Cryptocurrencies Might Be What Pushes Us Over the Edge Into Open Brawling

While we are not currently short of catalysts by any stretch, it might be cryptocurrencies that push us over the edge into open brawling.

Now that we've covered the main catalysts, let's move on to a cryptocurrency theory.

There is no phenomenon like crypto. Some of it was no doubt created by geniuses (whatever you think of Bitcoin, the concept is pretty incredible), some was created as a pure mocking joke (Dogecoin from Musk) and some is just created by and for flat out idiots (Hawk Tuah coin, Fartcoin, ten thousand others).

The polarity of opinions is incredible, with hyper intelligence on either side. Some of the very smartest people mock crypto mercilessly (the otherwise ultra-rational and now gone Charlie Munger once referred to crypto as ‘rat poison’, later upping the ante considerably: "Suppose you could make a lot of money trading freshly harvested baby brains. You wouldn't trade them, would you? It's too awful a concept. To me, Bitcoin is almost as bad. ... I regard the thing as a combination of dementia and immorality. And I think the people pushing it are a disgrace."), while other smartest-people-I've-ever-encountered consider crypto a Godsend for an entire slice of (non-criminal) humanity that has no access to a sound local banking system (several billion people) and a brilliant innovation.

Some people just jump camps. Trump mocked crypto a few years ago, and now wants to make the US the “crypto capital of the universe” or some such hyperbole, and just the other day announced creation of a Crypto Strategic Reserve (in a sign of the extent of current policy chaos, Trump’s initial announcement via social media forgot to include the two most predominant cryptocurrencies - Bitcoin and Ethereum - that would be “the heart of the reserve.”).

What on earth is going on?

Well. Take a deep breath. Consider this fascinating angle that just might make a lot of sense.

For full disclosure, this scenario is nothing my mind could piece together, ever. It originated with (I think) a very bright guy named Luke Gromen, one of those people that grasp macro issues before anyone else.

Mr. Gromen spoke on a podcast of hearing Donald Trump proclaim that “Bitcoin is the new oil.” Now, Donald Trump says a lot of wild things, and some filtering is good for the sanity. After a few exposures, one develops a sort of Trump Translator that shaves down some of these hyperbolical mountains and so forth.

But this one is different. “Bitcoin is the new oil.” It stops you in your tracks. It’s something else. Not dumb, not hyperbole, not bombast.

Technically of course it’s not true either, in any practical physical sense. As Peter Zeihan says, oil is civilization. It just is. Hate it all you want, but you really shouldn’t, because it is the building block of everything in our material existence that isn’t made of stone, wood, or plant matter (and all of these are brought into your world via oil in one form or another, with modern abundant food supplies actually being the poster child for hydrocarbon value-add).

Bitcoin is an imaginary phenomenon dreamed up 15 years ago by some anonymous person or persons, a new medium of exchange that only ever touches reality in one critical juncture point: it requires vast and ever growing quantities of energy. So how could anyone even utter that phrase? “Bitcoin is the new oil.”

That question vexed the very intelligent Mr. Gromen, who mulled it over until he made a fascinating realization.

As with Trump himself, put aside any negativity you feel towards crypto for a second (this is also a key to sanity in the modern age, btw; don’t judge, analyze; don’t ‘wish it weren’t so’, work with the hand that is dealt). Don’t take the sentence literally; that is, this isn’t a statement that BTC can approximate the functionality of oil. Think of it like: Can BTC accomplish a very specific task that oil also did?

Here is Gromen’s thesis. Back in 1973, the price of oil tripled in a relatively short time. This spike had massive repercussions because oil is everything, and when the cost of the economic lifeblood triples, it’s going to have a big impact.

The benefit to the US of having oil prices spike was that, because oil largely trades in US dollars, the global value of USD-denominated trade rose massively through the oil trade alone. When the price of oil spikes in USD, the demand for USD increases, and that means it is easier for the US to borrow money without causing a spike in interest rates. Many large scale investors that need to buy USD via trades just park their USD in government debt because there is so much of it, it is very liquid, and easy to enter/exit huge positions. This demand for US debt then pushes up the debt price, and pushes down the interest rate. Voila. (Note that the much-