· What is Bitcoin? Just like its creator no one really knows.
· The Bitcoin was left to fend for itself because its decentralized structure means no single entity is able to influence how Bitcoin evolves.
· Numerous narratives have sprung up over the years. Some have faded, others have proved more durable.
· The “uncorrelated asset” narrative is being challenged because of the Covid pandemic shock and the Russian invasion of Ukraine. These shocks will also have a profound impact.
· All this matters because Bitcoin’s definition drives the value its users ascribe to it, which, in turn, effects how it’s price will move in the future.
We do not know the true identity of Bitcoin’s creator Satoshi Nakamoto. It could be one genius, a small collective of enterprising individuals with a strong libertarian bent or, as some have suggested, even the CIA. The decade-long guessing game continues. Fun though such speculation is, the more interesting question for anyone already invested, or thinking about investing, in Bitcoin is what exactly is it? This matters greatly because it has a direct bearing on how one goes about valuing it. Yet, odd as this may sound, just like its creator, no one really knows (at least not yet).
Let’s begin at an obvious starting point, the white paper. Its title is “Bitcoin: A peer-to-peer Electronic Cash System”, a pretty strong indication Satoshi envisaged Bitcoin as a decentralized (hence peer-to-peer) digital form of money.
Both fiat and commodity monies – the two most popular forms of money throughout history – have drawbacks. Fiat money relies strongly on trusting a central authority both to ensure money is not double-spent and to maintain its purchasing power - trust that has been repeatedly abused. Commodity money conversely is expensive to store, subject to non-monetary demand/supply shocks and, most importantly given how the online world has encroached upon our lives, cannot be used for digital payments. Satoshi’s intention was to try to overcome these drawbacks and in doing so create a better form of money, one well-suited to the digital world we increasingly inhabit.
It is also clear in the white paper and the various comments made in early Bitcoin forums that Satoshi believed Bitcoin would operate as a cheap payments network, one that could potentially facilitate micropayments because of its lower running costs compared with the traditional commercial banking system. In August 2010 Satoshi acknowledged that while it was not “practical for smaller micropayments right now, it will eventually be as storage and bandwidth costs continue to fall”.
Fixed Supply = Digital Gold
Another important design feature was the 21 million cap on Bitcoin issuance. This limit was not included in the original white paper, but was outlined in the email announcing the release of Bitcoin v0.1 sent on January 8, 2009. When asked about it in February 2009, Satoshi wrote the following reply:
“… indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don't know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.
This comment suggests the hard supply cap, achieved by halving block rewards to miners every four years, was introduced as it was the only way Satoshi could think of controlling the supply of Bitcoins while keeping the source code fully self-contained, ie. not requiring an external input. However, Bitcoin issuance could have had a fixed growth rate, which would have also kept the source code self-contained. Obviously, Satoshi was smart enough to realize this, so the 21 million cap must have been considered beneficial for other reasons. Indeed, it becomes apparent in the very next paragraph of his reply.
In this sense, it's more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.”
Instituting a hard issuance cap gives Bitcoin gold-like characteristics, supply is bounded not unbounded as would occur with a fixed growth rate. This is a valuable characteristic for any fledgling money because it strengthens positive externalities (network effects to people unfamiliar with economic jargon).
No Central Controller
Bitcoin may have been conceived by its creator as a digital form of synthetic gold-like commodity money that could, over time, facilitate cheap global payments, but because of his decision to disappear into the ether in December 2010 and by virtue of its decentralized structure – required to overcome the trusted central authority – no single entity is able to influence how Bitcoin evolves. Satoshi planted the definitional “seed”, but the Bitcoin “plant” was left to fend for itself.
In a 2018 Medium post, two crypto enthusiasts attempted to plot of this definitional evolution by analysing BitcoinTalk posts and from discussions with members of the Bitcoin community. Although it is a necessarily subjective assessment of what Bitcoin is (narratives in their language), it is hard to critique their findings which are eloquently illustrated in the following graphic. It plots the relative importance of each of the seven Bitcoin narratives they identified since it’s creation until 2018 when they published their post.
Evolution Of Bitcoin Narratives
Source: Hasufly and Nic Carter
According to the authors, in the very early days Bitcoin was considered both a cheap payments network and censorship resistant e-gold, definitions entirely consistent with Satoshi’s “seed”. It was also very much a proof-of-concept because nothing like it had been created before. Essentially, it was a real-world implementation of previous thought experiments about electronic forms of money such as b money and bit gold proposed by Wei Dai and Nick Szabo respectively.
Despite initial scepticism by members of the Cryptography Mailing Listto Satoshi’s email introducing Bitcoin (sent on October 31, 2008), its primary user base in the early days were chyperpunks and tech geeks interested in road testing its technical viability and libertarians and anarchists interested in exploring its practicality as an alternative to the centralized fiat currency system. At this stage in its lifecycle Bitcoins were generally swapped rather than used for transaction purposes.
It wasn’t until it became the payment medium for Silk Road – the first darknet market launched in 2011 – that Bitcoin was used extensively for financial transactions. Over the two-year life span of Silk Road, total sales were estimated to be in the region of $180 million. This provided the first serious test of Bitcoin’s ability to function as a medium-of-exchange at scale. As well as marking the beginning of the end of the proof-of-concept narrative it also spawned the illegal usage narrative – one that remains widespread today notwithstanding increasing contrary evidence.
In addition, during this two year period, Bitcoin’s price rose from roughly $1 to more than $30. This 30-fold return unquestionably gave birth to yet another Bitcoin narrative, namely as a speculative asset (or “hi-tech Ponzi scheme” for the nay sayers). For whatever reason this narrative was not identified by the authors of the Medium post, even though it has been one of the more persistent.
By 2013/14, with Bitcoin having passed the proof-of-concept phase and with its price moving higher, transaction volumes also naturally picked up – see chart below. This was soon to cause problems because of how Bitcoin was originally designed. Its protocol limits the block size, where transactions are bundled together, to 1MB. Given the average size of a transaction (roughly 250 bytes) and the speed limit applied to the creation of blocks (one on average every 10 minutes), at its very upper end only seven Bitcoin transactions per second can be processed: a transaction throughput substantially below equivalent processing rates for the likes of Visa, Mastercard or Paypal which can handle thousands of transactions per second.
Confirmed Bitcoin Transactions Per Day
In the first few years of Bitcoin’s life, rising transaction volumes could be accommodated because the block sizes were well below the 1MB limit. However, by 2015 it become obvious that available space in the blocks was quickly diminishing – see chart below. As blocks began to fill up, transactions slowed due to network congestion and mining fees increased as users were incentivised to pay more to get their transactions processed faster.
Average Block Size (MB)
Bitcoin’s cheap payments narrative was being put to the test. The question as to how to deal with this “scalability” problem turned out to be a highly contentious issue within the Bitcoin community and led to the so-named block size wars, which really was a proxy-war in the bigger battle for Bitcoin’s soul. For this reason, it is worth looking at this period of Bitcoin’s history in more detail.
The Block Size Wars
As mentioned above, no single entity is able to influence how Bitcoin evolves but that does not mean that it cannot be influenced. One of the most interesting aspects of Bitcoin’s decentralized architecture is that anyone can implement a software upgrade to change the rules by which it is mined and operated. These can be backwards compatible (a soft fork) which does not result in a new version of Bitcoin, or not (a hard fork) which does result in a new version because it causes a split in the blockchain.
In 2014 Mike Hearn, an early Bitcoin developer, proposed the first intended hard fork that would increase the size of the blocks (8MB initially then doubled every year until it reached 8GB) in order to allow Bitcoin transactions to scale up and in doing so reinforce its ability to serve as a cheap global payments network. The code change was released in 2017 and a new version, Bitcoin XT, came into being. However, just a few months later this new version of Bitcoin was effectively abandoned. The reason is because changes to Bitcoin code cannot be imposed, it requires miners and users to adopt them. In other words, Bitcoin relies upon the consensus of its community. For a variety of technical, security and political reasons Hearn’s proposal did not gain sufficient backing.
Bitcoin XT was not the only hard fork that has been implemented – there have been over 100 in total – nor was it the only proposal to increase Bitcoin’s scalability. Others include Bitcoin Cash, Bitcoin Unlimited and Bitcoin SV (SV standing for Satoshi vision and championed by Craig Wright an Australian computer scientist who, unusually for someone who is a plausible candidate, claims to be Satoshi Nakamoto). What is interesting about these Bitcoin alternatives, created by hard forks off the original blockchain, is that their market caps are dwarfed by Bitcoin. Compared with Bitcoin’s $741bn market cap, Bitcoin Cash is a measly $5.3bn and Bitcoin SV is even lower at just $1.4bn.
For whatever reason(s) such large market cap discrepancies aptly demonstrate that the crypto community prefers Bitcoin to remain as close to its original form as possible even if this means it is not directly useful as a cheap payments network as Satoshi originally envisaged. The preference instead seems to be to overlay a Layer 2 Lightning Network on top of the Bitcoin blockchain to facilitate greater and cheaper transactions. While some may argue this keeps alive the cheap payments / micropayments network Bitcoin narrative, in my view, because it requires off-chain transactions it no longer applies (happy to debate this point).
The final, and most recent, narrative identified by the authors of the Medium post that is worth considering is as an uncorrelated financial asset (coloured pink in their graphic). This meant it had potential to add return diversification to portfolios based on traditional assets like equities and bonds – a useful characteristic for institutional investors. It marked Bitcoin’s emergence, and cryptocurrencies more generally, as a new investible asset class.
Quantitative support for this narrative was solid between 2015 and 2020 as can be clearly seen in the chart below, which plots the 100-day rolling correlation in daily returns between Bitcoin and the S&P500. The correlation coefficient did fluctuate over this period, but as a general tendency it remained low, ranging between -0.2 to 0.2 range the vast majority of the time (bearing in mind that the maximum range for correlations lies between -1.0 to 1.0).
100-Day Rolling Daily Return Correlations
Source: Author calculations
As the chart also shows, with the outbreak of the Covid pandemic – an extreme event by any definition - these correlation coefficients changed significantly. As investors scrambled to liquefy their portfolios amid unprecedented uncertainty, Bitcoin and US equities both sold-off sharply - as the old market saying goes “in times of crisis all correlations go to one!” That said, what is more important than the knee-jerk reaction is that Bitcoin’s price correlation to US equities remains notably higher in the post pandemic period. This shift challenges the uncorrelated financial asset narrative.
It doesn’t take much pondering to think what might have brought about this increased correlation. The macro policy response to the Covid pandemic was simply to repeat that of the earlier Great Recession: inject substantial demand-side stimulus. Government deficits soared and the financial markets were flooded with liquidity. Nominal short-term interest rates (where not already zero or lower) were slashed and central banks restarted quantitative easing.
This surge in fiscal and monetary stimulus supported economic activity and helped short-circuit a potential deflationary spiral. Moreover, policymakers were uncertain whether the subsequent rise in inflation was attributable to global supply chains being negatively impacted by Covid restrictions (population lockdowns etc) and hence temporary, or something more durable. Their collective decision was to err on the side of caution and maintain a stimulative policy setting, especially monetary.
Like a rising tide lifts all boats, this abundant global liquidity provided a substantial boost to all nominal assets, including stocks, gold and fixed, or limited, supply cryptocurrencies like Bitcoin.
As can be seen in the chart below, which plots these asset price returns since the start of the pandemic, US stocks have pretty much doubled while gold has risen by nearly a third. These impressive inflation-beating gains are, however, dwarfed by the twelve-fold gain in Bitcoin’s price (hence the need to show its return index on the right-hand scale). What these return profiles tell us – irrespective of the differences of magnitude - it that all three assets performed well as a hedge against the inflationary consequences of the macro policy response to the Covid pandemic. This is unlike nominal government bonds, deposits in the commercial banking system or cash who’s real (inflation-adjusted) returns have become increasingly negative.
Nominal Asset Return Indices
Source: Authors calculations
Such stellar returns for Bitcoin, combined with the increase in correlation to stocks, has prompted many investors - not to mention the IMF - to conclude that Bitcoin has been acting as a risky asset. Is Bitcoin as a speculative asset now the favoured narrative?
Speculative Asset Narrative
Not many financial assets generate 10-fold plus returns in under a year. Undoubtedly, such price action attracts speculators seeking to make a short-term gain. However, simply describing Bitcoin as a speculative “risk-on” asset, in my view, misses a key point.
One of the cleanest measures of investor risk appetite is the VIX, which represents the market’s expectation for volatility over the coming 30-day period. The private sector is, at the aggregate level, long equities. Hence, when investors are worried about a market correction demand for option protection, which manifests itself as rising implied volatility, increases. Consequently, the VIX should be negatively correlated with US equity returns and other “risky assets”. Indeed, this turns out to be the case – see chart below.
100-Day Rolling Daily Return Correlations
Source: Author calculations
Gold, in keeping with its safe haven asset status, typically has a positive correlation with the VIX. But immediately after the Covid outbreak and for much of the following two years, the correlation coefficient was negative. It has only recently flipped back to positive.
Like gold, Bitcoin’s correlation with the VIX moved sharply into negative territory early on in the pandemic, but unlike gold it remains modestly negative. Its correlation coefficient sits between the two assets suggesting Bitcoin investors are not a homogeneous bunch – some view it as a speculative asset, others view it is safe haven.
That said, attempting to define what Bitcoin is purely based on return correlations may be fatally flawed. The reason being that compared with equities, and especially gold, Bitcoin is still very much the new asset class “kid on the block” (no pun intended).
Let me explain.
Market prices are determined by those actively participating or transacting – these are the sources of supply and demand. Money, or Bitcoins, sat on the sidelines have no impact on market prices (not in an immediate sense at least).
Thanks to the transparency of the blockchain it is possible to accurately measure in real time the holding duration of Bitcoins. The chart below - courtesy of glassnode - shows the percentage of Bitcoin supply that hasn’t moved over the past year (orange line) versus the price of Bitcoin (black line). These are the Bitcoin’s sitting on the sidelines so to speak.
Bitcoin: Percentage of Supply Last Active 1+ Years Ago
The age distribution of Bitcoins tells us that - albeit with some temporary fluctuations during price spikes – long-term ownership is rising. In fact, over the past year, only 30% of Bitcoins – around 5.7m out of the current circulating supply of 19m - have been used for transaction purposes.
Furthermore, because during the past year Bitcoin’s price more than doubled on its way to hitting it’s all-time high of $67,000 in November, we know a large proportion of these long-term holders are pretty price insensitive. We also know these cannot be short-term trades gone wrong because, again thanks to the transparency of the blockchain, it is possible to calculate a break-even price (realized price in crypto terminology) for Bitcoin. It’s just over $17,000 for long-term holders so they are, on average, well in-the-money.
Naturally this raises the question why are an increasing number of Bitcoin users becoming price-insensitive long-term holders?
Given the flooding of the global financial system with liquidity during the pandemic and the recent surge in inflation a rather obvious rationale springs to mind.
Digital Gold Returns
For those who judge Bitcoin to be a store of value like gold (the e-gold narrative already mentioned) it is not unreasonable for them to assume its eventual market size will approach that of the yellow metal. At current valuations, the above-ground stock of gold bullion is worth £12tr. Spreading this across the 21 million Bitcoins that will ever be mined equates to a valuation for Bitcoin of just over $570,000 (or $630,000 based on the 19 million Bitcoins currently in existence). That’s a ten-fold plus increase from today’s price. Even if it only makes it a fifth of the way there, a three-fold price increase from today’s levels is still implied.
Because of the anticipation of much higher prices in the future, the incentive for Bitcoin holders motivated by the digital gold narrative to transact at prices anywhere near current levels is low. These Bitcoin’s are only likely to come back into play, ie be transacted, at much higher price levels. In short, long-term accumulation by price insensitive Bitcoin holders is exactly the sort of behaviour one would expect if it is increasingly viewed as a digital version of gold.
It may also be a factor as to why Bitcoin's correlation with equities has risen. The rising trend of price insensitive long-term holders means Bitcoin’s price action is increasingly being driven by shorter-term speculators and their actions, naturally, will cause its price to behave as if it is a risky asset. Increased belief in the store of value narrative could actually be causing Bitcoin to behave more like a risky asset in the shorter-term. Perverse right? Possibly, but valid nonetheless.
If correct, Bitcoin’s uncorrelated financial asset narrative will wane (at least until prices rise much higher bringing long-term holders back into play) while the digital gold / store of value narrative will wax. Indeed, I expect the latter to be further reinforced because of another substantial shock hitting the world, Russia's invasion of Ukraine – something in my view that will turn out to have even greater economic consequences than the pandemic.
It is patently obvious this conflict goes way beyond a simple territorial dispute. We are witnessing the fracturing of the international community. As I discussed in a recent article, the economic fallout from the war will be tremendous (assuming of course we can avoid nuclear fallout - I honestly can’t believe I am typing these words).
From my perspective, the most significant and long-lasting impact, both on the world of global finance and cryptocurrencies, arises from the economic sanctions imposed on Russia. To wit
“Russia has been effectively isolated from the traditional global financial sector and in the process it, not to mention other nations such as China, has learned that the fiat foreign reserves they accumulate overseas can be blocked by government decree, rendering them practically useless when they are most needed. Given this, it is hard to envisage them not accelerating plans to continue to diversify away from standard reserve assets – such as the US dollar - in preference to unbannable assets, like decentralized cryptocurrencies, even if they do not meet the usual liquidity metrics normally required of them.”
In Or Out?
Almost all money in use today is what is known as inside money, defined as money backed by someone else’s liability. For example, money held in the commercial bank is backed by the loans it issues. The alternative is outside money, so named because it is outside the private sector and has no associated liability – it constitutes a net asset for the private sector. Bank notes and coins are good examples of outside money, as are central bank deposits, gold and – drum roll please – Bitcoin.
Most of the time the difference between inside and outside money is of no importance to anyone but monetary theorists. However, what everyone found out from the response of the west to Russia’s invasion of Ukraine is that a critical difference between inside and outside money is that the former, by virtue of it being someone else’s liability, can be subject to sanctions (outside money cannot assuming, of course, that is not held in a jurisdiction seeking to apply sanctions).
Considering how things have evolved geopolitically since the invasion this distinction is likely to become increasingly important. Only this week, the US announced sanctions against some Chinese officials because of “repressive acts” against “members of ethnic and religious minority groups” and it has also said it is “profoundly disappointed” with the UAE’s recent decision to invite Syrian leader Bashar Assad for his first visit to an Arab states since the start of the Syrian war. We are witnessing the economic equivalent of ententes cordiales being drawn up. US and western countries on one side and Russia, China and others such as the gulf states on the other.
Some financial commentators have focused on the obvious commodity linkages between Russia, China and the Middle East. However, there is another important financial link – all three countries have accumulated foreign reserves totalling several trillion US dollars. Should they become concerned about the return of capital, as opposed to return on capital in light of the sanctions imposed on Russia, moving these assets (held either by the central bank or the sovereign wealth fund) to more friendly jurisdictions becomes a rather obvious choice, as does substituting inside money for outside money.
As suggested above, outside money options are relatively scant. There are only so many bank notes in circulation, certainly insufficient to absorb large capital inflows. Gold is an obvious likely beneficiary given it has been a reserve choice for millennia. However, the advent of Bitcoin means there is another borderless, digital alternative.
Looking at the price action since Putin’s tanks rolled into Ukraine on February 24, the largest price gains have been in Bitcoin, whose price has risen over 15%, which compares with a 7% gain in US stocks and a 1% rise in the gold price. Is this the start of the next bull run in Bitcoin’s price?
Asset Returns Since Russian Invasion
Source: Author calculations
Admittedly, this is a very short window of time and extrapolating from it is a dangerous exercise, but it is already clear the sanctions imposed on Russia after its invasion of Ukraine will have far-reaching consequences politically and economically. The fact Bitcoin is, like gold, one of only a handful of forms of outside money to which sanctions cannot be applied will likely strengthen the Bitcoin “censorship resistant e-gold” narrative. It may even spawn a new narrative entirely – the inside-out narrative. Either way, the global environment has altered and in a way that is beneficial to Bitcoin something that its price should increasingly reflect.
Until next time.
Ryan Shea, crypto economist at Trakx
 A quick google of this theory throws up the following argument. Satoshi in Japanese apparently translates as “clear thinking, quick witted, wise” while Nakamoto means “central origin”…. Er go Central Intelligence given in Japan the family name comes before the given name. Be warned, this is a large conspiracy theory rabbit hole.
 See: https://nakamotoinstitute.org/static/docs/bitcoin.pdf
 One workaround is the creation of gold-backed crypto assets such as Paxos Gold. Each token is redeemable for 1 troy ounce of gold bullion custodied in vaults by Paxos. It does, however, require trust that the custodian has the assets and will make them redeemable on demand. Unlike Bitcoin, it is not trust-less, or trust-minimising – see: https://paxos.com/paxgold/
 As we will see, on this Satoshi was wrong - see: https://satoshi.nakamotoinstitute.org/quotes/micropayments/?order=desc
 See: https://satoshi.nakamotoinstitute.org/emails/cryptography/16/
 See: https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/threads/1/#7
 Formally, the mining reward is halved after every 210,000 blocks are mined. Because Bitcoin’s structure ensures that blocks are mined every 10 minutes this approximates to a four year interval.
 And vice-versa. The less people use it the less valuable it becomes. This feature is why many of the nay sayers consider Bitcoin to be a hi-tech Ponzi scheme. However, as I argued in an the earlier article on Bitcoin, all money is subject to this effect – public acceptability is the foundation upon which all money is based. Criticizing Bitcoin for this reason but holding fiat money makes no logical sense – see: https://blog.trakx.io/networktheoryofmoney/
 Aside from, perhaps, a one line comment posted denying he was Dorian Nakamoto, a person identified in a Newsweek article as being Satoshi Nakamoto – see: https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/threads/1/#14
 See: https://medium.com/@nic__carter/visions-of-bitcoin-4b7b7cbcd24c
 It should be no surprise that both of have been put forward as candidates for being Satoshi Nakamoto.
 A descendent of the famous Chyperpunks List.
 See: https://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html
 In fact, the moderator of the cryptography mailing list where Satoshi first posted his working paper for discussion called for the Bitcoin discussion to end after an initial flurry of comments. Hardly a sign that the audience was blown-away by it – see: https://www.metzdowd.com/pipermail/cryptography/2008-November/014867.html
 It is widely agreed that the first “real” Bitcoin transaction occurred in May 22, 2010, when Laszlo Hanyecz paid 10,000 Bitcoin for two pizzas. Surely the world’s most expensive pizzas!
 See: https://blog.trakx.io/crypto-in-the-spotlight-hacks/
 See: https://www.nber.org/papers/w19747
 The 2017 Segwit soft fork effectively increased the block size to 2MB (4MB theoretically).
 For those unfamiliar with Bitcoin mining the speed limit is determined by how difficult it is to find a hash below a given target. This difficulty is recalibrated every 2016 blocks to ensure blocks are mined roughly every 10 minutes – see: https://data.bitcoinity.org/bitcoin/block_time/all?f=m10&t=l
 In reality transactions per second tend to average between three to four – see: https://www.blockchain.com/charts/transactions-per-second
 An earlier hard fork occurred in 2013 but it was not intentional and was quickly identified and resolved – see: https://github.com/bitcoin/bips/blob/master/bip-0050.mediawiki
 This is also why the 21 million cap is extremely unlikely to be changed even though it is technically possible. Raising the limit would simply dilute existing Bitcoin holders. It’s akin to asking turkeys to vote for Christmas.
 Someone claiming to be Satoshi Nakamoto posted their objection to the proposal on the bitcoin-dev mailing list – see: https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-August/010238.html
 The block wars is a fascinating period in the evolution of Bitcoin and well worth reading about – see: https://www.amazon.com/dp/B08YQMC2WM
 See: https://www.theguardian.com/technology/2021/may/13/australian-man-craig-wright-who-alleges-he-created-bitcoin-takes-4bn-claim-to-london-high-court
 Figures correct at the time of writing. For current values – see: https://coinmarketcap.com/
 Going into more detail about the lightning network and its implications deserves a full article on its own, something I may revisit in the future - see: https://lightning.network/
 I am skipping over reserve currency for crypto and programmable shared database because outside the crypto world these narratives are of limited relevance.
 I recall at the time taking a screenshot of one of the most eye-catching presentations of an economic statistic ever courtesy of the front page of the New York Times. For full effect they didn’t truncate the scale, which made the Great Recession look like a regular business cycle - see: https://digg.com/2020/the-new-york-times-front-page-unemployment
 Think Japan and the Eurozone.
 The start date I chose was March 18, 2020 in order to remove most of the initial slump in prices.
 Bitcoin had gained 16-fold at the all-time high last November.
 For a discussion on the relevance of sustained negative real returns on deposits held in the commercial banking sector for Bitcoin – see: https://blog.trakx.io/fed-fears/
 In a recent blog post comment on the “stronger association between crypto and equities” the IMF concluded that
“Our analysis suggests that crypto assets are no longer on the fringe of the financial system. Given their relatively high volatility and valuations, their increased co-movement could soon pose risks to financial stability especially in countries with widespread crypto adoption. It is thus time to adopt a comprehensive, coordinated global regulatory framework to guide national regulation and supervision and mitigate the financial stability risks stemming from the crypto ecosystem.”
As I have stated in previous articles, the regulators are coming for crypto. Of that be in no doubt – see: https://blogs.imf.org/2022/01/11/crypto-prices-move-more-in-sync-with-stocks-posing-new-risks/ and https://blog.trakx.io/crypto-in-the-spotlight-hacks/
 A safe haven asset is one that should retain, or even increase in, value during times of market turbulence. It is the ultimate store of value vehicle.
 Statistical analysis by glass node indicates that the probability of a Bitcoin being used in a transaction declines markedly after 155 days of inactivity, well within the 365 day window used here to define long-term holders – see: https://academy.glassnode.com/supply/long-and-short-term-holder-supply/supply-held-by-long-and-short-term-holders
 An old market joke: a long-term trade is just a short-term trade gone wrong.
 See: https://blog.trakx.io/crypto-in-the-spotlight-attacks/
 Putin just announced that it will seek payment to be denominated in roubles for gas sold to “unfriendly” countries – see: https://www.reuters.com/business/energy/putin-says-russia-will-start-selling-gas-unfriendly-countries-roubles-2022-03-23/ and more pertinently for Bitcoin, the Chairman of the Russian Congressional energy committee indicated they would be open to accepting Bitcoin for its natural resource exports – see: https://bitcoinmagazine.com/markets/russia-open-to-sell-gas-for-bitcoin
 See: https://blog.trakx.io/cbdcs-crypto-killers-1/
 Recent comments by Russian Foreign Minister Lavrov suggest Putin’s regime did not expect such widespread sanctions, especially the measures applied to the Russian central bank’s foreign reserves – see: https://www.politico.eu/article/lavrov-admits-no-one-could-have-predicted-scale-of-western-sanctions/
 The Entente Cordiale was an agreement between Britain and France signed on April 8, 1904 in response to the perceived threat from Germany. A decade later World War I broke out. The role of such internal alliances as a catalyst for the war is a long-standing favourite question of history teachers.
 I do not mean to imply these assets are only held in US dollar denominated assets I am just using the US dollar as a unit of account.