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The Daily Missive

My Go-To Market Bubble Indicator

By March 8, 2022February 8th, 2023No Comments

“When your cab driver starts talking about Bitcoin, it’s time to sell.”

— Financial Post, the “Shoeshine Boy” adage for day traders, updated to crypto in 2017

Addison WigginDear Reader,

Whoa, the TBI was abuzz this morning. So much so, I may need to build a dial. Maybe like this one for the National Debt:

Click here to learn more

Future Model for the Tennis Buddy Indicator (TBI). (Image source: Shutterstock.)

If you don’t know, TBI stands for “Tennis Buddy Indicator.” It’s my surefire gauge of what individual investors like you are interested in… and worried about.

The TBI works on a similar scale as “the Uber driver” test. That is, when an Uber driver gives you investment advice — in anything from stock tips to cryptos — you know the market is frothy. The difference is the TBI is better. Here’s why.

By and large, my tennis buddies are all of a certain age. They also tend to be professionals, retired or otherwise; many have owned their own businesses. Most have enough money to be concerned about politics, the economy, the Fed, new tech developments… like you.

Most are more knowledgeable about markets and speculation than the average rando your ride-sharing app sends to pick you up.

One caveat, now that the Wiggin Sessions are outside the wire — a free version is available to non-Reserve members — several of my tennis buddies are reading, maybe even right now. So, umn, I’m going to have to speak more politely about them than usual. Apologies for that.

Where to begin? Well, my tennis buddies are just like your average golf buddy. They’re as likely to get as caught up in the media’s hype as anyone else… so they pepper me with questions anytime there’s news about oil prices (currently the highest since 1980), gold or tech stocks.

In fact, I coined the TBI after a short discussion about pot stocks and discovered several of them were trading small caps on recommendations from one of our publications. Imagine their surprise when I said… “yeah, that’s one of ours.”

This morning, I learned a few had tuned in to hear my Wiggin Session with James Altucher on Saturday. A few others had already read yesterday’s missive on Kazakhstan. In between sets, we shared speculative pensees about cryptocurrencies and Bitcoin mining. One was unaware how energy-intensive the process is.

To be honest, the crypto mining mechanics are a bit of a riddle to me, too. Here’s my best attempt at sorting it out…

If you have some paper money lying around, take a look at the serial number. It’s there to assure you that the bill is one of a kind — the only one in existence with that exact number. In theory, that serial number could be used to track the entire history of the bill, from the moment it was printed until it entered your hands — and wherever it goes next.

Cryptocurrencies have similar “serial numbers,” which are created by an electronic algorithm. Every transaction involving one of these digital coins or tokens is encrypted and shared across a network of computers. This creates a “decentralized ledger” known as a blockchain.

Anytime there’s a new transaction, computers on the network have to verify the coin’s history — from the time it was created to its current owner. Doing that requires decrypting the coin’s blockchain, then checking the information against what’s stored on the rest of the network.

A lot of the decryption comes down to luck — like trying to guess a person’s PIN for an ATM. The first computer to prove the transaction is valid adds the information to the coin’s blockchain, which gets distributed across the network. The validator is also rewarded with newly minted crypto coins for helping the system run smoothly.

The work put into cracking the encryption plus the chance to be rewarded if successful is why the process is known as mining.

In the early days of cryptocurrencies, the blockchains were distributed among a relatively small number of computers. So it was easier to check each transaction. But as more and more people turned to cryptos, more computers joined the network and the blockchains became more complex.

If you’ve ever had a lot of applications running on your computer or laptop at once, you’ve probably heard the internal fan kick on. If you’re on a battery, you’ll also need to recharge it a lot sooner. That’s because all that processing requires electrons supplied by your power source… and having so many active electrons at once heats things up.

Scale that up, and you can see why verifying cryptocurrency transactions takes so much energy. There’s all that data coming in from across the world, which then has to be processed and decoded. Time is of the essence, too. The faster a computer can take in data and spit out decryption guesses, the more likely it is to decode the blockchain first.

We’re talking about an incredible number of electrons converging at once — much more than the average home computer can handle. The heat alone could cause the hardware to literally melt down without a cooling system… which just increases how much electricity is used in the process.

Again, this is just my understanding of how it works based on my conversations with people like James Altucher. For the full story, I suggest you check out his Big Book of Crypto. Learn how to get it for free, here.

Follow your bliss,

Addison Wiggin

Addison Wiggin
Founder, The Financial Reserve

Addison Wiggin

Addison Wiggin Addison Wiggin is an American writer, publisher, and filmmaker. He was the founder of Agora Financial and publisher for 18 years. An acclaimed New York Times best-selling author, his books include: Financial Reckoning DayEmpire of DebtThe Demise of the Dollar, and The Little Book of the Shrinking Dollar. Addison is also the writer and executive producer of the documentary I.O.U.S.A., an exposé on the national debt, shortlisted for an Academy Award in 2008. He lives in Baltimore, Maryland with his family. Addison started his latest project, The Wiggin Sessions, powered by The Essential Investor, in March 2020. He films from a homegrown studio in his basement.