#106 The Confidence Game

Good Morning Everyone,

Feelings and emotions are fascinating phenomena, but how we interpret them is perhaps even more so. What is a feeling? Where do they come from? Where do you experience them from? Some would consider these extremely esoteric and “woo-woo” type enquiries but i would postulate that a focussed attention toward these appearances in consciousness are of critical importance in cultivating our ability to maintain a more sophisticated mode of operation as humans, and to prevent us from being puppets to these patterns of energy we call emotions.

I don’t wanna get too far out on the risk curve here, but I would postulate that fundamentally emotions are information and how we interpret this information is primarily based off of previous experience. Essentially comparative analysis in real time via the memory bank of your experience up until the present moment.

This is called unconscious pattern recognition, and it is a process our unconscious is constantly performing whether you are aware of it or not. It is this pattern recognition that will trigger an autonomous response to move your arm or your body if i threw a ball at your head (if in front of you or within your periphery) or if you are driving and have to quickly avoid something on the road. This system is always running.

So when we talk about confidence - what actually is it?

Britannica dictionary defines confidence as follows:

* a feeling or belief that you can do something well or succeed at something.

* a feeling or belief that someone or something is good or has the ability to succeed at something

* the feeling of being certain that something will happen or that something is true

Typically humans do not like uncertainty. People often associate the feeling of uncertainty with bad, and certainty with good, although in many ways these perspectives are not truly representative of the reality outside of the individuals experience. Hence why nation states have been able to prey so effectively on large populations - they provide people with the illusion of certainty (safety and stability).

OK. That all sounds well and good, right? What does this have to do with bitcoin or financial markets?

Well we’re currently in the throws of extremely volatile market conditions. Even more broadly in respect to the various factions or tribes of humans on the planet. The geo-political landscape appears to be the most unstable it has been in decades, and many countries are experiencing significant levels of polarisation and division amongst local populations. Central banks are devaluing currencies at record rates. Energy markets are in disarray as a result of ESG zealots and downstream of that is food and agriculture. Which is fundamental to sustaining life and is having dramatic impacts on the costs of living all over the world.All these things are having major impacts on how people are “feeling” about their current circumstance and the level of certainty, or uncertainty they have about the future (the unknown).

We currently are in the midst of a major breakdown in confidence.

Whatever this feeling is, and however reliable it is as as a source of information, there seems to be a record number of humans in developed countries experiencing it at present.

There are multiple data points showing confidence is near record lows.

1. Australian consumer confidence back to levels seen at the beginning of the pandemic, but otherwise not for 30 years.

2. Michigan consumer sentiment came out in the US and the last time it was this low, was 85 years ago.

3. The bank of Japan seem to have a major problem on their hands, with their currency peg looking on the verge of breaking, despite yield curve control policy which includes unlimited buying of government bonds at 0.25%. This means in an effort to maintain the peg they are devaluing their currency (read: siphoning the wealth of their population) at an incredible rate, with the Yen now reaching back to levels last seen in 2002.

4. According to Reuters there was a major protest in China over frozen bank funds totalling $178m. Apparently they cleared the protesters by authorities activating a code red on their health app, which forced them to disperse. Unbelievable

5. Despite all of this central banks continue to posture for further rate hikes, while most currencies are getting killed relative to the USD. Inversely the US Dollar looks like an absolute rocket ship which puts further pressure on the US and likely continues to fuel high inflation.

6. Not to mention the slew of crypto scams blowing up. Be it Luna/UST, Celsuis, 3 Arrows Capital sound like they may also be in trouble, binance halting bitcoin transactions and also Coinbase limiting transactions and operating in a generally suspect manner.

Buried deep amongst this crumbling of confidence is a somewhat comical irony. What does everyone think the money is backed by? That is, that the only thing backing the US dollar, and really any of these political shitcoins is an ephemeral sensation or pattern of energy inside of us, we call confidence, and a belief (or delusion) that my political paper will continue to be able to be exchanged for goods and services in the future.

As Paul Volcker explained in the documentary “In Money We Trust” when asked what backs the US dollar:

“What backs the dollar today is confidence that we will maintain reasonable stability in its purchasing power over a period of time. Nothing more than that. It's confidence in not just the Federal Reserve and government, in society; and we better maintain that confidence - A lot of things are going on that raise too many doubts.”

So while the US and political monies are backed by nothing more than an ephemeral internal experiential state, and becoming increasingly worthless, amongst all this chaos bitcoiners continue to stack sats. Are they just over confident? Perhaps. Obviously a strong bias exists whereby we believe bitcoin is the most superior monetary network and monetary good in human history, and that over time others will come to realise it too.

The difference is, it’s not based simply off a blind belief, or some unexplainable ephemeral pattern of energy occurring within consciousness - it is because bitcoin has a predetermined issuance schedule that is known into the future. It is because bitcoin is controlled by no single entity and requires no human intervention to continue to operate into the future. It is because it is backed by energy. By the fundamental laws of physics. These FACTS are what provide bitcoiners with confidence.

This confidence is because bitcoin doesn’t tell stories to us to try and provide us with certainty; bitcoin provides certainty because the rules are baked into the code and cannot change. They are set in digital stone. Protected by the scarcity of energy via proof-of-work.

There is no question there is a ton going on in financial land right now, and there is a ton going on more broadly. I have no answers for how any of this ends. What i do know however, is that the legacy system has uncertainty baked into it at the protocol layer - and humans tend not to like uncertainty.

As the financial infrastructure continues to be tested, bitcoin is a beacon of hope and can provide certainty like no other monetary network humans have ever known. It’s only when you measure it in melting political shitcoins that the water becomes muddied. Sats are the standard. When measured in sats, nothing has changed.

Continue to stay humble, and stack ‘em. The long term hodlers set the floor.

Hope you have a great day. I’ll talk to everyone tomorrow.

AK

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