Now What Does Bitcoin Say About The Dollar And The US?


A setback is commodities and technology are roiling equity markets today.  The inability of US equities to sustain yesterday's rally provided an initial headwind to trading in the Asia Pacific region today.  Hong Kong and South Korea markets were closed for holidays, but most of the bourses fell, led by Australia, where the market tumbled nearly 2%, the most in almost three months as the drop in mining and energy took a toll.  Europe's Dow Jones Stoxx 600 gapped lower, and information technology, materials, and energy were the largest drags.  US equity futures are seeing follow-through selling as well.  Bonds are not drawing a safe-haven bid.   The 10-year US Treasury yield is up a couple of basis points to 1.66%, while European yields are mostly 2-3 bp higher.  The dollar is finding a bid after the downside momentum stalled in North America yesterday.  The Antipodeans and Norwegian krone are the weakest.  The Canadian dollar is faring the best of dollar bloc.  Emerging market currencies are also mostly weaker, snapping a four-day advance in the JP Morgan Emerging Market Currency Index.  Gold is backing off after reaching $1875 yesterday.  It looks poised to return to the $1850 area.  July WTI is near $64 after briefly poking above $67 yesterday.  (GLD, SPTL)

Crypto, Bitcoin, Money, Electronic


Asia Pacific

Early in the North American session yesterday, the PBOC took to its We Chat account to announce that digital currencies ought not to be used in the financial markets or real economy as money because they are not "real currencies."  The PBOC said that financial and payment companies cannot price products in any digital currency and cannot issue crypto tokens.  The PBOC announcement was quickly followed by a joint statement by China's Internet Finance Association, Banking Association, and Payments and Clearing Association.  Officials did not address the mining of crypto, and China is reportedly home to as much as 70% of Bitcoin mining. Some argue that China is taking action to secure an unchallenged monopoly by the digital yuan. 

There may be some merit in the claim, but it has yet to be demonstrated that crypto is being used as money.  Yes, some credit card companies and non-bank financial institutions are creating the capacity to transact with crypto.  Yet, the use of it to purchase goods or services remains very limited, it appears.  Air miles and hotel rewards schemes appear to be used more for transactions than crypto.  In addition, is the volatility.  Bitcoin has lost almost 40% of its value since the April 14 high.  Etherium, the second-largest in the crypto space, has fallen by about a third in the past two weeks.

Back when Bitcoin first rose above $50k, many insightful people made all kinds of extrapolations about what it meant about the world.  Many claimed that it said something about Fed policy or about the role of the dollar, or even the US, in the world. Rather than see it as an international phenomenon or the result of bold innovation, it was seen as a sign of America's decline, often a preconceived idea (confirmation bias) of the observers.  A little more than 20 years ago, people argued the single currency in Europe would replace the dollar. Then it was the Chinese yuan that was going to supplant the dollar.  More recently, it was crypto. (BITCOMP, CYB)

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Read more by Marc on his site Marc to Market.

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