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Bitcoin Has No Intrinsic Value? Neither Does the Dollar, According to St. Louis Fed

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Bitcoin has seen its fair share of criticism from central bankers, but for two analysts at the St. Louis Fed, cryptoassets could be the wave of the future.

In a recently published paper, Aleksander Berentsen and Fabian Schar of the St. Louis Federal Reserve argue that cryptocurrencies are “well suited to become an important asset class.”  As one might expect, this way of thinking is not common within institutional circles or even government.

The paper is intended as a primer on cryptocurrencies, delving into the technical details of transactions and mining. In the Outlook section, the authors maintain that bitcoin’s most apparent application is holding value as an asset. In time, bitcoin can emerge as its own asset class, giving investors broad diversification benefits.

Interestingly, Berentsen and Schar argue that bitcoin itself “could over time assume a similar role as gold.” This argument has been posed before by those who view bitcoin as a long-term store of value. Investment adviser Ark Invest has explained that bitcoin could store $25 billion worth of value if it usurped only 1% of gold’s role as a private investment.

Bitcoin and gold have diverged sharply in recent weeks, as the cryptocurrency’s nouveau riche sought refuge in bullion following an unprecedented decline in the crypto market. Gold prices clocked in at four-month highs recently, while bitcoin plunged 50% from last month’s record levels.

Bitcoin Has No Intrinsic Value? Neither Does the Dollar

One of the chief criticisms levied at bitcoin and other cryptocurrencies is their lack of intrinsic value. According to the authors, the same criticism can also be directed at fiat money like the dollar.

“… Bitcoin is not the only currency that has no intrinsic value,” they argue. “State monopoly  currencies, such as the U.S. dollar, the euro, and the Swiss franc, have no intrinsic value either. They are fiat currencies created by government decree. The history of state monopoly currencies is a history of wild price swings and failures. This is why decentralized cryptocurrencies are a welcome addition to the existing currency system.”

It goes virtually without saying that the views expressed by Berensten and Schar are rarely uttered in the world of central banking. After all, these are the very institutions in charge of monetary policy (a fancy word for the size and growth rate of the money supply).

The Federal Reserve has expressed keen interest in bitcoin, and has confirmed that it too is thinking about creating its own digital currency. Like other central banks, the Fed is also interested in distributed ledger technology to facilitate payments, clearing and settlement.

It has been tough to ignore bitcoin’s growing sphere of influence. The cryptocurrency, which started off as an obscure and esoteric entity, has spawned a multi-billion-dollar economy that connects startups, investors and consumers. At its height, the cryptocurrency market reached $830 billion. That was a mere 12 days ago. Even after the latest drop, the market cap for all 1,400+ coins is in excees of $564 billion, according to CoinMarketCap.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Bitcoin

Davos: What’s Bitcoin’s Role in Trump and China’s ‘New World Order’?

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According to Investec CEO Hendrik du Toit, despite U.S, President Donald Trump and China’s President Xi Jinping not coming face to face at Davos this week, the event is still encapsulated by their simmering economic battle.

The chief of the global investment firm suggested that Davos represents a thrashing out of the coming ‘new world order’ – with the U.S. and China fighting for a seat at the head of the table.

Amid these talks some still found time to throw FUD on Bitcoin and cryptocurrency in general. But putting aside price predictions for the moment, just what is crypto’s role in this new world order? The answer probably has nothing to do with its role as a digital currency.

New World Order at Davos

Du Toit told was quoted as telling CNBC reporters on Thursday morning that:

“The big uncertainty is the U.S.-China trade negotiation which is not really about trade, it’s about a new world order.”

Henrik also made allusions to China’s recent slump in GDP growth, which just hit the thirty year low of 6.6%. As many former communist nations have discovered in the past thirty years, it’s easier to record growth when you don’t have much to begin with. Now China is up in the big leagues, and it’s not entirely clear how the country will adapt to its new surroundings. Du Toit continued:

“And if we get a dysfunctional world order having come from a space which was very, very good business over the last 20, 30 years since communism fell, then there may be some big hits along the way and there may be some big challenges.”

Keeping Score

China’s GDP growth rate is still almost three times that of the U.S, and the trade deficit between the two nations saw China record a $350 billion surplus at the end of the year in 2018. Exports to the U.S. rose 11.3% last year, compared to the measly 0.7% increase in U.S. goods shipped to China.

However, few statistics tell the whole story, and according to financial analyst Gary Shilling, the trade deficit is a clear sign of American dominance, as he recently posited:

“The thing is…we (the U.S) are the buyer, and they’re the seller – and when you’ve got plenty of goods and services, it’s the buyer who has the upper hand. And besides, where would China sell all this stuff if it wasn’t to American consumers?”

Shilling went so far as to say that Donald Trump currently has the upper hand in the trade war, and that U.S. economic dominance would continue to eclipse China – specifically due to Trump’s ‘America first’ policies.

“I think ultimately we’re going to see more imports of American goods into China; they are going to be less aggressive on exports; they’re going to steal less technology, they’re going to demand less technology for the cost of doing business in China. I think it’s going to shift in America’s favour, but the transition is rough.”

Weaponizing Bitcoin

Shilling’s take encapsulates a best-case scenario – one where the growing number of Chinese troops terraforming the South China sea, and the constant theft of U.S-patented technologies don’t cause global tensions to boil over.

But if they did boil over there’s every reason to assume that cryptocurrency, and Bitcoin in particular, would have a major role to play. However, that role may be its last on the world stage.

Estimates towards the end of 2018 placed over 80% of Bitcoin’s mining power in China. Given the Chinese government’s tendency to simply take things they like, any conflict between them and the U.S. would likely see Bitcoin weaponized, and its ‘distributed’ ledger commandeered.

A recent Forbes article suggested as much, and claimed that China’s Bitcoin’s dominance posed a real threat to American tech, finance and economy. Furthermore, many nations have already taken steps to curb that dominance:

“While U.S. regulators are wrapped up in their own turf wars, other nations are moving fast to create a welcoming regulatory environment for cryptocurrency.”

That includes the U.K and the European Union, both of which have taken steps to increase the popularity of cryptocurrency and blockchain within their respective regions. It might terrify the banksters to see blockchain spread around the Western world, however, the shadowy figures at the levers of governmental control are already attempting to leverage blockchain technology in their favour.

Hash Wars

How much would it be worth to China and the U.S. to gain control over Bitcoin’s ledger? In the previous century we saw the world’s nations sacrifice not only money and resources, but also a majority of their male adult populations for a slice of whichever pie was being baked at the time.

While many major cryptocurrencies can be commandeered for just a few thousand dollars per hour, Bitcoin would cost $261,379 per hour to control according to independent data. The Ethereum Classic blockchain can currently be bought for $4,275 per hour via cloud-mining marketplaces like Nicehash, but control of BTC wouldn’t be sought in that way.

More likely both nations would get to work on building the largest mining farms they could, made up of as yet unseen super-computers from various R&D labs hidden around the country. A digital battle for control of Bitcoin would ultimately be decided by which nation could develop their computational tech the quickest.

America needs YOUR Bitcoin!

Such a scenario would see the sharpest minds in silicon valley employed as government agents in much the same scenario as mathematicians and codebreakers during the second world war. By the end, the Bitcoin blockchain would be illegitimate and abandoned; and the lasting legacy of BTC would be as a bit-part player in the much larger engagement that was World War 3.

Looking Ahead

Not all the noises coming out of Davos this week were so ominous. The CEO of Nasdaq, Adena Friedman, recently offered the possibility that cryptocurrency could still be the global currency of the future.

Meanwhile, Circle CEO, Jeremy Allaire, suggested that if humanity is to survive the digital age, it will require the resilient and decentralized tools which crypto and blockchain provide.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 144 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Cardano Price Analysis: ADA Must Hold This Key Support or Be Forced to Give Up $0.04 & $0.03

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  • ADA/USDT price action has formed a head and shoulders pattern, subject to a possible neckline break.
  • Chunky supply is heavily capping upside for ADA/BTC, tracking from 0.00001400-0.00001200.

ADA/USDT in the very latter stages of trading on Sunday was seen nursing chunky losses of over 5%. The price has continued to trade within a choppy nature, a failure to see commitment from either bear or bull camp for ten sessions now. Market participants have been treading extremely cautiously since the steep fall on 10th January. ADA/USDT had plummeted a whopping 22% within the mentioned session. It was the biggest drop in a single session observed since 16th January 2018, where the price tanked around 44%.

Head and Shoulders Formation

ADA/USDT daily chart.

Looking via the daily chart view, price action has been constructing a head and shoulders pattern formation. The left shoulder and head are seen with the right shoulder close to completion. Currently the price on the latest candlestick heading south is edging closer to the neckline, which will determine whether the textbook pattern will materialize. In terms of the vital support (neckline), this is tracking at $0.047000. Should the bears sustain the downside momentum observed in this session, then a breakout could be seen in the next day or two.

Key Support Areas

A breach of the above-detailed neckline will likely open another wave of hard selling pressure. On this potential note, key areas of comfort should be known at $0.039000 (daily support), $0.035500 (27-28th December 2018 low area). Going by the distance between the head and neckline of the pattern, a drop down to the December 2018 lows may be seen. As a result, this would see a retest of the low area from 7th-15th December, $0.027600. Strong buyers came into play here in mid-December to send ADA/USDT back into a decent upside trend.

ADA/BTC Technical Review

ADA/BTC daily chart.

Upside is capped as the price trades within a very stubborn area of supply. There is a chunky amount of resistance that tracks from 0.00001400 down to 0.00001200. The price has not traded comfortably above this region since the start of September 2018. Furthermore, given the continued rejection and lack of upside momentum, ADA/BTC could be seen back down to the demand area below, 0.00001000. Further south, eyes would be on December low area, 0.00000800.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Tron Price Analysis: TRX/USD Rallies a Chunky 20% in Three Days

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  • TRX/USD extends to the upside, rallying over 20% within the past three trading days.
  • DApp developers continue to migrate over to the Tron network.

TRX/USD was seen holding decent gains of some 4% at the time of writing on Sunday evening. The bulls are further resuming their current solid trend higher. It has gained a whopping 20% within the past three trading days. After a brief period of consolidation, between 22nd December to 3rd January, the bulls have been gunning aggressively higher. Additional buying pressure came following a breakout of a pennant pattern structure, seen via the daily chart view.

Aside from the solid technical price developments, fundamental updates surrounding the Tron foundation remain positive.

DApp Developers Love Tron

The Tron network continues to further maintain high popularity as the go to blockchain for dApps developers. A growing number of migrations have been occurring, particularly away from the Ethereum network, as developers seek alternatives. They are looking for somewhere that will facilitate for higher number of processed transactions, among other requirements.

A top Ethereum DApp, EtherGoo, a competitive blockchain based game, recently announced their decision to move over to the Tron network, away from Ethereum. This coming on the back of a growing trend across gaming DApp developers, given Tron’s large efforts to build a presence within the gaming sector.

Following the developer announcement, EtherGoo is now going to be known as TronGoo. This game rewards players with crypto for depositing Goo, promotion of the game, token stealing other users, among others. Previously the reward was in ETH, but now users will be rewarded with TRX.

Technical Review – TRX/USD

TRX/USD daily chart. Bulls are strengthening their move to the upside. Next target zones are highlighted on the chart.

As detailed, the bulls managed to execute an explosive move out from a pennant technical structure. This saw an additional wave of buyers come in, assisting TRX/USD to further elevate. The price is testing the 24th December high area, $0.024355, where sellers previously came in.

A break above the mentioned area of resistance, will likely provide further win behind the bull’s sails. The next zone of interest is seen just above, which can be seen tracking from $0.026000-$0.028000. TRX/USD has faltered here on several occasions between August to October.

Finally, should upside momentum maintain its current course and breach the detailed supply zones, then $0.040000 will be eyed. The price was last seen here back in July 2018, before TRX/USD fell hard.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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