The Daily View 4/13/2024: Bitcoin Crashes, Iran Attack, and ‘Degen communism’

Item #1: Bitcoin crashes, as I predicted last week, on Iran escalation (and the overall shittiness of cryptocurrency that requires no additional explanation). It’s going all the way back to $20k, maybe lower:

When one of the smartest people and best forecaster says Bitcoin is going back to $20k, you better believe it. Contrary to what is promised by the crypto salespeople, Bitcoin is not a hedge against crisis, nor does it provide diversification, but instead is just another risk-on asset that is highly correlated with other risky assets, like stocks. During crisis people want usable cash, not magic internet money.

Item #2: Live updates: Iran’s retaliatory attack on Israel has begun

Iran has begun its retaliatory attack on Israel weeks after a suspected Israeli strike on the Iranian consular building in Syria’s capital, Damascus, killed two of Tehran’s top commanders.

Buy the dip on any stock market weakness on Monday. That is what I will be doing. There will be no World War 3 or other escalation, and the conflict will remain contained between Iran and Israel (with the US providing assistance if necessary or requested, similar to with Ukraine, but no boots on the ground). Although the involvement of Syria, which is an ally of Iran, is still on the table.

From the WSJ, all-out war is unlikely :

Iran and Israel have been engaged in a shadow war for decades, but direct military confrontation has been rare. Saturday’s attack will likely trigger an Israeli response and threatens to take the Middle East to the brink of war.

But even in the unlikely event of war, war tends to be bullish for stocks anyway. Given I was right about the Ukraine-Russia conflict remaining contained between those two countries, contrary to predictions in 2022 of another world war, I will likely be right here too. Same for predicting that stocks would rally after the October 7th surprise attack by Hamas on Israel, which similarly six months later remains self-contained. Of course, the situation regarding Iran is bad, but from an investor standpoint I am not concerned.

Item $3: By Vitalik Buterin, Degen communism: the only correct political ideology. He proposes a decentralized version of the FDIC to bail out smaller holders from hacks and other losses:

When projects collapse or get hacked, and only partial refunds are possible, don’t make the refunds proportional. Instead, make smaller users whole first, up to some threshold (eg. $50k). Two years ago, when I proposed this idea, many treated it with scorn, misrepresenting the idea as asking for government bailouts.

I am not sure how he missed the most obvious flaw of such a proposal: FDIC insurance is tied to actual physical identities, whereas a crypto address is not tied to anything. A single crypto ‘user’ can have unlimited addresses. Thus anyone can make an arbitrary number of addresses to spread out their assets to skip to the front of the line, which of course would defeat the whole thing. True, someone can try to bypass the FDIC limits by spreading their money out across many banks, but this is much more impractical than making thousands of crypto addresses from just a single seed.

One way to make this possibly workable would be that only users who submit to KYC are applicable for a refund after registering or whitelisting a single address designated for the user, to prevent abuse of the refund system by a single user creating many addresses. Or better yet, avoid crypto altogether. It’s evident given the crash today that crypto is overhyped crap, so why bother.