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Is Bitcoin back? – MacroBusiness



Bitcoin is back:

I do not even pretend that this is sustainable. Nothing has changed for crypto in my book. It's as useless and useless as ever. With the same intrinsic contradiction: if it succeeds, it can only fail, since its only objective is to subvert a system of fiduciary money that it does not control. Regulatory risk is as extreme as ever.

But let's put that aside for a moment and try, as best we can, to understand what signal is being sent here. Nobody knows what the BTC is for the simple reason that it is nothing: it is neither a store of value nor a means of exchange. But supporters argue that it's digital gold, so let's start with that:

At least so far, BTC tracks the price of gold approximately. In this sense, it is a kind of store of value in relation to fiduciary money, represented by its structural inhibition of multiplication. The fact that he tracks gold tells us that it is mostly a protection against the deterioration of the world's reserve currency, the US dollar.

JPM examines who buys this time:

… A recently published book by Bitwise, a cryptocurrency asset manager, as part of an application for a bitcoin ETF, suggests that bitcoin trading volumes on many cryptocurrency trades are significantly overestimated by the "false" exchange, for example. the stock exchanges report a volume of transactions that never took place or via washing operations, and that actual trading volumes could represent around 5% of the total reported. Similarly, the Blockchain Transparency Institute publishes monthly market surveillance reports and estimates, in April 2019, that less than 1% of the volumes reported for certain exchanges corresponded to actual transactions … the importance of quoted futures market was significantly underestimated.

… The market structure has probably changed a lot … with greater influence from institutional investors.

This reminds me of many other commodities futures markets that have been overrun by speculators. Futures contracts are meant to be term hedging contracts that remove volatility for the users of the real economy. But in the era of financialization, they have become tools of leveraged speculation that increase volatility.

The BTC seems to perfectly fit this description, except when we consider that futures on the BTC are a derivative of a gold derivative that is itself a physical derivative of the US dollar. Thus, in this sense, BTC became a cubic CDO, a synthetic asset entirely driven by other synthetic assets, that adds leverage to each derivation, until it becomes an epic fluctuation instrument of wild fluctuation attached to an affirmed link with reality.

That it is put forward as a store of value is surely the ultimate joke played by financial capitalism.

Yet, as gold increases, it seems that BTC will probably do it too, at least until it is finally extinguished by a regulator somewhere. So, if your buying BTC, you'd better ask where the gold goes.

This question is answered very simply. Its value comes from the foundations of the value drivers of the US dollar. They are weakening today as the US Federal Reserve enters a cycle of easing. Two scenarios are to be considered in this regard:

  • the economic cycle persists while the Fed reduces by less than 100 basis points and that a trade agreement is reached with China;
  • a global shock is occurring, including a major correction in the stock market, and the Fed is forced to aggressively mitigate because no trade agreement has been reached.

In the first case, gold and BTC are likely to increase as the US dollar weakens, but not too far, as other central banks will also pile up and support the value of the dollar. American.

In the second case, the gold will fall as the crisis occurs and the USD will get a safe haven offer, but it will go much further as the Fed goes back to zero and relaunch the QE plus, possibly, money from helicopters. BTC follow the same pattern to take. On the withdrawal who knows? On the next rocket most likely.

Do not mistake yourself. I would not recommend anyone to buy BTC. It is of any kind. But if you are looking for an extremely important bet (which could go to zero at any time) on US currency disorder, then BTC looks like it.


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