“The rumors of my demise have been greatly exaggerated” is a colloquialism that is often heard in the political arena, the playing field, and everywhere in between. It’s come to epitomize the action of victory rising from the jaws of defeat, of the phoenix ascending out of presumed ash. It, in and of itself, is a bit of an exaggeration. The actual statement, given by one Mark Twain to a reporter who queried about rumors of his actual death was, more simply, “The Report of my death is an exaggeration”.
Whichever version you prefer (I’m sure Twain wouldn’t object to the former), it certainly applies to the blockchain industry as the crypto markets came back in force in January, with Bitcoin surging approximately 39% in one month and other tier one assets performing in kind. Indeed, with so many sounding a death knell in 2022, it would seem that blockchain & crypto are rising like a phoenix indeed. Let’s dive in further.
Spring in January
This is not all that surprising for those that have been following this blog and/or the industry overall. Certainly, FTX was a catastrophe and SBF will go down as a fraudster for the ages, but a dubious player in an industry does not make that industry itself dubious. Likewise, Celsius’ failure in 2022, which is one of Centralized Finance (CeFi), does not mean that the corresponding decentralized finance products are subject to the same fate. In fact, these two cautionary tales are a case for blockchain, for smart contracts that aren’t manipulatable by human greed. From our view, the burning of the fields in 2022 is exactly what we needed to clear out the bad actors. Of course, once a field is cleared, a new harvest can be planted.
January’s surge also seems to imply that all the “bad news” was already baked into the price in November and December. I cite as evidence the fact that the SEC filed a suit against Gemini and Genesis on January 12… and the markets did not even flinch. Same could be said about the raid on Nexo (another CeFi lender) in Bulgaria. The markets *yawned* and just kept on climbing.
Uncoincidentally, this all corresponds to exactly what we would expect when looking at the four-year cycle of crypto. A brutal year pounded into submission (et tu, 22?) is what we have consistently seen in the cryptoverse. On the other side, historically, is a three year run that begins with a good year and ends with two great ones. January 2023, marks the beginning of that good year.
This also synchronizes with the macro-economic cycle noted by the famous economist Kondratiev, who marks longer cycles as patterns of Winter-Spring-Summer-Fall. Winter, as you can imagine, culminates in a big, bad bear (yes, 2022) while spring, which is a thawing and beginning of new growth, is hallmarked by big bold inflation. We can check that box as well. When markets are awful it seems that we all think Earth is going to end and we all seem to forget about cycles. If we take a cue from Kondratiev, maybe spring really does start in January.
Which brings us to the current macro-economic picture. As noted in this MacroVoices podcast, we’re in a place where defense, interest payments and entitlements are now projected at $4.1 – $4.5T in 2023 while, simultaneously, there is a significant drop in tax revenues. We’re going to need to get liquidity in the markets and traditional buyers of treasuries are drying up. This is before even considering the new $1.7T spending bill that passed in December, which all but guarantees Quantitative Easing in 2023.
Here’s the “So What”
Why do we care about this? Because when we look at the intersection of this macroeconomic picture, the Kondratiev cycle and the crypto cycle, we see strong evidence that not only are better days in front of us, but that our opportunities to deploy at the bottom may soon be in the rear-view mirror. Importantly, the Fed’s actions support this as well, with a 0.25 point rate hike published on Feb 1, this is a harbinger to a slowing of the harshness and preparation for a change of seasons indeed.
Yes, yes, we need regulation. It’s coming. Yes, there’s still an overabundance of nonsensical blockchains. There are still good ones. Sure, we may have one more down leg. We also may not. The point is, the technology is sound and being adopted, as evidenced by Starbucks launching their now loyalty program using blockchain technology, Amazon Web Services now embracing blockchain, Lowes using blockchain to thwart tool theft… you get the idea. And these are all not withstanding the proven but young world of decentralized finance (DeFi) , the nascent-but-growing metaverse worlds, and the ever-increasing Bitcoin adoption. The future is bright. This tech is not going anywhere.
Now, about human nature. Everyone wants to buy low and sell high, but it takes conviction to deploy into carnage. There are always reasons to say no if you look for them. With many crypto assets at 85% off all-time highs and bitcoin still at 66% off of all-time highs, I argue that this is the place and now is the time that planted seeds have the best possibility to grow into healthy crops.
AI for Everyone
The future is not tomorrow. It’s officially yesterday. Everything is changed. Period. End of Story.
ChatGPT made a huge splash at the end of 2022 and, with it, AI is now in everybody’s hands. Some argue that this technology is not new. Some argue that it’s “fake” AI. Whatever. I’m not going to split hairs in this missive over what AI is or is not. What I am going to do is say that this genie is not only out of the bottle, it’s in your living room. ChatGPT brings an eerie tool that can actually start to combine and deliver data in ways that seem, well, intelligent. It’s not a human mind. But it sure produces responses that seem like it.
If you haven’t gotten your open.ai account yet then, as soon as you are done reading this, you need to get over there. But first:
What is ChatGPT?
Let’s start with the basics. Maybe you have heard about ChatGPT, maybe you haven’t. Regardless, there’s a lot of buzz about this tool and the buzz seems to be growing on a daily basis. This begs the question, what the heck is it? Well, a more formal explanation would be:
ChatGPT is a language model developed by OpenAI. It is a type of neural network that has been trained on a large dataset of text, allowing it to generate human-like text in response to a given prompt. It can be fine-tuned to perform a variety of natural language processing tasks, such as language translation, question answering, and text summarization.
ChatGPT is based on the GPT (Generative Pre-trained Transformer) architecture, which uses a transformer neural network to generate text. It is trained using a variant of unsupervised learning called unsupervised pre-training, which involves training the model on a large dataset of text without providing explicit labels or task-specific objectives.
ChatGPT is able to generate text that is coherent, grammatically correct, and often mimics human writing style. It can be fine-tuned for a wide range of natural language processing tasks, such as text completion, text generation, question answering, and more. It’s also open-source, therefore allowing researchers and developers to train their own models or fine-tune the model to their own dataset.
You may be wondering why I put that in italics and indented it. I did that because that block of writing was generated from ChatGPT. I just asked it “What is ChatGPT” and it spat out the answer. I’m not saying it’s self-aware. I am saying spoooooooky……
It doesn’t stop there. One can enter any concept and get analysis. For example, in a college literature class, I read (mostly) and dissected (with much difficulty) the epic poem, “The Odyssey” by Homer. It’s a thick read and if you could write an essay on it, you certainly understood the concepts. Now, that was 30 years ago, and I don’t remember a whole lot. Guess I don’t have to because I just typed in the prompt “Write an essay about the Odyssey by Homer highlighting the main character struggles and proving the thesis, Every Man is Odysseus.” The result was a six-paragraph essay that does not disappoint. A couple of more queries and tweaks and the result is a college-worthy paper. This is just the beginning. Legal needs? I asked it to create a Mutual Non-disclosure agreement. Done. No problem. I even asked for “a comparison of the modern LA Lakers to the showtime Lakers.” ChatGPT knew what I meant by showtime Lakers and outlined the differences between Labron’s Lakers of today and the Magic and Kareem days of the ’80s.
It’s not perfect. Plans to build an airplane out of lumber? Well, that stumped it, but it did warn me that lumber was not an appropriate material due to its strength to weight ratio and advised that I consult with an engineer. So, it’s not omniscient. Not yet. But whoo-doggie! If you are a professional whose career is based on sharing knowledge and expertise, the bots are coming, they are coming fast, and they are coming for you. We’ll still need knowledge professionals – but the herd is going to be thinned.
This is important to us because we’re not just blockchain enthusiasts. We care about The Age of Autonomy® – the convergence of AI, Robotics, IoT and Blockchain. These technologies are all taking shape and, as ChatGPT has demonstrated, are growing quicker than expected.
I got a head cold this month and, when sick, I feel kind of like it’s going to last forever. That I’ll never feel good again. But the body heals. Likewise in winter, it sometimes seems like it’s eternal, and that the suck is just going to keep sucking. It doesn’t. Seasons change and progress… progresses.
The fact is that we’re still at the very beginning of blockchain adoption but it is happening. The point of Crypto: Decrypted is to have you be prepared for the impact of that adoption, rather than get blindsided by it. From an everyday life perspective, this is happening now. So get ready. As far as investments? Well, it’s not too complex. Everyone loves to buy low and sell high. If you do too, this may be your time to get at it.
That’s all for now. Until next time, be well, stay safe, and I’ll keep decrypting: crypto for you!
Disclaimer: Not investment advice. This information should not be construed as a recommendation, investment or tax advice, or an offer or solicitation to buy or sell any security.