The digital currency space has reached new heights with a total market cap of more than $24 billion, an all-time high. The main driver appears to be the two biggest digital currencies, bitcoin and ethereum, which have attracted adoption based on different use cases.
Digital Currencies Reach an All-Time High Market Cap – image from coinmarketcap
Bitcoin is now seen as a hedge and a useful addition to investment portfolios due to its unique nature which means it is uncorrelated with any other assets, making it highly desirable for diversification as it reduces total risk while potentially increasing gains.
In particular, anticipation over the bitcoin ETF which, if approved, would bring in Wall Street, has propelled the currency to its highest level ever, surpassing gold. A historical event that may have significant psychological effects as the currency now proves its value.
Ethereum, a barely two years old digital currency has in a short time created a highly vibrant, dynamic and very innovative happy ecosystem with discussions ranging from primitive artificial intelligence to preventing cheating in fantasy sports. Its market cap has recently reached an all-time high.
The eth community speaks of a flipping – a point when ethereum’s market cap overtakes bitcoin. They argue the new currency can do everything bitcoin does, but better, and then some more. They say eth’s transaction times are in seconds, fees almost nonexistent, taking bitcoin’s mantra of as good as free and instant global payments.
Bitcoin, but better? Perhaps, but the two are different and as we have seen recently can both grow. Bitcoin is more concerned with gold-like qualities, something you uselessly hold as a hedge against monetary mismanagement. Eth is more concerned with codable cash, money you or machines spend either manually or automatically. It is further concerned with a much wider range than just money. Chronicled, for example, secures the authenticity of sneakers through eth’s blockchain to prevent fake goods.
Bitcoin, through Rootstock, can take some of eth’s niche while ethereum could make obsolete bitcoin’s gold claim by themselves capping coin issuance. They both are trying, but Rootstock has problems from a user perspective while eth, though there are suggestions it will be limited to around 100 million, might still have some inflation.
They, therefore, appear more complementary, at least for now, but many are asking: brothers or foes? The market hasn’t decided, instead appears to be betting on both.
Regardless of how matters may further develop, both communities, which often overlap, have much to celebrate. Bitcoin just surpassed gold parity, eth just surpassed silver parity. Both are at or near all-time high. The boom times have arrived.
Following yet another sharp price drop due to the secretive, closed-door and private actions of China’s Central Bank, the bitcoin community turned today to angry rhetoric directed at PBOC.
“You can’t live in a fascist state and not expect the fascist state to come bursting through your door to slap you around, every now and then.” – says one bitcoiner. “I am about sick of China.” – says another. “It’s safe to say that China is going to keep saying something every time Bitcoin gets close to the value of Gold.” – says a third.
PBOC stands accused of taking measures against bitcoin every time price rises. Just as bitcoin surpassed gold parity, they announced the opening of an “investigation” into China’s big three exchanges: BTCC, OKCoin and Huobi.
Price fell sharply by around $300, but then slowly recovered, increasing by around $170 from the beginning of this month to reach around $1,070. PBOC again interfered. Telling Bloomberg they were to hold a closed door meeting with nine of China’s smaller bitcoin exchanges: CHBTC, BtcTrade, HaoBTC, Yunbi, Yuanbao, BTC100, Jubi, BitBays and Dahonghuo.
PBOC warned them to comply with regulations or risk being shut down. Price initially reacted by $80, but it recovered and even went higher as PBOC’s language was ambiguous. A word for word translation reads: “If there is a Bitcoin trading platform in violation of the above requirements [related to money laundering, foreign exchange rules, taxation and advertising],[and] the circumstances are serious, the inspection team will bring it to the relevant departments [for the exchange] to be closed down according to [the] law.”
It is not fully clear whether PBOC is referring to violations that happen after the above warning, or to violations that may have occurred in the past. The price’s reaction suggested the former which would have earned PBOC some praise for acting reasonably. But then, OKCoin and Huobi announced they are to pause bitcoin and litecoin withdrawals for a time estimate of one month to enact measures that allows them to comply with the requirements of PBOC.
Bitcoin’s Price Drops as OKCoin and Huobi Temporarily Pause Withdrawals – image from cryptowatch
Price reacted quickly, falling by almost $160 in minutes. It has now somewhat recovered, but denying people access to their own funds for a current time estimate of one month is always a worrying event. Some might also wonder, why is it just these two exchanges?
No one talks. We’ve tried to reach out to many, but they all have the same response: silence.
Anger Grows
OKCoin and Huobi were by far the most popular bitcoin exchanges. Most western traders used one of the two, with suggestions that hedge funds and other financial institutions were engaged in high-frequency trading there.
Some hours before their official announcement earlier today, a western based trader stated his hands were shaking as while he was logged in on OKCoin, he was suddenly logged out. When he entered the password, it would not work. “It’s the correct password,” – he insisted. After some more comments full of typos because he was imagining the worst, “going on a bike ride” – he said.
Hopefully he is fine, but the actions of PBOC leave much to be desired as they are not explaining their aims. PBOC is not officially talking to the media, instead sending out rumors about “third party custodians,” with their brief announcements nothing more than bland, bureaucratic, grayness, which says little to explain their intentions.
Instead, all we get is drip drops, with exchanges arbitrarily probably asked to enact trading fees although their absence breaches no laws, as well as to remove margins or futures for no given reason that has any relevance to the country’s laws.
This is no way to behave for the world’s second largest economy which has aspirations to be a global player. One of the world’s most powerful central bank cannot arbitrarily take actions that affect global markets without even explaining their aims or laying down proposals on what it wishes to achieve and how.
It has been over a month since the PBOC began investigating Chinese bitcoin exchanges.
PBOC’s actions do not affect just Chinese citizens. Many westerners used those two exchanges and probably other bitcoin exchanges based in China. Many of them are now suddenly shut out and though we are told temporarily, until it is proven so we do not quite know.
When America wished to make an example to show its intentions of applying the current laws to bitcoin related activity before it was clear it was so applicable, they picked a target which had seemingly intentionally engaged in actual money laundering. A target who happened to be running one of the far smaller bitcoin exchanges.
A bigger exchange would have affected many who would have turned their ire against the state for intentionally causing them the loss of much wealth. In any event, China has made clear its intentions that they require exchanges to comply far more than American authorities did back in 2013. Someone to make an example may not even be necessary.
If violations are found from now on then enforcement would be appropriate, but doing so without prior warning at the expense of so many, both Chinese and non-Chinese citizens, serves only to show that Chinese authorities do not take into account the considerations of others.
Regulations with clear rules, as well as audits, are desirable. Potentially shutting down exchanges before the law is even laid down and clarified it applies to this very new technology is a draconian action by out of touch far older generations who probably can’t even use an e-mail, let alone have any clue about bitcoin, the blockchain or today’s interconnected global markets.
It is rare that the London sky shines so bright you can’t find one cloud, but that was the weather yesterday in the capital that once used to run an empire where the sun never sets. In Washington DC, which has in many ways taken on that banner, the weather was more somber, just slightly less rainy than during the vote for Brexit, reflecting in both cases the seriousness of a monumental task that now faces the world and the country.
“We assembled here today are issuing a new decree to be heard in every city, in every foreign capital and in every hall of power. From this day forward, a new vision will govern our land.”
So thundered the newly elected president, putting to rest any speculation that he might soften his tone. Instead, both implicitly and explicitly, the speech indicated that Trump is now to go full speed ahead with what he has promised. That suggests current market trends will probably continue as somewhat confirmed by bitcoin’s recent $40 rise.
Bitcoin’s Price Rises Following Trump’s Inauguration – Image from BitcoinWisdom
Traders are betting that Trump’s plans are good for the economy. The already revamped White House website promises a “return to 4 percent annual economic growth,” through a one trillion infrastructure spending stimulus, “lower rates for Americans in every tax bracket,” and, somewhat directly relevant for our space, a “moratorium on new federal regulations” which “cost the American economy more than $2 trillion.”
With the republicans now controlling all legislative branches, the above economic plan is likely to go through in a relatively easily manner compared to his other aims. Moreover, it is doubtful any of it will be much diluted as Trump has seemingly made it clear in his speech that there won’t be any uturn:
“The establishment protected itself but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs. And while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land. That all changes starting right here and right now… [w]hat truly matters is not which party controls our government but whether our government is controlled by the people.”
Facing opposition, within and outside his own party, he’ll need to maintain the support of the people. So far, he has not disappointed them. In fact, he has offered them hope and optimism for the future, promising in his speech that “we will bring back our dreams,” further stating:
“We stand at the birth of a new millennium, ready to unlock the mysteries of space, to free the earth from the miseries of disease and to harness the energies, industries and technologies of tomorrow.”
It is still just words, but how anyone will retain trust in the political system if those words are not maintained after being told “[t]he time for empty talk is over. Now arrives the hour of action,” is unclear. Perhaps, therefore, we may shift and consider the new reality as well as the biggest question now facing the world with the answer having a significant effect on bitcoin’s behavior.
Confrontation or Cooperation?
“We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first. We do not seek to impose our way of life on anyone but rather to let it shine as an example… We will reinforce old alliances and form new ones. And unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.”
From China to Arabia, Europe and South America, a defining question is preoccupying glittery halls. Do they risk confrontation, or opt-in for co-operation?
For Arabia, any proxy wars between America and Russia, exemplified by the former’s support for Saudis and the latter’s for their geopolitical rival, Iran, will hopefully be brought to an end. How, exactly, is not clear as what little is now officially stated is far too general:
“Defeating ISIS and other radical Islamic terror groups will be our highest priority. To defeat and destroy these groups, we will pursue aggressive joint and coalition military operations when necessary. In addition, the Trump Administration will work with international partners to cut off funding for terrorist groups, to expand intelligence sharing, and to engage in cyberwarfare to disrupt and disable propaganda and recruiting.”
“Peace through strength will be at the center of… foreign policy.” – his administration now says. Whether showing great strength in the middle east will be the right decision, probably in cooperation with Russia as well as maybe all of NATO, is difficult to judge impartially, but what is easier to say is that the longer this continues, the more a minority on both sides will be radicalized, at a great cost for both, increasing the urgency for a quick end to this confrontation.
The Trump administration has a strong mandate regarding ISIS, so referring to them throughout the campaign, but whether he can end this 15-years long war which, in the process, would restore the reputation of the vast majority of Muslims, remains to be seen. If he does, markets are likely to very positively react both within and outside the blockchain space.
On China, they have recently softened their tone and have suggested a desire for co-operation. Trump will probably accept their offer and begin negotiations, with the two countries’ strong economic dependence towards each other likely leading to an agreeable outcome for both, but, whether that will indeed be the case or whether they instead repeat the mistakes of almost exactly a century ago, remains to be seen.
Domestically, the left in America likewise has to decide whether to co-operate or confront the new administration. President Trump and Bernie Sanders share in common some views, especially on trade, but much of the opposition has been regarding more cultural aspects. To that, he said:
“It is time to remember that old wisdom our soldiers will never forget: that whether we are black or brown or white, we all bleed the same red blood…”
There is a minority of racists in all colors who use it as an excuse to gain power and subjugate others, as there are small minorities who want their country to rule the world or to impose their religion upon others, but, by far, the vast majority of America, and, in my view, certainly Trump, do not see color, or gender, or sexual orientation, or nationality, so knowing there are people of good and bad character in all those groups. The left may, therefore, eventually, save their resistance for when it actually matters and has a chance of gaining the support of independents.
The Rise Once More of the Cross-Atlantic Alliance
It was almost 40 years ago that Ronald Reagan and Margaret Thatcher undertook structural reforms that shaped and still shape the world. Securing their place in history as, after a difficult period of transition, peace and economic prosperity followed.
Trump is no movie star and May is no Thatcher, but the people of Britain and the people of America have clearly once more ushered in a new era. Partly due to economics, but also, in my view, as a backlash against an elite that has given us 15 years of war and appeared to have no intention of ending it.
The very close decision by the free people of both Britain and America in the EU referendum and in the presidential election reflects the difficult choice that was to be made. Some may still fear, but our space, in particular, is a great example of the global world we live in. We interact with bitcoiners from Argentina, China, Dubai, Russia, South Africa, all over Europe and all over the world. Many of us have grown up chatting to individuals from countries across the globe. We see no color, no nationality, no religion. We consider all those qualities irrelevant wherever there is injustice. We just want back the peace and optimism of the 80s and 90s and, who knows, maybe we now might get it as Trump clearly indicates we are to move full speed ahead.
Disclaimer: The views expressed in the article are solely that of the author and do not represent those of, nor should they be attributed to CCN.
