Alice's Adventures in Wonderland: BTC-based Worldview

When you first meet someone in the crypto world, the most common question is "how to jump into the XTZ rabbit hole", which comes from Lewis Carroll's classic children's novel Alice's Adventures in Wonderland, published in 1865. The first chapter is titled "Down the Rabbit Hole", which later became a metaphor for unwittingly falling into a world of logical inversion and living a completely different life.

BTC Standard means seeing the world based on BTC in plain language. It seems to explain, but it seems like nothing has been said, at best it only expands the literal meaning, and those who don't understand will continue to not understand. From my own experience, the reason why BTC Standard is difficult to understand is not because the concept is difficult, but because it is completely opposite to the logic we have internalized over the years, to the point where it feels like a battle against reflex nerves and feels extremely unnatural. Therefore, the deeper people delve into the traditional system, the less they understand BTC Standard.

Below, let's once again invite two old friends, Alice with a dollar (America) perspective and Bob with a Bitcoin perspective, to understand the different aspects of investment from their perspectives, and appreciate the world view of Bitcoin, experience the dreamlike Alice, and see how logic is turned upside down after falling into the BTCXTZ cave.

Figure: British Library public domain

1. Settlement

Alice: The bank monthly statement converts assets such as forex, funds, and stocks into US dollars, adds up the total value of Bitcoin, Ethereum, and other assets in US dollars, and Alice calculates her total asset value.

Bob: At the end of each month, Bob calculates the total value of his assets by converting the US dollars and a small amount of forex, funds, stocks, and other assets into BTC, plus the total amount of cryptocurrency assets priced in BTC.

If you intend to practice BTC-based, BTC Settlement is the basic step. If you don't even know how much of your assets are in BTC, there is no point in talking about BTC-based.

2. Buy and Sell

Alice: When assets are parked in the form of US dollars, it means there is no investment. When Alice sees the potential of X and wants to buy X, she exchanges US dollars for X; when she exits an investment, she sells X and exchanges it back to US dollars.

Bob: When assets are parked in BTC form, it means there is no investment. When Bob sees the potential of X and buys X, it means exchanging BTC for X; When exiting an investment, X is sold, that is, exchanging X back to BTC.

I once suggested in "BTC Breaks Historical High, Remember These Five Things During Bull Market" to buy 0.001 BTC in USD every day. A reader kindly reminded me that I made a mistake; no, it's not a typo, I mean buying in USD with BTC as the unit. I didn't write it to confuse anyone. Numerically, it's no different from selling 0.001 BTC every day, but the mindset is completely opposite, using the logic of the XTZ Cave. From Bob's perspective, it's not because the BTC price is high that he sells, but because the USD price is low that he buys, and he sells after it appreciates to get back BTC and make a profit.

3. Quotation

Alice: quoted in US dollars. In Alice's view, 1 BTC = 100,000 USD, 1 ETH = 4,000 USD, 1 AAPL = 169 USD, a TSL Model 3 sells for 40,000 USD; Alice occasionally uses Coinmarketcap to check the currency prices and chooses to display the prices of various cryptocurrencies in US dollars.

Bob: Quoted in BTC. In Bob's eyes, 1 USD = 0.000014 BTC, 1 ETH = 0.052 BTC, 1 AAPL = 0.0024 BTC, and a TSL Model 3 sells for 0.557 BTC; Bob often uses Coinmarketcap to check coin prices, and uses BTC to display the prices of various cryptocurrencies. Just like an American looking at the price of a foreign currency against the US dollar, BTC is Bob's legal tender, and altcoins are a foreign currency; Convert some BTC into altcoins, sometimes because he is optimistic about its potential, and sometimes because he needs to use this "foreign currency". In addition, Bob uses Fiatmarketcap to check the prices of more than 100 fiat currencies in the world, for example, the market cap of RMB is 584,862,949 BTC, and the current price of 1 RMB is 195 sats, which is 0.00000195 BTC.

One of the reasons why it is so difficult to practice BTC standard is that the quotation currency is not individual but socially dominant. The dollar quotation is the world mainstream. Practicing the BTC standard requires constant conversion in mind, just like foreign visitors looking at the McDonald's menu, they need to convert back to the standard legal currency before they can understand how much a burger costs. Unlike the fixed exchange rates between legal currencies in Taiwan, Hong Kong, and the US dollar, which are of a smaller order of magnitude, such as 1 US dollar is approximately equivalent to 8 Hong Kong dollars or 30 Taiwan dollars, it is very difficult to convert to BTC quotation without using a computer. It is like traveling to Vietnam, where you have to multiply the price by 0.00004 to convert it to US dollars, greatly increasing the mental accounting barrier.

Four, Profit and Loss

Alice: With the US dollar as the benchmark; 'making money' refers to increasing the amount of US dollars in hand after converting assets into US dollars, such as buying AAPL four years ago for 67 mag and selling it today for 169 mag, making a profit of 152%; For example, buying ETH for 173 mag four years ago and selling it today for 3,644 mag, making a profit of 2,000%. Although Alice sometimes converts US dollars into other assets, the investment goal is to increase the amount of US dollars in hand in the long run (what a nonsense), so she will convert the assets back into US dollars when harvesting.

Bob: Using BTC as a reference; 'making money' refers to increasing the amount of BTC on hand by converting assets into BTC. If Bob and Alice make the same investment decision, 4 years ago bought AAPL with 0.0091 BTC, and sold AAPL today with 0.0024 BTC, resulting in a significant loss of 74%; bought ETH with 0.024 BTC 4 years ago, and sold ETH today with 0.052, making a slight profit of 116%. Although Bob sometimes converts BTC into other assets, the investment goal is to increase the amount of BTC on hand in the long run (not to mention), so when harvesting, assets will always be converted back to BTC.

If Bob's logic is too difficult to accept, you can compare it with the logic commonly used by stock investors, the Hang Seng Index. Assuming Carol bought China Power at 34.1 HKD during the SARS period in 2003 and sold it today at 62.3 HKD, looking at it in Hong Kong dollar terms, she made a profit of 83% (for simplicity's sake, dividends during the period are ignored, although they should actually be taken into consideration); however, during the same period, the Hang Seng Index rose from 8,579 points to today's 16,854, an increase of 96%. Therefore, in terms of the Hang Seng Index, this investment incurred a loss of 14%.

Chapter 5: State of Mind

Alice: BTC broke through the historical high in early March, and the overall price of cryptocurrency led by BTC has significantly risen. At the end of 2023, the price of BTC was 40,000 USD. Alice held 1 BTC and 80,000 USD, with a total asset value of 120,000 USD; now the price of BTC has risen to 70,000 USD, and Alice's total asset value has increased to 150,000 USD, earning 25%. Alice regrets not buying more BTC at the end of last year, missing the rise of BTC during this period.

Bob: The dollar fell to a historic low in early March, with the overall price of fiat currencies, led by the dollar, falling significantly. By the end of 2023, the dollar price was 0.000025 BTC. Bob held 1 BTC and 80,000 USD, with a total asset value of 3 BTC; now the dollar price has fallen to 0.000014 BTC, and Bob's total asset value has dropped to 2.14 BTC, a loss of 29%. Bob regrets not selling the dollar at the end of last year and cannot escape the fall in the dollar during this period.

The cryptocurrency market is experiencing a bear market while BTC is in a bull run. Is it becoming increasingly difficult to accept this logic? Please think deeper. When you believe that cryptocurrencies will enter a bull market in 2024, you are actually viewing the world from a USD perspective. However, for Bob, who holds BTC as a base currency, 2024 marks the start of a bear market for fiat currencies. The more USD Bob holds, the greater the losses. This is simple arithmetic. Believing that holding USD has no risk, at most, means missing out on opportunities to make money, all because one forgets that they are viewing things from a USD perspective.

Ultimately, 'X-centric' means that our entire lives are heavily surrounded by X without us realizing it.

Finally, BTC is a XTZ hole, falling into a deep pit all at once, feeling dizzy and questioning life is normal. Let's take a break for now, let Alice digest it, and come back later to talk about how Bob, who is based on BTC, became successful.