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The below is a direct excerpt of Marty's Bent Issue #1210: Bitcoin gives you control. Thats the fundamental value. Sign up for the newsletter here.

We're at the part of the bitcoin bear cycle where those in the mainstream who have derided the new monetary asset running on its own distributed network as nothing more than a ponzi for degenerate speculators and drug addicts are coming out of the woodwork to claim victory. If you've been paying attention to the headlines and talking heads you've likely heard phrases like:

"See, this is proof that bitcoin is too volatile and can never work as a store of value. Who wants to store value in an asset that fluctuates so violently?"

"It can't even work as a proper medium of exchange due to slow confirmation times and the amount of transactions per second that are supported by the blockchain."

"I told you so!"

These are nothing more than vapid phrases uttered by individuals looking to confirm their flawed biases while hoping that this is truly the bear market that sends bitcoin to zero. The problem for this class of critic is that their view of bitcoin is myopic, wholly focusing on the price at any given time and how rapidly it has fluctuated. While price is certainly an important aspect and a higher price can be viewed as much better than a lower price for bitcoiners, price alone does not capture the fundamental value of the network. A fundamental value that cannot be replicated by any other asset on the planet. As I said in the tweet at the top of this page, bitcoin provides individuals the world over with the ability to easily receive, save and send money in a self-sovereign fashion.

The fundamental value proposition of the network is control over those three functions. Every other monetary asset on the planet falls short of providing individuals with the type of control that bitcoin can provide. Short-term price volatility at the beginning stages of bitcoin's monetization phase is something I am more than happy with stomaching. Knowing that I actually control my money is a type of peace of mind that a fully stable monetary good being controlled by corrupted middlemen simply cannot provide.

I know I own x/21,000,000 of the total supply.

I know how my private-public key pairs were created because I made them myself.

I can verify that the bitcoin being sent to my wallet is actually bitcoin.

I can hold that bitcoin for as long as I want without the risk of a bank or payment processor denying me access to my funds because of the particular time of day, my political views or the need for a bail-in of the failing central banking system.

This level of control is extremely powerful. Despite recent and historical price volatility, I believe that more and more individuals across the planet will slowly but surely come to recognize the fundamental value proposition of this level of control over one's money. No amount of pundit screeching or schadenfreude will change the inherent control that the Bitcoin network gives an individual over their money. They can screech and laugh. I'll continue to preach and stack.

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Bitcoin Gives Users Total Control Of Their Money - Bitcoin Magazine

Link to tweet thread.

As Lyn Alden explains in this thread: the 10-2 curve is saying, we're probably getting close to a possible recession, but not confirmed, and probably many months away...

Lets break that down a bit, shall we?

First of all, what exactly is the yield curve that everyone seems to be talking about lately, and how is it tied to inflation, the Federal Reserve Board and possible recession?

The yield curve is basically a chart plotting all the current nominal (not including inflation) rates of each government-issued bond. Maturity is the term for a bond, and yield is the annual interest rate that a bond will pay the buyer.

A normal yield curve (this one from 2018) chart will typically look like this:

SOURCE: FRED, Federal Reserve Bank of St. Louis

The Fed sets what is called the federal funds rate, and this is the shortest interest rate you can get a quote on, as it is the rate (annualized) that the Fed suggests commercial banks borrow and lend their excess reserves to each other overnight. This rate is the benchmark that all other rates are priced from (or so, in theory).

As you can see, in a normal economic environment, the shorter the maturity of the bond, the lower the yield. This makes perfect sense in that, the shorter the time committed to lending money to someone, the less interest you would charge them for that agreed lockup period (term). So, how does this tell us anything about future economic downturns or possible recessions?

Thats where yield curve inversion comes into play and what we will tackle next.

When shorter-term bonds, like the 3-month or the 2-year, start to reflect a higher yield than longer-term bonds, 10-year or even 30-year, then we know there is expected trouble on the horizon. Basically, the market is telling you that investors are expecting rates to be lower in the future because of an economic slowdown or recession.

So, when we see something like this (e.g., August 2019):

SOURCE: FRED, Federal Reserve Bank of St. Louis

where the 3-month and 2-year bonds are yielding more than the 10-year bonds are, investors start to get nervous.

You will also sometimes see it expressed like below, showing the actual spread between the 2-year and the 10-year interest rates. Notice the momentary inversion back in August 2019 here:

SOURCE: FRED, Federal Reserve Bank of St. Louis

Why does it matter so much, if it is just an indication and not a reality yet?

Because inversion not only shows an expected downturn, but can actually wreak havoc in the lending markets themselves and cause problems for companies as well as consumers.

When short-term rates are higher than long-term, consumers who have adjustable-rate mortgages, home equity lines of credit, personal loans and credit card debt will see payments go up because of the rise in short-term rates.

Also, profit margins fall for companies that borrow at short-term rates and lend at long-term rates, like many banks. This spread collapsing causes a sharp downturn in profits for them. So they are less willing to lend at a reduced spread, and this only perpetuates borrowing problems for many consumers.

Its a painful feedback loop for all.

No surprise, the Fed has an answer to all this dont they always? In the form of what we call yield curve control (YCC). This is basically the Fed setting a target level for rates, then entering the open market and buying short-term paper (1-month to 2-year bonds, typically) and/or selling long-term paper (10-year to 30-year bonds).

The buying drives the short-term bond interest rates lower and the selling drives the long-term bond interest rates higher, thereby normalizing the curve to a healthier state.

Of course, theres a cost to all this with the likely expansion of the Feds balance sheet and further expansion of the money supply, especially when the open market does not participate at the level necessary for the Fed to achieve its targeted rates.

Result? Possible exacerbated inflation, even in the face of a contracting economy. Which is what we call stagflation. Unless the control of the curve helps head off a pending recession and economic expansion resumes: a big if.

A eurodollar bond is a U.S. dollar-denominated bond issued by a foreign company and held in a foreign bank outside both the U.S. and the issuer's home country. A bit confusing, as the prefix euro is a blanket reference to all foreign, not just European companies and banks.

More importantly, and in our context here, eurodollar futures are interest-rate-based futures contracts on the eurodollar, with a three-month maturity.

To put it simply, these futures will trade at what the market expects U.S. 3-month interest rate levels will be in the future. They are an additional data point and indicator of when the market expects interest rates to peak. (This is also known as the terminal rate of the Fed cycle.)

For instance, if the December 2023 eurodollar contract shows an implied rate of 2.3% and the rates declining to 2.1% in the March 2024 contract, then the expected peak for the fed funds rate would be at the end of 2023 or early 2024.

Simple as that, and just another place to look for clues of what investors are thinking and expecting.

Lets say youre watching rates closely and hearing that the Fed is going to start using YCC to manage the rate curve, thereby printing more money and, in turn, likely causing more long-term inflation. And what if inflation somehow gets out of control? How can you protect yourself?

It doesnt matter when you are reading this, as long as the world is still operating primarily with fiat (government-issued and backed) money, bitcoin remains a hedge versus inflation and insurance against hyperinflation. I wrote a simple but thorough thread about that here:

Link to tweet thread.

To identify the inflation hedge attributes of Bitcoin, its simple really. Because Bitcoin is governed by a mathematical formula (not a board of directors, CEO, or founder), the supply of bitcoin is absolutely limited to 21 million total.

Furthermore, with a truly decentralized network (the computers that collectively govern the Bitcoin algorithm, mining, and transaction settlements), settled transactions and total number of bitcoin to be minted will never change. Bitcoin is therefore immutable.

In other words, Bitcoin is safe.

Whether or not the price of bitcoin (BTC) is volatile in the short term does not matter as much as the fact that we know the value of the U.S. dollar continues to decline. And in the long term and in total, as the dollar declines, BTC appreciates. It is therefore a hedge against long-term inflation of not just the U.S. dollar, but any government-issued fiat currency.

The best part? Each single bitcoin is made up of 100 million pennies (actually the smallest unit of bitcoin - 0.00000001 btc - is called satoshis, or sats), and one can therefore buy as much or as little they can or want to in a single transaction.

$5 or $500 million: You name it, Bitcoin can handle it.

This is a guest post by James Lavish. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The rest is here:
Yield Curves, Inversion, The Eurodollar And Bitcoin - Bitcoin Magazine

Ethereum co-founder Vitalik Buterin posted a tweetstorm this week revealing contradictions in his thoughts and values.

Buterin listed ten distinct contradictions, including reducing reliance on people versus building lasting systems and his love of decentralization and democracy versus a tendency to agree with intellectual elites over the people.

Surprisingly, several of the contradictions mentioned suggest Buterin is not happy with Ethereum, specifically, its protocol design. Whats more, he also spoke about his desire to make his project more Bitcoin-like.

Some have taken this to mean Ethereums transition from Proof-of-Work (PoW) to Proof-of-Stake (Pos) is proving more difficult than expected.

Speculation is mounting that Buterin wants to develop on Bitcoin instead.

Last month, Ethereum Protocol Dev Tim Beiko said the Merge would not happen in June, as previously announced.

The Merge refers to merging the concurrently running PoW and PoS chains. This event represents a significant milestone in completing the ConsenSys layer (ETH 2.0). Current estimates put a rollout date of between Q3/Q4 2022.

Considering the constant delays, Its clear that devs are struggling with the scale of the task at hand.

Buterins tweetstorm talks about a desire to turn Ethereum into a robust protocol capable of withstanding extreme circumstances. Perhaps events at Terra reminded him of whats at stake if things go wrong.

Nonetheless, he continues by saying this desire belies the reality that crucial ETH dApps are vulnerable to attack. Additionally, this situation falls below what is acceptable from a security perspective.

Contradiction between my desire to see Ethereum become an L1 that can survive truly extreme circumstances and my realization that many key apps on Ethereum already rely on far more fragile security assumptions than anything we consider acceptable in Ethereum protocol design.

Taking this in, Input-Output CEO and former colleague Charles Hoskinson responded by saying, its not too late to come to Cardano.

Last month, Buterin posted a blog in which he discussed Bitcoin maximalism.

Bitcoin maxis are often accused of being toxic and narrow-minded. But Buterin argues that a healthy dose of intolerance is excusable in defending the ideology of the most honest cryptocurrency.

What if Bitcoin maximalists actually deeply understand that they are operating in a very hostile and uncertain world where there are things that need to be fought for, and their actions, personalities and opinions on protocol design deeply reflect that fact?

The post goes into great depth on the topic, covering issues such as developing sound money, first movers being the most genuine, and intolerance being necessary to counter bad actors. Buterin ended by advocating for more maximalism.

Its fair to assume the Ethereum co-founder is a strong proponent of Bitcoin and those who uphold its ideology at the expense of all others.

When taken in conjunction with his recent tweetstorm, specifically the post in which he wished for Ethereum to be more Bitcoin-like, some suspect Buterin wants to leave Ethereum to work on Bitcoin.

The CEO of Bitcoin Magazine, David Bailey, commented that such a move was far from being on his 2022 Bingo card.

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Is Vitalik Buterin about to jump from Ethereum to Bitcoin? - CryptoSlate

Markets can remain irrational for long periods of time, and this is doubly true for Bitcoin (BTC), an esoteric cryptocurrency that continues to divide the wider financial community on its utility and intrinsic value.

Whatever your opinion around Bitcoin, it is a near certainty at this stage that BTCs bullish calculus has been severely dented in the past few weeks as the worlds largest cryptocurrency fell to December 2020 price levels, helped along by the utter implosion of Terras UST stablecoin.

Terra Bets the House on a New Fork as the Zero-bound LUNA Coin Cant Resurrect the UST Stablecoin

Against this backdrop, Bitcoin is about to undergo another test. To wit, the worlds premier cryptocurrency is now nearing a crucial support level against the price of gold. Bear in mind that many analysts value Bitcoins relationship with gold, especially in light of the store-of-value narrative around both assets.

As can be seen on the BTCUSD/Gold chart above, Bitcoin is nearing a multi-year support. If the cryptocurrency fails to hold this level, its price is likely to undergo further correction. After all, the next major support zone is located at the 9 - 11 ratio level, corresponding to a theoretical Bitcoin price of around $16,000, based on the low end of this range and the current gold price of around $1,800.

Readers should note that Bitcoin usually falls around 80 percent relative to its all-time high in bearish cycles. This relationship held during the last three bearish phases, and there is a hefty probability that the current phase of weakness might also entail similar losses, corresponding to a low of around $13,000.

Combining these two factors, we believe that Bitcoin might feasibly touch the $15,000 price level should it fail to hold its proximal support in relation to gold.

Of course, Bitcoin is also enjoying secular tailwinds that can play an important role in stabilizing the sentiment around the worlds largest cryptocurrency.

Cryptos Lehman Moment Eviscerates Terras UST, Pummels Bitcoin, and Shakes up Tether

For one, long-term holders of Bitcoin also called HODLers are currently holding steady. The absence of any capitulation among this hardcore set of investors is a major tailwind for the cryptocurrency.

Moreover, recent weeks have seen major developments around spot Bitcoin ETFs. Bear in mind that the SEC has only permitted futures-based BTC ETFs. However, these suffer from a major flaw contango.

Contango is the norm in the futures market and refers to a situation where the forward price of a commodity increases as contract expiration time increases. This leads to a forward curve that is upward sloping. ETFs that invest in futures have to roll over the front-month contract as it approaches expiration by buying one at the tail end. For example, consider a scenario where an ETF retains exposure to six consecutive monthly contracts. Also, assume that the January contract is nearing expiration. Consequently, the ETF would buy the July contract, with the February one becoming the front-month contract. However, due to contango, the ETF would be buying the July contract at a price that is at a substantial premium to the spot price. Over time, should contango persist, this practice leads to higher costs and ETF underperformance relative to the spot price. Due to this phenomenon, the futures-based Bitcoin investment avenues are not conducive to large-scale institutional adoption.

Nonetheless, Canada recently approved the Purpose Bitcoin ETF, which has now commenced trading and currently holds over 36,000 Bitcoins. Additionally, Australia has also allowed the trading of two spot-based ETFs: the 21 Shares Bitcoin ETF and the Cosmos Purpose Bitcoin Access ETF, which allows Australian investors access to Canadas spot-based Bitcoin ETF from Purpose Investments.

These are major developments that can play an important role in facilitating greater financialization around Bitcoin. However, as with almost all good things in life, there is a downside to this. As most of our readers would know, weve been consistently highlighting Bitcoins growing correlation with US equities in recent months, which we believe is a function of greater institutional adoption. This correlation regime has prevented Bitcoin from acting as a true store of value in light of the ongoing inflationary impulse. Nonetheless, financial trends never last, and we do believe that the current high-correlation regime will end once enough secular demand around Bitcoin materializes.

This brings us to the growing headwinds around the worlds premier cryptocurrency.

Our readers would remember that China had unleashed a crypto destabilization wave back in 2021 when it completely banned the mining of Bitcoin and other cryptocurrencies, heralding a mass migration of mining activity into the US and other parts of the world.

Well, we have bad news on that account now. Chinas role in the mining of Bitcoin is again gaining ascendancy, having clinched the second spot in terms of the hash rate in recent days.

Given Beijings penchant for dropping the hammer on Bitcoin at anytime the cryptocurrency begins to gain prominence in the Asian country, we do believe that Bitcoin miners are setting themselves up for another regulatory crackdown under the auspices of Chinas Communist Party.

On the other front, the stablecoin universe continues to contend with the fallout from the implosion of Terras algorithmically adjusted UST. To wit, the Fantom stablecoin (DEI) recently became the latest stablecoin to lose its dollar peg. Moreover, Tethers (USDT) circulating supply has slipped by $7 billion in recent days amid soaring redemptions. Stablecoins act as the engine oil in the crypto world, allowing liquidity to flow seamlessly from one corner of the market to another. Tether is by far the largest player in this sphere. Even though USDT is fully backed by reserves, there are pockets of investors and analysts who continue to question whether Tether indeed holds sufficient reserves.

Under these conditions, if Tether were to suffer a black swan event, the implications for Bitcoin and the wider crypto universe would be truly horrific.

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If Bitcoin Fails To Hold a Crucial Support in Relation to the Price of Gold, the Ensuing Carnage Might See Its Price Fall to Around the $15,000 Level...