BITCOIN BOX SCORE
Exchange Rate: $26,575
Market Capitalization: $517.8B
Hash Rate (90 days): 381.4 EH/s
Transactions (30 days): 14,577,904
Network Fees (day): 12 sat/vB
Bitcoin Dominance: 50.11%
"The economic data have been just surreally good. Even optimists are stunned, so why do polls show most Americans don't think the economy is doing well? There's a really profound and peculiar disconnect going on," huffed New York Times opinion columnist Paul Krugman on CNN earlier this week.
For context, economic confidence among U.S. adults remains low (-30 on a scale of –100 to 100). 42% of Americans view economic conditions as poor, and 67% think they are worsening.
Krugman, the Nobel Prize winner who said bitcoin was overpriced when it cost $7, believes slight downticks in core CPI (Consumer Price Index) amount to victory over inflation.
Tell that to those still dealing with grocery prices up over 17% since 2021.
Back here in reality, Americans have been burdened by hefty price inflation for 31 months. Although the last three months' CPI increases have not been as dramatic as prior ones, the trend is still far above the Fed's inflation target of 2% (which, itself, is much too high – a topic for another time).
An alternative measure of the prices and goods important to everyday lives, the Everyday Price Index (EPI), produced by the American Institute for Economic Research, reached an all-time high this month.
There is also the looming commercial real estate crisis, a decrease in real annual earnings, and rising energy costs.
Regime apologists like Krugman are either so out of touch that they can’t understand the reality faced by the middle class, or they are intentionally gaslighting the public ahead of a Presidential election. Either way, people have grown tired of the lies and incompetence, and they are looking for alternatives. Fortunately, bitcoin provides a recourse.
With that, let's dive into the news.
PayPal’s costly bitcoin blunder 🤦♂️
PayPal overpaid a record-breaking $510,750 in Bitcoin transaction fees due to a software bug in its processing system, per an investigation by Mempool's Mononautical. A PayPal spokesperson confirmed that their infrastructure partner Paxos was responsible for the overpayment, stating it impacted only Paxos's corporate operations and that all customer funds are secure.
After launching a stablecoin and introducing on and off-ramps for crypto payments, it appears PayPal is dealing with the realities of doing business on the bitcoin network. Transactions are final – no reversals!
The Fed is losing money 🏦
The Federal Reserve reported a loss of $57 billion for the first six months of 2023 due to borrowing short and lending long at a time when interest rates have gone against it; it made investments yielding about 2% while borrowing at rates over 5%.
Despite having the privilege of issuing U.S. dollar paper currency, the Fed has incurred not only significant operational losses but also a market value loss of over $1 trillion on its investments, leading to a technically insolvent capital account that holds negative $32 billion, undermining the Fed’s reputation for financial stability and expertise.
Not many have reported on this massive loss of money by the Fed, but to those in the know, it further damages the Fed’s credibility. For a government already drowning in debt, having a central bank deep in the red is not a good thing.
Gary Gensler goes to Washington 👁️
SEC Chair Gary Gensler testified before the Senate Banking Committee, emphasizing that most crypto tokens likely qualify as securities and thus must comply with securities laws. He pointed out that the crypto industry is "ripe with misconduct" and noted that the SEC has already taken enforcement actions against companies for non-compliance.
"We are still reviewing that decision and reviewing multiple filings around Bitcoin exchange-traded products. I'm looking forward to staff's recommendations on similar questions," stated Gensler on recent spot ETF (particularly Grayscale's) applications.
Reading between the lines
The elephants in the room that Gensler did not address are his agency's ongoing cases against Coinbase and Binance. Expect the agency to delay ETF decisions until after they have played out, so Gensler can claim he has "cleaned up the industry" before approving new products.
ZK rollups promise privacy and scaling 💻
“Zero-knowledge (ZK) rollups” are being developed in the bitcoin ecosystem, promising to boost scalability and privacy. Recent advancements from Chainway and Kasar Labs make it possible to use bitcoin's secure architecture to bring advanced programmability and better transaction efficiency to bitcoin without requiring a consensus change.
Are ZK rollups necessary?
Bitcoin works well in its current form. Still, scaling technologies like the Lightning Network and ZK rollups offer ways to increase user participation and enable more complex transactions. That’s a good thing. Bitcoin, meanwhile, will continue to function as sound money regardless of these improvements.
BITCOIN ADOPTION CONTINUES
At a Cato Institute event, CFTC Commissioner Caroline Pham proposed that the CFTC "launch the first-ever U.S. pilot program for digital asset markets," stating that the "principles-based framework is built for innovation in technology, new products, and market structure."
HOW BITCOIN WORKS
Learn one key idea about bitcoin each week. This week:
Bitcoin is a return.
Honest economists and politicians admit that centrally planning the economy doesn't work.
The most extensively planned economy in history was that of the Soviet Union, and we know how that turned out. The fact is that government officials cannot possibly know enough to plan what, when, and how we should live our lives.
This raises a question: Why in the U.S. do twelve unelected officials plan the price of money, the most important good in the economy that undergirds virtually every transaction?
By attempting to control interest rates and the price of money via the federal funds rate, the Federal Reserve distorts the price of money and, by extension, the cost of capital.
It has done so for decades, resulting in artificial asset bubbles, longer and more intense boom and bust cycles, and difficulty for entrepreneurs and investors to make sound decisions.
Bitcoin offers a viable alternative to centralized economic control, and allowing markets, not a central authority, determine the value of money.
On a bitcoin standard, the price of money would be determined by supply and demand, reminiscent of the pre-central banking era. Moreover, with its credibly fixed supply, bitcoin reintroduces the concept of scarcity, similar to gold.
Such scarcity prevents the unchecked inflation often seen with fiat currencies, where central banks can print money at will, diluting its value and robbing savers of their purchasing power over time.
Bitcoin is not just another novel invention; it's an opportunity to return to a genuinely free market – where prices and the cost of capital are governed by market forces, not the whims of a privileged few in a boardroom in Washington, D.C.
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.