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 stuff you should check out this week.
Nick
Bloomberg is bullish on Bitcoin
If you needed one more hint than Bitcoin has graduated to a fully fledged gold like financial asset just read that piece from Bloomberg.
Gone are the day where the narrative even was painting Bitcoin as magic internet money whose main use is to buy drug on Silk Road. The tone of the commentaries have changed.
In a recent article PlanB describes the evolution of Bitcoin as a series of phase transitions. I’m paraphrasing here:
Proof of concept after the white paper.
Payment method when BTC reached parity with the US$.
E-gold after the first halving.
And now financial asset with legal clarity and regulated derivative markets.
You can feel how we are in the financial asset phase by reading the opening paragraph of the Bloomberg article:
“Diminishing supply, increasing demand and a favorable macroeconomic backdrop sustain our favorable view of Bitcoin’s price outlook. In May, the daily production of new coins will drop by half, and unlike quasi-currency brethren gold, higher prices won’t be an incentive for more supply. Perceptions of Bitcoin will continue to transition toward a gold-like store of value and away from a risk asset. The first-born crypto’s volatility is in decline vs. rising for equities. Restricted supply means adoption is the metric that matters, and most indications remain positive in an unprecedented environment where virtually every central bank is aggressively adding liquidity.”
Sounds more like serious financial asset than magic internet money.
Paul Tudor Jones is long Bitcoin (cash settled futures but still…)
Legendary fund manager Paul Tudor Jones has announced that he is bullish on Bitcoin. That’s good. Having respected figures in the investment world endorse Bitcoin will certainly drive more money into it.
The specific reason Paul Tudor Jones sees Bitcoin as a good investment is to use it as a hedge against inflation. That’s great. This is what Bitcoin is for and he is endorsing that.
Now what could that actually mean in terms of actual investment. A quick search shows that Paul Tudor Jones BVI Fund as roughly US$ 20 Billion in assets under management. According to the article he plans to have a low single digit percent of it allocated to BTC.
If we take that to be 1% then that is US$ 200 Million allocated to Bitcoin futures. At 5% we get a long bet of US$ 1B on Bitcoin.
Compared to Bitcoin market cap these are not huge numbers but that’s a good start. And most importantly it helps with the narrative.
Note that this will be a play on Bitcoin futures, most likely CME cash settled futures, for Paul Tudor Jones. As far as I understand this is not a direct investment in physical Bitcoin. Still that should get people excited and fuel more FOMO.
“If you are Bobby Fischer, you must play only chess for money.“
Talking about billionaires, there is no need to be too harsh with Warren Buffet.
I know people don’t like his stance on Bitcoin. People are really upset about that and this week Max Keiser adds to the voices calling Warren Buffet stupid for this.
Honestly I think you are expecting too much from Warren Buffet. Warren Buffet does one thing well. He does value investing in businesses. That’s it. Warren Buffet is not a bond trader, a commodities traders, a currency trader, a gold trader and even less a tech person.
Everyone has their domain of competence and for Warren Buffet Bitcoin falls completely out of it. He admits himself that much in the 2019 Berkshire Hathaway letter:
“[…] if I were ever scheduled to appear on Dancing With the Stars, I would immediately seek refuge in the Witness Protection Program. We are all duds at one thing or another. For most of us, the list is long. The important point to recognize is that if you are Bobby Fischer, you must play only chess for money.”
Crypto is not Warren Buffet’s game.
Read Berkshire Hathaway 2019 letter.
What is coming after the US Dollar?
The US debt is seemingly increasing forever. Mistrust between countries on the international scene has never been so high. And the global economy is headed for a new depression. To me that is good ground to start thinking about what comes after the US$ stops being the world reserve currency.
David Birch has some ideas about that in his book The Currency Cold War and shared some of them in a Coindesk interview this week.
There are more or less three types of digital currencies:
Bitcoin, the real decentralized deal.
Government issued digital currencies.
Corporate issued digital currencies.
Both government and corporate issued digital currencies suffer from the same problem.
A lot of the US soft power is directly derived from its hegemony over the global financial system. And this hegemony is guaranteed by the status of the US dollar as a reserve currency. With this power the US has great leverage over other nations and over individuals.
Replacing the US dollar by a digital US dollar won’t change that. If anything it will make things even worse in terms of privacy.
But using something else, say the digital Yuan is just serving a different master with the same drawbacks.
Thinking about switching to Libra, aka Facebucks as David Birch would say? Ok well, welcome to your corporate overlords then. You have traded control from the State for a corporate control.
Only Bitcoin, a real decentralized solution, would bring real changes.
But it might not turn out that way so you should check out what David Birch has to say about that in this interview.
The great disconnect
On Friday we have seen once more that the indicators for the real economy are in the red. But once more that translated in the stock market ending up in the green. That is the great disconnect. The actions of the Fed are creating wrong incentives. That’s the driver for an ever increasing gap between the stock market and how ordinary people live.
Marty Bent commented on that last week.
But that’s not new. Since 2008 the Fed’s various QE programs have been distorting the market. In the last QE cycle the Fed balance sheet grew 4.5 times larger than before 2008. In this new QE cycle the balance sheet is only up 50%. So if anything we can expect the disconnect to widen. Until the gap is too large and things start to breakdown…
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