A Crypto Gospel

The investment narrative

A Crypto Gospel

Note: Essay submitted to CoinDesk as an opinion piece.

It’s a captivating idea that can have you discussing unfathomable wealth creation in a short period of time.

And the magnitude of how much change and growth is upon us is incomprehensible.

To state it simply, it’s literally the biggest growth trend since the seventeenth century.

A time when goldsmiths began practices that gave way to modern day banking practices such as the storage of wealth, providing loans, transferring money and providing bills of exchange that would lead to the development of bank checks.

An idea of this size is called a grand supercycle.

Now, you’re probably laughing a bit since the idea of bitcoin going through a supercycle is a relatively well known idea for those who follow the space. And many have called it “dead” in part from depressed prices.

Then here I come in and try to “one up” the name by tossing the word “grand” in front of it.

I assure you it’s not the case. The idea I’m presenting here is the idea that our entire society is about to enter the highest rate of growth ever. An enlightening period.

And where it can all be found in a single chart.

U.S. 30 year bond yields.

It’s one I constantly stare at each day. Most recently I sat there trying to figure out an investment thesis over the next six to twelve months given the macro conditions taking place.

Luckily, the answer was already on my screen and it evolved into something I’m calling Crypto’s Gospel.

It’s the investment thesis everybody can get behind no matter where you stand. So join me as I take you through the thought process so if you ever find yourself speaking with somebody that has the means for change, this might give you that last tool in your bag to make a difference.

The Correlation

Now, when you take a look at the chart feel free to nit pick the similarities or lack there of in the comments section below. I agree there are some holes in this comparison. But one thing is for sure… Broadly speaking, you can’t disagree these two assets are moving similar to one another with a several day lag.

So… what might be the story here?

Well, bonds are a great barometer for the market and helpful gauge for future market conditions. And while it’s a tricky one to get right with so many variables at play, we need to have our vegetables from time to time.

Which means occasionally digesting some rather unpleasant information is necessary for our health.

Cue up the macro talk…

Alright, in my daily newsletter Espresso we discussed some policy implications from the FED meeting that I’ll quickly cliff note here.

The FED handed out a bit of yield to banks flush with cash. The way to think about this is the money printers in Washington created so much cash that banks ran out of places to stuff it… And they were so full they regurgitated the cash back to the FED.

They did this by swapping their excess cash for collateral, aka treasuries, that the FED were now happy to dole out with some yield.

This means banks are now getting yield on short-term treasuries and collateral unlike before.

You can see the impact it had on treasury yields in the chart below with short dated treasuries getting a nice bump.

Additionally, the FED hinted at a desire to raise rates sooner rather than later. While this is still a ways away, this lifted rates for other treasuries as well.

So we sort of had two results from the FED meeting last week that played a role in yields.

What’s interesting is not all durations or time to maturities followed suit. Here is what happened to the 30Yr yield.

Dropped like a rock.

When thinking about the amount of money which was printed in the economy, and how inflation is beginning to rear its head, how does this happen?

After all, if inflation is expected to rise, the FED will need to raise rates to combat these pressures. And since higher rates mean stuffy language like discounting one’s future cash flow, this creates higher yields (lower bond prices).

This all leads to the concept of higher rates slowing down economic growth.

The Secret is Productivity

But more importantly, and a less often talked about concern is higher rates slow down the “churn” of cash.


I know there’s a lot coming at you at once here, so let’s break it up with an example…

If a coin had a supply of 100 coins, and 30 of them are locked up… Meaning 70 are freely available.

What happens when you add 50 coins to its supply? Besides there are now being 150 coins.

The coins that are freely available go from 70 to 120. And as those coins move hands faster and faster in order to pay for goods and services, the coin loses value more and more.

That’s because at first if nobody moved coins, the added supply would do nothing to prices. And it’s not until the coins begin to chase the same amount of goods and services that its price starts to drop.

It’s price discovery in a way. More coins chasing after the same amount of goods means the price of goods go up relative to the coin.

But consider this… if you slow down the movement of coins to where the locked amount or the amount that rarely transacts grows from 30 to 100… And now 50 coins are chasing the same goods and services, the price of the token is likely to rise again.

This is the beauty of economic levers at work.

It works because the good and services have less demand since the overall economy has a slowdown, which in turn means goods drop in price relative to coins to attract buyers… Giving the token holder more bank for their buck once again.

It’s essentially the playbook for how the US fights inflation.

The only thing here is we can’t expect this to happen again. Wait... what?

The detour was relevant, I promise.

The fact is, if you crank rates higher, the markets get whacked. We all seem to realize this lately. And it’s why we all grab popcorn before Powell talks now.

But the thing here is markets more so than in prior times creates some feedback when it comes to spending more… And therefore, the growth of an economy (GDP).

If your stock portfolio goes higher, you are more inclined to spend more. And also more easily access more cash.

Which begs the question...

How do you drop the market and raise rates at the same time? You can’t. It’ll crush economic growth in the long-term.

The 30Yr yield reflects this current situation.

That’s because 30Yr yields tend to rise when there is an expectation that the economy will grow.

It’s how you get a normal looking yield curve at a time when everybody is anticipating inflation due to insane money supply growth.

Now, bare with me here. I know this is getting a bit boring. But I promise it’ll help in getting my point across later.

So before getting to it, let’s quickly reiterate…

Too much cash in the system.

Rates are rising in part because of the FED’s hand out of yield to banks and also because of inflationary forces beginning to percolate.

And 30yr yields dropped below 2% for a hot minute since future growth looks muted.

So why does this matter for bitcoin? And why might bitcoin be tracking the 30yr yield?

The Supercycle Theory

Well, I’m starting to form my own case for the supercycle theory.

My version of it puts crypto into the limelight of economic growth discussions. And if crypto as a whole bands together and adopts it, I think the prospect of economic growth becomes not only real, but better than the highest economic forecasts out there.

Consider this…

How much of crypto is measured by GDP?

I know stocks and equities are not measured in GDP… And therefore the crypto market cap should not be measured either.

But there is an economy forming in crypto that feels like its off the record. Like a game of monopoly… Unmeasured GDP - h/t to Crypto Cobain in the UpOnly show with Raoul Pal, I got this non-existent GDP idea from him.

What’s interesting is this untapped economy is more efficient than what is already measured in the normal economy. It’s in part why we are witnessing some of the smartest money in the world drop bucket loads of cash on young crypto projects. However, the truth is these stats are virtually unaccounted for.

If crypto were able to grow and be accepted in the everyday commerce of life, the benefit for regulators, tax authorities, and lawmakers would be seen almost overnight.

More growth, more taxes, happier citizens, and all those lovely feels.

The way to see this is in viewing how many employees it takes to run Uniswap’s various smart contracts?


Sure there were or still are about 16 or so employees… But now that those contracts exist in the wild, they can continue operating without any of those devs touching them. This makes crypto swaps via DEXs extremely efficient.

The same operation in the legacy markets requires nearly 10,000 employees at traditional exchanges. Or the nearly 1,000 at Coinbase.

Paving the way for these highly efficient businesses allows for the thousands or tens of thousands of employees in more traditional setups to build higher valued business, applications, and services by building on top of protocols similar to Uniswap.

This is the catalyst for future growth. Any lawmaker that realizes this can instantly punch their ticket to a lifetime legislature seat if they lead the way towards clearer regulatory structures with low levels of red tape.

If these structures are adequately framed, this freed up productivity will make its way into GDP growth. And for the lawmakers attached to these drafted proposals, this growth can be directly correlated to their name.

Easily measured economic growth tied to their wisdom.

The benefits for society are even greater. It can result in the highest levels of productivity in history. The third industrial revolution, exponential age, Web 3.0, The Fourth Turning, or whatever else you want to call it.

These projects just starting to gain their footing in the cryptocurrency markets can be the foundation in which the rest of society’s technological advances will be built upon. And it’ll reduce costs as well as barriers to entry across the board.

If you look throughout history, the growth in the number of businesses boosts GDP per cap. Crypto does this with thousands of businesses eagerly awaiting to set up shop in various jurisdictions around the world. It’s why Singapore has such a backlog of companies setting up shop right now regardless of necessary fees and hurdles.

Opening up the economy to this type of growth is what the three piece suits walking the marble laid floors of the Federal Reserve call higher GDP per cap. It’s the pinnacle of goals for world leaders.

Creme de la creme - Economic growth.

And in order to get there the space needs clear regulatory structures. This allows cryptocurrencies to be brought into the conversation of economic growth along with other technological advances like AI and self-driving vehicles. And then act as a foundational layer - Web 3.0 - for a lot of technological developments taking place today.

The main point here is crypto protocols enable services to happen with higher security and less cost.

When there is nobody at the other end deciding the terms of your loan, and processing your payment… together with more security and less cost… this is measured efficiency.

This enables business growth, more revenue, and similar prosperous outcomes for the economy.

This might have seemed like a massive tangent to our conversation about 30Yr yields, but here's where I tie the two subjects together.

When the broader population begins to see cryptocurrencies as part of the economic growth equation, the crypto space will ignite in a good way.

What I expect to happen is a narrative change and almost enlightening moment as 30yr yields creep up again.

This is in part the reflexivity argument. The positive feedback loop where higher prices means more belief.

Only this time, as the belief in economic growth rises, 30Yr yields will rise along with it. And as these yields rise, the cryptocurrency market will follow along.

This will then give way to crypto being a part of the conversation of creating more productivity in the economy. Reflexivity.

To me, when that moment takes place the supercycle has arrived. It’s the moment cryptocurrencies go from a niche economy, to having a driver seat in the real economy.

To date, bitcoin’s narrative is being driven by the inflation hedge rhetoric. This is accurate. But the missing piece here is cryptocurrencies as a whole enabling higher economic growth per person. Pairing these two together provides the investment thesis for bitcoin, layer one protocols, DeFi, NFTs, and so much more.

Programmable money in a world of heightened inflation expectations that brings along with it higher economic growth per capita is where we are headed.

This is not an argument just for bitcoin, ethereum, or DeFi. This is a crypto narrative. And I hope it helps band the crypto space together into a seamless front.

Your Pulse on Crypto,

Ben Lilly

P.S. - I know many of you were hoping for a market update given the price action. I did a Quicktake on CryptoQuant that you can look at here. Here is the chart below for those who don’t want to click the link.

We have bearish flows. But more importantly, and something I left out of tweets and the QC update… These resulted in bearish signals coming through the Jarvis AI system.

Best to exercise caution.

And on that note… I noticed many people overtrading right now. This is not the time for that. The market is full of mixed signals, which means forming a bias with a time horizon between one week and two months is nearly impossible. Patience.