Over the past year, I have consumed a lot of crypto-related content. Not because I seek it out, but because every writer and podcaster in the financial world has been covering it. I tried my best to ignore Bitcoin, but it’s become impossible as it completely dominates discussion in financial media.
In 2021 I began researching Bitcoin and cryptocurrencies with an open mind. I try my best to make evidence-based decisions with my money. In my crypto research, I was looking for some real evidence that this is something beyond a speculative asset.
Surely, with all of the hype, there must be some truly world-changing applications of Bitcoin. In all of the interviews I’ve listened to from the crypto evangelist’s over the past year, I have never heard a convincing answer to the following question:
What problem are cryptocurrencies, like Bitcoin, actually solving?
And if anyone can ever answer that question, I have a follow up:
Is it worth all of the negative externalities?
In this article, I lay out my skepticism of crypto. If you are a crypto true believer, my intent is not to offend but to offer a counterpoint to the common arguments I hear in favor of crypto.
Did you know 1/3 of all dollars were created in the past 12 months?
Anyone who has read a piece making the case for Bitcoin has without a doubt seen some statistic about the mass “money-printing” that’s about to lead to currency debasement and mass inflation.
It sounds terrifying, which is the entire point. Like with any evangelist, the crypto boosters need a good story to recruit new converts. If what you’re selling is a new currency, the logical story to push is that the old currencies are dying.
The floods are coming, but don’t worry we’ve already built the arks.
If one of the core value propositions of an investment is that the world is ending, you should be very skeptical and begin asking a lot of questions.
Here’s the first question you should ask before investing in crypto
Is there actually any evidence that mass inflation is coming?
Yes, we have printed a lot of money over the past 10 years.
If you listen to the crypto boosters for long enough, you will begin to believe inflation has been the greatest economic challenge of our time.
Except it isn’t.
The only problem with inflation is that until very recently, we haven’t had enough of it.
A little bit of inflation is a good thing as it means there is strong demand for goods and services in the economy. Annual inflation in the 2%-3% range is a sign of a healthy economy.
If inflation was consistently running over 4%, we might have a real problem on our hands.
Do you know how many times inflation has been over 4% in the past 10 years?
In fact, it’s only been over 3% once, and that was back in 2011. Over the past decade, inflation has struggled to crack 2% most years. This is summarized nicely in this chart;
So, yes, the impacts of inflation have been greatly exaggerated.
I recently attended a lecture from an agricultural economist at The University of Guelph, who presented a few simple statistics that perfectly summed up what a non-issue inflation has been.
- In 1935 a carton of eggs caused 31 cents in Canada.
- In 2008 it cost $2.57.
That a 730% increase! Look at that currency debasement; fiat currencies are on the verge of collapse!
Here’s a much more useful way of looking at the “true cost” of a carton of eggs.
- In 1935 a Canadian worker earning an average income had to work over 100 minutes to earn enough wages to buy a carton of eggs.
- In 2008 the average worker had to work less than 10 minutes to buy a carton of eggs.
In terms of time spent working, the cost of a carton of eggs dropped by 90%.
The true cost of anything is how many hours you need to work to buy it.
It’s easy to spin a story about currency debasement looking at the top line inflation numbers over a very long time period. But what we should be concerned about is not inflation but standard of living.
If the value of a dollar declines by 2.5% and I get a 2.5% pay raise, my standard of living remained unchanged, so why do I care?
The gold standard was a bad system, which is a problem for crypto
A common narrative surrounding Bitcoin is that it’s “the new gold.” Indeed, the crypto boosters make a lot of the same arguments that the gold bugs make. Money printing, currency debasement, economic catastrophe, and all that.
If Bitcoin is the new gold, it would be terrible to have Bitcoin or similar cryptocurrencies as the primary means of exchange. At one point, the dollar and many other fiat currencies were tied to the value of gold.
I’d recommend reading this article from money and banking dot com for a detailed breakdown of why the gold standard was a terrible idea.
The biggest takeaways:
- The year-to-year variance in inflation was much higher under the gold standard.
- Deflation was much more prominent under the gold standard. Deflation is a much bigger problem for the economy than inflation and is often harder to combat.
- The variance in economic growth was much higher under the gold standard. Recessions, often painful ones, were much more common than under the fiat model.
If Bitcoin were to replace the dollar, we could expect similar levels of economic volatility.
Change does not mean things will be better. It just means things will be different.
Bitcoin’s massive energy use is finally in the spotlight
Bitcoin has a massive carbon footprint and consumes more energy than the entire country of Argentina, which has a population of 45 million. If you are worried at all about climate change, then you really need to stop and consider if it’s ethical to buy Bitcoin.
As the price of Bitcoin rises, so will Bitcoin mining activities and, along with it, CO2 emissions. This is the stated reason that Tesla stopped accepting Bitcoin as a form of payment. Buying an electric car with Bitcoin is kind of like buying solar panels with a bag of coal; any environmental benefits are instantly wiped out.
When you think about fossil fuel energy, it obviously has a huge carbon footprint, but we put up with it because that energy is vital (for now) to the global economy.
- If all the oil in the world instantly vanished, the global economy would fall into a crippling depression.
- If all the Bitcoin in the world instantly vanished, it would not impact the economy in any meaningful way because 12-years after its creation, Bitcoin plays no meaningful role in daily economic activities.
All the makings of a bubble
If you believe markets are efficient, it’s difficult to predict a bubble before it happens.
For all the reasons discussed in this article, I can’t think of many markets that are less efficient than Bitcoin. It appears that Bitcoin has two primary uses.
- To facilitate Ransomeware attacks.
- Speculative trading.
Is the cryptocurrency market a bubble waiting to pop?
If it is, that could be one of the greatest things to happen to cryptocurrency. In the 2000s, the dot com stock market bubble burst, and a lot of companies went under, and investors lost their shirts. But from the ashes rose Amazon, which has become one of the most dominant businesses in history.
If the crypto market crashes hard, could we see Bitcoin or some other cryptocurrency rise from the ashes?
But for that to happen, they will need a compelling answer to my original questions: what problem is this actually solving, and is it worth the negative externalities?
How Archer Swap Has Helped End Ethereum’s Bidding War
Most DeFi users have heard of Ethereum’s high congestion issues, but few are aware of the controlling forces operating behind the scenes, and how badly they can be impacted by this single problem. When traders send a regular transaction via the Ethereum network, it is susceptible to attacks from bots or front-running software run by entities seeking to profit from trader activity.
Ethereum’s ecosystem is perhaps amongst the fastest growing in the crypto space. Thus, there are already many solutions that tackle this issue and operate for the benefit of the users and decentralized exchange (DEX) traders. Most of them have gone under the radar.
Archer Swap is part of the Archer DAO, a project with features designed to mitigate the risks associated with sending transactions on Ethereum. It protects users from Miner Extractable Value (MEV) strategies, sandwich attacks, and front-running bots while maintaining a connection with Uniswap and SushiSwap, two of the most popular DEXs on Ethereum.
In this sense, Archer Swap can be described as a DEX extension that enhances the trader experience on these dApps. This protocol combines two powerful sets of features that give traders improved operations on Ethereum – protecting them and making trades more cost-efficient.
The first set of benefits are called Archer MEV Shield. Besides protecting transactions from bot attacks, it allows users to eliminate failed transaction fees, a recurring problem on Ethereum. Traders can also cancel transactions at no additional cost.
The second feature is called Archer Trader Extractable Value (TEV), a proprietary and innovative concept introduced by Archer Swap. Operating within the Archer Relay, Archer TEV uses automated rebalancing transactions with bots to sync market prices when big market moves occur.
After a trade or a big swap, there is usually an arbitrage opportunity in a market. Archer TEV uses these opportunities to capture the value and redistribute it to Archer Swap users. In essence, Archer TEV takes revenue generated by Archer Swap and gives it back to one of the protocol’s core components, the traders.
Archer Swap Launches Campaign To Reward Traders
Following a community vote, Archer DAO recently launched a 6-week campaign to buy back and distribute its native token ARCH. In this way, the protocol can reward early adopters. The tokens will be acquired with the revenue generated by Archer TEV.
The protocol won’t have to touch its treasury reserves to attract new users to the platform. The protocol and the users will benefit – as more users trade on Archer Swap, the campaign will have more resources to acquire and distribute ARCH. Therefore, the token will most likely see an increase in buying pressure during the coming weeks, and the platform will see a surge in the number of users.
Archer DAO will distribute rewards every Friday from June 11th to July 16th, 2021. The platform will calculate rewards for each user based on their transacted volume for each week. The rewards will be delivered automatically and with basically 0 risk for the users, all they need to do is trade.
Archer Swap has had famous trades. In May, during the high of the dog meme coins, the inventor of Ethereum, Vitalik Buterin, used Archer Swap to dump his supply of Shiba Inu (SHIB), AKITA, MIRI, ELON, and others into the market.
The dump served a good cause, as Vitalik used this money to send over $1 billion to different charity organizations. The most notable is the Covid-19 relief campaign for India started by Polygon’s co-founder, Sandeep Nailwal. This trade could be among the most famous in 2021 and was enabled by a protocol whose main objective is to shield its users and give them back the power to operate safely within the Ethereum dark forest.
Crypto Crash Trends On Twitter As Bitcoin Falls Below $30,000
Twitter has gone into a frenzy after bitcoin fell below $30,000 this morning. The hashtag #cryptocrash is currently trending on the platform. This is after the coin broke the $30,000 stronghold and fell below it. A price that has been a stronghold for bitcoin for a while now. Speculations were that as long as the asset didn’t fall below $30,000, then there would be a recovery.
Related Reading | Galaxy Digital CEO: Bitcoin Dips Should Be Bought Despite BitMEX News
Bitcoin has been in a downtrend for a couple of days now. News of mining rigs closing down in China pushing the price even further down. Falling below $30,000 means bitcoin is about to erase its gains for 2021. The coin was trading at $29,001 n December 2020. Only breaking the $30,000 barrier in 2021. Now bitcoin is trading at only 3% gains for the year 2021.
Bear Market Trends
Richard Bernstein was on Trading Nation two weeks ago to talk about the trends in bitcoin. The CEO called bitcoin a bubble. He pointed out that bitcoin was currently in a bull market. Noting that people were leaving the markets that were actually in a bull market behind.
Bitcoin crashes below $30,000 before recovering back up to $32,000 | Source: BTCUSD on TradingView.com
Bitcoin has been struggling for the past two months. This was after the coin finally hit the all-time high of $64k in April. There was a lot of speculation that the coin was headed for $100k. But it seems the asset had other plans.
Analysts have compared this to the 2018 crash. When bitcoin hit a new ATH of nearly $20k and then proceeded to lose 80% of its value. At one point trading at a little over $3k.
There Is Still Hope For Bitcoin
Novogratz further explained that calling a bottom on the crash is hard to do. This he attributed to the large liquidations currently taking place across a number of assets.
With regards to the $30,000 price level, Novogratz said, “We’ll see if it holds on the day. We might plunge below it for a while and close above it.”
Related Reading | Over 3 Metric Tons Of Bitcoin Mining Rigs Airlifted Out Of China
The co-founder of Galaxy Digital noted that he wasn’t worried about the price crash. Explaining that he does not expect another crash of the 2017 magnitude to occur again. This he chalked up to the maturity of the ecosystem. Pointing out that much more mature players are now moving into the system.
“Every single bank is working on their own crypto project, how they can get bitcoin to their wealthy clients. I think a lot of clients that didn’t buy it the first time will see this as an opportunity to buy it and get involved.
– Mike Novogratz, CEO of Galaxy Digital
Twitter users have taken to the platform to express their opinions on the current market movements. There are countless tweets asking people to not panic. That the market is going to recover. And right now, it is starting to look like they’re right as the market has gone back into the green. Bitcoin is currently back up to $32k, after a dramatic price drop below $30k.
Featured image from Forbes, chart from TradingView.com
Asia Broadband Forays into Crypto with Gold-backed Token and Exchange
Asset-backed tokens have long offered significant promise to transform the world of finance and investing. 24/7 trading, instant settlement, and fractionalization are just a few of the benefits offered when assets are recreated as cryptocurrencies on a blockchain. From the perspective of the cryptocurrency investor, tokens backed by real-world assets may also offer an opportunity to hedge a portfolio against some of crypto’s notorious volatility, which has once again been in evidence over recent weeks.
The traditional hedging instrument of choice, gold, is ripe for tokenization. Owning physical gold comes with issues such as storage and security, not to mention that it’s a relatively illiquid asset. Instruments such as ETFs may not offer the same direct exposure to gold prices. In contrast, gold-backed tokens are directly linked to gold prices and provide a fast and easy way to buy and sell gold, introducing new liquidity to the markets.
Over recent years, several firms have attempted to launch a version of tokenized gold; however, there has been an absence of operators from within the gold sector itself. Now, Asia Broadband, Inc. (OTC: AABB), a resource company focused on the production, supply, and sale of precious and base metals, has released its own gold-backed token.
For the 25-year-old US firm, it’s the first foray into the world of digital assets. And for the cryptocurrency space, it’s the first time an established player has emerged with a vertically integrated “Mine-to-Token” concept.
About Asia Broadband and AABBG
Asia Broadband was established in 1996, producing and supplying precious and base metals from Mexico to clients based in Asia. It’s now a US-listed company, delivering value to shareholders through its vertical integration approach to its value chain. In 2020, the company achieved an all-time high annual gross profit of $16.8 million, and over $100 million in assets for its first quarter of 2021.
The shift into cryptocurrency has come about thanks to the direction of the company’s president, CEO, COO, and Director, Chris Torres. Despite being a long-established business and finance leader, he has an aptitude for technology and possesses extensive knowledge of cryptocurrency investing. As a result, Asia Broadband has now released the AABB Gold (AABBG) token.
The company believes there’s a significant market for investors interested in owning cryptocurrencies as a digital store of value but who are likely to be put off by the inherent volatility in the crypto markets.
AABBG is backed by the gold mines owned and operated by Asia Broadband, along with $30 million in physical gold reserves. The company has made a public pledge to back 100% AABBG by gold reserves, supplied uniquely by its own mining operations, with third-party sources used only as a backup.
This vertically integrated “mine-to-token” concept is completely unique. Investors can benefit from knowing that they’re dealing with an established, US-listed firm and gain exposure to gold without any of the existing challenges.
Price and Demand
The minimum token price is pegged to the current spot price of gold, which means the token benefits from the lower volatility of gold relative to the cryptocurrency space, offering a sense of stability. Given fears of devalued fiat currencies, the bull case for gold remains intact, and AABBG could also rise as a function of increasing gold prices. As the price of gold fluctuates, the floor for AABBG tokens can change, but the potential upside price of the token will be driven by market demand.
It’s also worth noting that Asia Broadband’s experience and network in the gold sector also offer significant potential to drive demand. As the company has put extensive focus on the vertical integration of its own sales network in Asia, these global relationships provide the potential for cross-selling and deeper liquidity.
AABBG launched in March and, within two weeks, had sold $1 million worth of tokens. It’s now developing a proprietary exchange to allow AABBG holders to trade their tokens for various cryptocurrencies.
The entry of established professional firms to the asset-backed token sector could be just what it needs to get kick-started. With industry expertise, global networks in the business, and innovative business models, it’s evident that they’d have plenty to bring to the table.
Image by Daniel Dino-Slofer from Pixabay
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