ETF
A short comment on the ETF. It went live and was successful with the second highest volume of any ETF launch ever.
The team at Arcane Research declared it the most successful ETF launch ever because it had the highest “natural volume”. Meaning, if you strip out the giant pre-planned investor that normally supports a new ETF, it had the highest natural volume. To me, that is nonsense because “giant pre-planned investors” are still investors.
Overall though, not bad.
For a long time in this column we have wondered about institutional money, this was our blog post in late 2018 lamenting the low odds of an ETF. We were convinced at that stage that institutions would start buying bitcoin but it took another three years for that to happen in earnest.
Since then, our view as a fund has developed. The product wrappers like the ETF are good, they help distribution but the thing that will really drive bitcoin is solving real problems in the real world.
Arguably, this week’s news from El Salvador is bigger than the ETF, even though the volume is orders of magnitude smaller.
The $30 in bitcoin everyone in El Salvador received a month ago is now worth $45, which in such a short period is nothing but luck. Even so, luck rarely walks through the door and introduces itself. You need to put yourself in a position where it might and the President of El Salvador did.
More importantly, the remittance engine they are using is saving them up to 20% in transaction costs. That is a meaningful and continual benefit to the whole country.
If things like that keep happening across the world, you won’t care about ETFs and neither will we.
A very special offer
“Smashing your savings goals”, at 1.5%? It must be said this generous offer lasts only three months before the interest rate drops back, at which point the beneficiaries will be less emphatically surpassing their wealth accumulation dreams.
There are some relevant metrics which are not included in the offer document too, like these, provided by the Australian Bureau of Statistics:
Quite clearly with an inflation rate running at 3.8% (if you believe it is that low) then saving at 1.5% p.a. is to go backwards. Indeed, you will go backwards at a rate faster than you believe you’re gaining.
The question becomes, how do you save money today? If you have savings, how do you protect them?
The answer was provided this week by the White House itself. They were explaining their $3.8 trillion spending plan.
There you have it. The cost of spending is apparently zero when someone else pays.
Sir John
Here’s a new angle of attack we haven’t really seen before, the idea that bitcoin might be blamed for the next financial crisis (inevitably, there will be one).
The man making the claims was Sir John Cunliffe, what we might call a career diplomat. Sir John works at the Bank of England and is a member of the G20 Financial Stability Board Steering Committee as well as being Chair of the Bank for International Settlements Committee on Payments and Market Infrastructures.
Sir John has a lot of experience, as we shall see.
In 1992, the UK endured a massive financial crisis as it was kicked out of the European Exchange Rate Mechanism. On that day George Soros made himself billions of dollars shorting the pound. Who was at Her Majesty’s Treasury on the other side of the trade? Sir John! He was there, but it wasn’t his fault.
He then spent the next 15 years working at the Treasury making sure such things could never happen again. We were told “the days of boom and bust are over”. Until they weren’t. It was 2008 and Britain’s largest banks did go bust and many were nationalised in the largest financial crisis Britain has ever encountered. Sir John was there, at the Treasury, but it wasn’t his fault.
He worked so hard his Knighthood landed in 2010 for services to financial crises that weren’t his fault.
Sir John then had a spell as Cabinet Office Permanent Secretary responsible for EU coordination. That role doesn’t exist anymore because Britain left the EU, in a crisis, so now there is nothing to co-ordinate. Sir John was there too, but it wasn’t his fault.
Now Sir John thinks Bitcoin will trigger a financial meltdown. Let’s face it, he’s been at the helm of every financial crisis and it’s time to give Bitcoin a chance to see if it can produce a better one.
Arise, Sir Bitcoin.
Dorsey goes deep
Bitcoin has attracted tremendous support over the last few years from some famous names. Michael Saylor of MicroStrategy is perhaps the most prominent with his $3 billion bitcoin investment late last year. Saylor is a buy and hold man and while he is himself a technologist, the bigger technical contributor is Jack Dorsey.
Dorsey has been selling bitcoin on Square (his payments business) since early 2018. A moment in time when Bitcoin was deeply unfashionable. That he did that demonstrated he is deeply committed to the concept of decentralised money. That commitment continued this week with more announcements from Square.
For many users handling bitcoin is too risky. If you lose your private keys, they are gone forever and there is no recovery.One solution has been external custody. Even then, you need to trust the custodian and for some people that itself is uncomfortable. So Square are building and recruiting a team that will effectively host your bitcoins on your mobile phone but in a layered way, through multi-signature, multilayered accounts.There isn’t much more detail than that, but you can imagine a scenario where you might configure the application to always have $500 of bitcoin available in your wallet and keep the rest locked in cold storage etc.Dorsey is working towards custody for the individual, while Wall Street and their ETFs are working towards custody for Wall Street. Big difference.
Bitcoin Mining
“We will incubate the bitcoin mining system project inside Square’s hardware team, starting with architecture, design, and prototyping of more efficient silicon, hashing algorithms, and power architectures,”
It’s an ambitious goal. Designing low power consumption chips specifically designed for the bitcoin algorithm is tremendously complex and lot of very well capitalised companies are already doing it. Maybe Jack will be successful here and maybe he won’t, the point is that his commitment to decentralised accessibility to bitcoin is as total as it is impressive.
There is only one asset sitting right at the centre of the current global zeitgeist. Something that demands huge computing power, that requires better and better chip design. It is driving efficiency in the consumption of energy (because it has to) using every more innovative ways to consume more. It is also right at the centre of the discussion about what money is and what value is.
If you are still in the camp of it’s backed by nothing; think about that golden triangle of silicon chips, energy and money. Why is it capturing the minds of the best technologists of this generation?
Euro-Trash
More self-congratulatory Euro-babble from the ECB team this week as they continue to beat the unsuspecting proletariat with the output of their strategy review. Once again, cartoons led.
I wouldn’t mind the cartoons so much if they weren’t so misleading. The idea that the ECB has any precision at all in its policy making is ridiculous. They have missed their own targets for about 10 years, the cumulative gap is now enormous. The fact of the matter is that the price mechanism is so vastly complex nobody could ever expect to be able to comprehend it. To claim they can do so with precision is simply wrong.
What the ECB has done is fire a huge bazooka of cash all over European banking and hope very much that does the trick. It’s the difference between having a surgeon remove an ingrowing toenail and dropping a bomb on the town where the person with the sore toe lives.
Happily a random bitcoiner took the ECB on at their own game producing a rather more accurate picture of the impact of central banking.
