First Chairman of the Fed Jerome Powell chimed in:
“bitcoin is a store of value like gold”. Also,
“the USD won’t be the worlds reserve currency forever”
“I don’t like bitcoin……..the USD is by far the most dominant currency anywhere in the world, and it will always stay that way.”
Then, Treasury Secretary Munchin
“it’s a national security issue”
“We take very seriously the role of the USD as the worlds reserve currency”
We predicted a battle and it has arrived.
Libra and Congress
Facebook’s Libra was also in the firing line. Executives from Libra visited Congress this week to explain what they are up to. Meanwhile Congress has drafted a law to thwart them (which is unlikely to pass – see the image below).
Broadly its says, if you’re big and techy, you can’t launch a coin.
Steve Munchin was slightly more expressive, saying that Facebook will have to comply with all the same regulations as banks do. Expect every conceivable hurdle to be thrown in front of Libra. Personally, I expect them to clear them all.
We’ll find out during the next Presidential campaign who runs the town these days in America. Recall that not that long ago that the biggest US companies were oil companies and banks. US dollar and petro-dollar dominance worked for everyone and the law reflected it. That is no longer true, big tech dominates and has all the money and that is likely to tell in the long battle that lies ahead.
Meanwhile in Australia traditional banks continue to wrestle with the recommendations of the Royal Banking Commission . This week it was Westpac’s turn to show what progress they are making.
Naturally, rather than sort out their problems themselves, Westpac has hired consultants (as all big companies love to do). They found numerous issues and reported back (without a sense of irony) that among other things.
“There is a culture of over-collabaration, we will be working with staff to change this.”
So, with the help of consultants, they will be collaborating to prevent further over-collaboration.
Other than being amusing, so what? Well here is a comparison.
Bitcoin has no staff. No CEO. No teams. It does however have collaboration across tens of thousand of nodes across the world. This is enforced by computer code, encryption and algebra, it has been working successfully and uninterrupted for 10 years. That is part of the genius of the technology. It achieves efficient consensus among decentralised individuals, every 10 minutes.
If you are a shareholder in a bank, there are millions of people around the world eroding your value, holding meetings with each other about collaborating less, or more, depending on the whims of the latest consultants. It’s a massive and unnecessary waste.
Altcoin markets struggle
Alternative currencies have had an awful time since June. Against bitcoin they are down as a cohort ~ 50%. The liquidity issues in some of the smaller coins are now coming to the fore, if you try and sell, markets are thin. More pain to come for many of these assets in the next six months and expect outright failures.
Bitcoin Power Usage
The Cambridge Judge school of Business released a model this week estimating the total consumption of bitcoin miners, projected based on a combination of network hash rate and energy prices.
Bitcoin now has annual power consumption equivalent to Australia’s quarterly consumption (64.63TWh vs 260TWh). This consumption of power is where bitcoin derives its value.
Over 70% of this power is from renewable energy and it has to be. Bitcoin mining is a race to the bottom of electricity prices, cheapest electricity wins. You will not find a better driver for the pursuit of renewables than bitcoin.
Putting that in security terms, we are reaching the point where successfully attacking Bitcoin requires the entire resources of a nation state. Bring on the challengers (there’s no way they haven’t already tried).