I’ve been corrupting the lovely quote from William Goldman’s wonderful book “Adventures in the screen trade,” that ‘no one knows anything’ into ‘no one knows nothing.’
This is to stress that no one in the Crypto business I’ve spoken too understands the current lofty price of Bitcoin or Ethereum, even after slogging around NFT NYC.
Back in the day a market was either ‘soft’ or ‘firm’ which was a way of describing the trend in terms of whether it was rallying or retracing. Implicit was that it didn’t really much matter in the long run yet that was the direction at the moment. It is fair to say Crypto has been soft but the media is reporting it as if it has crashed. At these levels it’s a miracle of strength, in my opinion see how the US government has set the dogs on America’s main crypto players.
I think this action while wrong is totally understandable.
The best hope for Crypto is the realisation that AI dwarfs ther threat of Crypto. AI is even more of an existential threat to government, not to mention democracy, not to mention humanity than a little competition on the money minting front and regulation needs to focus on saving us from a robot overlord as opposed to fussing over ADHD crypto entrepre-nerds.
Hopefully the emerging Godzilla of AI will replace Crypto as the bad guy in town.
Of course it is probably better to leave both alone, but there seems to be an awful amount of luddites out there in the US keen to snuff out the ‘new new’ thing. This threatens to put the final nail in the US coffin but there seems to be no end of hammer wielding players lining up for that.
As far as Crypto is concerned the US government should do some basic economic reading. I mean really basic school book stuff.
Lets start on an early chapter. Gresham’s Law.
“Bad money drives out good”
OK, therefore the Government can forget the threat of Crypto. Apart from arresting digital fraudsters and hackers of all tendancies, a job they are extremely bad at, they could comfort themselves with the fact as “Bad money drives out good” there is no risk from Crypto from hard money Crypto.
Clearly ‘fiat’ is bad money, so the chance of deflating Bitcoin or Ethereum driving out inflating ‘fiat’ is zero.
I wonder if they think Crypto is bad money and will therefore drive out the Dollar but there is also a fix for that if it is that way around. Never allow taxes to be paid in Crypto. ‘Fiat’ money derives much of its value from its ability to pay tax. The selling pressure of having to spend crypto to buy “fiat” to pay taxes will always keep “fiat” in prime position. You just have to see the tax/gdp data to see how much “fiat” goes through that doorway each year to see how “fiat” would always keep its primacy as currency.
But now the dogs are on the loose, they are unlikely to come home any time soon. Crypto will be under the death ray in the US for years.
So the question is why is Bitcoin so strong, even though its off its highs. Here are some possible reasons.
Market manipulation from centralised exchanges
China is on the brink of invading Taiwan (please No!)
There is a money flow conduit between US QE and BTC that no one understands
The crypto maximalists are just plain right, its going up and to the moon. Its humanities fate.
I asked anyone at NFT NYC with a hope of having an answer to why is BTC/ETH so strong and the reply was ‘beats me.’
It beats me too.
I think its most likely No3, because the spikes and dumps seem often to be directly liked to index moves in the same direction. The federal Reserve pumped an ocean of money into the system when Silicon Valley Bank hit the skids and its been yanking the surplus back out again in the last few days. If BTC tracks the Fed balance sheet then the link will be established that Crypto is now welded into the global financial system and is no longer an uncorrelated asset.
Im not sure if the anarcho-capitalists will agree but its easy to see the link.
If you do then once again the markets are in a situation where it not about investing, its about gambling of the whims of governance, which is of course a very tricky game.