The IMF announced that the Federal Reserve is looking into possibilities of CBDC (central bank digital currency) in several countries. China is in the trial stage right now of rolling out CBDC with the Chinese Renmibi very soon. Fed Chariman Jerome Powell said the US is still looking into the feasibility of CBDC, we’re not there yet. The US could be 2-3 years behind China on CBDC. This will increase the roll China has economically on the world stage as more and more countries plunge into Hyperinflation. The Renmibi will grow stronger as it will be more common in Iran, Turkey, Lebanon, Greece, Kazicstan all over Africa where Hyperinflation has happened. Over time it could spread to Venezuala, Argentina, and other countries that begin experiencing Hyperinflation. It will be easier to transact, and easier to get because it is digital. This Renmibi strength will hurt the value of the US Dollar. It should weaken faster unless the US Fed speeds up the transition to the CBDC. Here is a direct quote from the Federal Reserve of Cleveland from late September:
“The Federal Reserve Bank of New York has established an innovation center, in partnership with the Bank for International Settlements, to identify and develop in-depth insights into critical trends and financial staff members from several Reserve Banks, including Cleveland Fed software developers, are contributing to this effort. The Federal Reserve Bank of Boston is also engaged in a multiyear effort, working with the Massachusetts Institute of ledger platforms to understand their potential benefits and tradeoffs.
Experimentation like this is an important ingredient in assessing the benefits and costs of a central bank digital currency, but does not signal any decision by the Federal Reserve to adopt such a currency. Issues raised by central bank digital currency related to financial stability, market structure, security, privacy, and monetary policy all need to be better understood.” Loretta Mester CEO of Federal Reserve Bank of Cleveland
As the US drags it’s heals on this decision, it will, over time add stress to the strength of the US Dollar and it’s position as the global reserve currency.
The opt out to all of this has been Bitcoin since 2009. It has the most secure network in the world. As country after country goes to a CBDC, the following will become obvious about these types of currencies:
- They will increase government survalliance.
- They will decrease financial security as the Fed can pull out taxes directly from the Fed account where a citizens CBDC is held.
- They will devaluate similar to fiat currency because printing paper money and creating digital money will not change money supply, liquidity.
- CBDC are still 100% under Central Bank control.
Bitcoin is digital and convenient compared to paper cash, like a CBDC. The similarities stop right there. Bitcoin is uncorrelated to Central Bank control, government survalliance, and it’s supply is halved every 4 years. Scarcity with Bitcoin cannot be reversed as the halving is written into the code for Bitcoin. It would take 51% or more of all Bitcoin holders to vote for an increased supply which would plummet the valuable price. That goes against why Bitcoin even exists. CBDC will be created at the will of the Federal Reserve, whenever more supply is needed. This appears that it will lead to inflation. However, since technology is so deflationary by it’s nature, that may never happen. What will happen is a debasement of the USD value over time. This dollar debasement or devaluation will lead investors, businesses, hedge fund managers, institiutional investors to Bitcoin. We already published the list of companies that have moved significant % of their reserve assets into Bitcoin. The list now totals $6.7 Billion dollars invested into Bitcoin. Today, Bitcoin is up to 64% YTD return while most other assets are struggling to break even or provide a small return. Gold (26% YTD), and Silver (36% YTD) are the other good uncorrelated investments but they are’nt giving Bitcoins returns. Gold and Silver miners are unincumbered to seek out and find more of these precious metals so supply cannot be halved every 4 years like Bitcoin. At this period in time, Bitcoin has been breaking out of a 2.5 year triangle pattern since late August 2020. In September it retraced and tested the support which as you can see on the chart is the top of the triangle. Today it has exploded off that support and is breaking through $11,800 now. Look at the latest Bitcoin chart from 3 hours ago:
Neutral ATM would not be surprised to see Bitcoin jump well above $15,000 soon. We have broken $12K retraced to $10K to test resistance, and now it is close to breaking $12K again. We have gone over the HODL wave and how that chart points to a very bullish future for Bitcoin. Now, price action is beginning to show the same signs. Time will tell the tale. Only history will prove us right or wrong. As the news of CBDC broke today and was rumored about all of last week, see the below chart:
Bitcoin pushing up, S&P showing weakness. Again, time will tell the tale. Neutral ATM is here to get everyone off of zero Bitcoin.