Trump Bubble: What's Next for Bitcoin?

Author: @packyM, Not boring

Translation: Plain Blockchain

As is well known, one of the major risks that current cryptocurrency companies face is that government regulation may slow down their progress, even leading to stagnation. Over the past week, I have closely watched the political developments in the United States and found that the current situation has many similarities to what I usually discuss, and it is more optimistic than expected. My intuition tells me that we are at the beginning of all bubbles — a bubble-making machine that breeds countless bubbles: the Trump Bubble.

One of the most surprising things about last week's presidential election was that many people seemed unusually excited about Trump's victory, and some were extremely excited about a certain future vision, precisely the sign that a bubble is beginning to form.

Over the weekend, I read Byrne Hobart and Tobias Huber's "Boom: Bubbles and the End of Stagnation." The core idea of the book is that certain types of bubbles play a huge role in driving the world forward. They believe that bubbles are a panacea for solving stagnation.

While reading this book, I noticed that the post-election reaction is remarkably similar to those productive bubbles described in the book: the Manhattan Project, the Apollo Program, Moore's Law, the golden age of corporate R&D, the shale gas revolution, and Bitcoin.

Byrne and Tobias summarized five common features of all the technologies and top projects they studied:

Clear optimism and a focus on fear of missing out (FOMO) and you only live once (YOLO) mentality Overly risk-taking and overinvestment Parallelization and coordination Reflexiveness and hyperstition

Defending the Bubble

The term "Trump Bubble" might sound worrying. When most people hear the word "bubble," they usually think of something "overinflated and destined to burst," a term often carrying a negative connotation, especially when originating from some bad bubbles. But not all bubbles are of this type. In the book "Boom," Byrne and Tobias describe two types of bubbles:

1) Mean-reversion bubble: "The basic bet is that the future will continue along the current trend." For example, the subprime mortgage crisis. If you bet that the future will largely remain the same, you can increase the bet through leverage.

2) Inflection bubble: "Investors believe the future will be significantly different from the past." For example, the dot-com bubble. If you believe the future will undergo significant change, you would buy assets that would benefit from this change.

They believe that the Turning Point Bubble has driven progress. This view is similar to what I mentioned in my book "Infinity Missions": The Turning Point Bubble drives progress by channeling a significant amount of resources into crucial projects that cannot be feasibly executed under normal cost-benefit analysis.

Take the Apollo program, for example:

In May 1961, President John F. Kennedy declared, "This nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon." At that time, no one knew how to accomplish this goal. Rockets, launch pads, spacesuits, hardware, software, zero-gravity food—none of these existed, and there were no experts in these fields. Not only did the space program lack the necessary conditions to achieve a lunar landing—the scientists of the time were not even sure if it was possible.

The Turning Point Bubble, by concentrating vast funding and human capital on a very specific future vision, has propelled progress and allowed for wasteful exploration and parallelization in the pursuit of this goal that would not typically occur.

Without bubbles, some things might never happen. Byrne and Tobias point out that Moore's Law itself is a classic bubble phenomenon: "The industry displayed classic bubble behavior: Predictions of the future—especially bold and nearly incontestable predictions—ultimately drove the behavior that made those predictions come true." For example, the expectation of continuous chip advancement prompted the design of products that could take advantage of better chips, which in turn made chip manufacturers aware of the demand, stimulating investment in the continuous improvement of chips.

In other words, a compelling vision can turn into reality. As Stripe Press writes on the website for Boom, "Optimism can create self-fulfilling prophecies."

Source: Boom Website

As emphasized by Peter Thiel, Byrne, and Tobias, not all optimism is positive. Excessive optimism—merely assuming that everything will go smoothly—and pessimism are equally destructive. Therefore, the first common feature of a productive bubble is clear optimism: believing that the future will be better and having a concrete plan to achieve that goal.

What Exactly Is a Bubble?

Shortly after the election, I began to take note of the common features of bubbles, observing that the only unresolved question was their clarity—specifically, where attention was focused.

Mere “making everything better,” such as “making America great again,” is too vague and imprecise a goal to meet the definition of a positive bubble in the book: “The key is whether the vision contains a specific and actionable plan to transition from the present to the future.”

For example, beating the Germans (or the Soviets) to the atomic bomb was a clear and specific goal: landing a man on the moon within a decade. Every bubble discussed by Byrne and Tobias was also clear and specific. But what about Trump’s bubble? What kind of bubble is it, exactly?

Elon Musk played a significant role in Trump's election victory and is likely to continue to influence during his presidency. He once referred to Tesla's Gigafactory as a “machine that makes the machine.” If the Gigafactory runs well, producing cars becomes straightforward. And the United States, as a “machine that makes the machine,” has accumulated dirt in its gears.

The U.S. can still create outstanding companies, and these companies can produce excellent products. However, the slogan “make America great again” did not resonate with me because I have always believed that America is still the greatest country in the world, even though it is slower and bulkier now than before. Comparisons with other countries mask a more profound fact: America has not reached the greatness it should have.

If Trump's bubble takes shape, it will be about upgrading and cleaning the dirt from the “machine that makes the machine,” allowing America’s machine to operate at full speed. For those who believe in America, capitalism, and self, there is no more inspiring vision than this. This vision seems powerful enough to inflate the strongest bubble in history.

Signs of a Bubble

Although the “Manhattan Project” and the “Apollo Program” are two cases directly regulated by the government in the book, I believe Trump's bubble is more likely to develop like Moore's Law.

As Byrne and Tobias write, “Moore's Law is perhaps the most convincing and enduring example of a bi-directional bubble: the expected progress in one area propels the advancement of another, which in turn drives growth in the first.”

There is also a bi-directional relationship in Trump's bubble. The message conveyed by the Trump administration to the people is that construction, investment, and achieving grand goals will become easier, and this expectation itself has already inspired people with greater enthusiasm to build, invest, and achieve grand goals. The more energy and excitement people put in, the easier it becomes for the government to fix the machine.

Augustus Doricko of Rainmaker expresses this sentiment perfectly: “We have four years to give it our all.”

With control of the Senate, House, and the executive branch, the government promises to streamline processes and eliminate friction. In return, the private sector plans to increase risk, investment, and innovation.

While the actual difficulty of streamlining processes and eliminating friction may far exceed expectations, simply believing in the possibility of this outcome is enough to trigger a bubble.

Armed with a belief that anything is possible, people are eagerly sharing what they perceive the government could do.

Take note of this meme: Make America X Again. Bryan Johnson posted a photo of himself with RFK Jr. and captioned it “MAHA,” meaning Make America Healthy Again.

Bryan Johnson is a tech entrepreneur. If he can establish a connection with key figures in charge of the U.S. healthcare system, would people start to think that the government might be willing to listen to his advice on health and other matters?

You might see this as a good thing or a bad thing, but what we are focusing on now is the dynamics of the bubble. A characteristic of a bubble is that people begin to believe that they are just one tweet away from influencing government policy. This also means that more and more people are starting to share their policy suggestions on Twitter. Interestingly, some of these ideas may actually come to fruition.

Of course, the government can’t see all proposals, only considers a small portion, and implements even fewer. However, like a lottery or reward system, it’s almost certain that the government will attempt to push forward some previously unimaginable ideas, some of which may succeed. And when these successes occur—such as addressing global warming through sulfate injections—the government becomes bolder to try things that were once unthinkable.

By making people believe that change is possible—even if they are just projecting their hopes onto this change—the Trump administration is making collaboration with the government look "cool." Bryan Johnson is part of this movement, as are the world's richest person and the man who recently caught a 22-story rocket with chopsticks—Elon Musk. Geniuses who never thought of collaborating with the government are now also seeking opportunities to get involved. Sequoia’s Sean Maguire revealed that he has received inquiries from some physics PhDs asking how they can work in the Trump administration.

This is national-level parallelism and coordination. Parallelism is about more and more entrepreneurs wanting to build within a more efficiently operating American machine; coordination is about more and more talented individuals wanting to participate in the work of fixing this machine because they see the opportunity to do so now.

These phenomena once again validate the self-fulfilling prophecy. More and more talent is being poured into the work of fixing the government, and they have garnered strong public support, making them more likely to successfully repair the government. This, in turn, will enable those dedicated to building complex ventures—whether in the cryptocurrency field or the energy sector—to achieve more success in constructing their "machines."

People believe that ambitious projects striving forward within the existing governmental framework will ultimately succeed, and this belief triggers a genuine fear of missing out (FOMO). This phenomenon is particularly evident in the cryptocurrency market, as the high liquidity and price volatility of cryptocurrencies intensify this anxiety.

As of November 12, 2024, Source: Artemis Terminal

Investors are all asking, if the SEC no longer tries to exclude cryptocurrency through currently unclear legislation, then what achievements can cryptocurrency really make?

Interestingly, this process has also nurtured a mini-bubble. Byrne and Tobias, in their book "Boom," mention the case of Bitcoin, stating, "The value, security, and network effects of any currency are driven by adoption rates, and Bitcoin is no exception."

a16z Crypto has consistently emphasized the price innovation cycle in cryptocurrency: as prices rise, more attention and developers are attracted, developers start building products, thereby making cryptocurrency more valuable over time.

The State of Cryptocurrency 2024, Source: a16z crypto

This cycle is particularly pronounced in the cryptocurrency field, as cryptocurrencies are inherently liquid, but similar dynamics play out across all industries: price increases attract talent, and talent creates things that support the price increase. This is a manifestation of Hyperstition and Reflexivity.

I believe that the reason the Trump Bubble is so powerful is because it has spawned all these "mini-bubbles" around the world, like a "bubble-making machine."

As the construction of cryptocurrency becomes legalized, more people will get involved, creating more valuable cryptographic products; as the approval process for new types of nuclear reactors becomes feasible, more companies will start building these reactors; when SpaceX can launch rockets without FAA interference, it will launch more rockets.

This also makes us once again feel the concepts of FOMO (fear of missing out) and YOLO (you only live once). If you are following these trends, it's hard not to feel like something significant is happening and that you need to be a part of it. I also feel that I am not involved enough, both financially and on a deeper level, a kind of spiritual feeling. I thought I had done enough, but now I realize I should do more, I need to double my efforts to catch up—and this mindset is a characteristic of a bubble.

Byrne and Tobias mention in their book "Boom" that bubbles are often accompanied by a spiritual pursuit. They write, "To identify the areas of future technological advancement, one can start with the sense of transcendence they bring at a spiritual level."

It does feel like we are facing an unprecedented opportunity to truly build the future we envision, to realize the future vision ahead of time. However, no matter how much you invest, there will always be someone who invests more than you. It is precisely this atmosphere that is so motivating, rallying thousands, even millions of people together to get involved in this great project, whether it is to improve existing systems or create a brand-new, more easily achievable system. All of this almost inevitably leads to excessive risk-taking and overheated investment, which is also a characteristic of a bubble.

Although "hardcore technology" (such as vertically integrated companies) is increasingly valued, many investors still tend to proceed with caution, believing that the construction of these technologies is uncertain and capital-intensive, yet extremely rewarding once successful. However, I anticipate that in the next few months, from nuclear energy to aerospace, we may see investment excesses similar to those in the cryptocurrency market.

But this is actually a good thing! The allure of a bubble is that, even though some investors may suffer losses, it will not lead to a systemic collapse, and the world will still make progress in solving major problems. In the end, those companies that may not have survived will instead stand out and drive the world towards a better direction.

Of course, it will not be smooth sailing, and it will inevitably be full of volatility and uncertainty. But I firmly believe that this process will yield extraordinary results.

How the Bubble Machine Formed

In 2021, Musk shared his five-step process for improving manufacturing and design in a very famous video with Everyday Astronaut:

Source: https://www.youtube.com/watch?v=t705r8ICkRw&feature=youtu.be

Make demands more reasonable Remove unnecessary parts or simplify/optimize processes Speed up cycle times Automation

If you think of the United States as a "machine of machines," then the approach Musk took in building SpaceX as a "machine of a machine" is not only worth noting but also a very interesting point. Because this approach is very similar to the plan claimed by the Trump administration:

Make demands more reasonable → Regulatory reforms (e.g., NEPA, NRC) Remove unnecessary parts/processes → Eliminate entities like the Department of Education Simplify/optimize → Streamline remaining processes Speed up cycle times → Increase approval speed Automation → Modernize government systems

Obviously, these changes may pose some risks! For example, SpaceX's rockets sometimes explode, indicating that overly aggressive innovation may encounter issues.

However, once these improvements and optimizations are implemented, many things will be smoother. This is also why people are so enthusiastic because they believe this is the first government in many years to truly push the limit and test the existing system's boundaries.

But more importantly, this "breaking the mold" approach symbolizes a return to embracing risk.

Summary

On November 13, Trump announced that Elon Musk and Vivek Ramaswamy would co-lead the newly established "Department of Efficiency."

According to Trump, DOGE will "clear bureaucratic obstacles for my government, cut excessive regulations, reduce wasteful spending, and reshape federal institutions." He also stated that this will "pave the way for an unprecedented entrepreneurial government management style" and "unleash our economic vitality." In short, the goal is to fix the "machine of a machine" and drive a series of reforms.

Can you understand why people are so excited? I mentioned Musk's machine repair process in the previous section, and at that time, I felt that this metaphor was somewhat "too fitting." Then, immediately after I finished writing, Trump appointed Musk to co-lead this organization responsible for "fixing the machine." Musk is undoubtedly the best person for this position, and he gladly accepted the task.

While many have pointed out that DOGE has no real decision-making power and can only make suggestions, that is not the main point. The key is that both supporters and opponents are starting to believe that the government might actually become more efficient. Even if Musk and Vivek cannot directly cut through bureaucracy and regulations, they can at least uncover the most wasteful parts of the federal government and push for change through public pressure.

This is a long-awaited opportunity, where people feel they might personally engage in the process of making the American "machine" run more smoothly. Musk also stated on the X platform that they will publicly share all of DOGE's actions.

Vivek stated on Twitter that DOGE will collect public opinion through crowdfunding: "Americans vote to support comprehensive government reform, and they should have the opportunity to participate in fixing the government."

This leads back to what was said earlier; any good, healthy bubble can create a sense of involvement in people. People will feel like they can truly fix the government, so they will put more effort into trying to improve it. This might manifest as submitting suggestions or calling congressmen to push for the adoption of DOGE's suggestions.

Whether the end result turns out exactly as expected is not the most important thing. The key is that when a bubble forms, people firmly believe things will move in that direction, and that belief itself will shape their actions.

The current issue is no longer Democrats versus Republicans. Regardless of the dissatisfaction and disagreements people may have, what matters more is the actions between those who believe in the ability of the American people to effect change and make America, and the world, better, and those who think the government bureaucracy should do these things for us. This is far more important than mere political strife!

No one wants to pay more taxes to fund a wasteful bureaucracy. No one wants to feel that their country is broken beyond repair. No one wants to see things progress 100 times slower than they should, or cost 100 times more than they should. There is actually a lot we can agree on.

This is a "meta-bubble" that may give rise to a turning point bubble in the coming decades, welcome to the Trump Bubble.

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