2021 seemed like the year cryptocurrency grew up. Bitcoin broke out of its three-year bear market in November 2020, going on a massive rally vaulting it into mainstream public consciousness.
It was a great year for enthusiasts for sure.
We saw Bitcoin become legal tender in El Salvador, and other countries begin walking in President Bukele's footsteps. Lightning Network began bringing first-world financial services to hundreds of millions of unbanked citizens.
Wall Street got in the bitcoin game in a big way, with multiple new ETFs, funds and IPOs. Many of Bitcoin's enemies flipped to become allies. Some remained stalking horses for the existing system, like SEC Chairman Gary Gensler and U.S. Treasury Secretary Janet Yellen.
Despite mounting pressure Bitcoin went from fringe technology to the vanguard of the technology investor space. Decentralized Finance (DeFi) projects, ill-intentioned or not, proliferated like mushrooms after a rain. The rate of code evolution is mind-boggling.
Capital inflow to cryptocurrency grew as China forced out mining and sent that capacity to the U.S. Global economic disruptions thanks to COVID-19 forced radical rethinking of energy policy. Bitcoin was finally exposed as uneconomic subsidized electricity rates in China, for example.
So, given this immense growth in the public mindshare in 2021, the title seems a moot question at first blush. In many ways Bitcoin has already proven itself.
But 2021 was just the warm-up act for the real economic showdown in 2022 between the Great Powers. The old system is clearly failing. It is the way it fails which will inform geopolitical tensions worldwide. These will take center stage as the titans of that old financial and political order fight for dominance over a shrinking pile of capital.
In the middle, bitcoin stands ready to perform the vital role of intermediary and escape valve for potentially trillions in capital seeking a safe haven from that storm.
The World According To Davos
To understand my predictions for 2022, I have to lay out my general thesis of the geopolitical landscape. And that means introducing you to the transnational shapers of insane policy I like to call The Davos Crowd.
In short Davos is that group of globalists centered around the World Economic Forum who gather every year (but not this year) at Davos, Switzerland to discuss which direction they will take the world.
They are bankers and politicians, heads of state and leaders of powerful institutions, who think their network of allies and previous success gives them the power and the right to guide the future of humanity.
Their machinations and policies can make national policy look incompetent and contradictory.
Davos orchestrates elections in important countries, sets energy policy, produces unreadable and insipid whitepapers everyone in power agrees on. The chief among these policies being ending fossil fuel usage without a credible replacement over plant food and moving to a Chinese social credit system through digital health passports over something as deadly as the annual flu.
In my observation it has been Davoswhich has dominated public policy for years. Most recently it was the systematic rollout of medical tyranny in response to COVID-19 accelerating their plans to first break the old global order (including commercial banking) and "Build Back Better" with them in control over the flow of all capital through an enforced digital apartheid.
Think China's social credit system merged with Terry Gilliam's classic film, "Brazil," and an episode or two of "Black Mirror" and you have the core of it.
2021: The Year Davos Failed
If all of this sounds like a marginal James Bond movie, you're not crazy. That's the saddest part of all this.
The good news is people still respond to incentives. The negative incentives of Davos'plans finally pushed a critical mass of people into staunch opposition to them.
Davosis a cartel of power brokers who don't like each other any more than we like them.
That's the Achilles'heel of all cartels. Eventually individual desires trump the group's goals, and the cartel frays when the benefits of being in it are subsumed by the personal risks of the members.
I spent most of 2021 identifying those moments in geopolitics where the cracks appeared. Some of them came from surprising places, like from within the Federal Reserve. While others were more predictable, like from Russian President Vladimir Putin.
Wall Street's embracing of bitcoin was one of those cracks and had profound effects on U.S. domestic policy squabbles on Capitol Hill. It placed pressure on swing politicians to block important legislation intended to place the U.S. at a disadvantage in the quest for global capital.
The breadth of the moves I witnessed in 2021 is too big to lay out here but what's clear now is that powerful forces within the U.S. political and financial elite are locked in mortal combat for the future of the nation.
They join, in a game theory sense, Russia and China in opposing Davos'plans to reorient the global economy around their digital dystopia. This isn't to say that these players don't have their own dystopian plans, but politics is said to make strange bedfellows.
In 2022 the stage is set for the biggest shift in geopolitical power in decades, since the fall of the U.S.S.R.
The lame duck in this Great Powers struggle is the European Union, where Davos has the most influence and control.
No Country For Old Men
The conflicts in the world today are decades in the making, guided by people who have been in power for most of that time. It is their unwillingness to relinquish power at the end of their lives which informs these conflicts.
These old men have no country, nor any allegiance to anything but their own power.
Bitcoin was spawned in response to this and the shock of the 2008 financial crisis which was the beginning of the end of the current monetary system.
Today the world is beyond the so-called "unipolar" moment where the U.S. controlled all the major levers of power. Davos'plans have centered around using that to their advantage. First building up U.S. power and then taking it away and transferring it to the EU.
China and Russia were to be continually destabilized to bring them into line. That strategy has failed.
The world operates on the important notion that capital flows to where it is treated best. Davos'strategies all rest on using regulation and legislation to force capital to flow where it wants it (the EU) and away from where it is (U.S./China).
This multipolar world, to echo Putin, along with rising decentralized technology resist this tyrannical impulse and grants capital an escape hatch, the kind of which European Central Bank President Christine Lagarde stated she's afraid of. Lagarde is the key mouthpiece for Davos having been placed there by World Economic Forum Chair, Klaus Schwab, after she ran the IMF for a decade.
Once you shift your perception to this way of thinking, you'll see the old men without a country are now improvising trying to maintain control over capital flow while it, to quote Princess Leia, "slips through their fingers."
This is a very simplified lay of this land of confusion. It's time to make some predictions for 2022, not just for Bitcoin, but also for the future of human society.
The Ever-Popular Tortured Planet Effect
Let's start in the U.S. and look ahead to the midterm elections. The Democratic Party is headed for a split as its internal factions tear themselves apart. The Democrats'inability to advance Davos'agenda to bring the U.S. down means political stability will begin returning to Washington D.C. starting now.
This will invite frozen capital back to the U.S., which is why our equity markets continue to levitate. This means also that it will flow out of Europe, unleashing chaos early in the year not seen since the European sovereign debt defaults of the 1930's which helped lead us to World War II.
Will this round of European sovereign debt default lead to WW III? I think it already has, but it's mostly a financial and diplomatic war, rather than a kinetic one.
Europe emerges from COVID-19 as the sickest man at the geopolitical table. It has lost every battle with Russia to secure cheap energy on its terms. The European Central Bank is trapped by rising inflation, spiking energy costs and angry electorates governed by weak coalitions which work for Davos.
The euro is headed for a major crash in the face of the Federal Reserve's tightening monetary policy, which began in June when the Fed raised the payout rate on reverse repo contracts to 0.05% draining the world of trillions in liquid dollars.
With a weakening euro and embattled governments locking people down to quell civil unrest, Europe's staring at double-digit core inflation, lower output, more money printing from the ECB and further fracturing of its cartel.
This lack of political cohesion will see a massive wave of capital flight out of Europe in early 2022 because fund managers looking ahead can see what I'm seeing. It's their job.
The Fed's strong dollar policy forced a reassessment by capital markets after Federal Open Market CommitteeChair Jerome Powell was reappointed by President Joe Biden. Powell was clearly the choice of Wall Street while Davoswas advocating for modern monetary theorist Lael Brainard to push the U.S. into default while freezing capital in Europe.
That plan also failed spectacularly.
China is reeling slightly from the Fed's draining offshore dollars. It forced the default of overleveraged players globally, most notably the massive Evergrande. China quickly loosened monetary policy to contain the internal damage while publicly declaring that foreign investors would be the last ones paid out in restructuring.
More dollars off the global table.
At the same time, the U.S. began pulling out of Asia while we reached what we hoped would be a tenuous understanding with Russia over the civil war in Ukraine. The need for stable European energy forced a non-violent resolution there but poisoned relations between Russia and the west to a near terminal state.
There are still powerful neoconservatives within NATO, the State Department, the U.K., and Congress who disagree with this policy. They will keep fomenting a hot war to reverse the pivot of U.S. foreign policy away from Russia to confronting China in the South Pacific.
This remains the biggest geopolitical wildcard for 2022 as personnel is policy on Capitol Hill. Those neocons are a kind of Davos'blackmail team, intent on threatening nuclear war to remain relevant.
I expect Powell and the Fed to quickly end quantitative easing (QE) and to raise rates before June to force Europe into default and recapitalize the U.S. It should also force both the U.S. and China off the rhetorical cliff over Taiwan. Expect Biden to lift the Trump tariffs on Chinese imports to help with inflation and save some seats in Congress for the Democrats.
The Flow's The Thing
But the big thing that will occur is the question I asked at the outset. Bitcoin, along with gold, will assert themselves as the premier custodial assets for a world in chaos. Debt will become the dirtiest word in the English language over this period of history.
The trade in both gold and crypto will be volatile and choppy as day-to-day U.S. dollar funding needs will create false moves up and down. The Fed will defend the dollar. Bitcoin will peak and likely fall later in the year as the crisis in Europe reaches its zenith and the four-year bitcoin cycle asserts itself. It will be a titanic fight.
But the early trend will be the same as 2021, up. During the height of the crisis that emerges, bitcoin should be the premier asset of choice which investors flee into.
The groundwork for this capacity was laid in 2021. 2022 is the year it gets utilized. For capital that can't move into bitcoin and for central banks who need to diversify reserves, gold will remain their asset of choice. Gold will play catchup in 2022 to bitcoin.
Because capital flows to where it is treated best. And despite the volatility, there are fewer places on earth that have the capacity to treat capital better today than Bitcoin.
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