The recent action in $BTC has understandably gotten everyone excited, but there hasn’t been a lot of discussion on why. The USD is strong, the stock market is strong, gold is bid, why the sudden interest in crypto?
The reason, as I see it is China. To understand why, READ THIS ARTICLE by the anonymous “LZ”, https://investinginchinesestocks.blogspot.com/2019/05/china-must-prepare-for-new-global.html Go do it, I’ll wait here.
I know that was a lot to digest, and if you haven’t been studying up on macroeconomics & monetary systems (why haven’t you done that?! Do you want to be poor?! Argh!), it might be difficult to understand. Here’s the key paragraphs and how it relates to cryptocurrencies:
Read that again if you think China will dump treasuries. That paragraph explains the reality of the situation: if China exports less to the USA, it obtains fewer U.S. dollars, but it needs foreign currency to import natural resources such as oil. China’s dollar holdings will fall if trade is rebalanced. China has extremely tight capital controls because it has very little excess reserves backing its currency. If trade rebalances, China may “run out” of dollars, forcing a devaluation of the yuan to bring it in line with reserves.
The smart money in China (and anyone with a lot of it is likely going to be smarter than not), sees this coming. But because of the tight capital controls, they can’t get into dollars. So one of the escape hatches is $BTC, whether they buy it outright, or mine it.
China isn’t going to put out an editorial warning of a collapse in the Chinese yuan, but that is what is coming as the global financial system begins breaking down. The editorial also doesn’t say the end of Bretton Woods 2 was inevitable and forecast long ago. China should have been preparing for years, but instead of economic reform and opening the capital account, it went in the opposite direction. China’s current predicament is based on their failure to reform and presumably their assumption that the United States would continue its slow suicide for another 10 to 15 years, that a Trump figure would never come along to disrupt and accelerate the process.
China’s leaders got lazy and complacent, and then Trump came along and threw the chessboard to the ground. Makes you wonder who they were listening to regarding their grand global strategy, doesn’t it?
Ultimately, it doesn’t matter if you agree on the order of events because unless you’re speculating on relative movements in fiat currencies, the outcome of any reset will be global currency devaluation. What really matters is the timing, and whether you own enough gold and real assets before the reset hits.
$BTC is one of those assets.
Every Chinese millionaire (3.8 million of them) is going too soon be looking to preserve their wealth, because of the incompetence of their leaders. Chinese capital controls will limit their options. They will need something that is liquid, dis-inflationary, transnational, easily transmissible, and censorship resistant to store their wealth. Only one asset class fits that description, and it’s not stocks, bonds, gold, cash, commodities, collectibles, or real estate.
I’m guessing anyone reading this far knows what to do: Front run them.