Shorting capitalism

Investing in crypto is both a short position and a long position. The short position is a bet that currently-known assets are entering a period of uncertain prices and potentially general decline. The case in the making: In a crisis almost all conventional assets are correlated. Where do you find non-correlated assets that are not just ‘gambling’? There is something new happening: asset market liquidity is now directly dependent on state funding and fiscal spending: liquidity is now a ‘public good’. Is it sustainable? Can central banks ever sell the trillions of dollars of private assets they now hold? Will governments ever pay down the fiscal deficits they have accumulated? Are there limits to the market/public acceptance of state money printing that underlies these state fiscal and monetary positions? And what happens when that limit approaches? As a short position crypto offers: (1) non-correlated assets that can have ‘real’ economic underliers and (2) an alternative economic domain not contingent on being denominated in state currencies and not reliant on state underwriting of liquidity. Investing in crypto is a bet against riding the volatility of a capitalist economy. It may still appear volatile, but a different volatility. The short position trades the spread of volatilities. In addition, the long position sees crypto not just as an alternative asset class, but as a different notion of an asset itself. This isn’t true of all cryptotokens, but only those with real underliers: tokens that link to processes of creation of something useful/valuable, be it block space, anchoring role in measurement, access, co-ordination or some other notions of ‘value’. Going long is a bet that these assets will grow in value not just because standard capital markets will see their value directly, but because participants in the cryptoeconomy will see value in their terms. The long position is about going outside what will in the old economic space standardly be recognised as value-creating, and see there are new notions of what is meant by value.NFTs opened the game precisely to this direction: people are excited about their newly discovered capacity to express what they consider valuable. If a critical mass of investors embraces these new notions, a unique process of accumulation has started. It is about re-evaluating value itself. The long position trades the spread of ways of evaluating value. So what do the short and long positions mean in terms of stability? In other words: Is volatility a problem? All markets need some volatility or they stagnate, but what is ‘reasonable’ or even ‘welcome’ volatility? It depends on how you measure. The short position is intentionally volatile with respect to the mainstream capital market – that’s part of being an ‘alternative’ asset. In the long position some assets are designed to be innately stable, when defined by mainstream capital market norms. Stablecoins are designed to deliver such outcome: they embed incentives to buy when the price falls, and to sell when the price rises, so they can be made stable with respect to any nominated asset - the dollar, the euro, the S&P500, etc.). They don’t do anything in themselves, but they are a valuable bridge between two worlds. But different notions of ‘value creation’ can offer their own stability with respect to their specified underliers. Stability here is that cryptotoken’s prices hold a direct and predictable relation to the underliers of value creation. The key: measuring in a crypto unit of account: a unit that ‘describes’ and counts the cryptoeconomy. Token stability, when measured in terms of its own unit, verifies the direct connection to the underlying value-creating performance. Current state currency links directly to a system based on profit – so system liquidity means keeping stock prices high, banks profitable and firms profitable. This is where, and why, we see monetary and fiscal policy directed. Liquidity doesn’t link to the environment, scientific research or social welfare, or to a viable art community – indeed, with a fiat unit of account, these must be sacrificed, at least in the short term, to secure fiat liquidity. But what if you design a money linked to other values? Where liquidity would be defined by the creation of different values, let’s say environmental value, and not ‘profit’ value? The design issue in these cryptoeconomies is how to secure buy-in on a different unit of account, or mode of measurement, a different mode of accounting. We are born into a money system that values profit, but we must make a money system that values social and environmental goals. We think crypto is not just an alternative asset class that cycles differently from the stock market, but an alternative notion of what an asset can be. It is not a bet on whether cryptoassets can look like mainstream assets, but that the spread between the two is not just a price spread denominated in fiat, but a mode-of-calculation spread as well. The long position is a bet that this mode-of-calculation spread will grow. And that more and more people will value the latter when they realize it is actually possible. When that happens, on which side of the spread do you want to be?

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