Wally F

I know a lot about the recent Robinhood incident. I have been on Wall Street for 33 years, so one of the first things I learned at Goldman Sachs is how trades settle, what the margin requirements are for, etc. There is a regulatory body called the DTC, Depository Trust Corporation, which handles the flow of trading and the clearing of trades for the international marketplace, but specifically Wall Street. When trades were going on in GameStop around the last week of January 2021, this was what happened: let’s say I buy the stock for 50 dollars, and after a while, the stock price goes to 75 dollars, so I ask Robinhood for a margin to buy more stock with it. Then the stock price goes up even more, and I buy even more stock with that margin, and you could be in a situation where Robinhood is lending 250 dollars per share on GameStop.

Gold and silver have been used as money by human beings for thousands of years, but in the 13th century, some city republics in northern Italy, such as Florence and Venice, issued a gold coin by their mint that had been changed to purity. This was unprecedented and such an event had never happened before where a coin had such stability and a government didn't devalue the currency like it had done in the past, such as during the Roman Empire and the Greek city-states. Because of the stability of the Gold Florin, the coin of Florence, and also the gold Ducat in Venice, this new class of merchant bankers started to issue promises to pay Florin and Ducat.

The single most important feature of Bitcoin is the fact that it is thermodynamically sound. Bitcoin is a closed thermodynamic system with no more than 21 million coins. You can't add or remove coins other than losing them. It's a deflationary system, and all you can do is add energy to it or take energy away from it. So, you can either heat it or cool it down. What is compelling about Bitcoin is that it is the first sound monetary network invented in the history of the world. I view it as a monetary energy network that can collect, store, and channel monetary energy and space over time without power loss. Energy means you could put money in it and hold it for a decade or 100 years. Over space means it's 1:1000 to 1:10 000 of the energy required to move gold or other sources of monetary energy. Therefore, it is a highly efficient monetary network. That's what's compelling.

We have many unique indicators using or on-chain data. For example, the Estimated Leverage Ratio shows all the derivatives exchanges' open interest divided by their BTC reserve on that exchange. The value of this graph goes down, which is an indication that people are trading with low leverage. As you can see from the graph below, the estimated leverage ratio has decreased, meaning that people have opened their positions with low leverage. Leveraged trading is the use of borrowed funds with a contractually determined return to increase the ability of a business to invest and earn an expected higher return. A lower ratio of leverage means that companies operating or traders are generating enough revenue to grow their assets through profits.

I think that on-chain data is something completely new. it's a new kind of exotic data that does not exist in traditional markets. Now we have open ledgers (blockchains) that have millions of recorded transactions. And there's a lot of information and a lot of value in that data with respect to fundamentales and the market. From on-chain data, we can know how to time the cycles of these markets. I think this is something anyone involved in this industry would want to have an eye on. You will get a grip of what is going on under the hood, how network participants and investors are behaving.