Cryptic Currency From Blockchain To Daisy Chain And Beyond

You have to ask yourself about the world we live in when Bloomberg sees fit to run a segment titled, “DaVinci and Bitcoin.” A sign of the times it certainly is. The tie that binds the two parabolic price behaviors apparently comes down to scarcity value.

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The global art market is about $45 billion. So, who’s to question when a mere one percent of the market changes hands for a one of a kind? Why indeed? And Bitcoin’s market cap of $300 billion doesn’t even register compared to the $6 trillion of the world’s mined gold. An even smaller drop in the bucket!

What’s next you might be asking? Based on the current thinking, we could see a $225 billion trophy property change hands based on the prevailing value of the global real estate market.

Is it me or does this logic have a, “Get it while it’s hot!” feel to it, and not much more?

On the other proverbial hand, major markets are moving into the Bitcoin space at a furious pace. The Nasdaq will launch Bitcoin futures following the CME on the supposed road to legitimacy. This can’t possibly be mob scene madness we’re witnessing, but rather a market setting prices based purely on the fundamentals of supply and demand. Right?

Denying Bitcoin’s appeal is both near-sighted and infantile. Investors worldwide are justified in their anxieties about fiat currency degradation care of the quiet and corrosive currency wars being fought to sustain an impossible debt build, a race to the bottom with no precedent. In the context of bubbles, it’s the very global nature of Bitcoin that makes it so difficult to disavow. And yet, bubble it undeniably is.

The more pressing question on investors’ minds should be what happens in the aftermath of Bitcoin’s bubble bursting? What will the contagion effects be? What other frothy asset classes will it take down with it? Or better framed, what asset classes will be spared?

It appears that one man will be tasked with addressing the damage the coming storm will leave in its wake. To incoming Federal Reserve Chairman Jay Powell’s credit, in his Senate confirmation hearing, he rejected the notion that banks are Too Big to Fail. We can only be optimists in interpreting his position to be one of a strong man, determined to let the banks suffer the fates of their own making.

As for the markets and in turn, the economy, we won’t know about such things as zero, or worse, negative interest rates for some time yet. By all indications, the Fed is poised to hike rates come December 13th. What follows in the year to come though is anyone’s guess. It’s more than likely we will be caught off guard by a supply rebuild that flatters growth figures through the first quarter. Will the Fed depend on this sugar-infused data to keep tightening all the way into recession?

And then what? Will central bankers’ dreams of totalitarian control of our spending come true? Is the Bitcoin of today a mere technological dress rehearsal for Fedcoin and its central banking cryptocurrency brethren of the future? I explore the potential for just that in this week’s installment, Cryptic Currency: From Blockchain to Daisy Chain and Beyond.

If you can tear yourself away from the fawning news coverage of Janet Yellen’s last trip to the Hill, I invite you to hopefully enjoy and generously provide feedback at will.

Bidding Yellen a fare thee well, and wishing you well,

Danielle




About the Author

Danielle DiMartino
Called "The Dallas Fed's Resident Soothsayer" by D Magazine, Danielle DiMartino Booth is sought after for her depth of knowledge on the economy and financial markets. She is a well-known speaker who can tailor her message to a myriad of audiences, once spending a week crossing the ocean to present to groups as diverse as the Portfolio Management Institute in Newport Beach, the Global Interdependence Center in London and the Four States Forestry Association in Texarkana. Danielle spent nine years as a Senior Financial Analyst with the Federal Reserve of Dallas and served as an Advisor on monetary policy to Dallas Federal Reserve President Richard W. Fisher until his retirement in March 2015. She researches, writes and speaks on the financial markets, focusing recently on the ramifications of credit issuance and how it has driven equity and real estate market valuations. Sounding an early warning about the housing bubble in the 2000s, Danielle makes bold predictions based on meticulous research and her unique perspective honed from years in central banking and on Wall Street. Danielle began her career in New York at Credit Suisse and Donaldson, Lufkin & Jenrette where she worked in the fixed income, public equity and private equity markets. Danielle earned her BBA as a College of Business Scholar at the University of Texas at San Antonio. She holds an MBA in Finance and International Business from the University of Texas at Austin and an MS in Journalism from Columbia University. Danielle resides in University Park, Texas, with her husband John and their four children. In addition to many volunteer hours spent at her children's schools, she serves on the Board of Management of the Park Cities YMCA.