Fragile by design

And it's all political


Exchange Rate: $44,335

Market Capitalization: $868.5B

Hash Rate (90 days): 481.4 EH/s

Transactions (30 days): 16,353,654

Network Fees (day): 56 sat/vB

Bitcoin Dominance: 52.78%


Are banks prone to crises by their nature? The United States banking system has undergone a series of crises over the decades, which many consider to be empirical data that banking systems are inherently fragile – and that central banks are necessary to prevent crises. 

However, when you dive deep into monetary history, you begin to realize that this line of thinking may be backward. 

The banking histories of Canada, the United States, England, Australia, and other developed nations reveal that some systems generate successive crises while others do not. The reason? Politics. 

As Charles Calomiris and Stephen Haber outline in Fragile By Design, banking systems are not spontaneously arranged by the free market but rather "the product of political deals that determine which laws are passed." Top-down planning of this kind creates banking networks that exhibit instability and moral hazard.

This explains discrepancies in outcomes among nations whose financial systems would otherwise be assumed to be equivalent.

With that, let's dive into the news.


Questioning the Fed’s inflation target 🎯 

The 2% inflation target, now a central banking standard, originated from a seemingly arbitrary decision by New Zealand's central bank in 1989 to combat high inflation – and gained global traction despite lacking rigorous justification. This target, later adopted by major central banks, including the Fed, has dominated economic policy for decades. It is not grounded in sound theory but rather in outdated models like the Phillips Curve.

Finally, mainstream media journalists are keying in to this oddity and beginning to question the 2% target. In an article titled "The Fed's 2% Inflation Target Is a Made Up Number," for Time Magazine, Zachary Karabell writes,

Why not let inflation fluctuate in a wider band, not a much wider band for sure but more than 2%, to allow for some organic settling of what is supposed to be a free market?

Imagine what will happen if the mainstream media continues down this path – and concludes that monetary policy can be accomplished entirely through decentralized consensus.

Voting with their feet 👣

Per the latest Census data, progressive states like New York, California, and Illinois are experiencing population declines as people flee high taxes and business regulations. The decline would be even sharper without foreign immigration to these states. This exodus, made up especially of affluent taxpayers, is impacting state revenues and reshaping future political landscapes, with these states likely to lose Congressional seats. In contrast, lower-tax, business-friendly states in the South, like Texas and Florida, are growing dramatically in both population and tax base.

Want to know which states are the most bitcoin-friendly?

Check out our research report, the Bitcoin Index, which ranks all 50 U.S. states to help determine which places are most suited for bitcoiner's needs.

Inflation blamed on supply shocks (again) 🙄

Recent disinflation is less about supply-side improvements and more about demand-side factors, as evidenced by the mismatch between the modest increase in real GDP growth and the slowdown in inflation rates. This contradicts the supply-side theory, indicating that changes in fiscal and monetary policies are the primary drivers of the current inflation trend rather than supply chain improvements.

However, that hasn't stopped Janet Yellen from claiming that the Biden Administration's approach eased "supply-chain bottlenecks that had contributed to a surge in goods inflation." 

The math doesn't back Yellen's scapegoating – inflation is always a monetary phenomenon.  

Are spot bitcoin ETF approvals priced in? 📈

Chatter about spot bitcoin ETF approvals has reached a fever pitch. The SEC will issue final comments today, followed by applicants submitting final responses in the form of 19b-4 and S-1 filings. Approval of one or more ETFs could occur any day.

Are they priced in?

Bitcoin's dollar exchange rate has risen rapidly over the past few months, and one theory as to why is that the market is anticipating approval of the ETFs. The reason this could raise the exchange rate of bitcoin with dollars is that ETF issuers, which comprise the largest brokerages in the United States, will market these new financial products to their millions of customers. With institutional capital flowing in to bitcoin, its market capitalization could rise dramatically.

According to a recent survey conducted by Bitwise and VettaFI, only 39% of financial advisors believe that ETF will be approved in 2024. Notably, 88% of them are planning to purchase BTC only after the approval, indicating that approval could generate substantial inflows.


On January 3rd, 2024, bitcoin technology company JAN3 unveiled AQUA Wallet, which facilitates transactions across on-chain, Lightning, and Liquid networks.

Hong Kong is embracing the digital asset industry, with new regulatory clarity and a comprehensive strategy to become a leading bitcoin hub.

The Blink Plugin, a new integration for the BTCPay Server, simplifies Lightning payments for merchants by eliminating the need to run a Lightning Node and offering Stablesats to counteract volatility risk.

U.S.-based bitcoin miner CleanSpark announced plans for an internal trading desk to optimize returns on its substantial holdings, which totals over 3,000 BTC.

Missouri's "Digital Bill of Rights" (HB 2107), backed by the Satoshi Action Fund, was introduced, setting forth a policy to protect bitcoin miners and users.


Learn one key idea about bitcoin each week. This week:

Bitcoin is governed by consensus.

Bitcoin's governance is removed from the political and hierarchical structures of traditional financial systems. The Bitcoin Improvement Proposal (BIP) is a key part of this process, a mechanism that embodies the ethos of bitcoin's consensus-driven development.

In 2011, inspired by Python's Enhancement Proposal system, Amir Taaki initiated the BIP process to bring accountability to bitcoin's development.

These proposals can range from critical consensus changes such as soft or hard fork protocol upgrades to more peripheral adjustments affecting various aspects of bitcoin's software. Overall, the BIP process helps ensure that changes are well-considered and transparent.

The journey of a BIP from draft to adoption is a testament to bitcoin's consensus-driven nature. Proposals often start as informal discussions in the community, moving to more formal drafting stages where they are refined based on community feedback. Crucial to this process is achieving community consensus, which is necessary for a BIP to progress to finality. This requires the agreement of developers and, critically, bitcoin’s user base, ensuring that changes are widely accepted and beneficial.

It's important to note that BIPs are not binding. They are recommendations rather than mandates. This distinction underscores the decentralized nature of bitcoin. Developers freely choose which BIPs to implement in their software, and users independently decide which version of the software to run. The power rests not in a central authority but in the hands of the individual network participants.

Without something like the BIP process, bitcoin’s code would never change. With it, bitcoin can change, but only very slowly and only when users opt in. That means that the BIP process cannot be co-opted by interest groups or top-down imposition of authority. The BIP process could even serve as an example for how other decision-making systems could be governed.


What significant event in bitcoin’s history occurred on January 3rd, 2009?

  1. The Bitcoin Whitepaper was published

  2. Satoshi mined the first block of transactions

  3. Satoshi disappeared forever

  4. The Blocksize War ended

Check your answer at the end of the page.



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2. Satoshi mined the first block of transactions.

When Satoshi Nakamoto, the pseudonymous creator of Bitcoin, mined the first block of transactions, known as the Genesis Block or Block 0, it marked the beginning of the Bitcoin blockchain.

Each new block is linked to the previous one, creating a continuous chain, reaching all the way back to Block 0.

That’s all for this week, folks! When you signed up for this newsletter, we promised to act as your personal guide and help you understand what’s happening in the world of bitcoin. What did you think of today’s newsletter? Reply to this email and let us know what you’d like to see more of.

Until next week!

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