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📝 Tech mogul bets on crypto

📝 Tech mogul bets on crypto

PLUS: Blackrock's Bitcoin ETF

Alex M.
October 09, 2023

GM everyone. This is 2036, the crypto newsletter that pays you.

Here’s what we’re serving up today 🍲: Sam Altman is tech’s latest superstar 🕺🏻. He’s the founder of OpenAI, the company behind ChatGPT. But Sam has bets on 3 technologies: AI, energy, and crypto. Last week, he finally revealed why.

Let’s dig in.

🥔 Today’s meat and potatoes

Get smarter on crypto in 2 minutes

Sam Altman’s the closest thing we have to a new mogul in tech. Some people speculate he’ll become the world’s first trillionaire.

Here’s why.

ChatGPT - the brainchild of OpenAI - is the fastest-adopted tech in history. They reached 100 million users in just 2 months.

But to build things using OpenAI’s technology in the future, you’ll likely need:

a license
a developer program
a beta

… or some other form of permission from OpenAI.

And who’s going to capture the upside of that? You guessed it - Sam.

Sam Altman’s a clever cookie.

But he isn’t just an AI guy.

On his path to becoming a trillionaire, he’s putting his finger in 3 cookie jars:

Artificial intelligence (Open AI)
Cold fusion (no, that’s not a new type of tea, but a form of nuclear energy)
Crypto

Sam started his own crypto project - Worldcoin - which aims to:

register every person in the world as a unique individual
ensure everyone participates in the benefits of AI through some form of profit distribution

It’s noble, but to participate, you gotta scan your eyeballs in a creepy-looking “orb”:

Oblivion vibes, anyone…?

Luckily, Sam’s not just into our eyeballs.

He’s had sights on bitcoin for over a decade. And last week on Joe Rogan, he said about bitcoin that:

“a global currency outside the control of any government is a super logical and important step on the technology tree.”

[Here’s a short explanation of a technology tree]

Sam likes - and owns a bunch of - bitcoin because it allows anyone, anywhere, to have access to a currency that shelters people from:

government confiscation and restriction (e.g. central bank digital currencies that control what you can spend your money on)
inflation (which is an invisible tax on your savings)
political incompetence

…all while reducing corruption, as all flows of funds are recorded on a public blockchain.

Right now, unfortunately, all of these are on display.

Multiple central banks are flirting with the idea of Central Bank Digital Currencies. And Canada has already set a precedent for blocking “government dissidents” from their bank accounts.

Inflation - which central bankers promised was transitory - still hasn’t gone away.

So interest rates - which central bankers also promised would stay low for a very long time - have been jacked up to calm inflation. But it’s breaking the system.

The result is:

1/ The worst bear market in bonds in over 100 years.

When interest rates increase, the government issues new debt at a higher interest than before.

This makes all prior bonds unattractive. Why own a 10-year bond yielding 2% when you can now get a 10-year bond yielding 5%?

When interest rates 📈 = bond prices 📉

This has resulted in…

2/ A banking system on the brink of collapse, as unrealized losses on bonds reach an all-time high of $400 BILLION - in the US alone.

Some of the biggest buyers of bonds are foreign governments, banks and insurance companies.

Foreign governments - notably China and Japan - aren’t buying that many bonds anymore.

But banks use these bonds as collateral to borrow more. And if the collateral tanks in value, the whole system becomes unstable.

Silicon Valley Bank was just the tip of the iceberg. The problem hasn’t gotten any better.

At the same time…

3/ US government interest payments are skyrocketing.

When interest rates rise, borrowers get paid more. Issuers must pay more.

And who’s the biggest issuer of debt? You guessed it - Uncle Sam.

Seriously, what’s with all these hero-villains called Sam? Altman, Bankman-Fried, etc.

The US government now spends more on interest payments than on defense.

That’s crazy.

And the only realistic way out of this mess is to lower interest rates again and print more money to pay the debt.

This has:

the advantage of lifting all risk assets (stocks, bonds, crypto, real estate, etc.) higher
the disadvantage of probably causing inflation, which hurts savers but benefits all holders of debt - including the US government - as old debt is now worth less.

[The other two options - defaulting on the debt and growing our way out - are both very unlikely in the short term.]

Central bankers know this. But if Biden wants a chance at getting re-elected, he has to get inflation under control before the election. That’s why rates could go higher before they go lower.

He knows inflation is the number #1 issue for voters.

This will play out whichever way it will.

But as Sam Altman says, you can either:

allow the US government’s unpredictable and politically motivated decisions to determine the fate of your savings
or allocate a % of your net worth to an asset with a predictable monetary policy and a shot at becoming a global reserve asset - bitcoin.

More and more people are waking up to the reality of what this means.

As the IMF said - crypto’s no longer a fringe movement.