"Powerless" dollars, DeFi booms and 2000% returns
There’s never a dull moment in Cryptopia
Last month, we had the excitement of WallStreetBets, GameStop shorts and old-school billionaire hedge funds being spanked by a bunch of anonymous online game lovers, in something we dubbed #RevengeoftheNerds2. It was great news for many, sad for a few, and certainly interesting to see the tables being turned.
This was followed by a massive BTC rally as the world’s richest man announced he had put a lazy $1.5 billion into bitcoin. The long-term residents of Cryptopia cheered to see more recognition coming to the space. We had seen billion-dollar hedge funds such as Grayscale, Square and MicroStrategy move into the crypto neighbourhood, and now we have “Mister Tesla” moving in just down the road.
Not everyone is happy about the “gentrification” of crypto. Some of the hardcore crypto-geeks do not want large banks and financial institutions moving into crypto, as some nerds and HODL-ers feel that crypto is “their” territory, and should be free from the forces of market manipulation.
To the hardcore exclusionists, we say, “live and let live”.
Bitcoin is in finite supply and cannot be printed, manipulated or hyperinflated like central bank’s fiat currency, so we think that things will be alright. Sure, the first billionaire who moved into Byron Bay’s hippy haven may have been an occasional annoyance, but many locals and local businesses benefitted from a fresh injection of capital, and now the hippies and the have-mores live side by side.
Even the staunchest early adopter would have to admit that BTC prices have been much higher and less volatile since the billionaires discovered it. Now that renegade billionaire badboy Elon Musk is crypto fan, who will be next?
Rumours abound that Apple Inc will be the next major corporation to put some of its enormous cash reserves into bitcoin, as a hedge against oncoming inflation. There is no evidence of the rumours yet, but many Wall Street insiders speculate that Apple could invest around $5 billion into BTC and still leave itself with plenty of spare change.
Like Tesla, Apple is a huge corporation with millions of employees and suppliers in multiple countries. All of the workers and suppliers need to be paid for their goods and services, and if using local currencies, Apple would already be paying large amounts for currency purchases and currency transfers. Imagine if you yourself needed to pay for Chinese goods with the local currency: find out how much the exchange rate commission is and then add a few more zeroes to pretend you are Apple. If major corporations could transfer crypto instead of using the onerous SWIFT system, it would cut their costs and transaction time. Heck, it would even use less power.
Making dollars “powerless”
One of the concerns recently voiced by crypto-critics (read: ‘sour grapes from those who missed out on buying under $3000’) is that “Bitcoin uses so much energy!”. Your tinfoil-hatted friend on Facebook is correct: running the blockchain does use more electricity than the entire country of Iceland. However, it is unfair to use the “green” argument to compare apples and orangutans.
Bitcoin is a world-wide 24/7 currency network, not a small country of 300 000 people, who get free solar power for almost 23 hours a day in summer. To get a fairer comparison, we could compare the energy use of the crypto blockchain network to the power used by Visa, Mastercard, the SWIFT system, the Federal Reserve, the IMF, and all the bank branches and ATM’s in each country. Does anyone care to do the research and the math?
In addition, the various crypto blockchains have the potential to replace or automate the work done by innumerable insurance companies, real estate agents, conveyancers, lawyers, stockbrokers, and many more businesses; thereby saving incalculable amounts of power and probably saving countless millions of trees and polar bears.
Next time you hear a Greta Thunberg-wannabe making spurious claims about crypto, feel free to ask them if they prefer the power use of the antiquated system, or if they would like to join the 21st century. Nothing is yet perfect, but crypto is making progress towards a world which is fairer, more cost-effective and more “green”.
DeFi continues the #unbankyourself revolution
As more savers notice that inflation is over 2% and they are earning less than 1% on their cash in the bank, the savers may become investors and switch to chase increased yield on property or stocks. This pushes up the stock market and property market, which could lead to simultaneous bubbles in two asset classes which are usually uncorrelated. It is all well and good to buy a property of stock which pays 3% yield, until it crashes by 40% in value.
A small but growing group of savers are seeking out additional yield with less volatility, in the form of stablecoins. These are basically digital dollars which are always fixed at 1:1 ratio with the local currency. Stablecoins are already available in United States Dollars (USD), Canadian (CAD), Australian (AUD) and Hong Kong dollars (HKD). More countries may come on board as demand increases, but these four currencies are historically among the most stable and readily acceptable anyway.
Once you turn a paper dollar into a digital dollar, it can be used on the blockchain to purchase goods, services, to buy other crypto or “staked”. Staking is just like a term deposit or certificate of deposit, where you leave your money in the bank and earn interest. A whole plethora of DeFi projects (Decentralised Finance) or digital banks have emerged to offer services to savers who are disillusioned with earning under 1% on their savings.
As digital banks do not pay an abundance of staff, do not usually own premises or rent huge downtown offices, they can afford to pay a lot more interest than traditional brick & mortar banks. It is easy to imagine that someone else is paying 12% interest on a credit card, so why can’t you earn 10% on your cash instead of 0.2%?
We do not make recommendations on which DeFi service to use, and encourage you to DYOR (do your own research) before choosing where to park your large swathes of cash. We have used Celsius.network, Crypto.com, and BlockChain.com, however there are many others, offering a variety of interest rates and services, so choose what feels best for you.
What else is news?
The BostonCoin portfolio is growing in value and notoriety. A few days after Valentine’s Day, on Feb 17th, we had a promotion on the Times Square billboard in New York, featuring the BostonCoin CFO and one of our cute Boston Terrier mascots. You can see the picture on the BostonCoin blog here.
This past month BostonCoin has had increased interest from investors in the USA, UK, India, Australia, Italy, Argentina, Turkey, South Africa and Mexico as well as from self-managed super and retirement funds. We had a big spike in Google searches for “BostonCoin” after the NYC promo, with noticeably high peaks on Feb 18, 19 and 20.
Keep sharing the love with your friends, as this little puppy goes global: first slowly, then very quickly.
Our BostonCoin balanced portfolio (now recognised as the world’s first crypto managed fund) continues to paw-form well. Winners this month include:
· PowerLedger up 118%
· ARK up 179%