Your favorite influencers don't understand Bitcoin (how to understand it)

To actually understand Bitcoin, you must map the control stack above the protocol and grade the incentive gradients that drive real users.

Control-Plane Capital

Oct 24, 2025

a horse walking down the middle of a road — Photo by Gunnar Kaplick on Unsplash

I’ve already written about the things most Bitcoiners don’t understand about Bitcoin.

In this article, I’ll go over the things you need to understand to actually understand Bitcoin.

A) Money plumbing that outranks ideology

Perimeter power > protocol design.
Who controls on/off-ramps (banks, payment processors), distribution (app stores), infrastructure (cloud/CDNs/ISPs), and identity (KYC providers) sets the envelope of feasible Bitcoin usage. The protocol can be permissionless while usage is permissioned by the perimeter.
Paperization is policy.
ETFs, futures, notes, trusts, custodial “yield” wallets — these divert flows from spot self-custody, create basis trades that damp upside, and make governance leverageable (one memo to the custodian ≫ a million sovereign users).
Convenience yield beats monetary purity.
Institutional allocators prefer operational simplicity + auditability over theoretical perfection. That’s why custody wrappers win flows even when self-custody is “better”.
Stablecoins are the Medium-of-Exchange we actually have.
They already perform the “digital cash” job inside the perimeter. Bitcoin is priced accordingly — as a reserve/Store-of-Value with optional convexity, not the default retail Medium-of-Exchange.

B) Control surfaces (where switches live)

Bank choke points.
AML/Travel Rule, Suspicious Activity Report (SARs) thresholds, correspondent-banking risk scoring, and de-risking policies can throttle exchange rails without passing a single new law.
App-store policy.
A quiet Terms of Service (ToS) nudge — “non-KYC wallet distribution restricted / sideload only / added frictions” — moves more behavior than 10 hearings. Defaults decide usage.
Cloud and ISP Acceptable Use Policies.
Most “full nodes” run on VPS/cloud. Abuse desks + policy flags can de-platform relays, nodes, and explorers on content or “financial crimes” grounds. It’s already happened to other gray-zone software.
Chain analytics as de facto law.
Heuristic flag → exchange/fintech freezes funds first, asks later. Risk scores (not statutes) decide which coins move frictionlessly.
Mining policy points.
ASIC supply concentration, energy interconnect rules, pool templates, payout accounting, and OFAC filtering shape transaction selection more than hash slogans. Pool centralization is a policy lever.
Mempool policy & client defaults.
“Policy”, not consensus, decides what’s relayed/mined cheaply. Fee rules, standardness, datacarrier limits, and template code all influence what the network practically accepts.

C) Supply/flow realities (what drives price more than “number go up”)

Liquidity regime > halving charts.
Net liquidity (Fed balance sheet – TGA – RRP), USD trend, Treasury issuance mix, China credit impulse — these set multiple/flow conditions for BTC just as they do for tech beta.
Wrapper share = vol regime.
As ETF/custodial share of supply rises, realized volatility compresses, upside tails are sold, and carry appears (covered calls on wrappers). Watch the paper share like a hawk.
Funding structure matters.
Perp basis, borrow availability, and Prime Broker risk budgets determine how far rallies extend and how sharp flushes are. Weekends get used to harvest leverage when liquidity is thin.
Self-custody friction = adoption cap.
Key management, inheritance, org governance, and accounting overhead are non-ideological blockers for serious capital. Until these are solved at scale, wrappers win.

D) Legal & narrative plays (how norms get set)

“Illicit content” as a policy crowbar.
If arbitrary data becomes cheaper/easier to embed, expect node-operator liability scares, cloud evictions, and “money transmitter” arguments. The threat alone herds users into compliant rails.
Tax is behavior control.
Lot-level reporting + travel rule + nuisance filing duties on small payments will keep BTC as store/treasury, not MoE, for most people. Micro-taxation is the silent killer of retail MoE.
KYC optics > technical truth.
A KYC coin with “clean history” clears instantly; an identical UTXO with a false positive crawls. Reputation layers sit above raw consensus.

E) Mining & settlement microstructure (the boring stuff that decides outcomes)

Template providers and relay networks.
Who supplies the default block template? How fast do alternative relay networks propagate non-standard transactions? This determines practical censorship resistance day-to-day.
Stratum versions and job negotiation.
Without broad Stratum V2 job negotiation, pools, not miners, effectively choose inclusion policy. Adoption pace is thus a political economy problem, not a GitHub problem.
DATUM by Ocean Mining is another option that allows miners to maintain control over block templates while still earning rewards from the pool. With DATUM, coinbase payouts go directly to miners, instantaneously and without custodial oversight. This ensures that every block found is rewarded in a decentralized, non-custodial manner.
Energy policy > ideology.
Zoning, interconnect queues, curtailment rules, and grid services credits decide where hash can live. Energy politics is mining politics.

F) Adversarial playbooks you must model (because someone else already has)

Spam-as-a-service.
A deep-pocket actor can pay to congest, raise fees, and shape the narrative (“Bitcoin is unusable as MoE; use stable rails”). It’s not free market; it’s paid market.
Soft in-sourcing.
Regime sponsors “public-private nodes/custody” with SLAs, which become preferred endpoints for business/government payments. Default MoE migrates there without a ban.
Wrapper honeypots.
ETFs/treasuries scale convenience; later, rule-changes (KYC tiers, 6102-lite, windfall levy) steer behavior further — no seizure needed, just parameter tweaks.
Jurisdictional hopscotch.
Make life slightly harder in major hubs and watch capital self-select compliant routes. You don’t need global unanimity; you need choke-point plurality.

G) Things most commentators get backwards

“If fees are paid, it’s legit.”
True at consensus; false at perimeter. The cost of consequences (legal, operational) matters more than the fee when you’re an institution.
“Price = adoption.”
Often price = liquidity + wrappers + policy expectations. Adoption lags price because wrappers capture flows first.
“Censorship = explicit bans.”
No. Availability bias (app stores), bank Acceptable Use Policies, pool templates, analytics scores, and tax micro-frictions do the same job invisibly.

H) How to actually analyze Bitcoin like an adult (signals that matter)

1) Paperization Ratio (PR): custodied/ETF/futures exposure ÷ circulating supply.
– PR ↑ → vol ↓, upside tails muted, carry ↑. Adjust tactics (more options income, less tail-chasing).

2) Perimeter Tightness Index (PTI): app-store wallet rules + bank/exchange KYC stance + cloud Acceptable Use Policy actions.
– PTI ↑ → MoE usage falls; SoV share rises; stablecoins gain.

3) Mining Policy Index (MPI): pool top-5 concentration + Stratum V2/DATUM adoption + OFAC/template posture.
– MPI worse → higher inclusion risk, more predictable censorship vectors.

4) Net Liquidity Delta (NLD): (Fed BS – TGA – RRP) 4-week change; add USD trend.
– NLD ↑ → risk tailwind; NLD ↓ → risk headwind regardless of halving hopium.

5) Regulatory Synchronization (PSC): how fast identical wallet/ID/tax rules appear across US/EU/UK/SG.
– PSC ↑ → wrapper rails get a bid; self-custody UX worsens at the margin.

6) Self-Custody Share (SCS): exchange balances + ETF inflows vs self-custody outflows (on-chain heuristics).
– SCS ↑ alongside PR ↓ → real grassroots adoption; rare.

I) Playbook (how to position if you actually understand all this)

Core stance: Expect for BTC to become a SoV with shock convexity, not default, mass MoE.
Two sleeves:
(a) Core: Clean self-custody tranche (hardware + inheritance plan) for regime shocks.
(b) Optional (small): as PR ↑ → Paper BTC for carry (covered calls on ETFs, basis trades when safe).
Buy fear / sell clarity / keep core: Add on policy scares (hearings, “illicit content” hysteria, exchange blowups). Distribute into “regulatory clarity” rallies.
Monitor PR & PTI: If PR keeps rising and PTI tightens, expect tamer cycles and managed corridors (contained rallies, engineered flushes). Trade accordingly; don’t hallucinate “supercycles”.
Respect liquidity: Use Net Liquidity Delta and USD trend as your multiple compass; they move BTC like they move tech beta.

J) What you have to grok emotionally (or you’ll keep mispricing it)

Bitcoin can be unstoppable in protocol terms and still be steered in practice.
The cheapest control method is defaults + wrappers, not bans.
Containment can coexist with price appreciation. You can make fiat gains in a captured asset; don’t mistake that for freedom.
Self-custody is insurance, not a sermon. If it’s not operationally ready (keys, heirs, OPSEC), it’s theater.

Bottom line

To actually understand Bitcoin, you must map the control stack above the protocol and grade the incentive gradients that drive real users. The protocol is necessary; perimeter power is determinative. Price follows liquidity + wrappers + policy expectations more than sermons.

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