Ep. 74: Lyn Alden on inflation, investing, and cryptocurrencies.

Watch our interview with Lyn Alden on Youtube.

Lyn Alden began her career as an electrical engineer in the aviation industry before pivoting full-item into investment. Featured across major media and popular podcasts, Lyn focuses on macroeconomic research for retail and institutional clients, and in recent years has taken a progressively deeper look at digital assets such as bitcoin.


Show notes

  • Lyn Alden became passionate about investing very early on, purchasing her first stock when she was 16. She wound up working in aviation engineering for a decade before finally turning her full-time attention to investment management and research.
  • Like many others, bitcoin didn't really get her attention until 2017. Up to then she had watched its furtive upward price growth but she didn't know how to model it or think about it in traditional investment terms.
  • With the massive run up in 2017 she decided to sit down and think seriously about how the protocol works and what the technology could mean. This led to more research and writing, and today she is well known as an investor with a traditional bent but who takes cryptoassets very seriously.
  • Coming from similar backgrounds, Trent and Lyn each had an early fascination with compounding growth and the potential of investing to create far more wealth than almost any other activity, assuming you can place good bets.
  • Trent asks Lyn what a day of research looks like. Generally she begins by catching up on the news as it broadly relates to the market before settling in to do deeper studies on a topic she's investigating, such as energy markets.
  • Thomas notes that we're in a massive economic transition at the moment, and wants to know what red flags Lyn sees.
  • Lyn Alden has been publicly saying for years that the expansion of the money supply means we're moving into an inflationary period, and this has been born out by recent figures.
  • She also carefully tracks commodity cycles. There are periods of commodity overabundance, during which time no one invests in them because they're so cheap, and other periods where this lack of investment means we have commodity shortages.
  • How is it possible that people are repeatedly fooled by this cyclical behavior? Recency bias.
  • What's more, Lyn notes that trust in institutions is at historic lows, which is leading to fracturing and rising tensions.
  • None of this is new, but she foresees inflation being a bigger issue in the next decade.
  • Lyn mentions the book "The Fourth Turning", which lays out another cyclical thesis: that institutions are established to pursue some goal and then gradually decay over a period of decades until they collapse in dysfunction. She says the book has been eerily accurate in describing the trends of recent years.
  • Thomas comments that the federal government has demanded more and more information from citizens in recent years, and Lyn notes that privacy is going to be another big theme in the coming years.
  • Thomas also wants to know what sort of regulatory landscape the crypto industry is facing. The first round of crypto regulation centered on anti-money laundering and know your customer laws, which is the framework under which crypto companies work today.
  • Since then there has been a great deal of 'regulatory arbitrage', where companies benefit from being able to move faster than regulators.
  • This gap can be rather extreme. The "Howey Test" is the basic test for determining whether an asset is a security, and it's something like 80 years old. When regulators look at an asset like Ethereum to decide if it's an asset, therefore, they're using a test devised right after World War II ended.
  • Another wrinkle is that cryptoassets can actually change over time. Lyn Alden makes the case that Ethereum might've begun as a security because it was centralized and had monetary value, but the push to make it more and more decentralized might call its status as a security into question. This is a uniquely crypto phenomenon.
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