In last month’s issue, I talked about predictions, price models, cycle theories, and what to think about conflicting visions of the future.

In this month’s issue, I look at our legacy financial system’s rules and how cryptocurrency breaks those rules.

A few weeks ago, I heard a Fed spokesman define a “Goldilocks scenario” as full employment without much real wage growth.

In other words, they want you to have a job that doesn’t make you better off or increase your purchasing power. If all goes well, you’ll make just enough money to buy the things you already buy, but not enough to get ahead.

I understand that was not the intent of this person’s words, but that’s the problem with the people who run the legacy financial system.

Where they see victory, we see defeat.

For them, your welfare is not important. Their priority is the government’s money, not yours. It’s making sure that the richest and most powerful people can keep their place at the top while doing just enough to make the masses feel comfortable about spending and working so those same elites can get richer and more powerful.

As an American comedian once said, “it’s a big club and you ain’t in it.”

A dream or a scheme?

In the States, we have this concept of the American Dream.

It means different things to different people, but basically, it’s the idea that anybody can achieve financial security and social mobility through hard work and smart decisions.

Do you know why it’s called the American Dream?

Because you have to be asleep to believe it.

It’s not a dream. It’s an aspiration. It’s an innate desire among a certain group of people to build a better life for themselves. To work hard and keep the fruits of their labor. To own the things that they create.

Isn’t that what brings us to cryptocurrency?

The idea of taking a small investment and turning it into something much bigger. The idea of contributing time, effort, and money to a larger cause – with the benefits of our actions returning to us in the form of wealth or appreciation of our assets. The idea of securing our creations on an immutable ledger that guarantees our sovereignty.

The legacy financial system does not give us any of that.

In the legacy financial system, we need to know somebody who knows somebody. We have to get into the right social and financial networks. We have to give up decades of our lives to make somebody else rich in the hopes that they will pay us enough that we can feel good about our lives and maybe, if we’re lucky, retire.

It’s not that the system is stacked against us. It’s not! Plenty of people get ahead. Opportunity abounds.

The problem is, the system rewards only those who play by its rules.

With cryptocurrency, anybody can create a new game with new rules.

Why do our financial leaders think that’s a bad thing?

Because they worry that we might like another game—and its rules—more than theirs, and therefore take our time, talent, and money somewhere else.

If you think the sovereign debt bubble is bad now, just wait until governments have to compete with computer protocols for capital.

So it's little wonder that some authorities call cryptocurrency a scheme to defraud the innocents, swindle the greedy, and evade capital controls. They can always find examples of that. This technology lets people do all those things.

At the same time, cryptocurrency offers the potential to fulfill the pent-up demand for different ways of doing business, securing rights, distributing wealth, and raising capital.

It’s a whole new game.

The plan

The question is, how do you play this new game?

We’re all still figuring that out.

Last month, I talked about some of the data models and price theories people use to navigate the market and set expectations.

While they’re all good things to think about, I’ll stick to my plan. Three lines on a chart tell me when to buy and two metrics tell me when to sell.

Whenever I’m not doing one of those things, I set aside money for the next opportunity (and an occasional altcoin along the way).

If you followed my plan, you’re up as much as 500% and down as much as 35% at the extremes. More likely, you’re up 35% with cash to spare.

Bitcoin’s price is down 50% since the November 2021 peak. Your portfolio is up 35% since the November 2021 peak.

Today, my plan says not to buy. Tomorrow, it might! Let’s see how things go.

Mark, what good is a plan if cryptocurrency ends up failing?

Good question.

Why should anybody believe that our investments will ever come back to us in some form other than selling at a higher price to a greater fool for more of our government’s money?

Mark, in your Altcoin Reports, you say 75% will fail. What if the other 25% fail, too?

Also a good question.

If crypto fails, we’ll lose money. Probably not the $12 trillion wiped off of the US stock market in 2022, but enough that we’d feel terrible.

Before you go all Doomberg, consider some of the big, transformative innovations that can only come from crypto.

NFTs

When I started in crypto, the big idea was branded tokens. You create a token and sell it. No rights or utility, just a way to make money from your followers. You can set a certain threshold for various privileges—e.g., if you hold 1,000 Markcoin, you get a free dinner with me.

Now, the market has shown a better way: NFTs.

Not only can you deliver a tangible experience with NFTs in a way that you can’t with branded tokens, but you can also give people something concrete that they own exclusively and can monetize in their own way, with a share of the value returning to you and everybody else who holds that NFT.

You can embed rights and privileges that convey only to token holders, with a mechanism to verify that everybody who holds those rights and privileges does so properly.

For example, performance rights to stage a play, deed or title to a plot of land and membership or access to a certain club. You sell the rights and derivative benefits to a global audience, frictionlessly.

NFT holders do not have to worry about the price of the underlying currency for whatever blockchain they’re using. They only have to worry about the value of their NFT.

Mark, NFTs are all securities! You can’t do that in the US!

Yes, but only in the US and only if you take the law literally.

Since NFTs meet the definition of “security” under US law, you’d think that would stifle NFT development.

After all, if you had to register with the SEC every time you wanted to do an NFT, that would make NFTs prohibitively expensive and undermine the whole rationale for an NFT in the first place.

I have a solution. Here's what you need to do:

1. Get somebody else to mint an NFT.

2. Have them send it to you.

3. Print that NFT on a piece of paper, call it a trading card, and sell it online or in a mall. Or, stamp it on a piece of gold, put it on a t-shirt, slap it on a button, make a movie out of it, or list it on eBay, Amazon, or QVC. You can print a QR code, draw a jpeg, or come up with some other way to represent the NFT.

4. Throw in some perks for holding it. Tell people why it's valuable or cool, give them reasons to expect its value will go up, tell them what you will do to make its value go up, and create ways for people to resell your NFT.

If you do that, you can market, promote, distribute, and make as much money as you want from your NFT.

So many people sell so many products this way and the SEC doesn’t care. Perfectly legal—as long as you don’t record it on a blockchain or sell it for cryptocurrency! 

Once you do that, your NFT becomes an unregistered security.

(Please don’t take legal advice from a bitmoji with no experience in securities laws.)

Defi

While we’re on the topic of unregistered securities, let’s talk about decentralized finance.

With DeFi, protocols replace banks with smart contracts that programmatically issue loans, set interest rates, and manage controls to prevent or discharge bad debt.

The world’s wealth will no longer get locked up and split among gated entities that pick and choose who can lend and borrow. Instead, vast pools of capital will flow across open, permissionless financial networks that everybody can access. You just need to download the right app or pick the right protocol.

With DeFi, a teenager in Indonesia has the same power as a Manhattan financier.

Imagine humanity’s collective wealth at your fingertips—a system where it doesn’t matter what you look like, where you live, who you know, how you talk, or which family you come from. As long as you have something to contribute, you have something to receive.

Mark, Congress wants to kill DeFi!

No, they want to turn DeFi into a profit center for Wall Street. They’ll gladly let legacy financial entities wrap DeFi into a portal or app, then charge you for access.

Let the US government restrict DeFi to sanitized, regulated platforms that only a small portion of humans can access.

A teenager in Indonesia will create a better, cheaper version that everybody can access from anywhere, any time. A pensioner in Turkey will do the same. A former World Bank analyst in Zug will do it, too.

They’ll instantly have access to a larger capital pool than any Wall Street entity could ever hope for: all of humanity, not just the 10% of humans who pass KYC and have access to the US financial system.

A new generation of crypto wallets already abstracts away some of the complexities and nuances, making it easier for users to use DeFi protocols. You can bet we’ll see more improvements in the coming years.

RWAs

What about real-world assets (RWAs)?

RWAs represent digital records of things you own in the “real world.” For example, commodities, artwork, real estate, stocks, bonds, and anything else you can place a value on. A trusted custodian secures these assets (or claims on these assets) in exchange for tokens that you can sell or redeem on demand.

These tokens capture and distribute yields, dividends, and other benefits to token holders. As a result, businesses and common people can sell financial assets to more buyers in more ways with more transparency and lower fees than they can with legacy financial technology. Buyers can access these assets from anywhere, at any time, using a crypto wallet.

Some people think RWAs are stupid. Either stick to synthetic assets or don’t even bother with blockchain.

Time will tell.

To be fair, RWAs involve a lot of legal and operational nuance. That’ll take time to figure out.

As investors, we don’t need to worry about that. RWAs are a great story and one of three narratives for the next bull market (*this* bull market if bitcoin’s price stays above $15,600).

Bonus?

It’s easy for traditional financial entities to get behind RWAs. Wall Street gets a new way to make money, issuers get immediate access to a global capital pool, and custodians get another source of income.

Look for the first RWA tokens, “secured by [BNY Mellon or some other white shoe custodian],” coming to your financial institution in 2025.

(Maybe sooner.)

Stablecoins

The beauty of RWAs?

You don’t need dollars to buy US assets. You can use any crypto.

So it’s ironic that the first RWAs were US dollar stablecoins.

Also, fitting. These tokenized dollars can go to anybody, anywhere, anytime, in any amount, without restriction, at almost no cost.

Compared to a spread from a money exchange or a 3% fee on a credit or debit card, stablecoins offer a cheaper, simpler way for people to move dollars—or any other currency that has a stablecoin counterpart.

They’re more secure. You don’t have to share sensitive personal information or carry cash on your body.

Central bank digital currency

What about central bank digital currency, a form of government money that runs on a blockchain?

Call it the intranet to crypto’s internet. All of the benefits with none of the transformational potential.

CBDCs give the people in charge the illusion of authority and a way to control the flow of capital within an economy.

Not what Satoshi intended, but an innovation nonetheless.

Mark, won’t CBDC kill stablecoins?

No. In fact, CBDCs may make stablecoins even more valuable.

Stablecoins fill a different need than CBDCs. They have a bona fide use case: people want dollars but either don’t have access to the US financial system or want to do things that the US financial system does not allow.

Foreign CBDCs don’t fill that need and a US dollar CBDC can’t fill that need.

As a result, there will always be a place for stablecoins including Tether. It’s shady AF but it’s passed as many audits as the US military (and probably funded fewer terrorists).

Any person can launch a stablecoin from anywhere and instantly release it on a global scale. How does any government snuff that out?

The game is rigged

Some may say “those examples are all hypothetical.”

They’re not hypothetical. They already exist! But if your point is “they have problems,” you’re right. Not every problem has a solution, but every solution has problems.

Fortunately, crypto leaders are throwing time, money, and talent at those problems. Let’s hope they succeed.

We need cryptocurrency to succeed. It's our only chance to get ahead without playing a rigged game.

When the economy isn’t doing well, your central bank pumps it with cheap money to boost the price of assets and make it less expensive to borrow against those same assets.

Who owns the most assets? Rich people.

Who benefits the most? Rich people.

Then, when the economy does well and businesses start making more money, spending more money, and growing the economy, they pay higher wages. Normal people start getting ahead and feeling better about their financial situation.

At that point, your central bank raises rates to crush wages, kill job opportunities, and reward people who have cash.

Who has the most cash? Rich people.

Who benefits the most? Rich people.

You’re trying to make a dollar out of 15 cents. Your government is trying to make your dollar into 15 cents.

The whole system is designed to keep wealth flowing to those who already have it while offering just enough of that wealth to people like us that we keep playing the game.

Sometimes, one of us wins, and the rest of us get a sliver of hope that maybe next time, we’ll win, too.

It’s a big club and you ain’t in it

We have families making $500,000 and feeling poor. Families making $50,000 and feeling poorer. We all know something’s wrong, but nobody’s talking about it.

The media distracts us with war, hatred, conflict, and death. A spectacle of atrocities that keep us angry enough to care but not so angry that we fight back.

All the while, we’re starving for financial security—and each day, bread gets more expensive.

The spectacle is always free.

If history is our guide, a new spectacle will come to cryptocurrency soon. SBF, FTX, ETFs, SEC, and dozens of other acronyms will soon fade from the headlines, replaced with whatever stories Wall Street wants you to hear.

Attention will return but nothing will substantively change except the price.

And, maybe, us.

If you're in this market, you hold a stake in the financial networks of the future. You’re part of a peaceful revolution. A new game.

The question is, when prices go up and everybody's talking about crypto, what will you do with your stake in those financial networks?

Think about that now, before the market starts to zoom or we get some big crash that causes you to doubt your decision. Hopefully, this newsletter helps you.

I'm always happy to consult! You can schedule a time with me on Superpeer or Tealfeed.

In honor of the comedian I mentioned at the beginning of this update, a snippet you may enjoy. It’s NSFW with some crude language and lewd imagery.

Relax and enjoy the ride!