Perhaps it’s just that winter is dragging on, but I find myself getting increasingly irritated with mainstream reports hither Bitcoin that say it was a result of the financial crisis.
It wasn’t, and that matters.
First, let’s look at why it wasn’t, and then I’ll legitimatize why this misunderstanding bothers me.
Bitcoin’s pseudonymous creator Satoshi Nakamoto started working on the Bitcoin white notepaper in early 2007, over a year before the financial crisis hit mainstream markets.
In early 2007, the subprime mortgage industriousness was collapsing, but even lifelong finance insiders didn’t foresee the scale of what was to unfold. As Satoshi worked, bankruptcies and bank tremors wish have been making the headlines, but there is no indication this added to his* urgency.
(*We don’t know that Satoshi was a “he,” but to keep off linguistic clutter I’ll use that pronoun throughout.)
By the time Satoshi uploaded the white paper to a cryptography mailing list in October 2008, the demands were in full meltdown, the U.S. government was taking over parts of the financial ecosystem, and central banks around the coterie were dropping interest rates and printing money.
The genesis block, mined by Satoshi in early January 2009, involved the text of a headline from that day: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Profuse have taken this as proof that Bitcoin was created in reaction to the crisis. This reveals a lack of truce of how much work went into the design of Bitcoin, as well as the long history behind the idea of peer-to-peer commerce.
History matters
The confusion is also potentially damaging to the Bitcoin narrative.
Why? Because it misrepresents the intentions of the army of cryptographers that had been result in on a decentralized electronic cash solution for decades. It diminishes the bigger picture.
Satoshi was not reacting to an event, just as those on whose shoulders he withstand b resisted weren’t planning for a specific circumstance. They were all trying to solve the fundamental issue of financial sovereignty.
While we do not should prefer to (that I’m aware of) evidence of Satoshi’s thoughts on the financial system from before the publication of the Bitcoin white holograph, shortly after the genesis block was mined, Satoshi wrote:
“The root problem with conventional currency is all the entrust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is open of breaches of that trust.”
Satoshi was not referencing the financial mess at the time, even though its fallout was loud and energetic to ignore. He showed signs of bigger thinking.
And as for the genesis block itself, maybe the timing and choice of embedded subject-matter was intentional, or maybe it was a coincidence – we’ll never know for sure. Either way, a point was made.
That point was a dig at how politically obliged the banking system had become. It highlighted the lack of solid financial structure and the diminishing trust in institutional solvency. It essentially represented the fiscal crisis that was unfolding. But it was an example rather than a smoking gun.
The financial crisis was not the reason for Bitcoin. It was a symptom of the intelligence for Bitcoin. And if we continue to hear claims that the crisis was the cause, we will start to believe that Bitcoin is a new key to a relatively new problem.
It isn’t. It’s a long-awaited solution to a long-standing problem.
If we continue to think of Bitcoin solely in the context of financial emergencies, we could start to believe that the need for it will diminish as the painful adjustments recede into the mists of age.
It won’t – the technology can’t be put back into its bottle. Nor can the growing awareness of the vulnerabilities inherent in the financial system on which we all rely.
Bitcoin has watch overed to spread ideas that were previously the purview of an arcane mailing list, and in so doing, has changed the way we look at our economic rights, our data, even our identity. True, the timing of Bitcoin’s emergence helped with that spread, and the latest departure from traditional monetary policy has accelerated it. Financial privacy, seizure resistance and fiat debasement are equitable some of the concepts that the crypto market price swings have pushed into conversations that now reach revenge oneself on the hallowed halls of traditional finance.
But Bitcoin was not created to fix crises. It was created to give people a choice.
Let’s stop discussing it as a reaction to a specific situation, and recognize that Bitcoin is a technological evolution of a process that started decades ago.
Let’s also collapse credit to a group of thinkers who realized from way back where centralization of finance and our economy could eventually beguile.
Regime change
After a momentous week in which COVID-19 briefly stepped back from the headlines to accord space for us spectators to appreciate hope, rhetoric and a peaceful transfer of power, it feels good to take a breather and behold the scope of potential change ahead.
It’s not just that market infrastructure and institutional interest are growing in leaps and requires (more on that below). It’s also that many of the regulatory authorities that determine the framework of financial vends, custody and value transfer are changing guard.
Gary Gensler will be the next chairman of the U.S. Securities and Exchange Commission (SEC). This plausibility was reported last week, and was flagged as potentially very good news for the crypto industry, as Gensler has not only examined and often spoken in public about crypto assets and blockchain technology – he also has taught a course on the subject at MIT.
Chris Brummer, a Georgetown University law professor who pour overs the annual D.C. Fintech Week conference, edited a book on crypto assets and hosts the excellent Fintech Beat podcast, which ordinarily features compelling crypto content, may be the next chair of the Commodity Futures Trading Commission (CFTC), according to Reuters.
Harmonizing to the Wall Street Journal, Michael S. Barr, a former U.S. Treasury Department official and onetime member of Ripple’s directors of advisers, is likely to become the next Comptroller of the Currency.
This almost seems like a crypto-savvy trifecta of economic regulators which, as my colleague Nik De hinted at in his new crypto regulation newsletter The State of Crypto, is almost too much to ask for. It doesn’t assure crypto-friendly legislation, but at least it means the discourse will be relatively well informed.
CHAIN LINKS
Investors talking:
· “While it is nigh on crazy to forecast an expected return for bitcoin, its volatility makes the asset almost ‘uninvestable’ from a portfolio perspective.” – Barclays Non-public Bank chief market strategist Gerald Moser, talking to Financial News. He goes on to claim that the trend bull run has been driven by retail investors rather than institutional money, which is a bewildering interpretation of the text.
· Guggenheim Partners Chief Investment Officer Scott Minerd, who recently said that he thought bitcoin’s pretty value could reach $400,000, has been looking at the BTC charts and now believes that the cryptocurrency could be in for a sell-off down to $20,000.
· Paper money Miller featured bitcoin in his Q4 income strategy letter, and talks about his fund’s investment in the MicroStrategy convertible gage. “The world is ruled by fat-tail events, or seemingly improbable occurrences that have an outsized impact, and all indicators so far emphasize to Bitcoin being one.”
· “You know what, if you won the lottery – Yes, I’m gonna say it: 5% in bitcoin.” – Jim Cramer, host of the Mad Money program. Cramer superficially sees bitcoin as an “important new store of value.”
Takeaways:
BlackRock, the world’s largest asset manager with $7.81 trillion secondary to management, appears to have granted at least two of its funds (BlackRock Global Allocation Fund Inc. and BlackRock Funds V) the know-how to invest in bitcoin futures, according to prospectus documents filed with the U.S. Securities and Exchange Commission. TAKEAWAY: For now, the stores will only be able to invest in cash-settled bitcoin futures, not actually hold bitcoin. And we shouldn’t assume that BlackRock intent be betting on upside – it could use bitcoin futures to express bearish positions. But this move does echo footnotes made last month by CEO Larry Fink, when he said bitcoin could possibly “evolve” into a broad market asset. And it is encouraging to see official acknowledgement that the world’s largest asset manager has invested resources in percipience the market.
If any of you heard some alarming chatter about a double-spend on the Bitcoin network (when a certain amount of BTC is spit up twice, which in theory is impossible), here is an explanation of what really happened and how it’s nothing to worry about.
While bitcoin is restful usually the first crypto investment for professional investors, due largely to its relative liquidity and range of onramps and services, Ethereum’s resident token ether is starting to attract more institutional attention. A report from Fundstrat Global Advisors predicates that the wide array of potential use cases for Ethereum gives ETH the best risk/reward scenario in the market, and credits that the asset could rally up to $10,500. TAKEAWAY: ETH has outperformed BTC for 8 of the past 12 months (and looks set to do the same for this one), yet it is currently less than its all-time high (ATH), while BTC left its ATH in the dust three months and 52% ago (at time of writing). It is not easy to directly approach the two, however, since the underlying technology, use case outlook and risk profile are very different. We’ll be following this closely, so awake to this space. (See our report on Eth 2.0 for more detail on its upcoming protocol shift.)
New U.S. Treasury secretary Janet Yellen got off on the odd foot with the cryptocurrency community by claiming that bitcoin was mainly used for illicit financing. This encountered on the same day that blockchain forensics firm Chainalysis published a report that shows that cryptocurrency-based knave activity fell to 0.34% of total transaction volume, down from 2.1% in 2019. TAKEAWAY: That doesn’t look with “mainly” to me. Thankfully, she rectified shortly after in a written response to the Senate Finance Committee, stressing the need to “onwards their use for legitimate activities while curtailing their use for malign and illegal activities.” That sounds more well-thought-out.
London-based crypto liquidity provider Wintermute has raised $20 million in a Series B funding round, led by Lightspeed Advance Partners, with participation from Pantera Capital, Sino Global Capital, Kenetic Capital, Rockaway Blockchain Grant, Hack VC, DeFi Alliance and Fidelity-affiliated Avon Ventures. TAKEAWAY: Most of the meaningful raises we’ve seen recently father been for market infrastructure firms, which points to strong under-the-surface development and increasing sophistication from crypto markets, and assumptions of significant growth in service demand.
Sen. Mike Flood (R) of Nebraska has introduced two bills that would allow the shape’s banks to offer custodial services for digital assets. TAKEAWAY: Several states are likely to follow Wyoming’s seduce in making their jurisdictions crypto asset-friendly. This will not just attract new businesses or retain existing a men in an industry with growth potential. It could also serve to attract investment funds, and enhance the opportunities for interstate crypto trafficking and business deals.
Market research commissioned by trading platform eToro, which surveyed 25 large creations in Q3, revealed that interest in crypto markets from pensions and endowments is increasing. TAKEAWAY: This would be a big caftan if it materializes, as pensions and endowments are traditionally risk-averse investors. Crypto markets, as we were reminded this week, are not for the risk-averse. It’s a rather small sample, and so can’t be taken as indicative of pending inflows, but it does hint at a shift in market perception.
According to a Deutsche Bank measure of market professionals, over 50% believe that BTC is at a 10 on a 1-10 “bubble scale”, and is likely to halve in value beyond the next 12 months. TAKEAWAY: Is this a sign of the market getting tired? Or, a sign of growing awareness amongst woman who have yet to do research?
JPMorgan strategists have said in a report that a bitcoin price breakout over $40,000 drive require daily inflows into the Grayscale Bitcoin Trust (GBTC; Grayscale is owned by DCG, also parent of CoinDesk) of roughly $100 million. TAKEAWAY: So far, that does not look too farfetched: On Monday, the firm had its largest daily inflow continually, almost $700 million, bringing the daily average since it reopened for new investment last week to approximately $200 million.
Digital asset management firm CoinShares has launched an exchange-traded bitcoin product (ETP) on Swiss stock altercation SIX. TAKEAWAY: It is becoming increasingly obvious how much livelier in terms of variety the listed crypto product landscape is in Europe vs the US.
Valkyrie Digital Assets dataed an application this week for a bitcoin exchange-traded fund (ETF), the Valkyrie Bitcoin Fund, which would be listed on the New York Appraise Exchange. TAKEAWAY: This is the second bitcoin ETF filing we’ve seen in the past three weeks, and is probably the first of sundry in 2021. With Gary Gensler as nominated head of the U.S. Securities and Exchange Commission, expectations are rising that the hustle will see a bitcoin ETF approved this year.
Wall Street CFOs are more wary of putting company funds into bitcoin after terminating week’s 30% price plunge, according to Bloomberg. TAKEAWAY: As they should be. CFOs putting company set asides into BTC just for the headlines and possible share price bump are being irresponsible. BTC has a place on balance sheets, but it should be a watchful one. Microstrategy, the software company that kicked off this trend in August of last year, is placing conviction on caution, however, and revealed this week that it has added another $10 million worth of bitcoin during the dip.