In the world of crypto it is absolutely essential to do your own research. My advice, read a lot but approach everything with a critical mind.
Here are some things you should check out this week.
Nick
You can’t escape MMT
Maybe you have heard about Stephanie Kelton. No? Well to make it short she is an economics professor at Stony Brook University and a Modern Monetary Theory (MMT) evangelist.
Also before Bernie Sanders quit the US presidential race she was his economics adviser.
Recently she was interviewed by the Financial Times in the context of various governments spending money like it’s going out of style during the COVID—19 pandemic.
A few quotes from Stephanie Kelton to give a sense of what you are dealing with when talking about MMT:
They are going to have massive deficits. And it’s fine.
That Congress can spend now on a pandemic should tell politicians that they could have been spending the whole time.
I keep saying we don’t have a debt problem, we don’t have a deficit problem. We have a language problem.
Brrrrrrrrrrr…
What transpires of MMT is that money is no big deal. There is no real value attached to money. So who cares if we print more of it and throw it around to achieve our goal. MMT seems to completely ignore the geopolitics of money, the idea of reserve currency and the more complicated macroeconomics of money such as the EuroDollar system.
But with the current Fed operations and the disastrous shape of the global economy after the COVID—19 pandemic you can be sure UBI and helicopter money are on the way. So better start to get familiar with MMT right now.
Read the full interview. Warning, you might have to get around a paywall to see it.
Making good use of that stimulus money
The US government is showering the economy with stimulus money. And when I say showering I mean more like a tsunami. We are talking trillions of US$. Brrrrrrrrrrr…
And this is just the beginning. Once we start handing stimulus cheques to everybody we are only one step away from UBI. Might not happen tomorrow but the probability of seeing the US going full MMT at some point is high.
What the Fed expects is that this stimulus money will flow directly back into the economy. Direct spending. High time preference. But what if instead people choose to opt out. Instead of spending money why not buy BTC?
Some recent data out of Coinbase suggests at least some people are putting that in practice. A suspicious amount of deposits equal to the value of the stimulus cheques has been recorded on a bunch of exchanges.
So I guess we can thank the Fed for financing BTC. Brrrrrrrrrrr…
But I’ve heard people suggest there is one more thing the US government could do to speed up BTC adoption. Have the Fed issue a “crypto USD” and distribute it to everyone through a digital wallet. Once people get used to the concept of digital currency and digital wallet changing your USD for BTC should come more easily.
They haven’t done that so far. But think about MMT and UBI coming up in the next few years. We might end up getting it to facilitate the distribution of all that cash money.
So again I guess we can thank the Fed for their help in spreading the knowledge. Brrrrrrrrrrr…
Renaissance Technologies is coming to steal your Bitcoins
For those who don’t know, Renaissance Technologies is a legendary quant trading firm. Its Medaillon Fund has been returning an average of anywhere between 30% and 71% annually depending on the time period you are looking at.
The recent book The Man Who Solved The Market by Gregory Zuckerman will give you an idea of the history of Renaissance Technologies and its founder Jim Simons. You won’t learn any trading secrets in there but it is a good read.
Anyway their Medaillon Fund is apparently looking to add one more asset to trade in their basket of futures and that’s the CME Bitcoin contracts.
Now people are always excited when big institutional money moves into the Bitcoin space. The idea is that compared to institutional money the current market cap of Bitcoin is nothing. So any amount bought by big money should push the price much higher. We are still waiting for that to happen.
But Renaissance Technologies trading CME futures contract doesn’t mean anything positive or negative for prices.
The Medaillon fund is a systematic fund that trades on data. They are not in there for hodling. They don’t have any conviction that BTC will moon soon. What this is telling us though is that those BTC futures are now liquid enough for them to care about it. And that’s a sign that Bitcoin derivatives are more and more a legit part of the system.
Another investment case for Bitcoin
You should listen to the full interview of Yassine Elmandjra from ARK Invest on The Pomp Podcast #275.
I particularly appreciated two topics in this discussion.
First the idea that crypto as money / global reserve currency is a winner take all market. And for this market you want a system that is robust, simple and reliable. That’s what Bitcoin is. Bitcoin might not be flashy with tons of bells and whistles but it does the job. And this is why money is going to continue accumulating there.
Second don’t miss Pomp’s question about the halving. Yassine answer shows how the game theory built in the Bitcoin network is top notch.
What is Bitcoin?
I’ll leave you with this excerpt from Noelle Acheson Crypto Long & Short Newsletter:
“[Bitcoin] is the only quasi-cash equivalent that is resilient to the likely politicization of finance that results from the current ructions in markets and the broader economy.”