Blog

All of us were born into a society that has its norms around how you express value. The final distillation of those norms is our currency. As we grow up, we're conditioned to assess the relative price of things like for example a gallon of milk, groceries, a car, a home, etc. in our native currency. We take that expression or conditioning for granted and don't think that there's anything else to it until occasionally we get a glimpse of it when we go to another country. When you spend some time there, you struggle to understand whether what you're paying for is really worth it because the value proposition isn’t intuitively clear. And, it's that uncomfortableness that offers a little glimpse into what I think is really going on. I wasn't as interested in Bitcoin because I didn't see it as relevant for me being in the United States as we have a very mature payment structure. Those problems are largely solved for us, so we don't often find a need for entering into another money network. It wasn’t until much later that I started exploring the monetary system that it became clear what the latest narrative of Bitcoin was attempting to solve for, namely the unaccountability of central banking on our collective purchasing power.

A lot of young people think this FinTech is very revolutionary, but this revolution is just a part of an ongoing evolution in database management systems. When I first went to Italy with my mother in 1971, I was 10 years old. I remember before we went on this trip from Vancouver to Italy, we had to get a telephone book and look for Thomas Cook or American Express (offices). We needed to obtain a traveler’s cheque to be able to exchange Canadian dollars for Italian Lira.

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.

I started by giving a presentation to synagogues, youth groups and college students called Bitcoin and Judaism. In a presentation session, I go through the Jewish Bible, the Torah, and talk about what the religious, legal, ethical perspectives of money are, and connect that to how bitcoin can be the next step for further evolution. In the Bible, animals, silver, gold, jewelry, etc. are described as different forms of money at a certain period in ancient history. In recent years, this has developed as fiat currency, and now is further developing again with digital currencies. Everybody has a general idea of what they think money is, but most haven't put it all together: they don't know why credit cards are money.

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.