Monetary Viscosity

The international, centrally planned monetary order is on its way out. Now we need to get super clear on what value really is, and what viscosity means, in a world that tries to digitize everything.

Recently, we explored the gross commodification of financial and natural assets signifying a real reset.

Now we’ll explore the applied concept of value, and a related function known as velocity, both of which provide additional insight into where things are headed in the foreseeable future.

For starters, it’s important to watch this Peter Thiel keynote from the recent Bitcoin 2022 conference in Miami.

You will notice that Thiel is long on ideology and analogies. The most interesting is a comparison between Bitcoin and Ethereum, and another comparing Bitcoin and equities. You might consider this just a form of monetary relativism. He’s right about one thing, however: The sun has set on central bank FIAT, to which central planning will never recover from the Web3 storm.

You can smell the fear within Treasury Secretary Janet Yellen in this recent speech.

I’ve written previously that comparing Bitcoin and Ethereum is like comparing apples and oranges - one is a mediocre P2P network that is light on actual development, and the other is a developer network which bases its utility on upcoming Layer2 development that changes how we secure, digitize and transfer assets at a 1:1 par value.

This is an enormous distinction, and one that Bitcoin evangelists almost completely overlook.

Even more prescient is the understanding that Bitcoin’s market cap is speculatively valued against trillions in equities and gold as a store of value, while Ethereum’s medium of exchange value has it already outperforming Bitcoin by 2.5x over the last three years.

Which brings us to value and velocity. Thiel contends that value and velocity distinguish the market dynamics between credit on-ramps, cash and physicals like gold. But this is an incomplete picture.

The real picture involves something else that is critical to commerce everywhere.

Real value, as written here before, is neither a store of value nor a medium of exchange - it is a medium of transfer.

Think about it: If you and I can't universally agree on what is valuable, we can't create a standard medium of exchanging it, our true recourse is to agree that there is a common value in the transfer of said assets.

Therefore, transfer value and velocity value are inexorably linked to the asset you’re exchanging in a 1:1 capacity. The way this happens is in what we can consider as viscosity.