Very few things make sense in 2020. With Seattle’s CHOP zone, the now iconic St Louis gun toting couple and the destruction of statues coast to coast it seems Fight Club’s Project Mayhem has become the norm rather than the exception.
Seattle CHOPSt Louis Ripping down statues in USA
I am reminded of this final scene in Fight Club in which the protagonist has his epiphany just as the world around him crumbles.
While I love the movie Fight Club I don’t want to live through it. For me, life in 2020 has been more like this:
But enough of indulging in metaphors from one of my all time favorite movies, being a doom bear is not healthy or productive. However, certain things do need to be acknowledged and one of those things is we are living in very unique times.
So, what is the best course of action for portfolio and wealth protection? Well, I’ll offer some thoughts (not financial advice).
Stocks are clearly in a bubble. Fog of war can make a bubble difficult to see in real time but putting aside the clear signs of over valuation and the disconnect from average Joe, unemployment, inflation, company bankruptcies, empty and failing malls or any form of reality we are hearing pundits call this market a “new paradigm”. TSLA is not worth more than every other car company on the planet. AMZN cannot replace every retail job worldwide. AAPL did not sell more iPhones in Q2 during a 20M increase in unemployment. Period.
The calls that we are in a New Paradigm free from the constraints of a somehow outdated and irrelevant past signals we are reaching this point in the markets:
Markets can remain irrational longer than you can remain on the sidelines.
The latecomers to the market, AKA RobinHood investors, driven by the insane and easy gains and the promise of the new paradigm, are the final nail in the coffin. The tipping point is reached when the uber driver tells you about how much he’s making buying Tesla stock in his Robinhood app. Then you can be assured the very end is near because there are no new suckers to draw into the ponzi.
The caveat here is the Fed. Having propped up the economy through multiple bubbles this may be the one hand of poker they can’t walk away from. The Fed’s bluff may get called by China and Russia and in that case we’ll have a big fat cherry to go on top of the cake that has been 2020: an unimaginable new market blow off top followed by hyperinflation and global reserve currency reset. It will not be a smooth ride and the effects will be felt globally.
For stocks, if I had any open positions remaining, I would either sell this week or put in a 20% stop loss. A 20% stop on TSLA would take you all the way back to 8 days ago. I think you’ll survive. Given the Fed’s unblinking resolve to prop up the markets a stop loss may be a more profitable strategy than proactive profit harvesting, but either way the best offense at the moment is a good defense.
But if you sell your stocks what do you do then?
Real Estate is also in a bubble. However, hard assets like Real Estate have some advantages over stocks. Real Estate is a complicated investment with many variables so take this as a gross overgeneralization. If you can transfer ridiculous gains in stocks into Real Estate, even at these elevated prices, you can build in some portfolio protection. Going from one bubble to another is not ideal but the goal here is to move gains from stocks to dollars to hard assets. Real Estate, in some cases, may make sense but is likely for the minority. Those who can afford to transfer large sums to buy properties in cash. These real estate whales are the sole reason I believe we have not seen Real Estate already collapse, but I do think a Real Estate collapse is coming. Real Estate is a long term and complicated hedge, which is exactly part of the problem today. Real Estate should be your home or an investment, not a financial instrument designed to eek out alpha. But we don’t get to choose the times we live in, we play the hands we are dealt.
Gold is the undisputed world champion, the GOAT, of surviving currency collapse. While Gold is awful for using in any practical manner other than as protection for the cyclical 50 year currency devaluation that cycle may be near thus making Gold attractive for protecting assets. Gold may always be valuable but it’s threatened by a future of provably scarce and much more usable/practical digital assets. Gold deserves a spot in your portfolio, but not a large one.
BitcoinSV is high risk / high reward. But it has advantages over Stocks, Real Estate and Gold. BSV is the world’s first digital, scalable, usable, global, digital ledger and hard money. BSV can truly change the world but that doesn’t mean it will succeed. I believe BSV deserves a spot in your portfolio, likely above Gold, unless you are extremely conservative.
To summarize, stocks will likely correct hard this Summer. You’ll want to look at protecting profits with stops, diversifying now or outright eliminating this asset in the near term.
The USD, at the moment, is strong. It may gain some steam in it’s own blow off top and there is a possibility it goes from deflation to inflation in a hurry. USD is a hot potato. I wouldn’t want to hold too much of it long term.
Real Estate may be a poor investment in terms of recent history but a better place than stocks or USD in a market shakeout. It will only apply to high net worth individuals who need to lock up a lot of liquidity in a stable hard asset and who can successfully navigate the complicated process of buying properties. Medium term I expect Real Estate to collapse but it’s collapse may look good in relation to how USD performs.
Gold is a shiny rock that has held value for thousands of years. I quite enjoy holding a sleeve of gold coins in my hands. It feels good. That’s about all the positives I can say about Gold, but it’s enough in these strange times to consider holding some Gold purely because others may also value holding shiny rocks more than worthless paper.
Bitcoin SV is a risky investment, but given the crazy world we live in and the potential pay off, I think it will prove to be a winner in your portfolio over the next 12-36 months. BSV can be the hard money and digital ledger needed to bring integrity to government and trade as well as represent a single source of truth as a timestamped global ledger. If BSV fails, then I fear for how humanity navigates the next decade and I expect we’ll have bigger problems than where is the best place to invest.
While they never made a sequel to Fight Club I hope we don’t have to find out happens when society collapses in real life.
So, sell in 2020 and go away. Far away. You’re bothering me.
The SP500, aka the SPY, has been on a tear since the low of $2,200 on March 23rd. To the disbelief of many, the market has been on a V shaped recovery so far.
As I am a primarily a trend trader and use the Ichimoku Cloud as my primary technical trend indicator I noticed today that the SPY had a bearish TK cross on June 23rd. This occurs when the fast moving tenkan crosses under the slower moving kijun on the Ichimoku cloud.
If you don’t know TA jargon, it’s OK. This early signal could be reversed with another move higher which would signal bullish continuation but if it continues downward we may have the beginning of the exhaustion of this record setting rally.
What’s important here is to notice when strong trends falter. Is this a hiccup for the bulls or the beginning of a bearish trend?
I have no position in SPY but if I were long I would sell 25% of my position on this cross as a defensive measure and move my stop loss for the rest to the bottom of the Cloud (~$3,000).
This Index signal coincides with many new all time highs for individual stocks. However, as I run through my stock screens I also see many double and triple tops and other less visible stocks showing more bearish indications.
This is not a call for end of the rally but it is something to notice and track.
It’s difficult to keep a level head when markets are gaining 13% per month. This pace is not normal or sustainable. Keep an eye on the trend.
Tesla stock is resembling SpaceX as it rockets into space day after day. Up 10% on Friday followed by 13% today.
But I have some sobering news. The return to Earth is near.
Betting against Tesla has been a bad idea for years, but I have reasons to write this now. There are predictable cycles in markets.
Tesla exuberance has been well deserved. I love their vehicles and the company. However, certain laws in the market may bend but do not break.
Technical Analysis is about to catch up to TSLA in the form of Mean Reversion. TSLA is 200% of it’s 200 daily moving average.
Tesla has been at these euphoric levels before. From Feb 3 to Feb 25 TSLA was in the same overbought area relative to it’s 200 DMA. The day after entering this area a gap up doji candle covering a 25% move appeared on the chart and then a retrace of 55% to $341 45 days later.
On the fundamentals side the CyberTruck is poised to reshape the truck market the same way iPhones reshaped mobile devices. The market has been trying to price this in for months. The issues is this does not happen overnight. TSLA bulls are ahead of themselves.
TSLA is a great company to own, but it will be even better to own it when this blow off top completes which should be this week.
I will give one caveat to this scenario and that is the markets are clearly irrational globally. If global insanity continues, well, TSLA $3,000 by September? If that happens, we’ll be well on our way to a global currency reset.
My most reliable tool for buy/sell signals on BSV is approaching a BUY signal.
The Mayer Multiple tracks the daily closing price vs the 200 daily moving average. Historically when the MM indicator is below .7 BSV has been at a market bottom.
I’ve written about the Mayer Multiple in these previous posts:
Jesse Livermore, the legendary early 20th century stock trader, is the single greatest influence on my trading mindset. If you have not read “Reminiscences of a Stock Operator” and/or “The Boy Plunger” I recommend you buy and read them immediately. These books about Jesse Livermore’s life are entertaining and highly educational for everyone, trader or not.
One of the best tools for tracking a trend is the Ichimoku Cloud. An example of the Ichimoku Cloud applied to BTCUSD daily chart generates 7 trades (noted by markers at top of chart with 6 of 7 trades being profitable) over the past 18 months.
BTCUSD daily chart (click for big)
Different trading styles have different time preferences. Higher timeframe charts produce less trades per year. These higher timeframe trades are more profitable for less work. In these volatile times I believe you must be flexible enough to obey trends that are between 4H and 1D. Timeframes less than 4H are too noisy and over 1D can be too slow. Timeframes come down to personal preference and trading style. For me, having been a day trader looking at 15m charts, I can tell you I greatly prefer the higher timeframes for consistency of profits and quality of life.
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”
Jesse Livermore
The key to trend trading is patience and persistence. I have lacked both the past couple of years.
Going forward I’ll be blogging more consistently on trends I’m trading.
Here’s a snapshot on a few notable assets:
Apple, a close above $374 opens target $430. However, $374 area could be firm resistance. Stop $345.
“Experience has proved to me that real money made in speculating has been in commitments in a stock or commodity showing a profit right from the start.”
Jesse Livermore
BTCUSD, in cloud and trending down. Neutral trend with bearish bias. Confirmed sell signal $8600. Triple top formed at $10,500.
BSVUSD, below cloud and trending down. Bearish trend with support near $150. Reverse trend at $170. Stay out till trend reverses.
“I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.”
Jesse Livermore
TSLA, all time high with price 20% above Ichimoku Kijun indicator. This displacement between price and Kijun is a classic retrace signal. However, markets are irrational. I would be selling TSLA here to rebuy at Kijun support of ~$1,000. TSLA is a gamble for longs and shorts. It’s one of the most volatile and irrational assets to trade bar none in 2020 (including crypto).
AMZN broke a triple top and is now up 43% in 90 days since the Ichimoku cloud long signal at $2,008. Price looks determined to test $3,000 and I think it’s an ideal time to offload into that strength any shares you don’t plan to hold for 3+ years.
“End trades when it is clear that the trend your are profiting from is over.”
Jesse Livermore
To say these are unusual times in the markets is an understatement. Rarely has humanity had macroeconomic, political, health and cultural movements of this magnitude coinciding at the same time. Anything is possible in this environment.
Would you like to see more of these charts? What assets would you like to see tracked?
There is a lot to unpack in this post. Let’s begin with addressing a few world events and a brief discussion of money.
There are volumes of books about monetary theory. For this conversation I am going to sum money up as “the product of any one person’s work”. You may store that work product (accumulate money) or use that stored work product to purchase other products (spend it). In essence, money is the result of your work product, or the value you provide in the world.
So what happens when the Government prints money and gives it to banks, companies and individuals? After all, aren’t they issuing money to people without them working for it?
The answer is the Government is counterfeiting your work product. You work for your money but the Government prints it for free. When the money presses go BRRRRR they are counterfeiting work product. Think about it. GDP stands for Gross Domestic Product. As a Nation our GDP is based on the product we produce. It’s that simple.
The value the Government claims for free by increasing the money supply without a link to production occurs in the devaluation of the dollars you earn. They have counterfeited your work product.
In ancient Rome the Roman emperors would clip edges off of coins as a way to collect taxes. Then they would take those clipping and melt new coins. This was not taxation, this was monetary manipulation. This was the original counterfeiting! They took your stored labor and used it to counterfeit new money without a link to production. In the digital age we have replaced coin clippings with quantitative easing.
This fundamental issue of money is underlying the public unrest. People understand they are stuck in place or backsliding in quality of life but it’s been difficult to pinpoint why. Wages are stagnant, consumer prices are up but the markets are doing great! Something stinks, but we didn’t know exactly what it was. That dead fish smell is the deepening money pit we are falling into as a nation. The Government has been counterfeiting your work product for decades. It’s worse than that though. Since the USD is the world’s reserve currency the Fed has counterfeited the entire planet’s money supply. For every laborer that digs a hole the government prints the equivalent money and disburses it to those in power directly or via subtle means. Except now in this late stage game it’s becoming less subtle!
You may have recently heard of the Cantillion Effect. This simple rule states that when new money enters a system it is not evenly distributed. Those who touch the money first gain the greatest benefit. The average Joe Citizen suffers as the benefits of the counterfeited labor (new money) the Government created is redistributed unevenly. Your earned dollars are paying for the counterfeited dollars the Government gives to banks, corporations and slush funds.
Your work harder for less in return. Meanwhile, those nearest the Cantillion effect build wealth at a pace that matches the counterfeiting. Given the recent 6 trillions stimulus these must be good times for those banks, corporations and funds nearest the Government printing presses!
As a friend of mine once said, “If I had your money I could burn mine”. That about sums it up. Your tax dollars and earnings, your entire stored wealth, is a mirage. It’s all tied to and controlled by the Government who use your life’s work to steal value for themselves and their cronies. You are nothing but coin clippings to be melted into new gold bars for the elite.
OK, that was bit over dramatic, but you get the idea. The issue is that money is not tied to work. Without this correlation those who can print money can control the world. This is human nature and why empires eventually collapse. An empire may start out on a solid foundation but eventually enough entropy enters the system that the system falls apart. Given our iterations of money over the centuries an the repeated rise and fall of empires we have not been able to separate money from human nature.
We don’t have an honest system to reward one for the value provided that is not also subject to the booms, busts and cycles of human nature.
Till now….
Many people consider Bitcoin to be an Internet meme or the latest Internet ponzi. I was a Bitcoin skeptic for years. I followed Bitcoin for a few years but only as a technological curiosity before buying. I was blinded by the mockery of this new Magic Internet Money and it prevented me from doing the due diligence to understand Bitcoin for myself until years later.
Once I began studying Bitcoin I fell down a very deep rabbit hole and have been there ever since.
The information available on Bitcoin is biased depending on source, including my own blog posts.
Do your own research. Bitcoin is an IQ test.
Meanwhile, here’s your theme song for stocks in 2020.
Notice the columns in red. Inputs and fees are correlated. BTC users are paying ~$2 per input used in a BTC transactoin.
BTC is a shared ledger. Every BTC transaction has a number of inputs and a number of outputs. If you want to spend BTC your inputs are sent as outputs and the fees (currently) are ~$2 per input spent. The more inputs used to spend your BTC the more space your transaction takes on the BTC blockchain and the higher the fee.
Think about it as you have a wallet with three $20 bills. Each $20 bill is an input in your wallet waiting to be spent. If you want to spend those three $20 bills (three inputs) it will cost you ~$2 in BTC fees per bill (input) spent. Let’s say you want to buy an item for $50. You give the cashier three $20 bills (three inputs) and there are two outputs, the $50 you paid and the $10 in change you receive. Using BTC, this would result in ~$6 in fees to spend $50. This is not sustainable.
BTC proponents like to point out when millions of USD are moved on BTC for a transaction fee of $2 but they never mention when someone pays $6 to move $50, or $1,000+ for a single transaction that consolidates a large number of inputs.
This is a very expensive fee to use a very small amount of data on the BTC blockchain.
Why does this happen? Because BTC has a 1MB blocksize. This means BTC can only process ~1MB in data roughly every 10 minutes. The cap creates a fee market where users compete to pay for the privilege of using the 1MB BTC blocksize. This fee market makes BTC expensive to use in majority of cases and completely broken in times of heavy usage.
You’ll hear that BTC is a “Store of Value” and “digital gold”. Many talking heads in BTC claim these fees are good for the network. But look behind the people promoting this narrative. Their companies (or themselves) are financially tied to BTC operating in a limited fashion with high fees. Blockstream, the main company responsible for BTC’s direction the past several years, is based on selling products that take advantage of these expensive BTC fees.
Read the Blockstream whitepaper for yourself: https://blockstream.com/sidechains.pdf
What did Blockstream say when BTC fees last exceeded $100?
“Personally, I’m pulling out the champaign that market behaviour is indeed producing activity levels that can pay for security without inflation, and also producing fee paying backlogs needed to stabilize consensus progress as the subsidy declines.“ Greg Maxwell, Blockstream CTO
Translation: high fees justify limiting BTC to create a marketplace for Blockstream products.
Here are your Blockstream products:
If what I’m saying is true, why does BTC continue to appreciate in price? I don’t know, but I have a hunch it has something to do with this Tether chart.
Don’t trust anyone, including me. Fact check what I’m saying.
Summary: the investment thesis of BTC is that this artificially limited and expensive to use network will be adopted globally because BTC is a Store of Value and/or digital gold. Please ignore that BTC cannot scale without third party products that happen to benefit those in control of limiting BTC’s functionality.
Let’s compare BTC to BSV. First, here’s a comparison of BTC fees vs BSV from coin.dance
BSV fees are generally under 1 cent vs BTC fees of ~$2 per input spent.
But how can BSV operate with such low fees? BSV is scaling to millions of transactions per 10 minutes. The goal is exceed Visa volumes in the near future. At scale anyone can spend BSV, includuing making micropayments on the Internet, for nearly zero fees. At scale BSV will survive off fees as the Bitcon block reward continues to halve every four years. BSV is scaling for the world to use, no third party products needed.
This makes BSV a stable and inexpensive platform for commerce and application development.
Let’s look at transactions (algorithmic chart). BSV in red. BTC in yellow.
BSV can handle orders of magnitude more transactions than BTC at orders of magnitude lower fees.
Summary: BSV is positioning for high volume and low fees. BTC is positioning for high fees and low volume.
One of these approaches has a future and one does not. Let’s see who wins.
Mankind is shifting into a new era I am calling The Information Renaissance.
The Renaissance was the period in Europe between the 14th and 17th centuries when there was a surge of interest in and production of art and literature. … In Old French renaissance means “rebirth.”
vocabulary.com
You can see the need for a rebirth of information all around us. Misinformatoin has been a weapon of armies, politicians and elites for hundreds of years. Propaganda flyers dumped from planes are now Twitter bots manipulating Twitter trending topics. News organizations are no longer impartial. Newspapers and networks are a means to spin the political agendas of their billionaire owners. Deep fake videos are now very difficult to spot and increasingly easy to create.
Information is power. Enron was able to fake the books, even as a public company, because they could manipulate information. Madoff kept investors in the dark for years while running a billion dollar ponzi scheme. Epstein was able to pretend to be a savvy investor while doing little more than buying index funds. The most powerful organization in the world, The Federal Reserve, operates in an information black hole. No one knows who owns the Federal Reserve!
Today, there is much debate about the veracity of the Corona Virus numbers in China and other countries. In all the cases above there is no way to verify the truth due to manipulation, censorship and misinformation. This misinformation is costing untold billions of dollars and many lives.
Those who control the information wars control the story. As they say, “history is written by the victors.”
How does society cope with this explosion of information both real and fake? If we can no longer trust what we see with our own eyes how do we operate safely and free from control?
What’s been missing is a single source of truth for humanity. A source that records the time information is created as well as the author. A global immutable ledger of transactions and events. Could bad actors still record false information? Yes, but it would not be profitable long term. Today, entire companies exist to spread misinformation because it is profitable. This is a worsening problem that must be stopped.
This single source of information is possible on Bitcoin SV. BSV is a truth machine. Here’s how this works.
How did Enron get away with so much fraud given they must disclose immutable financial records? Easy, they kept two copies and auditors only saw what Enron wanted them to see. According to financial regulations Enron’s financial records were permanently burned onto a CD that cannot be altered but there was no way to audit what they provided was true. Enron controlled the information from start to finish. It was trivial to manipulate.
This is the problem of double entry accounting. I can not verify that the information you provided is true.
As the fable Ring of Gyges illustrates absolute power corrupts absolutely. In this fable a man discovers a ring that grants invisibility and then succumbs to temptation eventually killing his King and marrying the Queen.
…asks whether any man can be so virtuous that he could resist the temptation of killing, robbing, raping or generally doing injustice to whomever he pleased if he could do so without having to fear detection.
wikipedia
In today’s world having power over information is a ring of invisibility. If a person can act immorally, illegally or unethically with no consequences then eventually they will abuse that power. The key to that power is control of information.
Enter BSV and the triple entry accounting ledger.
Triple-entry accounting can be thought of as a way of agreeing on objective economic reality…placed side by side, the bookkeeping entries of both parties to a given transaction are congruent. The third entry in the system, entered into the blockchain, is both a receipt and a transaction. It’s proof that something happened between two parties, which goes beyond the receipts that each party holds in double entry.
Think about all the scandals you hear about Government waste. If triple entry accounting were available for tax money the Government would be accountable for every penny they spend in real time. Imagine this for the Federal Reserve. Open books where Fed funding facilities could be audited at a moment’s notice. Where is 6.6 trillion in stimulus (tax dollars) going? We will likely never know.
If information is power then those who hold the information are powerful. In a triple entry accounting system the power is distributed. The “truth machine” cannot be fooled.
Now, here’s where things get really interesting. Google, Facebook, Apple and others are mass collectors of information. So much information they call it Big Data. I’m going to simplify this example for brevity’s sake.
An Artificial Intelligence is built on data. Processing speeds are so fast now that several months to you and me are a millisecond to a computer in computational power. Processors are not the bottleneck. What Google et al need to build an AI is data. Lots and lots of data. And we are giving it to them, for free.
Now imagine one of these companies has a breakthrough in AI. Overnight they could be the most powerful company that has ever existed. A functioning AI grants mind boggling power over information. Google protects their data so they can use it as a competitive advantage to build AI.
This is the next frontier in technological development. How do we counter a company from gaining AI capabilities and using it to further their own gains? The first company to develop a working AI would have the Ring of Gyges.
To counter this, we use an independent source of truth. We use Bitcoin SV. The blockchain as a single source of truth in a triple entry system that is immutable and uncensorable. The data it not owned by any company. It’s public.
All of the examples of fraud and abuse of power above cannot happen if BSV is used as a global ledger.
Truth wins and the Information Renaissance begins.
Briefly, much of what I’ve been sharing on Twitter is playing out… but at a much faster pace than I expected. Just a couple highlights of what I’ve posted recently.
First, BSVBTC ratio:
Posted original chart Jan 6 saying BTC holders could make 40% by converting to BSV.
With that behind us many are looking for answers on what’s next. I’ll break it down here.
Fundamentally, BSV is Bitcoin. There’s not much else to say here that hasn’t been said. BSV has the best chance at changing the world. Browse some of my previous posts about BSV services and how it differs from BTC. The fundamental story is clear yet many refuse to accept this fact. This creates opportunity for anyone who wants to own the real Bitcoin.
Technically, we’ve had a heck of a run. Exuberance doesn’t begin to cover it.
In the game of investing rock paper scissors: 1) exuberance beats fundamentals 2) fundamentals beat TA 3) TA beats exuberance.
TA will always beat exuberance. Mean regressions are a thing for a reason.
More behind paywall below.
CONTENT BELOW PREVIOUSLY BEHIND PAYWALL. NOW FREE
The recent run was screaming for a pullback. A parabolic run in three days with a 400% increase is always ripe for a retrace. The key here is how far will the retrace go and what now.
To confirm this with data the Mayer Multiple I’ve been tracking on Twitter flagged a SELL signal based on the daily candle close of 422 last night.
In a parabolic run I look for a 20% retrace from the high. The high was $455. ~20% retrace is $360. BSV is trading around 340 at this moment and has a Head and Shoulders pattern on the 1H chart.
This H&S neckline is sitting around the important fib level of 2.618. Give or take $20 if this breaks down odds increase the next significant fib level of support at $240 is revisited.
Wave 4 of the pattern above could reverse here or near $240. Either way, target range of new ATH remains not only viable from a technical perspective but likely given the fundamentals and upcoming events with return to Genesis protocol and the Coingeek Conference in London Feb 20-21.
So I’m watching current levels, preparing for the worst but hoping for the best. I expect more good news and appreciation after a cooling off period.
BSV received quite a bit of attention from the price action yesterday from notable people on FinTwit. They are beginning to take notice and ask for info. While they pundits, including billionaires Novogratz, Draper and others, have mostly been behind the curve (because they don’t read my blog!) they are smart people. The fact they are asking questions is a good thing.
Fundamentally BSV is Bitcoin. Technically, keep your eye on key levels and always remember to take profits here and there.
Comments appreciated on the blog or via baemail: coinspeak@moneybutton.com
And as the great financial advisor Marshawn Lynch has said, no matter how hot you are in your market you gotta take care of that chicken.
Consider that this aphorism applies to using the Internet. If you aren’t paying for the content you consume then you are the content. I recommend watching “The Great Hack” on Netflix to get an eye opening explanation of the problem of your data being the price you pay to view websites.
Your data is more valuable than you know. To use a poker analogy, on the Internet you are the mark the rest of the table is conspiring to rip off. This is the status quo, and it’s a problem because the incentives are geared towards manipulation rather than truth. In The Great Hack the producers show how your data is used to shape behaviors. We are served a personalized web experience designed to push our buttons and take actions based on the desires of the highest bidder. You may object, saying that would never work on you. Maybe, but it’s been proven to work on millions of others.
Are you looking to buy new tires? Your one time Internet search for tires builds a profile marketers use to manipulate what you see on the web. Notice how you are now served ads for new tires on nearly every website afterwards? Creepy, right?
Selling your data via clicks and cookies is the primary revenue source for Internet giants. How much money have you directly given to Facebook? Zero? Exactly, YOU are the product. Facebook is selling your data, and their billions of other users’ data, to advertisers.
If this is the status quo how do we break free? How do we take back control of the Internet? One way is via microtransactions (very small fees attached to actions online) or via paywalls.
One way we’ve seen companies attempt to generate revenue for web content that doesn’t rely on selling your data is to turn to using paywalls. However, paywalls as they are currently used do not work.
A paywall is a way for a content producer to introduce a payment gateway to access privileged or valuable content on a website.
There are different kinds of paywalls. Soft paywalls let you click through after viewing an ad or banner for free. Hard paywalls require a payment to proceed.
Have you ever clicked on a headline that caught your interest only to be greeted by a paywall? What was that experience like for you?
Even under the best conditions, in a private place with your credit card in hand, did you take the time to enter your credit card details to pay $1 to read an article? Odds are, no, definitely not. By the time you’ve overcome the friction of entering your address and exposing your card online your interest in that article has likely faded to zero and you’ve closed the site disappointed and frustrated.
Here’s an example of The Guardian using a banner paywall on an article about the ineffectiveness of The Sun’s paywall. How ironic. Between the paywall banner and the cookie policy 50% of the screen is covered. Those in glass houses should not throw stones. On the one hand, The Guardian did a great job securing the Google search result for Paywall but then gave the reader every reason to immediately close the site with a landing page full of banners.
If you use the Internet in the past year you’ve also come across the dreaded cookie policy. What a mess. Most sites on the Internet use cookies to track and monetize your behavior online. Remember, YOU are their product. Recently the EU took action implementing the GDPR (General Data Protection Regulation) law to protect individual privacy which, put simply, required disclosure of cookie usage. Good intentions, but in reality sites comply with GDPR using obnoxious banners where users must accept the fine print allowing them to use your data for their needs. In some cases you cannot proceed without agreeing to cookies. The GDPR ended up costing us all. The compliance costs were passed along to consumers and in reality, cookie abuse has not substantially changed.
Cookies are all about money and it affects one of our most valuable resources, information. Our personal data is commoditized and sold in bulk for profit by large companies. As a result the incentives for producing online content are misaligned. Paying a professional journalist to do months of research to publish an in depth article is less profitable than a clickbait site using cookies to farm your data for affiliate marketing.
Getting back to paywalls and the way they can save the Internet. The reason it’s difficult to access information behind a hard paywall is that paywalls rely on credit cards for payment. Credit cards are poor payment methods for small transactions, especially online. Exposing your credit card to a website carries a level of risk for you, the consumer, that outweighs the benefit of reading a article behind a paywall, not to mention the time and effort involved in typing in the information.
Yet companies still use paywalls with credit cards because there hasn’t been a better option.
To be clear, I’m not against charging for valuable content (I use a paywall on this site occasionally, but more on that below). What I am pointing out here is that paywalls as they are currently implemented, using credit cards, do not work. If you run a website with a paywall using a credit card you are likely just pissing off your target audience. It’s not the paywall it’s the reliance on credit cards that is the problem. Why drive traffic to your content only to put a burden of using a credit card to proceed? Seems really silly, yet it happens all the time.
I assert that paywalls as currently implemented will hurt publications struggling to transition print revenues to online revenues. These old guard publications often have higher journalistic standards than the majority of the web’s clickbait sites. However, sites with journalistic integrity are losing the monetization game because credit cards are in the way of them delivering valuable content in microtransactions. The result is clickbait is more profitable than honest reporting, journalism is dying, the web gets dumber, and so do we.
There is a better way, although it will take a while for mass adoption. The current financial system is not competitive in processing microtransactions electronically in a cost efficient manner. This has impacted our experience of the Internet. This failure by banks to serve the microtransaction industry hurts content producers who would benefit from millions of small transactions.
If you have made it this far, don’t close this site when you finish this paragraph. I am pointing towards what I see will be the future of the Internet where information has/is value. This will shift incentives and alter how we share data globally. This is where Bitcoin SV enters the picture, not as a paywall but as the backbone of a new Internet where incentives are on quality of information vs manipulation of user behavior.
Bitcoin SV fees are less than a penny and have (practically speaking) zero fraud. This is a breakthrough in finance and information sharing. I’ll cover the paywall angle below but after that I’m going to go one step further. Read to the end to see what I envision as Internet 2.0
There are a few different ways to use Bitcoin SV as a paywall. On this site I have moneybutton.com as a donation button on the main page and I’ve added Mediopay as a way to paywall certain content. Here’s what a Mediopay paywall looks like:
[paywall] This is an example only, no content behind paywall[/paywall]
To be fair, the Mediopay paywall only solves the user experience of a paywall for those who already have Bitcoin SV. But once you have BSV it’s a simple click to access that content anywhere BSV is accepted. The friction of getting past the paywall is gone. It’s a night and day difference from paywalls using credit cards and I could charge a few pennies for that content and still be profitable. Every charge a few pennies on a credit card? Microtransactions on a credit cards are often impossible with many cards charging a minimum fee of 35 cents.
Imagine the revenue sites like The New York Times could make if there were a way to charge a penny per page view.
But alas, when visiting nytimes.com instead we get this option to sign away our data and agree to long legalese terms of service policies.
Thanks but no thanks. In the past year the problem has gotten worse. When GDPR went into effect rather than fix the problem most sites put in workarounds that made their sites less user friendly. I’d struggle to find a site that changed their data handling procedures other than force their cookie policies on users.
And there is the chicken and the egg dilemma. How do we transition from an incentives system based on user data, advertising and manipulation to a system where information can be cheaply and profitably rewarded?
The only system in the world that can process microtransactions at scale is Bitocin SV. Most people do not know what BSV is, how to get it, or how to secure it. Onboarding people to BSV should not be the problem a BSV powered paywall wants to solve.
The bigger opportunity here is to become the single platform for the web that allows content producers to monetize their value via microtransactions securely and with near zero fees. The Amazon of Internet Microtransactions (the race to be this leader has already begun with moneybutton.com leading the way).
Imagine an Internet where incentives are aligned with quality content. BSV is behind the scenes, invisible to the user, processing transactions. Banners, cookies, data leaks and identity theft are now no longer the primary way to monetize content online! With an Internet built on microtransactions the incentives shift towards quality journalism and orignial art. This is the start of a new Renaissance, lifting us up out of the dopamine manipulated era of social media clickbait.
BSV is the plumbing allowing content producers to take back the web via instant, cheap and fraud proof microtransactions. With a paywall powered with BSV you could charge as little as a few pennies for an article and still turn a profit. The user never knows the paywall uses BSV, all the user knows is this single paywall provider gets them access to content they want across multiple sites for pennies per article. And with the pseudonymous nature of BSV your personal data is never shared. This is how the future web will work. If not, we will all drown in clickbait and banner ads.
All of this is easier said than done, but hear me out. If The Sun, Chicago Tribune and other paywalled sites had a single platform that could offload the expense of them running their own paywall at a lower cost that paywall could be used in more places. As mentioned above, the Amazon of paywalls.
How much would you pay per day to have an Internet that has more valuable content and zero ads? 5 cents? 10 cents? 1 dollar? Now multiply that by millions to billions of users every day. This may be years away, but it’s coming.
Enter: The Network Effect
The value of a single fax machine in the 80’s was increased with every fax machine that was sold afterwards because with every fax machine sold there were more endpoints a single fax machines could access. The more fax machines in existence the more valuable each fax machines becomes. The Network Effect runs opposite to Supply and Demand value matrix. In the Network Effect Supply and Demand become a positive feedback loop. The more endpoints the more value for everyone. The same logic applies to a BSV powered paywall. The more places that use a BSV powered paywall the more incentive users have to use that paywall processor as it’s like Visa, everywhere you want to be (but microtransaction friendly). Users have a reason to establish an account with this paywall provider and use it everywhere. Simple, secure, cheap! Eventually that paywall becomes ubiquitous. Valuable content can be rewarded and users can directly access the curated information that is of interest to them. At that point a paywall is no longer a paywall but a junk filter.
Most of the content on the web is worthless because companies are not incentivized to provide valuable content. They are incentivized to get you to click on ads for pennies a click.
To have valuable content we need an incentive system that rewards content people value and ignores content that provides no value.
Now, to go a step beyond Paywalls as I mentioned above to Internet 2.0. Imagine an Internet completely based on microtransactions. There is no visible paywall because the entire Internet is based on microtransactions (running on BSV). This is what Dr Craig Wright calls Metanet (any misinterpretations of the Metanet are mine and I acknowledge the Metanet is much more than a micropayment structure for web browsing).
On the Metanet the mindless manipulation of the masses is no longer profitable compared to providing valuable useful data. By paying that microtransaction you have taken back the Internet. Incentives reward quality information so quality information proliferates. You and your data are no longer the product that is being monetized!
We’ve dug a deep hole with the current Internet and the impact on society is still being researched. There is very little value in the millions of webpages available today because we lack a reliable way to assign value. The cost has been that low value sites dominate. To turn this tide we need an affordable way to reward valuable content.
Content producers who deliver valuable content deserve compensation. If the content is really valuable they can accumulate millions of microtransactions. Value is rewarded and they are incentivized to continue producing valuable content. You win and they win.
Paywalls and microtransactions can save the Internet. We can go from garbage to effective and seamless garbage filters. Metanet, coming soon.
