Cryptocurrency – Stellar rise in value is a vote of no confidence in the status quo
It is as if investors are preparing to abandon ship and book their place on a life raft. Typically, during a financial and or geopolitical crisis, safe haven assets such as precious metals (gold and silver) tend to outperform all other asset classes. That was before cryptocurrency, particularly Bitcoin.
Indeed, the top performing asset so far this year is Bitcoin, it is providing investors with a life raft, a safe haven asset in a crisis.
The debt monetary system is starting to look jaded. Global debt has hit £170 trillion last year, according to the Institute of International Finance (IIF) and a common theme is now emerging among the G7 industrialized nations. Households are up to their eyeballs in debt, businesses are over leveraged and government deficits continue to grow exponentially.
In Europe, there is the talk of an economic recovery and also Europe’s expanding banking crisis (note the contradiction). Whether it is Greece’s never-ending debt negotiations, or nonperforming loans in Italy, Spain, and Portugal the cracks in the recovery story are just too big to paper over.
But when someone’s savings is someone else’s potentially bad debt then it is no surprise that investors are scrambling for a life-raft to escape a possible monetary crisis in which the system could potentially sink in a sea of debt. In a fiat, monetary system debt is currency, so bad debts destroy the value of fiat currency. What’s more, http://money.cnn.com/2017/06/29/news/economy/debt-ceiling/index.html target=”_blank”>US debt ceiling deadline could reach default by early October.
If a market is a voting machine in the short term and a weighing machine in the long term then Bit coins Stella rise this year is an overwhelming vote of no confidence in the current monetary system.
On 15 August 2016 Bitcoin was valued at 572 USD one year later August 13 Bitcoin was worth 4,111 USD, which is an enormous increase of 618.7 % in one year!
How does Bitcoin perform compared to other assets over a similar period?
FTSE 100 is up 2.88% during the same period (negative if you take into consideration the collapse in the exchange value of sterling), the European STOXX 600 is up 3.86% year to date (YTD), the DOW is up 10.6% YTD, US Ten Year Treasury Notes down 22.7% YTD, German 10 Year Government bond is up 21.75% YTD Gold is up 10.4% YTD, Silver is up 5.26% YTD. So, year to date the safe haven trade is outperforming. But it is cryptocurrency, particularly Bitcoin (the super safe haven trade?) that has taken a moon shot YTD.
In other words, the most lucrative trade so far this year was not to invest in the system but to completely opt out of it! Perhaps Bitcoin is the central banker’s worse nightmare.
In fact, all of the cryptocurrency gains in 2016 and their combined valuations are beginning to rival some of America largest corporations.
Cryptocurrency was worth $97.3B in 2016, which is more than the combined market capitalization of Ford, HP and Weyerhaeuser combined which amounted to $96.2B.
In an article, entitled “Top Performing Global Currency Wasn’t What You Thought”, I wrote
“So cryptocurrency might be more than a fad, it has a function particularly in these uncertain times and it could be the future of modern money,” dated January 4.
“Bitcoin (or other forms of cryptocurrency) is particularly in demand in times of geopolitical, economic uncertainty and we have a lot of that now. Why?
In a few words, cryptocurrency has become a vehicle for circumventing capital controls, particularly in China and that is what might have exploded Bitcoins value above the milestone 1,000 USD and beyond.”
So bypassing capital controls and moving funds across borders means that cryptocurrency has a genuine function in today’s turbulent financial world.
For example, in Venezuela Bitcoin could be used by local savers as a vehicle to safeguard their savings (a safe store of value) from a monetary crisis and to get funds out of the country (something not possible with precious metals due to metal detectors at the border).
In other words, Bitcoin ( which is not based on debt but a finite amount of coins mined) is behaving like a safe haven asset, gold with also the added advantage of being more transportable across borders.
However, if Bitcoin is a rival to the debt monetary system then it has very powerful adversaries.
The current debt monetary system is making the western central bank shareholders over one million dollars a second in interest payments. For a chosen few at the peak of the food chain keeping their global human livestock enslaved by debt is the most lucrative business on the planet.
In short, the western oligarchs will probably take down anything (asset, or rival system) that is a threat to their unimaginable wealth and power.
If Bitcoin and cryptocurrency are the new gold safe haven asset then we can expect it to be treated like gold.
Put another way, cryptocurrency is unlikely to fly under the radar for too long, it too a potential threat to the debt monetary system could be targeted and torpedoed. What a bloodbath that would be.
So are investors in cryptocurrency being hemmed in for the slaughter?
Time will tell.