1. The base US money supply.
Up just over 4 times since 2008
2. Rising prices (but not of everything)
US CPI: the blue line near the x axis
House prices: the red line.
So, lots of money printed. General prices and wages have hardly moved, real estate, stocks, bonds have all sky rocketed.
Conclusion. If you are rich you got richer. If you aren’t, you didn’t.
Wondering about ongoing protests in France and Hong Kong? Go back and look at the charts. Then buy some bitcoin.
The worlds central bankers got together at Jackson Hole under the banner “Challenges for Monetary Policy”. Stealing the show was Mark Carney, the Governor of the Bank of England:
“The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around a new Synthetic Hegemonic Currency (SHC) and it displaced the dollar’s dominance in credit markets. By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to EMEs”
“…it is an open question whether such a new SHC would be best provided by the public sector, perhaps through a network of central bank digital currencies.”
There’s a lot to consume
The dollar’s days are over. It’s unhelpful as a global currency because it is so singular. In particular, it crushes emerging economies when things go wrong (like it’s currently doing)
These digital currencies aren’t half bad, let’s build one ourselves and use it as a global currency because we must keep control of monetary policy
Like we said last week, these strange monetary times are hard to define but the bankers know something’s up and something has to change. Here’s a prediction for you, the dollar will continue to soar against all other currencies crushing dollar creditor countries in the process, cue mega-crisis, cue some new system.
Incidentally, Carney is on borrowed time at the Bank of England, he got a six month extension until January 2020 because of Brexit. He failed to get the IMF job that Lagarde left vacant. So, this is probably a pitch from him to run Central Bank CarneyCoin. Watch this space.
US Treasury Secretary Steve Mnuchin indicated in an interview with Bloomberg on Wednesday, that the US is considering “ultra long bonds”
“If conditions are right, then I would anticipate we’ll take advantage of long term borrowing and execute on that”
If Austria can lend for 100 years at 1.5% why can’t the US? It makes sense for the Americans, but really – who is buying this stuff? How are they pricing the risk?
Ultra long US bonds will be an entirely new asset class. I’m really looking forward to them running the risk gauntlet against bitcoin. It’s hard being new, so many tests to pass, so much doubt and skepticism and so much money printing. When they launch, we’ll price them in bitcoin and see how they go each year.
Over the years various people have claimed to be Satoshi Nakamoto. One of those is Australian Craig Wright who this week lost a US Court Case against the brother of the deceased Dave Kleiman (who was closely involved with bitcoin development). The case was utterly bizarre:
Wright claimed he was the owner of the 550,000 BTC mined in the early days of bitcoin by Satoshi & Dave Kleiman (hence the Kleiman claim)
Proving ownership in cryptography is trivial because you can sign transactions to show they belong to you
Wright said he couldn’t do that because the coins are locked in a multi-signature wallet held by something known as the ‘Tulip Trust’ which will only be released in 2020
In short, he claims he is Satoshi, but can’t prove it.
Anyway, it went a bit wrong. Wright was found to have submitted forged documents in discovery, the judge was seriously unimpressed and ruled entirely in favour of the Kleiman estate, ordering that half of all the bitcoin to which Wright has laid claim must now be handed to Kleiman.
“Dr. Wright’s demeanor did not impress me as someone who was telling the truth,” the judge wrote. “I completely reject Dr. Wright’s testimony about the alleged Tulip Trust, the alleged encrypted file, and his alleged inability to identify his bitcoin holdings.” Indeed, Reinhart concluded that “Wright’s testimony that this trust exists was intentionally false.”
So Wright is left here:
If he is Satoshi, all this nonsense just cost him 225,000 BTC, that’s $2.5 billion.
Also, he needs to pay Kleiman’s fees which won’t be cheap.
If he isn’t Satoshi and can’t produce the bitcoin then Kleiman can pursue Wright for the USD equivalent, which would bankrupt him.
So, in short. If Craig Wright isn’t Satoshi Nakamoto (and hardly anyone believes he is) then he just cost himself $2.5 billion he doesn’t have.
Bitcoins dominance of crypto-market capitalisation has been rising all year. Reaching a notional 70% in recent weeks. Really though, it is far higher. Liquidity is key in cryptocurrency, how much can you sell at the market price before you tank the market? Lets take an example:
The image below lays out the market for Digibyte, coin rank 57 and supposed market cap around $100m at 0.7 cents per coin. The circulating supply is 12.2 billion. On the left is market depth on bitfinex, if I were to sell into the the top 10 orders, that is 280,000 coins, 0.0002% of circulating supply. This would push the market price to 0.32 cents per coin. Less than half by selling almost nothing. There would be other forces at play here and buyers would move in, but you get the point.
If we are generous, non-bitcoin tokens have somewhere from 10% to 20% of the claimed liquidity and market cap. Total crypto market cap is $250 billion, of which bitcoin is $170 billion. This makes the treu non-bitcoin element $80 billion * 20% = $16 billion.
So bitcoin becomes $170 billion out of $187 billion = 91%.
We think its higher but it starts with a 9 for sure. As for bitcoin, yesterday it turned over volume twice that of the ASX.