Category: Economics

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Bitcoin Crypto News Economics Markets

US Inflation Hits Four Decade High of 7.9%

US inflation has hit a new 40-year high of 7.9 percent, driven by a surge in gas, food and housing costs, all of which are expected to increase further as geopolitical conflict intensifies in Ukraine.

From Bad to Worse

For the 12 months ending December 2021, US consumer price inflation (CPI) hit 7 percent, which at the time was the highest in four decades.

While Bitcoiners and other hard money advocates warned that more pain was potentially on the horizon, many mainstream commentators remained committed to the “inflation is transitory” narrative, citing Covid-related supply chain bottlenecks. They also referred to so-called “base effects”, a distortion in monthly inflation figures resulting from abnormally high or low levels of inflation in the year-ago month.

Turns out that inflation is stickier than anticipated, as the latest figures represent the highest CPI print since July 1981:

Latest CPI figures. Source: US Bureau of Labor Statistics

Costs are up across the board, but some segments are clearly increasing at a faster clip than others. Energy, fuel, transport and housing have experienced the most dramatic increases, as illustrated below:

Image
Illustration of CPI increase line by line. Source: Yahoo Finance

All of this assumes that you take the official CPI statistics at face value, which those in the Bitcoin world don’t:

Bitcoin Offers No Short-Term Relief, More Pain on the Horizon?

Bitcoin held steady on the news at US$39,300, confirming what most market participants believe – namely that in the short-run, it remains a risk-on asset. Interestingly, this trend was recently reversed amid the Russian invasion of Ukraine, but the point remains.

All of this is happening at a time when commentators are signalling that the US stock market is due for a serious correction:

The US markets have been in a bull market since 2010 and some have been screaming for a market correction for months, if not years. It’s entirely inevitable that the party will end. The timing, of course, remains unknown.

In the interim, ordinary consumers will continue to feel the pain as inflation, regarded by some as “tax without legislation”, continues to far outpace domestic wage increases.

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Bitcoin Crypto News Economics Russia

Global Bank ‘Credit Suisse’ Says We’re Witnessing ‘A New Monetary World Order’

Zurich-based financial services giant Credit Suisse has released a report entitled “Bretton Woods III” in which its strategist argues that we are witnessing the birth of a new monetary world order.

New Monetary World Order – Bretton Woods III

The report starts by saying:

We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West.

Zoltan Pozsar, Credit Suisse strategist

“Bretton Woods” refers to the 1944 World War II agreement in which 44 countries consented to a new monetary system in which the US dollar was pegged to gold, and other currencies were pegged to the greenback.

The arrangement completely disintegrated in 1971 when president Richard Nixon took the US off the gold standard. This marked the beginning of the current fiat currency system, what the author terms “Bretton Woods II”, a regime in which the US dollar’s value was largely backed by “inside money” (mostly US treasury bonds).

As G7 nations seized Russia’s foreign exchange reserves following its invasion of Ukraine, Pozsar argues that this marked the beginning of “Bretton Woods III”.

From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities).

Zoltan Pozsar, Credit Suisse strategist

The author notes that the West’s sanctions will result in self-inflicted financial instability, even if it causes pain for Russia. To believe that sanctions won’t lead to price stability risks is to “also believe in unicorns”.

He adds that “this crisis is not like anything we have seen since [Richard] Nixon took the US dollar off gold in 1971”. Pozsar then concludes that the West will therefore necessarily experience continued and increased levels of inflation.

‘Money Will Never Be the Same Again’

Pozsar outlines some possibilities as to what the future may look like and how the Chinese Communist Party may play a role (hint – a big one). He concludes his analysis with an ominous warning, saying:

“After this war is over, ‘money’ will never be the same again … and Bitcoin (if it still exists then) will probably benefit from all this.”

Over extended periods of time, Bitcoin has tended to act as a good hedge against inflation despite being correlated with equities. However, recently it surprised commentators by breaking this correlation and soaring 15 percent overnight in response to the Russian/Ukrainian conflict.

We’re living through an extraordinarily volatile and uncertain period of history, and no doubt the monetary system will look very different in the years to come. Is Bitcoin going to play a role? Quite possibly.

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Bitcoin Economics Russia

Can Bitcoin Protect You Against Rising Inflation?

Market volatility and geopolitical tensions remain high amid an ongoing Russian currency crisis, and the United States’ highest CPI print in 40 years. Where does Bitcoin fit into this inflationary environment?

As the “digital gold” narrative gained institutional traction in 2021, much of that argument rested on the belief that Bitcoin provided a hedge against inflation.

However, Bitcoin hasn’t performed as expected, nor has it been predictable. Most of the time it’s acted as a high-risk technology stock, experiencing sharp drawdowns whenever the market shifts risk-off. This broad correlation with equities was, however, recently reversed amid a widespread market sell-off following Russia’s invasion of Ukraine.

Notably, one of the main features of the “digital gold” narrative is that Bitcoin trades (or is otherwise supposed to trade) the same way as gold during these inflationary bouts. A failure to provide short-term protection against inflation is therefore viewed by some as a fatal flaw. This reasoning is however misguided.

Bitcoin as an Inflation Hedge

When considering whether an asset like Bitcoin is an inflation hedge, one shouldn’t be looking at how it reacts to the news cycle. Instead, we should zoom out and evaluate its performance over long periods of time.

Looking at gold, it tends to be the type of asset that underperforms for much of the time but dramatically outperforms in specific periods. This is reflected in the illustration below:

Gold’s performance against inflation. Source: Ecoinometrics

By contrast, Bitcoin has tended to outperform inflation over relatively short and long periods:

Bitcoin’s performance against inflation. Source: Ecoinometrics

Despite being down more than 40 percent from its all-time high, even at the current price of US$38,775, Bitcoin has dramatically outperformed both gold and the broader US stock market over periods exceeding one year.

BTC, gold, S&P 500 performance compared. Source: Casebitcoin.com

Key Takeaway

When it comes to evaluating whether an asset acts as an inflation hedge, it is critical to consider its performance over longer periods. How a particular asset fluctuates in response to news, while interesting, tells us nothing about its capacity to protect purchasing power over extended periods of time.

If you were one of the 1.1 billion people living with double-digit inflation, which asset would you be turning to? Available data tends to suggest that Bitcoin is a good bet.

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Bitcoin Crypto News Economics

Bitcoin Finds Support at $42,000 Amid Highest US Inflation in 40 Years

Since abandoning the narrative that inflation was transitory, the US Federal Reserve has tacitly admitted that inflation is here to stay. This was confirmed by the latest consumer price inflation (CPI) print for the 12 months ending December 2021, a 40-year high of 7 percent:

CPI, An Accurate Measure?

The US’ highest CPI print since 1982 proved to be in line with market expectations and, according to the report, was primarily due to supply chain challenges, labour shortages and the ongoing pandemic.

The highest contributors to the CPI basket included energy commodities (48.9%), used vehicles (37.3%), and meat, poultry, fish and eggs (12.5%).

CPI chart
US CPI to December 2021. Source: Bureau of Labor Statistics

Remarkably, the official increase for shelter was 4.1 percent, a figure many question since it is based not on actual house prices, but rather “owners’ equivalent rent of residences”. As reflected in the graph below, the real growth of the median US house price between December 2020 and December 2021 was, in fact, 20 percent.

US median house price 2020-2021. Source: St Louis Fed

It’s no surprise that not everyone agrees on the official inflation figures, particularly since its definition has changed over the years, most notably to exclude the real cost of house price growth.

Shadowstats purports to track real inflation figures and it suggests that inflation, based on the historical and more accurate definition of inflation, has risen by over 10 percent.

Alternative CPI data. Source: Shadowstats

Bitcoin Rises Above $44,000 on the News

January 12’s release of CPI data proved to be in line with market expectations, resulting in the broader crypto market lifting on the news. Bitcoin’s rally, in particular, offered welcome relief to HODLers, who have endured weeks of prolonged losses. On news of the CPI print, crypto’s premier asset rose above the key level of US$44,000.

BTC price. Source: Coinbase

Bitcoin has no doubt benefited from the Federal Reserve’s loose monetary policy since March 2020 and, given recent pronouncements of impending rate hikes, crypto investors can expect higher levels of volatility in the short to medium term.

Irrespective, for those with a long-term horizon, Bitcoin remains – on a risk-adjusted basis – the best hedge against inflation. One way to look at it is that if it’s good enough for the fund manager who outperformed the S&P 500 for a record 15 years straight, than it ought to be good enough for the average investor.

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Australia Crypto News Economics Regulation

Report Finds Australia’s Crypto Economy Could Grow to $68 Billion by 2030

An analysis by global consulting firm EY (formerly Ernst & Young), commissioned by digital asset management company Mawson, has found the economic value of Australia’s cryptocurrency ecosystem could grow to A$68.4 billion by 2030 and employ around 206,000 workers.

The Cryptocurrency and the distributed digital economy in Australia report, released on December 10, says that unlocking the value of the digital assets market – which covers crypto, stablecoins, NFTs, DeFi, Web 3.0 and DAOs – requires “attractive” policy settings to be put in place to drive innovation.

“The magnitude of the economic benefits will depend on the speed and scale of uptake and the transformational potential of technology across different industries,” the report states.

Digital Asset Ecosystem Set For 30x Expansion

The report puts the current value of Australia’s digital asset ecosystem at A$2.1 billion. It argues that enabling an increase of more than 30 times the sector’s value in the next decade rests on:

  • fit-for-purpose regulatory systems that provide greater business certainty;
  • upskilling the nation’s workforce, including skilled migration; and
  • more certainty around tax settings related to digital assets and the way they are transacted.  
EY’s report shows the potential economic gains from high-growth policies compared to current approaches.

Under the right reform and growth conditions, the report predicts the cryptocurrency and digital asset economy could:

  • grow in value by more than 50 percent each year;
  • add up to A$250 billion to the national economy over the next decade, reaching a value of A$68.4 billion in 2030;
  • eclipse the economic contribution of Australia’s tourism, agriculture and energy industries;
  • generate more than A$2.8 billion in high-value exports by 2030 and
  • create thousands of digital jobs across various industries, including more than 200,000 employed in 2030 and cumulatively more than 765,000 full-time roles over the next decade.

Report Responds to Australian Senate’s Crypto Recommendations

In a statement announcing the report’s release, CEO and founder of Mawson, James Manning, said the analysis was commissioned in response to the Senate Committee report, Australia as a Financial and Technology Centre Final Report.

“We are at a crossroads. As an industry, we desperately need a fit-for-purpose policy and regulatory framework to provide greater security and certainty to consumers and the crypto industry,” Manning said. He added:

The Bragg Report recommendations, in particular, represent a significant coming together of industry, regulators and government. [Those] recommendations, if adopted, will revolutionise the Australian crypto sector and improve consumer protection, therefore driving innovation, confidence and growth in the sector. 

James Manning, CEO and founder of Mawson 

Capitalising on the booming sector is clearly of interest to the Australian government. In November, in an address at the Australian Financial Review Super & Wealth Summit, Liberal Senator Jane Hume, the Minister for Superannuation, Financial Services and the Digital Economy, noted the importance of crypto and stressed the role of government in encouraging innovation.

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Crypto News Crypto Wallets Economics Investing NFTs Travel

Thailand Wants to Attract Crypto Millionaires to Revive Tourism

The Tourism Authority of Thailand (TAT) is looking into ways of boosting the country’s post-pandemic economy. Enter cryptos. The South-East Asian kingdom aims to attract crypto-millionaires to spend their newfound wealth in the hopes of becoming a “crypto-positive society”.

Thailand Facilitates the Use of Crypto

According to Bloomberg, Thailand is looking to attract individuals who have “become wealthy from holding digital currencies” to its shores in an effort to boost its pandemic-ridden economy. As a result of Covid-19, the tourism contribution to the country’s GDP dropped from 18.21 percent in 2019 to 6.78 percent in 2020. The Thai tourism authority will now seek to recoup some of the US$80 billion lost in revenue due to the pandemic.

The TAT has indicated that it is working with regulators and a local crypto exchange to make it easier for crypto holders to spend their currencies in Thailand. According to TAT Governor Yuthasak Supasorn, the authority will set up a new unit to issue its own crypto, develop a wallet and build a new tourism ecosystem in 2022.

The Governor said crypto holders may now be looking to spend their riches and added: “If they can use their currencies here without having to exchange [them], or be faced with government taxes, then it would create convenience for them.” Supasorn also noted that embracing cryptos would help the country recover its tourism sector.

Crypto is the future, so we must make Thailand a crypto-positive society to welcome this group of quality tourists. 

Yuthasak Supasorn, Governor, Tourism Authority of Thailand

Crypto Acceptance Could Help the Global Tourism Sector

The pandemic has had a far-reaching global economic impact, and none more so than in the tourism sector. Despite a major global economic downturn over the past year, cryptos have surged to new heights and can now help industries recover as the acceptance of cryptos also grows.

Earlier this year, luxury hotel chain Kessler Collection announced it would be accepting payments in cryptocurrencies going forward. The announcement was made after it had taken up a partnership with BitPay, which will oversee the payment processing part of the deal.

Hand-in-hand with aiding the tourism industry, cryptos have also been deployed in wildlife conservation. The endangered Seychelles magpie robin is now available to purchase digitally in the form of non-fungible tokens (NFTs). Funds generated from sales will help finance conservation efforts for the rare bird, indirectly boosting tourism in the Indian Ocean archipelago.

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DeFi Economics Hackers Tokens

CREAM DeFi Token Falls 43% Amid News Hack Compensation Will Increase Supply

When Decentralised Finance (DeFi) lending protocol Cream Finance suffered a devastating US$130 million attack two weeks ago, the team decided to compensate users for their losses in CREAM by pushing up the total supply and in return pulling down the price.

Following the hack, the Cream team moved to redistribute 1,453,415 coins from its treasury to the impacted users. In September, Cream also paid back its users for a different attack that cost the protocol US$19 million.

In terms of changes in security, Cream has tightened its token listing strategy to no longer include long-tail assets or tokens that can be wrapped/unwrapped.

Collateral Cap limits are deployed across all markets to increase security, while additional monitoring and alerting solutions are undergoing assessment and implementation.

CREAM Finance

Price Drops as Compensation Inflates Token Supply

While Cream has 9 million coins in its total supply, according to CoinMarketCap only 150,000 of those are in circulation. A rapid increase in supply was bound to have an effect on demand, and therefore the price per coin.

CREAM price chart. Source: CoinGecko

The price of the coin had fallen from around US$88 to as low as $49.80 at the time of writing – a 43 per cent drop, according to CoinGecko. Before the October 27 exploit, Cream was trading above $152, suffering a 66 per cent drop in price since then. This is now the second significant drop in price the protocol has seen in a short span of time, and the mood among users is dark:

Individuals hit by the attack seem to have divided into two camps: some of those seeking recourse also seek to undermine the effort to compensate Cream’s users, while others realise the risk of DeFi and that it’s their responsibility to do their own research and understand the risks associated with the nascent technology.

Most of the time victims of such attacks never see anything in terms of compensation, which makes Cream quite the gift-giver, having paid out its users twice after attacks.

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Australia Bitcoin Economics Ethereum Gold Markets Worldwide

‘Rich Dad’ Author Robert Kiyosaki Warns of Global Financial Crash Looming

Author Robert Kiyosaki has been outspoken on Twitter, expressing his take on the current economic situation, America’s leadership, and a fear that the world is headed for “the biggest crash in world history”. He urges citizens to buy Bitcoin, Ethereum, gold, and silver.

Concerns over US spending and approval of a monumental stimulus package are driving fear and uncertainty over the value of a dollar. Inflation is looming as the US continues to enter money into circulation. Bitcoin and other cryptos are gaining value, while the US Dollar (USD) continues to lose.

In a video posted to YouTube, the author of Rich Dad, Poor Dad expresses his views on the current world economy, his disapproval of US monetary policy, and the benefits of crypto.

US Dollar is Losing Its Purchasing Power – Buy Bitcoin

Since 1900, the USD has lost about 97 percent of its purchasing power. This means that whatever used to cost US$1 now costs US$31 – keep in mind that inflation affects this estimate.  

The US recently approved a stimulus package to the value of US$1.9 trillion, which suggests that the purchasing power of the USD against bitcoin may decline even further. When comparing the USD price against the Satoshi, which is 100 millionths of a bitcoin, it appears that since the inception of BTC the USD is losing up to 99 percent of its purchasing value each year. The US$1,400 stimulus cheque that the US Government is handing out to every citizen is likely to continue this trend.

Australia Is Turning to Crypto

The worrying US economic situation is being observed all over the world, and Australia is feeling it too. Many Australians are turning to crypto as wages fail to keep up with the consumer price index (CPI), the cost of living continues to increase, and job insecurity is at an all-time high.

Figures from Australian Bureau of Statistics indicate that the CPI has been rising consistently over the past 10 years.

The Australian CPI quarterly change. Source: ABS

The number of Australians turning to crypto to become financially free is on the rise, keeping pace with the demand for workers to be paid in crypto and millennials turning away from traditional avenues of investing, such as property, instead opting for crypto.

Take Note from Venezuela

Venezuela is a prime example of what happens when hyperinflation sets in. The Latin American country’s currency, the bolívar, is the world’s weakest and literally no longer worth the paper it is printed on. Creative artists have instead started turning the notes into bags and wallets, which they can sell for more than the currency is worth.

Venezuela is now ranked third in terms of bitcoin adoption and joins many Latin American countries to take the crypto route. Extremely high levels of inflation are forcing nations to turn to crypto as their native currencies continue to lose purchasing power.

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Australia Crypto News Cryptocurrencies Economics Payments

Melbourne Buskers Prefer Donations in Crypto to Cash, RMIT Study Shows

As Covid has changed our relationship with cash and dramatically reduced foot traffic in CBDs around the globe, street performers have had to find different ways to earn a living.

Economists at Melbourne university RMIT have found that passers-by often donate more when paying via digital platforms such as apps, QR codes, PayPal and even bitcoin, compared to the traditional payment method of loose coins thrown into a hat or guitar case.

Using data from online platform The Busking Project, the RMIT study analysed individual payments to over 3,500 active buskers from 121 countries, including Australia, to identify performers who were more receptive to online donations.

Melbourne Is Australia’s Busking Capital

Melbourne proved to be Australia’s busking capital, with nearly a third of the country’s 263 active street performers based in its second-biggest city.

The study also found:

  • Circus performers received the biggest donations.
  • Musicians were most likely to receive donations but received smaller amounts than other types of artists.
  • The number of other onlookers influenced if and how much passers-by donated.
  • The artist’s location and social media profile also affected the level of donations.
  • Artists who joined the platform after the World Health Organization (WHO) announcement that Covid-19 was a pandemic in March 2020 were more likely to receive a donation, which ranged from A$1 to more than A$700 .

According to the study’s lead author, Dr Meg Elkins, street performers have a critical role to play as cities look to revitalise their CBDs in the wake of the pandemic.

Buskers performing in public for coin is a centuries-old practice but they have to move online as our society becomes increasingly cashless. We … wanted to uncover how they could use digital payment systems to increase their online earnings and create more sustainable careers.

Dr Meg Elkins, lead author, ‘Beyond the realm of cash: Street performers and payments in the online world‘, RMIT busker study

Artists Must Also Be Entrepreneurs

Elkins, a senior lecturer in the School of Economics, Finance and Marketing at RMIT University and a member of its Behavioural Business Lab, says that artists have to become more entrepreneurial to survive.

“In the future, we could see QR codes as part of street performance, which would simplify the payment process even further,” Elkins says. “More than 40 QR code trials are already under way across Europe, the US and Australia.

Digital platforms can potentially allow street performers to generate more generous donations beyond cash tips. They’re also a way for artists to interact with supporters and build that all-important fan base, which can ultimately help sustain a career.

Dr Meg Elkins

Last year, Crypto News Australia foreshadowed increasing demand for digital wallets and cryptocurrency as Australia evolves towards a cashless society. Also in 2020, we reported how the pandemic had effectively halved cash payments in Australia as consumers continued to shift towards digital and contactless payment options. 

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Bitcoin Crypto News Dogecoin Economics

Musk vs Saylor Argue on Bitcoin’s Environmental Impact

It seems that Elon has done a complete backflip on his bullishness towards Bitcoin and is now asserting his power and influence to wage war against the very asset that has made him and his company billions.

Elon launched a negative attack on Bitcoin’s fundamentals to stir mass hysteria and fud on the entire crypto industry.

Saylor Fights Back

Michael Saylor has joined the debate to shed some light on the truth and offer some real facts over claims that Bitcoin is “bad for the environment”.

Michael Saylor intelligently articulates that while Bitcoin mining does use energy, it is actually powered by “wasted energy”: the 30% of lost excess energy generated by the world’s power grid. He argues that stopping Bitcoin mining would have no effect on reducing the amount of energy already being wasted in the world.

“The least energy intensive, most efficient technology that we have perhaps discovered, ever, in the history of the human race.”

Michael Saylor

The beneficial advantages that the blockchain solves in our society makes it’s energy usage justified. For Bitcoin, this energy expenditure is a small price to pay for a censorship-resistant digital bearer asset, one that lets citizens of the world to escape a broken centralized financial system and improve people’s lives exponentially.

He also explains that Bitcoin mining will decrease in the near future; as the last of the 21 million Bitcoins in existence are mined. Every four years, the revenue and the block rewards for Bitcoin are falling, so by the year 2035, 99% of the world’s Bitcoin will have been mined. This means that over time, Bitcoin brilliantly becomes less energy-taxing on the environment.

If you take all the energy of used in the Bitcoin network it amounts to 25 basis points of all the wasted energy. So 1/4 of 1% of the wasted energy in the world, offers the hope of a decent life to 8 Billion people and solves an economic problem”.

Michael Saylor

To slander crypto-mining as an inherently dirty business, appears intellectually dishonest and deliberately deceptive. Is Elon looking to get enter the cryptocurrency market himself and partner with Dogecoin to save the world from the ‘harmful environmental impact’ of Bitcoin mining? For starters, if Dogecoin was ever to be a serious contender for the ‘currency of earth’, or mars for that matter, it would want to be deflationary (as Bitcoin is) and also decentralised (as Bitcoin is), ie: not having 30% of the circulating supply owned by one person (as Doge is).

Elon Still Bullish on DOGE

Following a bizarre poll on Twitter on May 11, asking followers if they wanted Tesla to accept Doge; Elon took to Twitter again on May 13- this time to condemn Bitcoin, renouncing BTC purchases for Tesla due to ‘environmental concerns’. As cryptic as Elon’s tweets often are, you don’t have to be a genius to read between the lines; as he clearly hints at an alternative cryptocurrency being a more favourable alternative; stating: “we are looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction”.

What is Elon Musk’s agenda here? Is he really concerned about the burning of fossil fuels, in particular coal, used to mine Bitcoin, or is he carefully turning the debate to focus on something much bigger? Is it about creating further hype around Dogecoin, or something else that would hugely benefit Tesla’s financial interests?

If you’re going to focus on environmental issues, particularly those centred around the world’s consumption of coal, there are a lot of other places to start, than criticising the use of energy required to mine Bitcoin.

Will we see Bitcoin go to a proof of work model like Ethereum 2.0 which is greener and better for the environment.