Bitcoin ( Crypto) Is Not Tulip
Different Attitude Towards The World Of Crypto: China vs the US
It is quite obvious that China ( or even India and some other countries ) has a different approach towards Crypto vs the US. Those countries are imposing a ban or restricting crypto trading and mining while the US is just trying to regulate Crypto. Why?
Just look at the trading volume and value of Crypto daily and remember most of the trading is done in the US market and transacted in USD.
At the highest point, total market capitalization for Crypto was more than $ 2 Trillion in Apr 2021 and represent about 17% of the global total Gold value.
Again, if you look at the below chart, the highest daily trading value for crypto could reach as high as $3.18 Billion, even at this moment, the daily trading value is more than $450 mil.
Just imagine how the US major financial institution like GS / JP Morgan trying to promote the crypto through ETF/structural products / derivatives/options or futures contracts or even sovereign fund like Temasek also, jump on the bandwagon to invest in Crypto exchange platform (Binance ) through one of its ventures fund. But as a caveat, we need to distinguish between investing directly in crypto vs exchange platform or establishing ETF/derivatives to earn commissions.
Crypto Is Not Tulip
We all know that crypto can’t act as “currency” because of its hyper volatility but so long as it can find demand from investors (like ransomware / pirates/ warlord/ dictator /for money laundering) and because of its characteristic of privacy and anonymous, it can act as a perfect “alternative asset” or store value for such (special requirement) transaction purpose.
Can Bitcoin fetch $100K? Of course, it can if there is demand for it, for whatever reasons and I am sure, along the way, many people can make money and become a millionaire through crypto investing, no doubt. I think crypto may survive and will be with us for a long time so long as it can continue to attract demand for the above reasons/purposes, but with the nature of being a speculative kind of alternative asset class, the price will be very volatile from time to time.
DeFi ( Decentralized Finance ) is a BIG word and will continue to be used to promote crypto as an alternative investment. I am sure crypto will prevail and become more and more popular among tech-savvy investors.
The Crypto market will become more creative and flourish with different types of new crypto being created each day with branching out and development of blockchain technology.
“Bitcoin could turn out to be “the mother of all bubbles”
Like any type of investment asset, bitcoin/crypto could turn out to be in a “bubble” if there is enough “hype” and liquidity to drive the market /price. Even the stock market is having a bubble from time to time like the one that happened in the year 2000s ( dot.com bubble).
Anyone who invests in crypto should recognize the volatility and understand the nature of “speculative” in such “alternative investment” asset class.
PUBLISHED TUE, APR 6 2021
**BELOW KEY POINTS QUOTED FROM THE ABOVE ARTICLE PUBLISHED ON 6 APR 2021:
· -The value of the cryptocurrency market topped $2 trillion for the first time on Monday.
· - Ether hit an all-time high of $2,151.25 on Tuesday morning Singapore time, according to CoinDesk. It is up over 180% year-to-date.
· - Ethereum, the blockchain behind ether is seen as a key platform for so-called decentralized finance (DeFi) applications and non-fungible tokens, or NFTs.
· - Bitcoin the biggest digital currency accounts for over 50% of the entire cryptocurrency market capitalization and has been a big driver behind the move towards $2 trillion.
-Total global gold value at around $12.3 Trillion, at the top of Crypto valuation, it represents around 16% of total gold value.
U.S Dollar Supremacy And The Rise of Fiat Stablecoins< source: datadriveninvestors.ocm>
Why dollars are still king and fiat stablecoins may see a resurgence.
The Federal Reserve offers custodial services to foreign central banks for their Treasury and agency holdings. In March, these holdings reached a record high of nearly $3.58 trillion. Contrary to the cries of doom and gloom, the lesson is drawn from the 1997 Asian financial crisis, the 2008-09 financial crisis, and last year’s pandemic experience is that, when looking into the proverbial abyss, everyone wants dollars. A Bank of International Settlements study of dollar-funding of non-U.S. banks concluded that the dominance of the dollar in international finance and the attendant policy issues are likely to endure.
For all of its flaws, the greenback remains the most important invoicing and vehicle currency. Supply chains are often dollar-funded. The U.S. dollar is still on one side of more than 85% of the transactions in the $6.2 trillion-a-day foreign exchange market. The dollar knows no rival. There is simply no compelling alternative. The Chinese yuan is not convertible and its markets not sufficiently transparent to take on a significant role. Europe’s monetary union is far from complete; progress toward a fiscal union is stuttering at best. Its bond market remains fragmented, appearing more like the U.S. municipal bond market than the Treasury market.
While cryptocurrencies are traded, they are not being truly used as a means of exchange. The daily volume is minor compared with their market cap. Studies have found that a high percentage of Bitcoins have not changed IP addresses for a couple of years. The more they are hoarded, the less they can achieve the networking effect that bestows money-ness, making it more of an asset than a currency, which is how the Internal Revenue Service regards crypto.
What Is Stablecoins ? <source:Investopedia.com>
Because of volatility in crypto, some investors are looking for “stability “within the crypto world. Here you go, stable-coins with yield farming or coin-staking to earn a passive income of 10-40% p.a, some even giving out crypto token as a bonus and could fetch as high as 40-50% of “passive income” p.a.
What Is Yield Farming? <source:coinmarketcap.com>
Is Stablecoins Really Stable and Safe?
The world’s first large-scale cryptocurrency run.
BY MIU LIN ON JUNE 18, 2021 <source: OURBITCOINEWS.COM>
Iron Finance Details DeFi ‘Bank Run’ and Titan Token Collapse <source:finance.yahoo.com>
<Video CREDITED: TECHLEAD>
<VIDEO CREDITED: TECHLEAD>
The Real Risks of Moving all your Assets into Stablecoins <source:medium.com>
Petrodollars vs Cryptodollars
When the pandemic hit, the US dollar was as mighty as ever. Despite talk of faltering American supremacy with the US government printing trillions of dollars via QE and fiscal policy, the dollar ruled as the medium of international trade, the anchor against which other nations value their currencies, and the “reserve currency” most central banks hold as savings.
Dollar supremacy shall prevail and continue to hold its glory with the transition from “Petrodollars” to “Cryptodollar”.
Crypto may not be the perfect substitution for currency as medium of exchange but it could definitely be used as an alternative to Gold as a store of value, to some extent, as long as there is demand for its transaction. Another aspect to note is that the world central bank also using blockchain technology to develop their own CBDC ( central bank digital currency), which may increase the speed of transaction and reduce the cost but not the “privacy / anonymous “ aspect.
Why central banks want to launch digital currencies | CNBC Reports
Every investment carry risk, same as stocks where I lost huge amount of money in Eagle Hospitality Trust or even perpetual bond in Hyflux, investing in crypto also have its own risk. Even for stablecoins, the counterparty risk, governance or transparency of the collateral asset is worth taking into consideration, not just the yield (like dividend or value trap).
As a disclaimer, I do not invest in any crypto and this is not at a call to buy or sell crypto, please do your own due diligence (DYODD) before investing in Crypto.
<source:coindesk.com> Ends in $18.5M Settlement
In a closely watched case with wide-ranging implications for the crypto market, Tether has admitted no wrongdoing and will provide reports on USDT’s reserve composition for two years.
Tether’s First Reserve Breakdown Shows Token 49% Backed by Unspecified Commercial Paper <source:coindesk.com>
Well, why just a settlement with fine and not a ban? Like I said earlier "水很深".
If I were the US government, I will be happy to see if all the Stable-coin is using US T-bill as collateral, again it may retain my “Dollar-Supremacy”.
The U.S. Unlikely to Join Other Nations in Banning Bitcoin <source:newsweek.com>
Cheers !! If you want to be Happy, Buy HAPPYCOIN!! ( kidding ) :D
I am a bit puzzled initially on why we need “stable-coins” which is pegged or using fiat as collateral whereas the initial idea of crypto is because of problems cause by this fiat money and for which they say may lead to hyperinflation due to the government’s act of printing money recklessly? OK, well, the below link may have some explanation …
What's the Point of a Stablecoin? (A Simple Explanation) <source:grantbartel.com>
“There are several reasons cryptocurrency market participants move to stablecoins as opposed to traditional ‘risk-off assets. For one, staying in the cryptocurrency market allows them to move faster between trades without having to wait days to transfer to fiat money. It’s also true that not all cryptocurrency exchanges support the use of fiat currencies, leaving stablecoin as the only solution.
Now that stablecoins have provided a way to find safety in the cryptocurrency market, market participation in terms of volume and market capitalization has steadily grown. Due to increased confidence in the cryptocurrency marketplace, more people are choosing to engage in the market.
As stablecoins bring more confidence into the market by allowing participants a ‘safe space,’ more movement, or volume, has occurred. This volume has had a proportional effect on liquidity, making the cryptocurrency market quicker to manoeuvre as well as making it more efficient. Increased efficiency also brings more accurate asset pricing, resulting in fairer asset prices and tighter bid and ask spreads.
The benefits of stablecoins are immense and have given a massive gift to the entire cryptocurrency market. By providing a ‘risk-off instrument, the market has instilled greater confidence, it’s grown, and it’s become more efficient. However, not all stablecoins are created equally, so getting to know the way they work can help you choose one over the other when the time comes.”