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What’s Next For Bitcoin In An Era Of “Helicopter Money,” Negative Interest And Big Debt?

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Searching For The Roots Of Bitcoin’s Narrative

If we are to understand bitcoin’s meteoric rise, we must return to 2008. After all, the world’s largest cryptocurrency by market capitalization is a child of the global financial crisis (GFC). 

Once Lehman Brothers went into bankruptcy, many banks and financial institutions across the globe followed. Governments all over the world soon stepped in, bailing them out. Three days after Lehman went bust, Hank Paulson, U.S. Secretary of the Treasury, and Ben Bernanke, head of the Federal Reserve, went to President George W. Bush and him, “We need a trillion dollars in cash, and we need it by five o’clock,” as Steve Bannon, a former Goldman Sachs investment banker and advisor to President Donald Trump, recalled in 2018.

After Bush shrugged them away, Paulson and Bernanke went to Congress, where they repeated their plea: “If we don’t have a trillion dollars by today, the American financial system will melt down in 72 hours. The world financial system will melt down in two weeks, and there will be global anarchy,” Bannon recounted.

While the global financial system didn’t slide into abyss, trust had been lost in a monetary system that ran on trust. Robert Shiller, named a Nobel Laureate in 2013, pointed out that the experiences surrounding the financial crisis wove the narrative for Bitcoin:

“I think narrative is very important to the popularity of Bitcoin and other cryptocurrency,” he said. “Part of the reason that Bitcoin succeeded is that it fed into an anarchism narrative that government is unnecessary and untrustworthy. It fostered a narrative that young people have created a financial institution that is out of the government’s reach. That’s a powerful narrative.”

Fast forward a decade — welcome to a world of “helicopter money,” negative interest and big debt.

Though the U.S. and EU economies had been out of the woods for a while, neither the Fed nor the European Central Bank (ECB) could stop their addiction to expansionary monetary policies.

Then COVID-19 came, piling pressure on the Fed and ECB to open the financial floodgates another time. As the U.S. government distributed $1,200 stimulus checks to its citizens, Milton Friedman’s “Helicopter Money” became reality.

Yet Friedman was prescient enough to know that “there ain’t no such thing as a free lunch,” as the saying goes. In 2020, the U.S. debt-to-GDP ratio skyrocketed to unprecedented levels.

Deflating National Debt Through Inflation

With Modern Monetary Theory (MMT) en vogue, many economists believe that huge government debt is not a problem. Yet, at some point, the day of reckoning arrives. As of now, there are three main ways for governments to deal with debt, per Winklevoss Capital:  “They can choose to (i) not pay some portion of their debt (i.e., ‘hard default’), (ii) adopt austerity measures in hopes of running a budget surplus, or (iii) reduce the value of the debt they owe through inflation (i.e., ‘soft default’).”

With more than a fifth of all dollars in circulation being printed in 2020, the U.S. government picked the path of a “soft default.” Cynics may point out that COVID-19 even provided the U.S. government with a noble excuse for printing money; and thus, reducing its debt burden.

While we’ve witnessed inflation in various areas (including equity prices and real estate), the real inflation rate (measured by the CPI) remains low. Yet inflation doesn’t simply happen whenever more money is pumped into the system. The velocity of money matters.

For the velocity of money to rise, people need to stop hoarding money and spend it. This could either happen voluntarily or through a collapse in trust. The former scenario might happen when the virus is defeated, while the latter could happen if the people’s confidence in both the government and the future collapses — akin to what went down in the Weimar Republic. 

The Pandora’s Box Of Central Bank Digital Currencies

However, there is a third way that masquerades under the acronym of CBDC. The abbreviation conceals the ECB’s panacea: Central Bank Digital Currencies in the form of a digital euro.

The digital euro is nothing less than immaterial cash. Instead of carrying it in your purse, you have your own account at the ECB. Given the digital euro’s proposed use of blockchain technology, this might sound tempting.

Yet, on the way are several red flags. One of them was pointed out by Jörg Krämer, chief economist of Commerzbank, who noted that it would unnecessarily “make the state more powerful at the expense of its citizens.”

The heightened potential for citizen surveillance explains the allure for China’s government to experiment with a digital yuan. Any transaction could be tracked via the blockchain ledger.

Further, Bill Campbell, a portfolio manager for DoubleLine highlighted another troubling aspect of CBDCs: “With CBDCs, the central banks would possess the necessary plumbing to directly deliver a digital currency to individuals’ bank accounts, ready to be spent via debit cards. Such a mechanism could open veritable floodgates of liquidity into the consumer economy and accelerate the rate of inflation.”

But perhaps this hypothesis illustrates the most troubling aspect of a digital euro: 

Assuming that the digital euro gradually replaces cash, it would be impossible to evade negative interest rates. Not willing to see their deposits deflate, people would stop hoarding money, looking for safe harbors, but also increasing consumption. This would inevitably raise the velocity of money, pushing the rate of inflation higher.

The Allure Of Digital Gold: Scarcity In An Age Of Superabundance

When confronted with such scenarios in the past, people searched for safe harbors. They usually found them in gold. Yet with everything becoming digitized, it was only a matter of time until gold found its digital equivalent.

And Bitcoin wants to be that — or at least, that’s what the crypto community hopes for.

See Also

Humanity cannot advance forward unless we solve the problem of money printing, and Bitcoin actually fixes this.

The brilliant author Niall Ferguson succinctly captured Bitcoin’s allure: “Bitcoin is the only digital asset or token that has scarcity built in. Everything in the internet is defined by a superabundance; Bitcoin is the exception.”

While gold’s supply continuously increased as demand rose over the years, bitcoin’s supply is capped by default at 21 million bitcoin.

Toward Hayek’s “Denationalisation Of Money”

As bitcoin’s price reached record heights in recent weeks, some believe we are finally destined to witness economist Friedrich Hayek’s “Denationalisation of Money.” In 1976, Hayek wrote: “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop”

He also wrote: “I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.”

Hayek believed that people — if given the opportunity — would punish producers of inflationary money by abandoning it. As governments would no longer be able to reduce their debt burdens through inflation, it would also enforce fiscal discipline. Thus, currency competition would serve as an effective debt brake.

Until the advent of the internet, governments didn’t have to worry about competing currencies that were out of their reach. Yet with the decentralized structure of cryptocurrencies, currency competition in the spirit of Hayek has arrived.

Will Leviathan Retaliate?

Looking ahead, the crucial question will be if governments decide to reign in on Bitcoin. ECB President Christine Lagarde’s recent comments served as a warning shot: “There has to be regulation. This has to be applied and agreed upon … at a global level because if there is an escape that escape will be used.”

A look at history provides another bleak reminder. During the Great Depression, Franklin D. Roosevelt enacted Executive Order 6102, banning gold ownership. The ban lasted for 41 years until 1974.

As the crypto community experiences peerless euphoria, it might be worthwhile to revisit history. The time of governments as bystanders will come to an end — sooner rather than later.

This is a guest post by Philip Schaar. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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NEO Price Prediction: Long-term (NEO) Value Forecast – June 2

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  • The long-term outlook is in a bullish trend.
  • The 1.618 in the fibs at $19.17 is the bulls target in the long-term.

NEO/USD Long-term Trend: Bullish

Supply zone: $20.00, $30.00, $40.00
Demand zone: $2.00, $1.00, $0.50

NEO continues in the uptrend in its long-term outlook. The strong pressure on the cryptocurrency by the bulls’ comeback at the 61.8 on 18th May has kept price up with new high each week. $12.59 and $15.04 in the supply area were the highs on 20th and 30th May respectively.

The new week is started on a bullish note with today’s opening candle at $13.72 higher than last week opening price at $11.45, an indication that the bulls are more in the market.

Price is above the two EMAs that are fanned apart which suggest strength in the trend and in this case the uptrend.

The journey to 1.618 of the fib extension with price at $19.17 in the supply area is the bulls target in the long-term as the bullish momentum increase and more bullish candle open and closed above the two EMAS.

The views and opinion as expressed here do not reflect that of BitcoinExchangeGuide.com and do not constitute financial advice. Always do your own research.

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Argentina Using Bitcoin To “Skirt Capital Controls” – Economist Alex Kruger

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  • One BTC’s trading at $9,143 USD in Argentine exchange Ripio
  • Argentina’s black market peso fell 4.56% to an all-time low of 76.75 against USD
  • President Alberto Fernandez says Argentina is in virtual default, compares its economic solution to the 2001 crisis

Argentina is recording its highest volume week ever on LocalBitcoin, a peer-to-peer Bitcoin exchange platform. Although it has been at the highest volume in terms of the Argentine peso, the volume in terms of BTC is still small versus 2016.

In early April 2016, it hit its peak at 228 BTC, however, at that time, the value of 1 BTC was around $420. Today, 1 BTC is worth more than $7,365.

Source: Usefultulips.org

As per crypto exchange Ripio, the current value of 1 BTC is $548,197 Argentine peso which equals over $9,143 USD, trading at a premium of 23.5%.

On LocalCrypto, however, this is not the case as there are only about one hundred traders in Argentina in the past month. The Argentine peso is 25th by volume on the platform, reported LocalCryptos, but last month they added Bitcoin and could see these low volumes changing soon.

Capital Controls driving the need for Bitcoin?

Matt Ahlborg of UsefulTulips said, “Argentina had its highest volume day ever on Localbitcoins yesterday as capital controls on dollars increased earlier this week.”

Today, Argentina’s black market peso fell about 4.56% to an all-time low of 76.75 against the US dollar, pushing it further away from the official spot rate, which has been held steady by strict capital controls imposed in September.

Argentina’s new Cabinet chief, Santiago Cafiero said a new bill that is sent to Congress will hike taxes on goods and services purchased in US dollars to as high as 30%.

The move aims to stabilize peso that has lost over 80% of its value over the past four years, that fanned high levels of inflation, under former president Mauricio Macri.

On Sunday, new president Alberto Fernandez said Argentina is in virtual default, comparing its economic solution to the 2001 crisis. The country is currently in recession and its economy is expected to shrink by 3.1% in 2019.

“It is not the same as 2001, but it is similar. At that time poverty was at 57 percent, today we have 41 percent poor people; then we had a debt default, today we are in virtual default,” Fernández said in an interview.

Economist Says, That’s Not the case

Could it be that Argentineans are finding safety in Sats? According to economist and trader Alex Kruger, this is not the case.

“Bitcoin in Argentina is not used for safety, but as a temporary vehicle to skirt capital controls,” he said.

In September, he pointed out how the LocalBitcoin chart showing “exploring volumes” has been in the local term that has been because of the peso devaluation and not because Argentines are using the flagship cryptocurrency to “escape the economic crisis.”

In one of his recent tweets, he shared the findings of a poll he ran where he asked Argentine bitcoiners the reason behind their BTC purchase.

Out of the 3,000 people contacted, only 100 reverted that revealed only 10% bought BTC to protect themselves from the devaluing Argentine peso. The majority 80% is in it just for long or short term speculation.

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Here’s Why the Bitcoin Price Has Crypto Traders Railing at Bart Simpson

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Bitcoin’s contemporary worth actions have crypto buyers in all places railing at Bart Simpson for roiling the marketplace. Below, we’ll provide an explanation for why, however first, let’s check out the flagship cryptocurrency’s actions lately.

Bitcoin Price Trades Sideways

Bitcoin worth motion has now not modified a lot since our previous analysis. The virtual forex continues to pattern within a slender channel. Whether or now not this channel is a bull flag can’t be decided simply but. The best certain factor within the present pattern is bitcoin’s talent to carry onto positive aspects it made all through February 8’s spectacular bull run.

As of Thursday afternoon, the bitcoin-to-dollar rate (BTC/USD) used to be buying and selling at $3,576, down a modest 0.02 % because the Asian consultation open. Both the amount and volatility are decrease because the earlier upside run. That reasonably hints that the bitcoin worth is last in in opposition to its subsequent large transfer. Nevertheless, the intervening time bias struggle has made it tricky to are expecting which course bitcoin would pursue within the coming days: downward, sideways, or upward.

Bitcoin Divided Between Bart Simpson and Bull Flag

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The ongoing bitcoin worth motion has first introduced us earlier than the very well-known Bart Simpson. Yep, that Bart Simpson who may be our bearish indicator for lately – no pun meant. But earlier than we reside additional, let’s take a look on the symbol within the tweet beneath:

Technically talking, a Bart Simpson development happens when a sideways motion follows an sudden spike in worth, after which the fee drops again once more – all of sudden. The worth motion suits the form of Bart Simpson’s head.

In the present bitcoin worth motion, the BTC is midway becoming the definition of the Bart Simpson development. A complete Bart will broaden if the cryptocurrency undergoes a unexpected bearish correction, such that it erases its earlier positive aspects. Should that occur, bitcoin is taking a look at a drawback goal in opposition to $3,355. That’s what a immediately Bart Simpson head can do.

bitcoin, Btc USD, bitcoin price

BITCOIN 4H CHART | SOURCE: COINBASE, TRADINGVIEW.COM

But the glass is part complete. The bitcoin worth has now not fully invalidated the bull flag formation, which turned into a central level of debate in our earlier research. The BTC/USD price remains to be consolidating within just a little descending channel, which might imply there’s nonetheless an opportunity that the pair would lengthen its upside momentum.

A retest of the descending channel resistance, coupled with an building up in quantity, will ascertain a bull flag. Then, bitcoin will be capable of ruin above the mentioned resistance to set the following upside goal in opposition to the crimson line at the most sensible (within the chart above). From a broader standpoint, this higher crimson trendline makes the resistance of a medium-term symmetrical triangle. Have a glance:

bitcoin, Btc USD, bitcoin price

BITCOIN 4H CHART | SOURCE: COINBASE, TRADINGVIEW.COM

 Bitcoin Price Intraday Targets

As lengthy because the bitcoin worth remains within the descending channel, we can stay our bets within the vary. That being mentioned, a jump from strengthen would have us open a protracted place in opposition to resistance. Simultaneously, a pullback from resistance would have us input a brief order in opposition to strengthen.

We will keep away from putting breakout goals for lately.

Instead, we’ll go away you with one thing to chunk on:

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Bart Simpson Image from Shutterstock. Charts from TradingView.

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Early Bitcoin Adopter Throws Cold Water On Halving Narrative; Here’s Why

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As NewsBTC has covered over the past few weeks, a debate has erupted around Bitcoin’s impending block reward reduction. Informally known as the “halving” or the “halvening,” every four years the number of BTC issued per block (every 10 minutes or so) gets cut in half, resulting in a negative supply shock on the market.Analysts are currently divided over whether or not it will affect the underlying BTC price in a positive way — we just published another report on why the halving isn’t priced in from a derivatives perspective.While bulls have a good argument due to the Stock to Flow model popularized by pseudonymous quantitative analyst PlanB, a prominent early Bitcoin adopter recently came out in the side of bears, arguing that the halving will not help BTC investors.Related Reading: Bitcoin Price Likely to Jump After Christmas; Here’s Why“First Bitcoin Startup Investor” Bashes Halving NarrativeRoger Ver, an early Bitcoin evangelist who invested in Blockchain.com, Bitcoin.com, BitPay, amongst other crypto companies, recently remarked that he sees a “very real possibility the price of Bitcoin Core (BTC) does not go up after the halving.” This comment was made echoing a remark made by Melem Demirors of CoinShares, who cited financial derivatives as a potential dampener on the positive effects of the halving.The now Japan-based Ver, trying to build out his own thesis on the matter, remarked that he thinks the price won’t up because ” the blocks are full and there is no room for additional commerce to take place on chain.” With this, he is seemingly referring to the sentiment that the economic activity of a chain will affect the price of the asset that is based on top of it.There is a very real possibility the price of Bitcoin Core does not go up after halving.For the first time, the blocks are full and there is no room for additional commerce to take place on chain.Bitcoin Cash on the other hand, has
an amazing future ahead. https://t.co/z4tC7jij7d
— Roger Ver (@rogerkver) December 26, 2019 Related Reading: Why Did Youtube Crack Down on Crypto Channels? Lawyer Weighs InVer Thinks BCH Will Beat BTCVer’s latest comments on the Bitcoin halving come shortly after he remarked in two mainstream media interviews that he expects for BCH to rapidly appreciate against BTC.Per previous reports from NewsBTC, the cryptocurrency entrepreneur and investor told CNBC in an interview that he thinks the market capitalization of Bitcoin Cash is poised to appreciate by over a “thousands of times where it currently is because it’s looking to become peer to peer electronic cash for the entire world.” For some context, BCH would be trading $191,000 apiece if it was trading 1,000 times higher than what it is trading at now.He doubled down on this opinion in an interview with Forbes, saying that he expects for BCH’s market capitalization to supplant that of BTC:“Bitcoin.com is partnering with more household names to bring BCH usage to actual commerce for real people and real businesses. As that adoption of BCH-based commerce grows, so will its market cap.”While Ver has belief in this sentiment, not everyone is convinced that Bitcoin Cash will outperform BTC by that much, if at all.In the wake of his aforementioned interview on CNBC, the crypto community erupted, pledging not to take Ver’s rhetoric lying down. Dan Hedl, a long-time Bitcoiner and industry executive/entrepreneur, wrote on Twitter:“Hey @JoeSquawk whats up with this reporting on bcash by CNBC? Roger is saying factually incorrect information about adoption and identity.”Related Reading: Is the Bitcoin Halving Priced In? No Way, and Here’s WhyFeatured Image from Shutterstock

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Canaan’s New 5-Nanometer Chips to Escalate ASIC Arms Race With Bitmain

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Chinese mining application-specific integrated circuit (ASIC) manufacturer Canaan will launch new, improved mining machines with 5-nanometer chips in Q1 2020.

Chinese industry news outlet 8BTC reported on Dec. 24 that the new ASICs will have significant advantages compared to the previous generation. The new firm’s 5nm manufacturing process is expected to improve performance, power and area scaling.

A significant development

The company expects to scale the production of this new product series faster than it did with its 7nm chips. The number of nanometers refers to the size of the features of the silicon chip, 5nm approaches what is possible with conventional electronics. For scale, 1nm is approximately equivalent to the width of two silicon atoms.

As the features in chips become smaller, it becomes possible to fit more transistors in a silicon die of the same size. At the same time, the electric current has to travel less distance in the circuit to perform a calculation, which means that efficiency is improved and the amount of heat is decreased when the features are smaller.

Canaan is one of the few cryptocurrency-related companies that managed to go public with a $90 million Initial Public Offering (IPO) held in November. As Cointelegraph recently reported, the firm’s shares have seen a 40 percent drop in value since the IPO.

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