One of my favorite articles about Bitcoin is Parker Lewis’s “Bitcoin is the Great Definancialization.” In it he makes a compelling argument that the world has become increasingly financialized as a consequence of bad money.

He argues that the US dollar serves as a poor monetary instrument because it doesn’t effectively preserve purchasing power over long time frames. The government continuously prints US dollars out of thin air, which debases the money supply, robs people of their purchasing power, and causes price inflation. As a result, people don’t want to save directly in USD. In fact, the entire concept of savings has been largely eliminated. Instead of saving, most people are forced to invest. This is obvious if you observe the modern economy— the vast majority of people with any serious “savings” hold that value in things like equities, index funds, and real estate. People treat these things like savings, but in reality they are investments.

People have been convinced that they need to “put their money to work,” “make their money grow,” “own productive assets,” and “earn yield.” Lewis argues that the reason for this is money printing. The government prints money, the money supply grows, prices increase, and the purchasing power of any money held as savings decreases. If you’re just holding money, you’re bleeding value. You have to invest your money to make it grow, since that’s the only way to keep up with inflation. But investments, unlike savings, entail a lot more risk. People are forced to take on more risk in their lives just to preserve their purchasing power.

Perhaps the most significant second-order effect of this phenomenon is that it diverts time and attention away from important work. A highly advanced economy functions well because of specialization. But bad money has forced everyone to take on a second job managing their money. Instead of focusing entirely on the work they do best, they’re forced to also spend significant time and energy choosing how and where to invest their money in order to preserve their purchasing power. All of this is a consequence of the fiat money system, which allows governments to debase the currency arbitrarily. Bitcoin is “the great definancialization” because it’s a form of money that can’t be debased by anyone, and thus functions as a proper savings vehicle. People can create value, store that value in Bitcoin, and preserve their purchasing power over time without having to invest and take on additional risk.

Parker’s article is excellent, and I highly recommend giving it a read. But I’ve also noticed an interesting counter-phenomenon happening in the world of “crypto” generally. While Bitcoin simplifies savings and definancializes the world of money and savings, crypto is producing a world of hyper-financialization.

In the world of crypto, new phenomena constantly emerge that attempt to turn anything and everything into a financial market. The most recent example of this is memecoins— tradeable financial assets that explicitly offer no financial value outside of memetics. Memecoins don’t have any cash flows, they don’t offer any governance rights, and they don’t offer a claim on any underlying assets. But anytime a new meme emerges online, it’s immediately tokenized and traded (with Trump’s recent multi-billion-dollar memecoin launch serving as a particularly significant example). Memecoins are an attempt to financialize attention on the internet.

Prediction markets are another example. Users can trade the future outcomes of any arbitrary event. Social tokens, which allow users to purchase tokens tied to specific creators, give people the opportunity to speculate on the future popularity of social media users. NFTs turn pieces of art into highly liquid, tradeable commodities. The phenomenon of RWAs (real world assets) takes off-chain products like equities, treasuries, real estate, and even rare bottles of whiskey and tokenizes them to make them liquid and tradeable. In other words, crypto takes everything and turns it into a financialized, tradeable asset.

This reminds me of Balaji Srinivasan’s “internet dispersion” theory. He talks about how the internet increases the long tail of outcomes at both sides of the distribution. We used to have cable channels with standardized 30 minute or 60 minute TV shows. Now we have both hyper-short-form content (TikTok, Reels) and extremely long-form content (podcast interviews). We have more mass-produced, hyper-scaled physical products than ever before, as well as more access to extremely niche products for specific audiences. I think that Bitcoin and crypto serve as an example here— on one hand we have the best, simplest money that’s ever been created (resulting in the return of proper savings and definancialization) as well as hyper-financialization via tokens, where anything and everything that can be will be traded.

Ultimately I think that these two things connect. Hyper-financialization via crypto is just as much a consequence of bad fiat money as the push for everyday people to invest in index funds and real estate instead of saving. Much of crypto is a result of this same thing, just for a younger audience. People don’t feel like they can get ahead by just working and saving, so they feel the need to take on more and more risk for the chance of some high-upside event. Everything is turned into a speculative financial market.

I expect this phenomenon to continue as the fiat money experiment unwinds. But over a long enough time horizon, Bitcoin’s core value proposition will become more and more apparent. And both the financialization of the tradfi economy and the hyperfinancialization of the crypto economy will succumb to the great definancialization of Bitcoin.