WEEKLY, Oct 12, 2024
why geopolitical shifts matter for crypto, Bitcoin's politics, Fat Bear Week
Hi everyone, I hope you’re all doing well!
You’re reading the free weekly version of Crypto is Macro Now, where I reshare/update a couple of articles from the week.
If you’re not a premium subscriber, I hope you’ll consider becoming one! For the price of a couple of New York coffees a month, I can help you navigate the tangled web of macro impacts on crypto narratives, and crypto impacts on macro narratives.
You get ~daily commentary on crypto, macro and the space in between, plus some cool links, a smattering of charts, and a daily music link because why not. AND you get access to a premium subscriber chat over on substack.com or on the app! And audio most days.
Feel free to share this with friends and colleagues, and if you like this newsletter, do please hit the ❤ button at the bottom – I’m told it feeds the almighty algorithm.
Programming note: I’m in London and Edinburgh next week, and so I’ll have to miss a few days of publication, including next Saturday’s free weekly. I should be able to publish the premium dailies on Monday and Wednesday.
In this newsletter:
Is Bitcoin “speech”?
Realigning axes
Some of the topics discussed the past week:
What weak jobs market?
Is Bitcoin “speech”?
“Safety” is relative and misunderstood
Warnings for crypto from the internet parking lot
Newsletter stuff
Does inflation deserve a bit more attention?
When is a CBDC not a CBDC?
Realigning axes
The hedge funds are back
The right to cash
CPI: a whole pot of confusing tea leaves
Jobs data would like a word
Is Bitcoin “speech”?
Last weekend, I finally got around to reading a recent paper authored by NYDIG founder and executive chairman Ross Stevens, titled “Bitcoin’s Protection under the First Amendment”.
The main argument is that Bitcoin is speech, as it runs on communication. Nodes broadcast transactions to the network, miners help reach consensus on the ledger state, and ecosystem participants signal support (or the lack of it) for protocol changes.
Therefore, since Bitcoin is speech, any attempt to ban it or curtail its development is an attack on the right to free speech.
Also, according to Ross, Bitcoin is political: it is pro-property rights, anti-debasement, and against the centralization of financial access. Therefore, it should be protected
speech, unlike the transfer of fiat money which is unprotected (since it is not seen as political).
Ross is one of the most eloquent thinkers on crypto in our ecosystem, who brings not just a tradfi and tech vision to the evolution of money – he also ties in powerful philosophical threads that help put our current times into context while reminding us all why it matters.
Nevertheless, I’m going to disagree here. I do believe that Bitcoin is a tool for freedom, but it is no more speech than paper is speech, or the internet is speech.
Bitcoin is a distributed network that can carry speech. It is also an asset that can represent an opinion, but itself is not an idea any more than a spoon is an idea.
True, the “speech” transmitted on Bitcoin can only be transmitted there, unlike speech on paper that could be also written on a screen or even on cement. So, the network is not as removed from the message as with other “technologies”.
But, for many, a bitcoin transaction is not about defying government overreach, it’s about diversifying a portfolio or making a payment. These needs can be fulfilled in other ways, perhaps less secure but usually as effective in the short-term. Those who insist on using Bitcoin because they don’t trust banks are making a political statement, but we have no way of knowing if they are the majority on any given day, and they could also use other platforms such as zcash or even physical notes. So, it’s a stretch to claim that all Bitcoin transfers are political speech.
That said, the paper is an excellent read, makes many sharp points, and surfaces several judicial precedents that highlight the current inconsistency and dubious legality of the US approach to Bitcoin businesses. For instance, in 1983, the Supreme Court struck down a tax on ink as it could be seen as constricting expression. In 2011, sleeping in a park (illegal) was deemed legal when done so with political intent (eg. the Occupy movements).
And pedantry aside, I totally agree that the hostility the Bitcoin ecosystem has faced is deeply wrong in both intent and process.
Paper is not punished for what is written on it, nor are paper producers denied access to electricity because regulators don’t like what is sometimes published on their product. The internet is not held liable for websites, and attempts to restrict access are universally seen as a blatant and clumsy attempt at censorship. Going after paper, or the internet, or the radio, or van manufacturers when they are used to carry explosives, both suffocates innovation as well as commerce, and pushes those committing the crimes onto other platforms. It does not solve the underlying problem, and it hurts the economy it is aiming to protect.
The case against coin mixer Tornado Cash is an example of attacking the tool rather than the intent. It is wrong, and its most terrifying aspect is that the authorities cannot see the inconsistency nor the precedent they are setting.
I don’t believe that Bitcoin should be protected because it is political speech. I believe it should be treated like a tool, with the authorities remaining neutral on the technology, as they have with all others. Focusing on possible outcomes rather than intent will push us back decades if not more in terms of economic and individual progress.
What’s more, the authorities’ short-sightedness is self-defeating. Not only is the “censorship” of Bitcoin-related businesses via debanking and the threat of investor prosecution an unconstitutional selection of business sector support that signals fear and desperation – it is also a loud reminder of why Bitcoin needs to exist. The greater the government oppression of the Bitcoin ecosystem, the more obvious the use case.
See also:
Realigning axes
Unfortunately, it’s not just inflation and currency debasement that matters for bitcoin’s “hedge” narrative. Geopolitical uncertainty is delivering an even more existential threat to people around the world, and the likelihood of losing financial access due to chaos or censorship, or – worse – having to flee with what one can carry, all underscore the utility of a decentralized, digital store of value. When things get sad and desperate, alternatives are good.
This is one of the reasons I am watching with trepidation the battle for influence in the Global South, the region most vulnerable to turmoil and economic shocks. It’s not just the likely human cost, already at heart-breaking levels in so many places. It’s also the potential hit to the broader economic web of supply chains, which can lead to even more political dislocation and violence.
Given the noise of the news flow, it’s easy to lose track of the longer-term strategies in play, especially when both superpower rivals are distracted at home with political uncertainty and polarization on the one hand, and an alarming economic slowdown on the other. But that doesn’t mean new influences aren’t unfolding.
Last week, The Diplomat reported on an interesting experiment and study of Chinese vs US messaging to a global audience. Both nations engage heavily in state-sponsored “propaganda”, but with a difference: China generally extolls the efficiency of centralized control, the productiveness of action and the success of prosperity. The US focuses on spreading the appeal of democracy, the virtues of diversity, and the power of individual as well as entrepreneurial freedom. US messaging tends to be based on abstract principles; Chinese messaging focuses on results.
In 2022, a group of researchers from Yale University conducted a randomized experiment of roughly 6,300 people across 19 countries on six continents, covering developing and developed economies with a range of political regimes and exposure to international and Chinese aid.
Groups were “primed” with a combination of videos to either feed or neutralize unconscious bias, and were then fed news from a combination of Chinese and US sources. Any movement in approval of one tone over another was measured.
The findings showed that the Chinese are better at propaganda than the US. Exposure to Chinese messages tripled respondents’ identification with the Chinese political system; exposure to US messages only doubled support for democracy (good, but still less). The difference is even more stark when it comes to economic systems: Chinese messaging almost doubled support for state-managed economies. US messaging was also effective but less so, boosting support for the American economic model by a third.
There were some unexpected regional differences: respondents in the UK, Australia, Canada and Spain preferred China’s political and economic models to those of the US. The Chinese brand resonated the most in sub-Saharan Africa and Latin America. Respondents from the Middle East and North Africa were among the least receptive to Chinese messaging.
These findings are relevant given the proliferation of Chinese ideology and vocational training programs around the world.
(photo by Xiaoyu Li on Unsplash)
In June, the Atlantic Council reported on 795 governmental training programs delivered in 2021-22 to government officials across the Global South. According to obtained documents, these were not about infrastructure development; rather, they were guidance on how to train law enforcement to protect the state, harness media for messaging, and focus innovation on military achievement.
In August, the South China Morning Post wrote about more than 200 vocational institutions set up by China in over 70 countries, to train in a range of fields including renewable energy operation, advanced manufacturing technologies, connected hardware, and Chinese medicine, to name a few.
And the Confucius Institute, a program set up in 2004 to promote Chinese language and culture, reached 500 educational sites across 160 countries within a decade. It recently had a setback with the closure of just over 100 locations in the US, yet they are rebranding, reorganizing, and continue to be active elsewhere. Education is good, anywhere. But education is also messaging, and China is investing a lot in this effective channel.
Going back to the survey, researchers dug into why Chinese messaging was successful. There turned out to be many factors, but one of the key messages was that of political stability. Also, the growth of China’s wealth understandably hit home, with the country’s “economic miracle” (recent history aside) setting an aspirational example for nations struggling with underdevelopment and the high cost of aid.
Perhaps even more importantly, coordination and consistency matter. In the study, the US approach was described by a researcher as “scattershot”, while the Chinese approach was “more sophisticated, effective, and likely to succeed over the long run than many in the West believe.”
There could be some bias in the reporting, I have no way of judging. But the success of the Chinese approach can be seen on the global stage by, for instance, the refusal of African nations to “choose sides”, by the abstention of 17 African nations in the UN condemnation of the Russian invasion of Ukraine, by the growth in Chinese aid to and trade with the sub-Saharan region.
Why does this matter? It is yet another piece in the shifting axes of power. We can argue that choice is better than the lack of it, but we have also seen the toll of power conflicts: according to the Peace Research Institute Oslo, the number of state-based conflicts last year reached the highest level since 1946, and the past three years were the most violent in the past three decades, hinting at relentless escalation.
None of this is good news, and greater attention on Bitcoin as a hedge against oppression and disenfranchisement was never going to be a good thing. But, given the spreading risks, we should be glad that it exists, and that with work on education and usability, more people will have more options.
HAVE A GREAT WEEKEND!
(in this section, I share stuff that has NOTHING to do with macro or crypto, ‘cos it’s good to occasionally get out of our rabbit hole, no matter how interesting it may be)
Today I have to talk about Fat Bear Week. I just have to, not just because it’s about bears (bears!!) but also because it’s a reminder that the internet can be depressing but it can also be glorious.
If you’re not familiar with Fat Bear Week (like me up until just a few days ago), it’s an annual event held in October by Katmai National Park and Preserve in Alaska. It commemorates the seasonal bulking-up of the peninsula’s brown bears as they get ready for hibernation, and we get to vote on which bear has fattened the most.
Perhaps you find online popularity contests uncomfortable and worry that the media frenzy might trigger mental health episodes in these very large creatures. But fear not, the promotion of Fat Bear Week aims to spread awareness of bears’ annual cycle, and appreciation for their habitat. On that, it does a pretty good job.
The voting concluded this past Tuesday, and the winner is… 128 Grazer, for the second year in a row! Yay, Grazer!
(128 Grazer, photo via the BBC)
There was plenty of drama behind this selection. Grazer beat out 32 Chunk, who killed one of Grazer’s two cubs earlier this year. Revenge is best served cold. And fat.
(32 Chunk, photo via CNN)
Also, Grazer is the first bear mom to win the crown, which should fill moms everywhere with pride. She is known to be protective and fierce, and is generally given a wide berth as a sign of respect.
(128 Grazer, photo via the National Parks Service – that is one fat bear!)
And for a final tug at the heartstrings, Grazer’s surviving cub was a contender in this year’s Fat Bear Junior Contest, held in September. He didn’t win, but given the example set by his mother, we hopefully haven’t heard the last from him.
DISCLAIMER: I never give trading ideas, and NOTHING I say is investment advice! I hold some BTC, ETH and a tiny amount of some smaller tokens, but they’re all long-term holdings – I don’t trade.
The fat bear section was a cherry on top!