This will be the 13th presentation that I’ve given about Bitcoin and Crypto in general for the Ikigai Investors and Partners. In case you weren’t aware, these presentations are posted as articles on our Kana and Katana website each month as well. Earlier I was looking back at where we’ve come over the last year and I think this juncture is a good place to stop and reflect.

First, the industry as a whole has grown at incredible speed. New market participants have entered and it shows in the price.

At this time last year, BTC was trading at $11k, and ETH was trading just under $400. Since that time, BTC has gone up by 4x and ETH has skyrocketed by 7x.

Not a bad year, to be sure. But in addition to that growth, we’ve seen massive gains from the DeFi sector and the growth of stablecoins.

Stablecoins have grown from a total market cap of under $20b to over $100b in the space of a single year.

Interestingly, DeFi market cap has also seen growth on the same order of magnitude, but with a few more bumps along the road. DeFi as a whole started the year with total market capitalization under $20b, crested over $140b, pulled back from there and now sits just under $100b.

And just in case you’re not impressed yet, recent data from ARK shows that crypto trading is set to outpace FAANG this year. If this isn’t a pivotal moment, I don’t know what is.

One of the main drivers of this immense growth has been loose monetary policy. Now, there are a number of ways to think about this. We could say “Hey, wait a minute what happens if the FED starts to tighten? Wouldn’t that be very bearish for crypto and risk assets?” The other way to think about it is that Bitcoin and crypto in general are doing exactly what they were designed to do, provide an escape hatch for individuals and organizations to escape the fiscally irresponsible governments that they are subject to.

I’ll spare you the ump-teenth chart of the ballooning money supply and just handle the case for a responsible government head-on. It’s like this, we CAN’T start being responsible now. Nothing short of a revolution is going to fix our broken global economy based on endless growth, consumption and debt. When the going gets tough, our leaders say “bring in the clowns!” And that’s about all they’re good for these days.

Here at Ikigai we’ve been fortunate enough to have also grown rapidly over the last year. Our assets under management have increased significantly over the last 12-months. Along the way we’ve learned a lot. But we’ve also had our share of challenges with scaling in an industry plagued with uncertainty of any flavor you can imagine, and navigating the ascension of Bitcoin from the mailing group topic of a few cypherpunks and nerds to a global asset class being adopted as the national currency of a small nation, El Salvador.

As we look out over the bough, I see an increasingly complex landscape fraught with peril and opportunity. We can no more shy away from these challenges than we can deny who we are and what our purpose is. At Ikigai, I believe we all sense that the world is on the verge of a generational shift. Some kind of fourth-turning or perhaps just a restructuring from the post debt-fueled economy entering the digital age.

By the way, I hate to be the bearer of bad news; but we may not be “coming out” of the pandemic just yet. The latest data from world-o-meter shows that we may be entering a third wave fueled by the Delta variant which could eclipse the previous waves even after reaching a point where half of the USA has been vaccinated.

While this trend certainly isn’t encouraging, we have an established pattern of behavior from the Fed and from our elected leaders. We know that they’ll keep running the printing press until we’ve deforested ANWAR. Maybe at that point they can get around to creating their digital dollar and try to catch up with China? Or maybe it will be too late?

Either way, the words of Satoshi seem more prescient than ever.

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.“

Source: https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/#selection-45.1-45.381

And when you combine these tendencies of our central bankers with the frivolity of our government and its inability to balance a budget, it’s no wonder that trust is in short supply.

Thank you for being a part of this journey. We appreciate you. We couldn’t do this without you.

Hans Hauge

Head of Quantitative Strategy

Ikigai Asset Management

August 2021