Failures, all of them

Macro hedge?

Is bitcoin really a macro hedge? Take the charts below, there is no doubt that the weakening Yuan corresponds with bitcoin’s rise this year. The time period is short and the chart has zero statistical credibility, but:

• We know Tether issuance (the USD stablecoin) has risen sharply this year and particularly through the Hong Kong protests as people look to move their wealth out
• We know bitcoin is resistant to political interference (remember China banned it and it made no difference)
• We know bitcoin has steadily risen through a turbulent first 8 months of the year.

The problem of course is bitcoin is quite capable of dropping by 10% a day and it has done so several times this year. Not exactly macro-hedge behavior.

So one answer might be, yes it is, provided you hold it for long enough.

Hedera Hashgraph

In 10 days time a new and much hyped blockchain known as Hedera Hashgraph launches. Hedera is very well funded having issued something known as SAFTS (Simple Agreements for Future Tokens) to the tune of $124 million. You give me money, I give you tokens later. The first issuance of these tokens commences on 16th September.

Hedera also has some incredible backers on its Governing Council including IBM, Deutsche Bank, Nomura and Boeing. The pitch is basically high quality governance, superior speed and security, claiming 10,000 transactions per second (although see the footnote, which goes into detail about why this isn’t really true).

Not that the technology is not sophisticated but it looks very much like a corporate blockchain and that’s another name for a database, a very, very expensive database. It was described to me this week as a “VC Bagholder Special”, which means it will go well with the hype machine in overdrive, once the VC bags are dumped, then we’ll see.

Libra looms on ECB

“I sincerely hope that the people of Europe will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call,”

Pretty serious stuff from Yves Mersch, an Executive Board Member of the ECB. He went on:

“Libra could reduce the ECBs control over the Euro, impair monetary policy transmission mechanism by affecting the liquidity of euro area banks and undermine the single currency’s international role.

The amusing thing is that the horse he fears so much bolted in 2009. Since that date the euro has lost 99% of its value against bitcoin.

Dalio fears MMT

Bridgewater Associates’s Ray Dalio hinted at changing institutional views on the role of digital currencies this week. Bridgewater manages about $150bn in client assets (similar to bitcoin’s entire market cap).

Dalio has not been a bitcoin fan in the past “its a bubble and cannot store wealth”. The mood music is changing though, this week he laid out his concerns around the what he called MP3, which is really MMT, which is really lots of money printing and lower interest rates forever. Dalio believes this is now inevitable, and so:

“I think gold will probably pay well. And digital currencies could pay well. But there’s a reason they outlawed gold that probably could be analogous to the reason that they could outlaw digital currencies. But I’m looking too far ahead.”

So now it is not a bubble. It’s just that it will be outlawed.

Let’s end with a prediction. Ray Dalio will own bitcoin by 2021.