent halving (meaning crypto miners have to dig twice as deep to uncover Bitcoin) is now being reflected in the price – which is driven by the very small supply of new bitcoin vastly exceeding the demand for it. (Trading 101 stuff.)
Will does admit it’s not perfect: “Supply-demand price equilibrium must be restored. The only way to do that is for price to go higher, which will flywheel into mania and a bubble, but that’s how this thing works.” His core observation, however, is how the Bitcoin price tracks global liquidity. With Trump all in on Bitcoin, he says folk need to wake up to the American Govt buying it, rather than trying to ban it! (Effectively, that must mean since Bitcoin supply is effectively fixed, any increase in global liquidity, must push up its price! Doh.. that’s the one thing you have to know.)
Some great numbers Will provided are worth considering in terms of Bitcoin, the asset:
- At $90,000 Bitcoin is now worth nearly the same as Saudi Aramco
- At $109,000 it is bigger market cap than Amazon
- At $171,000 it is bigger than Apple
- At $180,000 it flips Nvidia!
Impressive, eh? I am now convinced there is a major role for digital assets in the tokenisation space. I am working on a new Tokenised deal. but..
One little thing though. If Bitcoin is an asset… what’s the return? Oh, there isn’t a return except what it appreciates by. Which is what gold does. It does not provide a return either, is a clear store of value, and its only upside is in appreciation. Unlike Bitcoin.. I can hold gold. But, the bulk of my gold holding is in the Gold-ETFs, which are just as vulnerable to the power being turned off as Bitcoin.
Is Bitcoin digital gold? What’s the difference? Volatility and Supply.
What can say with absolute certainty is Bitcoin is not cash. No one buys anything with Bitcoin. Which is why the narrative around Bitcoin is now all about it being a “digital asset”. Effectively the crypto-community has stopped talking about Bitcoin being money – knowing our bank accounts and future digital currencies supported by central banks are money.
I posit any economy based on Bitcoin would be doomed. How so? It is definitionally deflationary. The limits on Bitcoin mining, it’s supposed strength of a maximum possible 21 million bitcoins, which won’t happen for another 120 years because of the halving mechanism, means demand for bitcoin will always likely exceed supply. Therefore, if it was widely adopted, anyone holding Bitcoin will be incentivised to hoard it – making it less liquid, and the cost of anything priced in Bitcoin will apparently fall as Bitcoin become scarcer. Smaller and smaller fractions of a bitcoin to buy anything is what must happen as the B/X rises in price.
Any economy using bitcoin will logically see zero investment and falling discretionary spending because Bitcoin is so scarce. That can only lead to complete and unavoidable economic collapse because it is not money, and not exchangeable. (Gold periodically flooded historical markets, and spawned paper money to balance its supply. No such leverage exists for Bitcoin.) Bitcoin’s inbuilt scarcity will also trigger revolution when the populace realises the scale of crypto-scam being played upon them – that Satoshi and the other Crypto-Whales already have much of the Bitcoin Float absolutely locked up in their crypto wallets. (What portion of the Bitcoin “asset” market is actually free to float? 19 million coins and less than 3 million actually trade – the rest being locked up? (That’s a guess – if anyone knows show me.))
Let me posit another question. Would you borrow or lend in Bitcoin. Of course not. Lending it would be daft. The extreme volatility of Bitcoin means you will only be repaid if the borrower can buy it back cheaper… meaning you face significantly greater credit risk factors. To borrow it would be insane given the deliberate supply/demand imbalance.
I doubt any of the Nakamoto crowd every considered these issues when they invented crypto 15 years ago… In contrast, the price of gold is less volatile with a 5000 year record as a store of value – and makes my partner and my daughter smile and look even prettier.
The problem with Bitcoin is we have absolutely no clue what it is actually worth, no matter how loudly crypto-shills scream at us about them being worth quintillions. The reality is Bitcoins are only worth what the holders can persuade other people to pay for them. With a barrel of oil – you know it has value processed into fuel or plastics. An ounce of gold is a tangible asset you know is scarce and a liquid and predictable store of value anywhere on the planet – and becomes a bracelet when not needed to buy necessities. For the time being a dollar is a dollar is a dollar in New York, Nairobi or Tehran. But although you can buy crypto anywhere in the world – its volatility means you have absolutely no idea what it might really be worth except what the next fool might pay.
I have been trading Bitcoin, cautiously, on my Coinbase. I called the US election wrong, and as result got absolutely spanked. And therein lies the question – is bitcoin really a financial asset when it can rise, or fall, 30-40% on a too-close to call election coin flip.
If I were a crypto whale… I’d be swimming away with the swag at this point.
Out of time, and back to the day job..
Bill Blain
Author of the Morning Porridge, founder of Wind Shift Capital
