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HEALTH, WEALTH, AND HAPPINESS

March 28, 2022

"Money can't buy happiness -- but boy, it can really take the edge off."

- Rev. Bob Feeny

Bitcoin Miners Want to Recast Themselves as Eco-Friendly (New York Times): As we've written to bitcoin miners, the industry has an opportunity to turn bitcoin's enormous energy demands into a net positive, by only using sustainable energy for mining.

And as we've written Senator Elizabeth Warren, the U.S. government can require miners to use green energy, getting the crypto industry to build out sustainable solutions at their own expense.

Investor takeaway: Finally the industry is listening to us. Now if politicians can follow their lead and welcome the bitcoin industry, if they use sustainable energy. Then the U.S. will win on three fronts: technology, energy, and environment.

It's hard to get an exact number on how much of bitcoin mining is done using renewable energy. The University of Cambridge estimated around 40% in 2020:

Courtesy 3rd Global Cryptoasset Benchmarking Study

Investor takeaway: If bitcoin miners can convince U.S. regulators that they are helping build the supply of renewable energy, that will likely make them more welcome in the states where they are building.

On the other hand, crypto assets that use Proof of Stake use only a fraction of the energy, and will have none of these battles. (See last week's discussion of the upcoming merge to Ethereum 2.0, and note how much the price of ETH has already gone up.)

Now, I know this headline might be a bit confusing for most of us. Heck, it's confusing for me, and I've been analyzing this sort of stuff for almost 20 years. There's no need to worry.

Even though these words may be confusing by design, I'm happy to poke holes in it for your amusement and mine.

Too long, don't read: The central bank of Japan is making a very deliberate decision to inflate its own currency in order to maintain the appearance of a healthy economy. Their latest action proves that it is anything but.

Here we can see the the Japanese yen's long-term chart against the U.S. dollar. Bear in mind that the graph is inverted, so when the chart is going up, it means the yen is falling.

Controlling the snake

Those of you familiar with the Myth Adventures fantasy series by Robert Lynn Asprin may recall a game called Dragon Poker. It's often touted as "the most complicated game on this, or any other, world."

Its complexity is allegedly by design, in order to give an advantage to those with a deep knowledge of the game and help them fleece the newcomers.

This is largely how I see central banks in general, but the act of yield curve control, which the Bank of Japan has been practicing for more than five years, to me seems like an obvious farce.

Using the basis of the Phillips curve, which is designed to inform investors of possible speed bumps in the economy based on yields from various time frames, the Bank of Japan, who is by far the largest buyer of Japanese Bonds, simply purchases whichever time frame bonds are required to make the curve appear healthy.

For those who like to criticize some crypto projects because they resemble a snake eating its own tail, you may be right, but the world's central banks are clearly much larger, much hungrier snakes.

Unlimited fallacy

Of several words that jump out at me from the above headline, "unlimited" is one we've heard from central banks more than once lately.

Here we can see it happening multiple times in a day, because the first time was apparently not enough.

However, it's not what's in the headline that concerns me. The main logical flaw comes right in at the end, in the third paragraph from the bottom. ...

"The BOJ is caught in a dilemma," the article states. "By capping rates at zero, it is fueling yen declines that may hurt the economy by pushing up the cost of living for households and companies."

Most dilemmas actually have two downsides. We can see the first one clearly highlighted at the very end of a very long, complicated article.

The second downside, pointed out by economist Shotaro Kugo, is that "Making offers for unlimited bond buying too frequently may cast doubt over the feasibility of yield curve control."

It's a crying shame that BOJ policy makers have chosen the former over the latter, but it's not the first time we have seen politicians choosing to save face over making life better for their constituents. So, I suppose this is par for the course.

Although this is bad for the Japanese economy, it's decidedly good for bitcoin.

Have an awesome week ahead!!

Mati Greenspan

Analysis, Advisory, Money Management

This is a pretty incredible finding. It's great to see that many people flocking to the world's most prominent digital currency!

Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.

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