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Something out of Left Field

BostonCoin news pup*date Nov-Dec 2019

Something Out of Left Field

A month is a long time in cryptopia, and a lot can change. Last month we reported that the Chinese government had welcomed crypto and blockchain with open arms, and bitcoin rocketed up around 40% in a single day. A few more ticks of the clock, and other news out of China sees bitcoin plumbing new lows. Bitcoin going from AU$11k to AU$14k over the last weekend of October was a lovely ride, and it took many altcoins with it. It was a ride which very few people saw in advance (unless the chartists were privy to the thoughts of the Chinese president).

When bitcoin dropped back down to AU$10k, and many altcoins followed, it was a rude shock. Despite the tendency for bitcoin to head south every single Christmas season, every single year since it was born, investors and traders were again taken by surprise. It seemed that China may have been the elephant in the swimming pool which ejected many of the smaller swimmers. How much sway do a billion people put on the crypto market? It turns out that whilst one or two large whales can sometimes manipulate a market, a billion people will really change the tides. As the Chinese government have flip-flopped literally thousands of times on cryptocurrency regulation (over 2200 times and counting, in a single decade), one would think that diehard investors would be immune to their vacillations. Aside from China pushing and pulling the market on a whim, tradition still dictates a likely bitcoin dive in December and rebirth at Easter (the opposite of the Jesus mythos). As it turns out, the market does not seem to have a backup memory chip installed. Too many forget the lessons of the past and try to swim against the whales, at the whim of market forces which they cannot predict and cannot control.

Where do elephants come from?

We are using the analogy of elephants with purpose. Many crypto traders speak of “whales”: investors who hold vast amounts of cryptocurrency, sometimes millions or hundreds of millions of dollars’ worth, and when the crypto whales buy or sell, the “smaller fish” feel the impact of the move. Like their namesakes, whale investors can be found almost anywhere in the world, however, elephants are famous in only a couple of regions: Asia and Africa. Coincidentally, these two regions are also epicentres of massive human population, and under-utilised banking, two perfect conditions for the adoption of cryptocurrency. Whilst the broad market is monitoring China, wiser and more insightful investors are looking toward Africa, for a market impact which will seem “totally out of left field” for those who have not been paying attention.

A tsunami of wealth for early adopters

China was an investment opportunity long before you heard it on the nightly news. A 2006 book which predicted the GFC two years before it occurred, also predicted that in future, wealthy Chinese would be hiring poor Americans as house-servants (understandably, this was not a popular view in pre-GFC days, but the other predictions in the book have all occurred, or are occurring). The author had visited China for a month in 2000, and saw what was going on: workers who used to farm fields were entering factories and office buildings. An unprecedented amount of construction was occurring as the agrarian age gave way to a new industrial revolution. Large corporations were outsourcing and offshoring and the tides of money were changing; away from the West and toward the East. Those who followed the author's blogs and newsletters were made aware of the early signs back in 2000 -2006; those who acted were able to catch stock market gains of 450% or higher. Those who ignored or dismissed the early signs, well… there may be another boom on somewhere another time which you can catch. When the same author visited Africa for a month in 2010, there were similar early signs of a change in tides which could soon become a tsunami of wealth. The Chinese had been drilling for oil in Africa as early as 2000, and a decade later, the first Chinese factories had started to appear in Africa.

China had attracted western money because they would work in factories for a fraction of what a westerner would be paid, and fairly soon, almost every product purchased in the west was “Made in China”. After a few years, the Chinese realised that there were others who were paid less than themselves. They realised that they could copy the large corporations which had originally outsourced and offshored to China, by outsourcing and offshoring to Africa: a land similar in opportunity to China, where a billion people could potentially work for $2 a day.

Necessity is the mother of ingenuity

In poorer countries, some things which the Westerners take for granted are not available, and some things may be available, yet unreliable or unpredictable. This has led to some heartbreak for tourists (“what? No wifi?”) and some amazing inventions and breakthroughs. If you have ever seen an older documentary on Africa, you would have seen the ubiquitous image of African women carrying water in pots on their heads, as there was no running water in the village. Fast forward a few years, and Africans want to be connected to the internet and to each other, so mobile phones have become more ubiquitous than water pots. In a land where electricity is either absent or unreliable, many Africans use fuel-powered generators for electricity. This comes with its own costs, for purchase, fuel, and pollution. Some bright spark realised that, by giving the African women a round barrel with a handle, they could “roll” the water all the way home, and by attaching a bicycle-type rotating generator, the rolling water barrel could also charge a mobile phone. Some governments had tried to connect remote African villages to the national power grids, but thieves would often loot the copper wires for resale, risking their lives for a few dollars and plunging the villages back to the dark ages. A clever person created mobile phones where the entire back of the device was a solar panel, and another problem was solved with African ingenuity. These solar-powered phones were sold in supermarkets in Africa a decade ago, but those in the West have probably never seen one.

Cool story bro, but what about the crypto?