A visit from an alien
Money 1:
- Has a publically auditable record of every transaction ever;
- Has an absolutely known supply at all times in the present and future;
- Can only be mined by harnessing the energy of the sun and converting that into computational power;
- Can be transferred anywhere in the world (or indeed universe) at any time you choose, for any amount;
- Each transaction has an unbreakable mathmetical link to its predecessors and that chain of transactions houses the longest single continuous calculation ever performed by humanity.
Money 2:
- A piece of paper with a dead politician on it;
- It’s money because I say so.
Which one does the alien choose?
I’m putting it to you that your false monetary belief system is so entrenched that you don’t really believe what you are seeing and that explains why you are surprised by the move in the bitcoin price.
The surprise is only that is took so long.
A lot can happen while nobody is watching. While we were burning our hands on turkey skin, a lot did happen. Particularly in America.
1. Ripple
We have never had much time for Ripple. It seemed like the corporate answer to bitcoin. Simply sign up banks around the world, use the word “blockchain”, then issue yourself a lot of tokens and sell them to the unsuspecting public.
It just defies understanding how Ripple really added anything new, it simply enriched its founders at the expense of everyone else.
Against all odds, the SEC decided just prior to Christmas that they shared that view. The SEC alleges that Ripple is indeed a security, issued to the general public without warnings. Simply a centralised token with unlimited supply. Indeed, they make clear that Ripple’s claims that lots of banks are using it to transfer value are not true. Nobody is using it.
Ripple promptly went from 70 cents in early December to 20 cents now. Grossly overvalued in my opinion. It does nothing but apparently it is still worth $10 billion. It has now been delisted from the major exchanges in the US who do not wish to be caught in the web of selling securities.
Good riddance. Honestly, it’s Theranos stuff.
2. Privacy tokens
We then learned just prior to the New Year that many of the privacy tokens like Monero, ZCash and Dash were being delisted from the major exchanges too.
Privacy tokens generally have an additional layer of encryption that means the blockchain stores no information on who sent which amounts to who. It only shows that a transaction happened. This is in stark contrast to bitcoin which shows exactly who sent what and to whom (at least as far as addresses are concerned).
Again, this has been done following SEC pressure. Depending on your beliefs, this is less compelling. The privacy tokens were effectively digital cash in that they could not be traced and as a result US law enforcement does not like them. They will survive, but now they are black market money.
3. KYC
Finally, the US Treasury issued its guidance on what it calls “self hosted wallets”. If you buy cryptocurrency on an exchange and send it to your own wallet, the exchange will be obliged to report you if that transfer is above a certain value. So, for US citizens the US Government:
- will know if you own cryptocurrency;
- will know which one;
- will know if you sell it.
So, just the same as any other asset you might own then. There is great distress in the bitcoin community about this encroachment on people’s freedom but in reality you can still own bitcoin anonymously if you wish to and you can still use it in that way if you want to and know how.
4. What does it all mean?
As you may have seen from the price action it is generally positive for bitcoin, which arguably entered the mainstream in December 2020.
- The SEC is cleaning house for a reason;
- They have already declared bitcoin is not a security;
- Bitcoin is now regulated pretty much in the same way stocks, shares and property are. That’s sad for many of us but also a sign of maturity.
Meanwhile, on main street absolutely nobody is talking about bitcoin. In 2017 it was a mad retail frenzy. Now searches for bitcoin are about a quarter of the level they were then. Indeed, the average buy size for bitcoin is now far higher that it was then implying much greater scale of institutional interest.
The best thing about that is that institutions are likely to hold bitcoin for the long term and it should (should) reduce price volatility.
Under the radar is exactly where we want to be and stay, it’s unlikely though. So expect bubble journalism to return in force in 2021.
We will spend some more time on this issue in the coming weeks. In the meantime, I was pointed in the direction of a different inflation measure over the break, known as the Chapwood Index. It is an independent CPI calculation of the top 500 items on which American’s spend their after tax dollars.
The government’s CPI measure is rather different including some 80,000 items but excluding taxes, energy and food; because who spends any money on those things?
This suggests inflation is actually around 12% not 2%.
- If your grandchildren could inherit and use it – then inflation is rampant in that category;
- If it goes in the bin within five years – it likely has a falling price and in relative terms (to the category above) it almost certainly has a falling price.
It’s quarterly EUR bet update time. Before we get to that, Christine chimed in with a nice festive message for us serfs. It was some teary eyed nonsense where she claimed Europe had “come together” in 2020.
Remember April? Remember when Europe closed its borders to Italy, wouldn’t lend them ventilators or equipment. Remember all those Italians who died as a result? I bet most of Italy does, even if Christine doesn’t. They won’t forget either.
Anyway, the crux of the speech:
