Cryptocurrencies – Bitcoin – Central Banks
hi everybody I’m Lynette Zhang chief market analyst here at ITM trading well we’ve talked a lot about the central bankers and the the key tool that they use to regulate the rate and speed of inflation which is our interest rates and some of you also might recall that back in they came out with a piece on how to break below the lower zero bound because most of the world is anchored at zero percent interest rates and they say the most important consequence of breaking through the zero lower bound is that there is no longer any constraint on how low interest rates can go okay well we know that cryptocurrencies Bitcoin came out in and they looked at it and I’ve been following it since then too and I thought it was a fad and so did they well we all decided to no it’s not really a fad it is definitely here to stay and so there is a tremendous amount of money that is going into developing this area by central banks by governments by corporations okay so in fact here okay this is a piece from the rice bank which is Sweden’s central bank talking about issuing an e Corona and that would be a digital currency now we do know that sweden is instrumental in going there almost cashless right now so they are really way ahead of the curve and a great place to test that.
Central Banks and Cryptocurrencies
So central bankers see the advantage of that because cryptocurrencies are infinitely divisible so they could easily eliminate that issue of going below zero because they can do that easily of course they need everybody’s buy-in so they’ve taken a pretty good hands-off approach as far as regulation goes because they want people to get used to the cryptocurrencies so we can see the rise just since the first of the year in the market cap of cryptocurrencies these are the IC O’s which is the initial coin offering so you can see how rapidly that is rising as money flows into here now there are some that think that this is the beginning of the run on the dollar and actually all fiat money that could very well be true but they also need to control it so this going to that chart that I graph that I just showed you this is the important column in there you can see how much they’ve risen just since January this is a bubble that’s ready to explode and I’m going to come back to that in a second but when there is a flight to safety as that confidence is lost in the currencies what I’m not sure what that is focus on this camera okay if there’s a rise in the flight to safety well this is the current market cap of gold physical gold this is the current market cap of physical silver and this is the current market Katz actually a little bit bigger than larger than this of crypto currencies including Bitcoin.
So they’re now cryptocurrencies now have a larger Mac market cap than silver does physical physical cyber okay so I want you to be aware that there is definitely a growing awareness of crypto currencies which actually serves the central bank’s purpose of getting everybody used to it now the other thing I want to bring up is the fact that we do also know that the global power has been shifting from the u.s. to China and last month the shanghai gold exchange created a partnership or relationship with Dubai’s gold exchange well that does a few things number one remember this is the first ever ran in be denominated gold contract but with what’s been happening in the oil markets we also know that that the Middle East wants to create other of Revenue so by creating this partnership China gains access to . billion Muslims but Dubai gains access to both China and India the two largest Asian countries so this is pretty good now Sharia law okay well they’re starting to come out with its they’re not out yet but they are in the process of coming out with gold backed cryptocurrencies this is the only one it’s one gram gold is the only one that I could find that actually states that they are backed by that you could convert them back into physical gold the CME Group is coming out with one and then there’s another company that’s coming out with one however remember they don’t have firm regulations in here yet so I could not find any kind of legal document or filing or anything that’s that guaranteed any of this nor that stated that they could be converted into physical gold however in the bubble and the other cryptocurrencies explodes most likely you will see a flight into that so I definitely want you to be aware of that but truthfully if you don’t hold it you don’t own it.
Cryptocurrencies and Gold
Anyway I might personally feel a little more comfortable going in in that arena but my level of comfort is with my wealth that I can hold because if for any reason you cannot access that then it’s lost to you until you gain access again if you hold physical gold and silver in your possession that’s not true you can access it when you need it and you can always convert physical gold and silver into any currency Andy good or any service that same thing cannot be said for currencies and cryptocurrencies have only been around since I don’t think they’re quite fully tested yet not only that but we have seen what’s happened to cryptocurrencies when governments have central banks have felt threatened by them remember they have the laws on their side there are some that think that these cryptocurrencies will completely bypass the central banks and that is certainly a possibility but I don’t think central banks are going to give up their monopoly quite that easily so we’ll see the progress of this and I’ll let you know about it but what are they doing for themselves and what’s really happening this is physical gold bar and coin demand through the first quarter of it’s up nine percent year-over-year in China it’s up thirty percent year-over-year it’s pretty obvious what the central bankers and the wealthy are actually doing and that’s physical I’m not saying that they aren’t doing cryptocurrencies clearly you saw that big huge spike in there however this in my opinion this physical in your possession is the single safest place to be but we definitely want to keep our eye on what’s happening there because they’re infinitely divisible so that eliminates the lower zero bound challenge having said that they will still need to deal with this debt so we still need to go through that reset some things that’s the run into the cryptocurrencies is about me this is where I’m most comfortable and we’ll take it from there so that’s it for today I hope you found value in it make sure you share this information and follow us on Facebook like us on Twitter subscribe to us on YouTube give us a thumbs up if you like this and share share share and be careful out there six nine six four six five three take care bye you
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Chief Market Analyst, ITM Trading