7th July 2023 > > Vol, AI, CBDCs and pigs.

tl;dr

Volatility is back with a vengeance causing pain to leveraged players. AI can now use BTC for its own purposes. A strange phenomenon involving CBDCs and pigs.

Market Snap

Market Wrap

Yep, vol is back.

Briefly touching another 12-month high at $31.5k yesterday morning, an hour later $30k was breached to the downside as another central bank was found wanting in the fight against inflation causing anguish across all risk assets.

In the UK, gilt yields have hit a 15-year high and the FTSE dropped to an 8-month low, though strangely there are no newspaper reports of financial devastation and chaos, as we saw last year. I am not convinced that the UK government’s desire to decide the price of staples on behalf of the supermarkets, and the UK government’s desire to decide interest rates for deposit accounts on behalf of the banks, is going to help in any way at all.

Back to cryptos, the leveraged children – longs and shorts – got killed by both moves.

Finance lesson 1.0 – markets will cause the maximum amount of pain to the maximum number of people.

It’s just the way it is.

…

DCA, HODL, WAGMI, as the bros say.

But do not do this please:

h/t Milk Road:

https://milkroad.com/subscribe/?ref=o5CmCFhBAK

Curious Cryptos’ Commentary – AI

Lightning Labs created one of the first layer-2 solutions for BTC. L2s work by processing transactions off-chain, bundling them together, and recording a summary transaction on the blockchain itself. This process speeds up transaction times and can vastly reduce fees.

The firm has released a new set of tools that allows AI models like ChatGPT to receive, hold, and transact BTC using Lightning:

https://lightning.engineering/posts/2023-07-05-l402-langchain/

As the press release says:

“Today, we’re excited to announce the release of a new set of developer tools to enable the Lightning and AI developer communities to build global, inclusive, and out-of-the-box cost effective LLM (Large Language Model) tooling which seamlessly incorporates Lightning and bitcoin.”

The aims are laudable – as LLMs become ever more ubiquitous, someone (us) must pay for them. At present payments can only be made using fiat via a debit or credit card. With much of the world’s population remaining unbanked “… billions of people around the world are not able to interface with the new creative and educational medium provided by today’s LLMs.”

“Additionally, a new fast growing class of “organisms” (i.e. intelligent LLM or AI Agents) are unable to easily gain access to fiat systems of payment as they aren’t registered “entities” with any nation. However, these agents will certainly need to pay for resources whether from gated APIs or paid sources of data. Plus, they will need to be able to effectively evaluate pricing signals to determine the most efficient path to accomplish a task. These payments, evaluations, and decisions will lead to thousands of AI agents making countless micro-payments and micro-decisions a day. Given these factors, it makes sense the creators of AI agents will ultimately gravitate towards a globally available, permissionless, near-instantly settled internet native monetary system in Bitcoin and Lightning rather than the traditional fiat system which simply cannot support these types of payments or evaluations.”

…

This is a step-change in the interaction between humankind and AI.

AI may be able to write code, or write an essay, or paint a digital picture, or identify dubious financial transactions, but these outputs had to be acted upon by individuals.

Now AI will be interacting with the BTC blockchain on its own accord.

I am not sure how I feel about this.

Curious Cryptos’ Commentary – CBDCs

I can’t comment on this report, as it is just too annoying:

https://www.coindesk.com/consensus-magazine/2023/07/05/the-digital-euro-and-the-p-word/

But if anyone in the CCC community agrees with Dea Markova (nothing personal), Managing Director and Head of Digital Assets at Forefront Advisers, you are probably in the wrong club.

…

OK, I can comment.

“Legally, however, it is extremely unlikely that mass surveillance will ever be permissible by a G7 central bank. The EU rulebook will certainly make sure this is not the case.”

The porcine population is merrily flapping away above our heads.