It’ll be a short note from me today – I’ve just returned from a short holiday, and am still getting properly caught up.
It’s been good to “unplug” from screens for a while, and I highly recommend it. It does have its downsides though, like relying on print media for the news. And there wasn’t much in there besides the Conservative leadership drama, the public immolation of Neil Woodford (now being stoked by Mark Carney), and the crosswords (slowly getting my bearings with cryptic clues).
But now I’m back at my desk and plugged in once more. I wrote a little last week on my prediction that bitcoin will boom when the next round of interest rate cuts and quantitative easing kick in (when investors will be forced to “reach for yield” even further) but what it does until then remains to be seen.
Since then, BTC has lost the sunlit $8.5k territory, but has surged feverishly whenever pushed below the $7.7k area:
(Click to enlarge)
The reactions to the price action has been typical of crypto, by which they varied wildly and are often extreme. Just typing “bitcoin price” into Google this morning brought up three conflicting stories:
I need to speak to Sam Volkering and Harry Hamburg about what they make of it all. Sam bought BTC when it was $12, and Harry’s been neck deep in the subject since well before the great 2017 boom…
Meanwhile, the Italian Problem is rearing its head once more. Claudio Borghi, of the Lega “half” of Italy’s coalition government, has released a draft of the proposed separate currency, the mini-BOT. The mini-BOTs would be short-term government bonds that Italians could use as legal tender alongside the euro.
Source: Claudio Borghi’s Twitter
(BOT just means Italian government bond, meaning literally “Buoni Ordinari del Tesoro”, or “Ordinary Treasury Bond”. If the UK government were to try such a scheme, the notes would be called “mini-gilts”, while if the Germans were to try it they’d likely be called “mini-bunds”, or “mini-schatz”.)
Mini-BOTs are effectively a way for the government to borrow more and spend without raising tax revenue (not at first anyway). This is done by purchasing goods and services with bonds rather than euros. It doesn’t solve any long-term problem for the Italian debt burden, as the bonds would still need to be paid off.
But it does create a long-term problem for the euro, the stewards of which are now expressing a level of revulsion at the Mini-BOT that until now they’d only reserved for bitcoin. Mario Draghi over at the European Central Bank recently declared that “Mini-BOTs are either money and then they are illegal, or they are debt and then the stock of debt goes up. I don’t think there is a third possibility.”
Bitcoin and Mini-BOTs. Two bastard currencies, deemed illegitimate by the monetary establishment. Bitcoin’s success speaks for itself, and I’m confident of its continued survival. But the Mini-BOT is another matter – for its very existence threatens to kill its father…
More to come,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates