Bitcoin’s November moves brings $10K in sights

What was one of the biggest selling items over the Thanksgiving weekend?

Bitcoin. The cryptocurrency jumped from a low of $7,980 on Wednesday to $9,732 early Monday morning. Continue reading

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Saudi ‘reverse coup’ bolsters bitcoin, while dollar forex, crude may crater

Bitcoin soared past $7,600 in early Sunday trading as news came out of a Saudi Arabian crackdown on the royal princes in a consolidation of power for the new king.

Among the 50 royals detained on Saturday evening was Prince Al-Waleed bin Talal, the billionaire investor behind Twitter, News Corp. and Citigroup. Continue reading

Bitcoin thrives on dollar weakness

As bitcoin has recovered some of its JPM chief Jamie Dimon/China crackdown attack of last week, it awaits the next onslaught.

Trading roughly a $1,000 off its almost $5,000 high earlier this month the cryptocurrency has better resolve than other currencies including the US dollar.

The dollar has lost roughly 10% of its value against other currency this year. Trading near a high of 94 on the WSJ dollar index, today it stands at 85.3. The chart is one long slope down with no peaks since January.

Funny how this metric never comes up in Federal Reserve meeting or discussions. Cheapen the dollar to spur growth is not a sound basis to build a recovery. But Wednesday when the Fed announces its rate decision, we will not hear anything about the dollar’s worth vs. world currencies.

So how much of the roughly $3,000 price gain in 2017 can be attributed to dollar weakness? I would say it can take credit for almost half the gains as more sophisticated investors sought a hedge against a depreciating dollar. Especially the Chinese, which have their yuan pegged to the dollar.

Look for bitcoin to rise further after the Fed holds rates on Wednesday. This will give you more of an indication of who is using bitcoin as a hedge.

IMF eyeing blockchain for roll out of SDR to replace US dollar: Rickards

I was talking to a currency trader, Thursday on the train going home. He knows I’m a business editor at a large paper in New York City.

He was telling me how Fx traders were not taking any positions after the end of this year. How the markets were constricting and said it was a huge problem and perhaps a bigger story.

I asked why? Was there a global currency coming or perhaps a reset?

All he could tell me as we got off the train was that I should look into it.

I researched over the weekend, and could not come up with anything. Now admittedly, I don’t usually look that deep into the currency trading world. It’s a closed community that’s not very transparent or accessible.

However this morning I did see that James Rickards, author of “Currency War,” among other titles and cited here before, put out an open letter to President Trump warning him of problems in the US dollar.

The nutshell of the letter is that beginning Jan. 2018 the International Monetary Fund — using blockchain technology, which is the same technology that bitcoin and other cryptocurrencies use, will be issuing Special Drawing Rights (SDR) as a new world currency to replace the dollar.

Now I find his letter highly doubtful given the quick timing of implementation, however I have this currency trader from Deutsche Bank telling me there are problems in the Fx markets, prior to the paper being published.

So I have two sources essentially saying the same thing.

Rickards does cite white papers and statements from IMF chief Christine Lagarde talking about SDRs and certainly Rickards has a long history of talking up the SDR as a world currency, replacing the dollar.

So what does this mean in the big picture? Rickards writes:

Just look what happened the last time we had a big change in our global financial system. In 1971, Nixon announced the U.S. would no longer officially trade dollars for gold. That created a lot of uncertainties, turning that decade into a nightmare for stock investors.

 

Take a look… the Dow Jones, an index of “stable” blue chip stocks (the kind most retirees like to hold), was cut in half. Stock investors bailed out of the market and, for the most part, didn’t come back for a decade.

 

I expect something similar once Distributed Ledgers go live.

The transition from a U.S. dollar system to a new system dominated by SDRs will be messy. Stocks will collapse… and will stay down.

 

There will be no recovery this time, because the U.S. government won’t be able to come to the rescue like they did in 2008.

 

You [President Trump] won’t even have funding for normal operations, let alone enough funds to save stock investors.

 

There has been a plenty of selling of the dollar recently, but that’s against other currencies like the euro and pound, If the IMF’s plan is true those currencies would also be devalued, so that is not a good indication of the plan.

Unless you figure in a currency trading scenario where the 800-lbs gorilla is the dollar and it is weakened, then all other currencies in the world will gain.

If crude can be traded in any currency, then there is big trouble in not only the currency market — a small backwater trading operation — but Treasury trading will implode.

That’s where Rickard’s nightmare scenario comes to fruition.


9-11-01: Never Forget

Bitcoin's rise being Fed by Yellen

US security markets took the release of the Fed minutes in stride on Wednesday as most analysis said March was on the table for a rate hike.

Investors seem to take that in stride since Fed chief Janet Yellen has been using this script for some time and as I wrote yesterday there will not be any March madness in Fed rate complex.

However that does not mean the “currency” markets were unchanged. Bitcoin, the crypto digital-currency moved from $1,078 to $1,137 over the two-day trading period. That’s a 6 percent move on the words of the Fed, which tells me no Fed hike in March and the bitcoin move is a hedge against a weakening dollar. [Editor’s note: Bitcoin is now trading $1160 on Thursday]

As I have said many times, I use bitcoin as a canary in the coal mine, since its adoption is widely used as a hedge for devaluation in currency markets by large financial institutions.

Bitcoin is no longer a dark web currency for nefarious activities. The Securities and Exchange Commission is about to approve a bitcoin ETF administered by the Winklevoss twins of Facebook fame.

Keep an eye on bitcoin’s moves over the next three weeks for a good barometer of what the sentiment is for the March Federal Reserve meeting.