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Bitcoinist Book Club: “The Bitcoin Standard” (Chapter 3, Part 2: History)

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Welcome back, Saifedean Ammous’ “The Bitcoin Standard” lovers! Two episodes in a row, because we are committed to doing a whole chapter each week. The last time, we learned why humanity chose gold as the soundest form of money. Now, we’re opening the history books and telling you exactly how everything came to pass.

Needless to say, this chapter right here explains the current state of our present world. The parallels between the two periods of time are breathtaking and… a little scary. However, that’s exactly what we’re here to understand. How did we get here? And, why is Bitcoin essential for future human development? Keep reading to find out. 

Before we get into it, let’s explain what we’re doing one more time:

About The Coolest Book Club On Earth

The Bitcoinist Book Club has two different use cases: 

1.- For the superstar-executive-investor on the run, we’ll summarize the must-read books for cryptocurrency enthusiasts. One by one. Chapter by chapter. We read them so you don’t have to, and give you just the meaty bits. 

2.- For the meditative bookworm who’s here for the research, we’ll provide liner notes to accompany your reading. After our book club finishes with the book, you can always come back to refresh the concepts and find crucial quotes. 

Everybody wins.

So far, we’ve covered:

Let’s keep on trucking with “Chapter 3: Monetary Metals.

Remember book lovers, any resemblance to our current reality in what you’re about to read is NOT pure coincidence. 

Roman Golden Age and Decline

  • In Rome, the common coin was the Denarius, which contained 3.9 grams of silver. 
  • Julius Caesar created the Aureus, which contained 8 grams of gold, “and was widely accepted across Europe and the Mediterranean, increasing the scope of trade and specialization in the Old World.”
  • After 75 years of economic stability, Emperor Nero was the first to introduce “coin clipping.” The throne collected the population’s coins, melted them, and minted new coins with less gold and silver. Devaluation raised its ugly head.
  • To pay for the “lavish lifestyle” of the upper class, the ever-increasing military spending, and for “unproductive citizens living off the emperor’s largesse,” they reduced the Aureus to 7.2 grams, and the Denarius to 3.41 grams.
  • Through the years, of course, the emperors kept debasing the coins. More than 200 years after Nero, Emperor Diocletian introduced the Solidus, a replacement coin with only 4.5 grams of gold. Under his watch, the Denarius ended up having just a silver coating to “cover its bronze core.”
  • The author quotes Ferdinand Lips, “With money so unreliable and debased, speculation in commodities became far more attractive than producing them.”
  • This preceded the fall of Rome, “As taxes increased and inflation made price controls unworkable, the urbanites of the cities started fleeing to empty plots of land where they could at least have a chance of living in self-sufficiency, where their lack of income spared them having to pay taxes.

Byzantium and the Bezant

  • It was time for Constantine the Great. He kept the Solidus at 4.5 grams and “started minting it in large quantities.” Then, he “established Constantinople at the meeting point of Asia and Europe, birthing the Eastern Roman Empire, which took the solidus as its coin.
  • Rome fell, “Byzantium survived for 1,123 years,” and the Solidus changed names. It became the Bezant.
  • Approximately 500 years after Constantine the Great, the Byzantium Empire started to devalue the coin again. Everything declined little by little. Almost 500 years after that, the Empire “was overtaken by the Ottomans.
  • During that time, the Bezant reached Islamic lands. Using similar weight and size, they created the Dinar. The Arab and Muslim civilizations never devalued their coins, for that reason the Dinar continues to circulate to this day. 

Gold price chart for 05/30/2021 - TradingView

Gold price chart on Oanda | Source: XAU/USD on TradingView.com

The Renaissance

  • After Rome, it was time for Feudalism. The feudal lords controlled all the gold, the peasants transacted in copper and bronze coins. With those metals, it was easy to inflate the supply when needed.
  • Europe fell into the Dark Ages, as inflation and taxation caused that, “New generations of Europeans came to the world with no accumulated wealth passed on from their elders, and the absence of a widely accepted sound monetary standard severely restricted the scope for trade.”
  • The transition to the Renaissance began with “city-states adopting a sound monetary standard.” Florence minted the Florin and, seeing its success, Venice minted the Ducat. Less than 20 years later, “150 European cities and states had minted coins of the same specifications as the florin.
  • At this time, silver coins played an integral role. Its lower value made it the metal of choice for small transactions. 
  • The problem was the fluctuations in the price relationship between the two metals. So, “As sovereigns set an exchange rate between the two commodities, they would change holders’ incentives to hold or spend them.

Paper money

  • The two technologies that brought about the modern banking system were: the telegraph and the trains. As soon as they existed, “it became increasingly feasible for banks to communicate with each other, sending payments efficiently across space when needed and debiting accounts instead of having to send physical payments.”
  • The banks kept precious metals in vaults and emitted cheques and bills. This solved gold’s divisibility problem, so silver was no longer needed. 
  • Still, some nations decided to store silver instead of gold. We can still feel the consequences of that decision. Britain chose gold from the very beginning and achieved “economic supremacy” One by one, Europe followed. 
  • The last countries to join the gold standard were India in 1898 and China and Hong Kong in 1935. By the time they did it, India’s coins had lost 56% of their value, and China’s 78%.

History, Gold bars

La Belle Époque

  • By the 19th Century, most of Europe was under the same monetary standard. “allowing the improvements in telecommunications and transportation to foster global capital accumulation and trade like never before.
  • The only difference between the coins was the weight of the gold they were made from. “The British pound was defined as 7.3 grams of gold, while the French franc was 0.29 grams of gold and the Deutschmark 0.36 grams.
  • Sound money brought prosperity, which brought la belle époque, or the beautiful era. ”Some of the most important technological, medical, economic, and artistic human achievements were invented during the era of the gold standard.”
  • Gold became too valuable to carry around and tended to go into vaults. However, “Gold being centralized made it vulnerable to having its monetary role usurped by its enemies.” Namely, the government, “the banks and central banks holding the gold could create money unbacked by physical gold and use it for settlement.

A new kind of devaluation arose its ugly head. It always comes to that. And basically, that’s where we are now, in the paper money era. Throughout the whole 20th century, government and central banks progressively got rid of gold as a medium of exchange and as a unit of account. It still is a store of value, though. 

Images by Unsplash | Charts by TradingView

Source: https://bitcoinist.com/bitcoinist-book-club-the-bitcoin-standard-chapter-3-part-2-history/?utm_source=rss&utm_medium=rss&utm_campaign=bitcoinist-book-club-the-bitcoin-standard-chapter-3-part-2-history

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Commodity strategist predicts Bitcoin ETF could get the nod in US next month

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Bloomberg Intelligence Commodity Strategist Mike McGlone believes it is only a matter of time before the U.S. Securities and Exchange Commission (SEC) approves the country’s first Bitcoin exchange-traded fund (ETF).

In an interview with Stansberry Investor host Daniela Cambone on Sept. 21, McGlone asserted that Canada is extending a competitive lead over the United States after approving Bitcoin ETFs from 3iQ and Coinshares in April.

He emphasized that capital is flowing from the U.S. to Canada’s institutional crypto products, including from Cathie Wood’s Ark Invest. However, he believes that lawmakers in the United States will not want to miss out for much longer.

When asked about a timeframe on potential U.S. Bitcoin ETF approval, McGlone said it could happen “potentially by the end of October.” He maintained that it was likely to be a futures-backed product first, adding that it would open a “legitimization window for a massive amount of money inflow.”

McGlone also reiterated the latest report from Bloomberg Intelligence that stated Bitcoin prices hitting $100,000 was a possibility this year, and this would be driven by the approval of an ETF.

Crypto YouTuber Lark Davis shares McGlone’s price targets, observing that in previous bull markets in 2013 and 2017, the latter quarters saw huge price rallies.

Related: Canadian Bitcoin ETFs quickly hit $1.3B in AUM while US acceptance lags

The SEC is currently yet to approve a crypto ETF despite the number of applications it has received from prospective issuers continuing to mount.

Earlier this month, multinational financial services firm Fidelity Investments, lobbied the SEC to approve an ETP arguing that Bitcoin markets have already reached maturity under the regulator’s own standards.


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Source: https://cointelegraph.com/news/commodity-strategist-predicts-bitcoin-etf-could-get-the-nod-in-us-next-month

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TA: Ethereum Topside Bias Vulnerable If It Struggles Below $3K

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Source: https://www.newsbtc.com/analysis/eth/ethereum-struggles-below-3k/

Ethereum settled below the $3,000 support zone against the US Dollar. ETH price could resume its decline unless there is a clear break above the $3,000 resistance zone.

  • Ethereum started a fresh decline below the $3,100 and $3,000 support levels.
  • The price is now trading below $3,000 and the 100 hourly simple moving average.
  • There is a major bearish trend line forming with resistance near $3,000 on the hourly chart of ETH/USD (data feed via Kraken).
  • The pair could resume its decline unless there is a clear break above the $3,000 resistance zone.

Ethereum Price Remains At Risk

Ethereum started another decline from the $3,100 resistance zone. ETH traded below many important support zones near $3,000 and the 100 hourly simple moving average, similar to bitcoin.

The price even broke the $2,800 support level to move further into a bearish zone. A low is formed near $2,651 and the price is now correcting losses. There was a break above the $2,800 and $2,850 resistance levels.

The price recovered above the 23.6% Fib retracement level of the recent drop from the $3,105 swing high to $2,651 low. An immediate resistance on the upside is near the $2,880 level. There is also a major bearish trend line forming with resistance near $3,000 on the hourly chart of ETH/USD.

Ethereum Price

Source: ETHUSD on TradingView.com

The trend line is close to the 50% Fib retracement level of the recent drop from the $3,105 swing high to $2,651 low. A close above the $3,000 resistance could start a decent recovery. The next major resistance might be near the $3,105 level. A clear break and close above the $3,105 level could start a steady increase. The next major resistance sits near $3,135 and the 100 hourly SMA.

More Losses in ETH?

If ethereum fails to correct higher above the $2,880 and $3,000 resistance levels, it could start another decline. An initial support on the downside is near the $2,800 level.

The next major support seems to be forming near the $2,650 level. A downside break below the $2,650 support zone could lead the price towards the $2,550 zone. The next major support is near the $2,500 level, below which ether price might decline towards the $2,420 support zone.

Technical Indicators

Hourly MACDThe MACD for ETH/USD is slowly losing pace in the bullish zone.

Hourly RSIThe RSI for ETH/USD is still below the 50 level.

Major Support Level – $2,650

Major Resistance Level – $3,000

Source: https://www.newsbtc.com/analysis/eth/ethereum-struggles-below-3k/

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Evergrande crisis: Buy the dip or bail? Pundits weigh in

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As the prospect of Chinese property giant Evergrande defaulting on $305 billion worth of debt looms, pundits are weighing in on how the firm’s bankruptcy could impact the legacy and crypto markets.

Speculation as to whether the real estate investment giant will default has coincided with a downturn across the crypto and stock markets, leaving many analysts divided on whether traders should be buying the dip or looking to take profits in preparation of further bearish momentum.

At the time of writing, Bitcoin (BTC) is down by around 13% since the downturn started on Sept. 18, while the S&P 500 is down by 1.7% and the Hang Seng has dipped 2.8% within the same time frame.

Some are asserting that Evergande’s possible default could represent another Lehman Brothers moment — citing the major investment bank’s 2008 declaration of bankruptcy on $600 billion worth of debt that kicked off the Global Financial Cris.

However, speaking at the Greenwich Economic Forum on Sept. 22, Bridgewater Associates co-chairman and co-CIO Ray Dalio downplayed the significance of an Evergrande default and suggested that the debt is “manageable.”

Dalio admits that while investors will be stung, he thinks that Evergrande’s debt won’t cause structural damage, as the Chinese government may swoop in to restructure the firm and strike deals with the company. He said:

“[The] Lehman moment produced pervasive structural damage through the system that wasn’t rectified until the Treasury came across in terms of its borrowing and then the Fed came across with quantitative easing, but this is not that kind of a shake-up.”

Ming Tan, a director at the credit rating agency Standard & Poor’s (S&P) predicts the Chinese state will intervene to restructure Evergrande.

Speaking to Financial Times on Sept. 20, Tan speculated that said restructuring is likely to see the “profitable parts of [Evergrande’s] business bought up by rivals,” with its debt obligations likely to be underwritten by either a consortium of commercial Chinese banks or the local central bank directly.

Influencer Lark Davis also isn’t too concerned:

Not everyone is so optimistic. The host of CNBC’s Mad Money show, Jim Cramer asserted Evergrande’s debt issues will likely impact the crypto market because nearly half of the reserves backing the leading stablecoin Tether (USDT) are held in commercial paper

Cramer urged for investor caution while Evergrande awaits a verdict on a potential government bailout, stating:

“I know the crypto-lovers never want to hear me say sell, but if you’ve got a big gain as I did, well, I’m begging you: Don’t let it become a loss. Sell some, stay long the rest, then let’s wait and see if China changes its attitude toward an Evergrande bailout.”

While Tether has denied holding any commercial paper issued by Evergrande, analysts have warned that the fallout from an Evergrande restructuring could have significant impacts on the broader commercial paper markets.

“Tons of Chinese businesses stand to get crushed by this fiasco, and they have Evergrande exposure, and that could spell real trouble,” said Cramer.

Marty Bent, a podcaster and the co-founder of Great American Mining, also sounded alarm bells in his Sept. 20 newsletter.

Bent suggested that an Evergrande default will unveil how “exposed the Western world is to China’s economy” via investments in the large real estate players, their debt instruments, and the debt issued by the Chinese Community Party (CCP).

“Evergrande is going under and it is dragging other large real estate developers in China down with it. The world is witnessing another Lehman moment,” he said.

Bent questioned the assertion that Evergrande is likely to be bailed out by the government, noting the party’s recent push to rein in Chinese capitalism and tighten regulations on the real estate market.

“The CCP has come out and stated that they do not plan on backstopping the real estate developers who are currently plummeting toward bankruptcy. It will be interesting to see if they keep this posturing as things get worse,” he said.

The podcaster also noted that while he unsure how the fallout from Evergrande will impact Bitcoin in the short to medium term, he is “thankful” he can hold Bitcoin as a hedge against the fiat-backed global financial system.

Related: ‘Extreme fear’ as Bitcoin falls below $40K … and then bounces

The share price of Evergrande has been steadily declining during 2021 as its credit woes have mounted. After opening the year at roughly $14, the price sits now at $2.20 — a loss of more than 84%.


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Source: https://cointelegraph.com/news/evergrande-buy-the-dip-or-bail-pundits-weigh-in

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