This weeks installment of our quick video review highlights some of the implications of the crypto executive order and discusses the LME nickel escapade…
Read the video transcript
Happy Friday, everyone. It’s Friday, March 11th. I’m Dave Weisberg, CEO of Coin Routes. And it’s time for this week in crypto. Well, this week there is a lot going on. Obviously, with the war, volatility in bitcoin has continued up 10%, down 10% in the same single day. But what I want to focus on are two other events that are incredibly material for what the future will hold. The first is the executive order signed earlier in the week by President Biden. And it’s not so much that this particular order says anything incredibly interesting or incredibly surprising. It’s more a combination of two things.
First, what does it not say? Well, what it doesn’t say is outlawing, banning, etc. In fact, it goes so far as to say that they believe crypto is an important innovation that needs to be preserved. Well, that’s incredibly bullish and effectively takes out a lot of the fud or fear, uncertainty and doubt that get used by people who say, oh, well, the US government is going to ban it. The second thing that it did is it actually will go a long way. In all likelihood, they’re dispelling two of the largest sources of fud that are continually talked about. Senator Warren used to spend all of her effort trying to kill bitcoin because based on energy, saying it consumed too much energy, it was bad for environment, etc. lately she’s been talking about bitcoin’s ability to avoid sanctions. Both are nonsense.
Both stem from her desire to want to financially control all the individuals and decentralized government power. Kind of pretty much exactly against the “progressive ideology” that she purports to maintain. But that’s a story for a different day. Let’s talk about what the order does. The first thing it does is it establishes the need to study and it specifically directs a study to find out what is the impact of Bitcoin… Or it didn’t say bitcoin, it said crypto, but the impact of crypto on stabilizing energy grids and sustainable energy, well, that’s hugely important. It doesn’t specifically say to study the energy use. Which is the raw numbers that get used all the time. But specifically something that we know in the bitcoin community is important. Namely that bitcoin can take and consume energy and use it productively at off hours. At off times. In places where it’s otherwise stranded. Whether that is flared gas or simply installations that, like hydroelectric, that is far, that are far and from the mainline grid.
It seems fairly likely that a comprehensive study of the situation will show that bitcoin will be a positive for the energy situation and sustainability going forward. The second is they asked to study specifically issues about sanctions avoidance, AML, etcetera, anti-money laundering. In that given the fact that there are companies like Chain analysis and elliptic who are working very hard on the on-chain metrics, and the fact that all of the exchanges are participating with the fiat on and off ramps in terms of wanting more regulation. I suspect that will also show to be a pretty reasonable balance between security at the national level and privacy at the individual level. And that’s really what we’re trying to accomplish here.
But the important point here is that it’s asking for study. The people who do these studies for the most part are hardworking economic and econometric types and they tend to be career oriented, not necessarily beholden to one political party or another. So there is hope that we’ll get a fair reading on this. It will then, of course, also go out for public comment and there will be much more engagement. But it is, in short, a productive exercise and one that should be good for the crypto market going forward.
The second event, which is also important and within the context of the executive order is what happened in the metals market, the LME trading of nickel, that was really important. What happened, for those who don’t know, is nickel prices rallied substantially, so much so that it effectively bankrupted short someone, a very large nickel producer who had over hedged themselves overspeculated and therefore were short nickel into this rally. Now, the reason this is able to happen in the traditional futures markets is they settle all accounts at the end of the day. They don’t look to see our positions being eroded is there a chance of liquidation during the day like crypto does.
In the crypto derivative exchanges, liquidation engines are running in real time. So long before it got to a situation where the entire capitalization of one of the world’s largest nickel producers could be threatened, their positions would have been liquidated. And that’s very important because one of the other things the executive order wants to study is particularly market structure and how that will destabilize markets. Well, I think it’s pretty clear to say that the innovations that we’ve seen in the crypto market would be an improvement in that regard. And I think there are many people who look at the older markets and say just shake their heads, like how could this happen? How do you break trades? How do you intervene in the market this way? And I think it will be a big deal. So those are two very long term things that will influence crypto.
Meanwhile, as we sit here today on Friday, bitcoin is trading right back where it was several days ago, around 38,000. It’s been up a little bit to 40, it’s been down a little bit. But the reality is it’s still in a trading range as the speculators are still trying to figure out which way things are going to go all the time, block by block, day by day, the news flow shows very good future for the commodity and more and more adherents growing. But the reality is, from market perspective, we are, we are it’s a trading range. Anyway, thank you very much and enjoy the weekend.