A Statement on Ratings

11.06.2019

Effective immediately, all new and semi-annual ratings are on hold. This is a decision resulting from a creeping realization that the time I have spent on detailing the history, ecology, technology and centralization of many altcoins are really better spent by studying money protocols in general, and Bitcoin properties in particular. I have always applied Austrian Economics in my cryptocurrency valuation framework. The decentralization section in all of the rating articles has always been the most important part, and only a select few cryptocurrencies have ever gotten a decentralization rating other than abysmal. In other words, I have been far harsher than the competition when rating altcoins, which has resulted in a good track record as altcoin prices in satoshis have fallen considerably since early 2018. But admittedly, the focus I placed on decentralization and supply inflation was still not strong enough. It is now time to get serious about the implications from a decentralization and supply inflation intersection, which likely includes a long-term winner-takes-it-all effect similar to what gold has proven for us. The best embodiment of these intertwined properties is Bitcoin, which not in a decade has seen a change in its expected issuance schedule. This should be contrasted with most competing altcoins that are changing drastically every year or so, which causes them to deteriorate as value protocols in the long run.

The stock-to-flow ratio of primitive commodity money has always been a metric that single-handedly could explain a monetary premium evolving for such value protocols, given that other base properties like divisibility, fungibility etc. had been fulfilled. The importance of this ratio has with cryptocurrencies come back with a vengeance, after having been temporarily overshadowed by fiat currencies with their top-down monetary policies and more or less enforced acceptance as money. As cryptocurrencies have opened up for new markets to try out the soundness of various digital value protocols, the stock-to-flow ratio will again heavily determine evolving monetary premiums, like it did historically when gold, silver, copper, sea-shells, glass beads, gin bottles, sugar, tobacco, and so on, competed for wealth storage.

Future articles includes historical accounts of various primitive monetary systems and how they failed. Those are all important to fully understand how a stock-to-flow ratio affects a value protocol. I will also keep writing about certain altcoins in order to explain how an adjusted stock-to-flow ratio is needed to properly evaluate how hard or easy a specific cryptocurrency is as money. So in a sense, this is a pivot to Bitcoin and Austrian economics. The Austrian framework is simply logical, and Bitcoin is the closest thing to a hard money software implementation that we have of that framework.