Quantitative Easing & Cryptocurrency: Nuggets News presentation at GAIC 2019

Alex Saunders of Nuggets News shares his thoughts on what to expect from central banks on the road ahead from dropping rates, implementing quantitative easing and the applying modern monetary theory. Explaining why this is important to understand when investing in hedge assets like Gold and Bitcoin.

Alex Saunders is one of Australia’s leading blockchain educators and founder of Nuggets News.

Filmed at the Gold and Alternative Investments Conference 2019, Saturday, October 26, 2019.

 

how we’re going guys that’s working so
00:01
hands up who owns gold and hands up who
00:06
owns Bitcoin it’s bit more even than I
00:09
thought so yeah I’m definitely a big fan
00:11
of both and today I’m going to try and
00:13
give you a rundown of bitcoins history
00:15
and how it’s been affected by monetary
00:17
policy where I think that is going as we
00:20
head into the future and Bitcoin is very
00:23
hard to understand so I’m going to tie
00:25
together all these concepts as best I
00:27
can for you in under half an hour and
00:29
just a bit of an intro I run Nuggets
00:32
news I’ve been in cryptocurrency since
00:34
2012 I was actually a pharmacist by
00:37
trade and I’ll talk about how my story
00:40
came about so these days where
00:43
Australia’s leading provider of free and
00:45
premium education with a focus on
00:48
Bitcoin other cryptocurrencies as well
00:50
as the importance of gold and protecting
00:53
your wealth a bit of well-rounded
00:55
financial education so Bitcoin often
01:00
gets called you know digital gold
01:01
internet money and I think these terms
01:03
maybe oversimplify it and don’t do it
01:06
justice so I’m going to talk about all
01:07
the different things that it is bringing
01:09
together and why it is so important so
01:12
another focus of my talk today is you
01:13
know what have we learned from the GFC
01:15
it’s ten years on now and Bitcoin
01:18
actually came about from the GFC my
01:23
journey begins around that time when I’d
01:25
been studying pharmacy but investing it
01:27
always been my passion and when the GFC
01:30
unfolded like a lot of you I’m sure you
01:32
want to know what happened and there’s
01:33
some fantastic documentaries out there
01:35
and you learn about how you know the
01:37
banks effectively caused all this
01:39
trouble and then got bailed out and
01:41
satoshi the creator of Bitcoin embedded
01:44
this message about the the bailouts for
01:47
the banks in the Genesis block of
01:49
Bitcoin so it’s very much one of the
01:51
messages that he was trying to portray
01:53
about bitcoins mission going forward so
01:56
since the the GFC I guess the message
01:59
from central banks and their
02:01
relationship with government has always
02:02
been around you know trust us
02:04
we’ve got these levers of printing money
02:06
and interest rates and we can steer the
02:08
economy and they really ramped up their
02:11
production of of money as most
02:13
in this room probably know to encourage
02:15
banks to lend out and get the economy
02:17
going that I’m gonna talk about how that
02:19
hasn’t really unfolded and what we saw
02:21
around this time was people becoming
02:25
aware of these issues and push back
02:27
against what was happening so Occupy
02:29
Wall Street was pretty prominent at the
02:31
time he kind of died down a little bit
02:33
but this was when Bitcoin was starting
02:35
to get a little bit of traction now like
02:38
a lot of people when you learn about
02:39
what he’s going on in the monetary
02:40
system you know I’m preaching to the
02:42
converted here at a gold conference and
02:44
I know personally I wanted to go out and
02:45
buy some some gold and silver and one of
02:48
the first bars I bought it wasn’t a
02:50
common I commonly made bar and I was
02:52
sort of thinking you know how I know
02:53
that this is legit so I guess that’s
02:54
probably one of the the aspects of
02:57
Bitcoin and auditing and even gold that
02:59
I believe blockchain can help Gold’s
03:01
case as well but I’m very much an
03:02
advocate of gold and silver and I still
03:05
own those today another thing that a lot
03:08
of gold bugs will tell you is the price
03:10
manipulation so depending on what degree
03:12
you believe in that I certainly I can
03:14
understand the case for you know these
03:16
futures markets and ETFs and
03:18
rehypothecation and what what is the
03:20
real gold underlying that and it’s
03:23
something that I hope doesn’t creep into
03:24
the Bitcoin world too much because we
03:27
don’t want that money that once exposure
03:29
to that asset being pushed into these
03:31
things that aren’t backed by real
03:32
Bitcoin or by real gold so you see a lot
03:37
of these different slides around
03:39
bitcoins properties and you know it’s
03:42
it’s all looking pretty good according
03:43
to that but I’m certainly not here to
03:45
tell you that Bitcoin is a replacement
03:46
for gold at all there’s some things that
03:48
it does are better and some things that
03:50
it doesn’t do better that track record
03:52
and the history of gold obviously is
03:53
very hard to compete with but it’s all
03:55
the properties of Bitcoin that give it’s
03:58
you know good credence to be a good
04:00
money the future money the next
04:02
evolution of money so for the first time
04:06
ever we had a way so I guess stick it to
04:09
central banks and governments and say
04:10
well you know if you’re going to try and
04:12
manipulate gold and ETFs and I know most
04:15
people instrument robably fans of
04:16
holding the real thing for the first
04:17
time ever we’ve got a way to hold your
04:21
assets outside the system and become
04:22
your own bank and this was a famous
04:24
photo that you probably saw with someone
04:26
to buy Bitcoin behind janet yellen air
04:29
so what is Bitcoin what are the
04:32
properties that make it a good money
04:34
well the first things you learn is about
04:36
this finite supplier and how the
04:38
inflation rate halves every four years
04:40
so you can see there on the curve we’re
04:43
at a very important point well in May
04:45
next year we step down from 4% inflation
04:47
to 2% and then again four years later
04:50
down to 1% and at that time Bitcoin
04:53
becomes more scarce than that inflation
04:55
that all central banks are targeting of
04:57
two and three percent the new production
04:59
of gold is about one or two percent so
05:01
Bitcoin will become you know more scarce
05:03
in terms of the new coins created and
05:05
that’s very attractive in a world where
05:07
money printing is running right another
05:10
thing that you’ll love about Bitcoin
05:12
once you learn about is this
05:13
decentralized nature so what does that
05:15
mean well anyone can download the
05:17
Bitcoin blockchain running on their
05:19
computer help support the network you
05:21
can download a wallet and you become
05:23
part of the network you can send Bitcoin
05:25
to anyone else there’s no one company
05:27
that can be targeted or shut down
05:29
there’s there’s nodes computers all over
05:31
the world that run this network and it’s
05:33
literally impossible to stop unless you
05:35
plan on showing down the entire Internet
05:38
so around 2013 we saw the Cypress
05:42
bailing so heads up who knows the story
05:44
there so this is the first time that
05:47
we’d seen governments and banks say well
05:49
we’re not we’re not going to bail the
05:50
banks out and give them money you’re
05:51
gonna have to bail your customers in to
05:53
shore up your reserves and they got what
05:56
they call a haircut where the customers
05:57
lost a percentage of all money in their
05:59
accounts and we saw a lot of protests at
06:01
the time the ATMs shut the bank shut in
06:04
Cyprus and Bitcoin ran from a hundred
06:06
dollars to over a thousand dollars as
06:08
people in Cyprus saw that as the best
06:10
way to protect their wealth and have
06:12
access to their money so this was the
06:14
first I guess bubble and Bitcoin does
06:16
follow these these cycles these mini
06:18
bubbles where we have a very scarce
06:20
asset it’s thinly traded so when
06:22
everyone tries to borrow we get these
06:23
big run ups in price and that leads to
06:25
euphoria and speculation and then we
06:27
have these these crashes and like
06:29
anything it overshoots to the downside
06:31
and we have panic so I’ve been through
06:32
seven of these cycles now since 2012 and
06:35
you know every time people who say whoo
06:38
bitcoins dead he’d ends up going up a
06:39
thousand
06:40
sent the following year throughout this
06:43
time and despite this volatility if you
06:45
look at all the network stats for
06:46
Bitcoin and we can pull a lot of data
06:48
from that because the blockchain is
06:50
transparent and anyone can see what’s
06:51
going on the growth in the network was
06:54
very constant so bitcoins price
06:56
unfortunately isn’t just going to
06:58
steadily increase and you know REITs
07:01
these large market caps in the trillions
07:03
where I believe it’s going we’re going
07:04
to have those cycles despite the actual
07:07
growth underlying it being very very
07:09
consistent so most of you’ve probably
07:12
seen this slide about the u.s. debt
07:14
clock it’s probably going up a few
07:15
billion since I took this screenshot
07:17
yesterday and it’s these are the reasons
07:20
why bitcoin is so important because of
07:23
that finite nature that low inflation
07:25
rate that I spoke about there’s also an
07:27
Australian debt clock if you want to
07:29
google that and you can see how quickly
07:31
these liabilities and promises the
07:34
government is saying they’re gonna pay
07:35
us all are unfolding so I’ll put my
07:38
pharmacists hat back on
07:40
and once data like to tell people is
07:41
that for the first time in history
07:42
there’s more adult diapers than baby
07:44
diapers we’ve got a generation of baby
07:47
boomers every day 10,000 baby boomers
07:49
retire in the US and they’ve been
07:51
promised these pensions and this
07:52
Medicare and as you saw in the previous
07:54
slide that’s hundreds of trillions of
07:56
dollars the US and other countries are
07:58
promising at a time when they’re running
08:00
huge deficits there’s no way that this
08:02
can be funded and every dollar of debt
08:04
represents something that needs to be
08:06
paid out in the future so we know that
08:08
the money supply is going to have to
08:09
increase into the hundreds of trillions
08:10
of dollars and that is going to be very
08:13
inflationary in all countries around the
08:15
world at the same time we’ve got a
08:18
generation of young people such as
08:20
myself that have grown up with the
08:21
internet and devices and every time a
08:23
new technology comes along the adoption
08:26
rate speeds up so smart phones and
08:28
Facebook took over the world you know in
08:30
a number of years only a couple of years
08:32
compared to previous technologies and
08:34
communication things spread like
08:36
wildfire these days and when I see those
08:39
charts of the Bitcoin and people saying
08:40
it’s dead it’s a bubble all of those
08:42
little bumps on the road when you zoom
08:44
out just another adoption curve in my
08:46
mind and we’re gonna head to a 80 or 90
08:48
percent penetration and that doesn’t
08:50
mean the Bitcoin becomes a world
08:51
currency or anything like that it just
08:53
means that
08:54
every person he’s going to use it to
08:55
some degree whether it’s just on
08:56
holidays you know to some degree I
08:59
believe Bitcoin is going to be used by
09:00
lots of different people in different
09:02
capacities now when people tell me that
09:05
no one spends Bitcoin no one uses it a
09:07
little company in Australia called
09:08
living room with Satoshi you have
09:10
allowed you to pay any bill in Australia
09:12
since 2014 pay your credit card off pay
09:15
someone else to their bank account pay
09:17
your dentist over be pay you can pay any
09:19
bill in Australia for five years so
09:20
people are using this every day and we
09:23
have more and more merchants that are
09:25
accepting Bitcoin directly so there’s
09:27
websites and and cards where I can use
09:29
to pay for things with my Bitcoin do my
09:31
shopping every week but now we go a step
09:33
further where the merchants and cafes we
09:36
rolled out Brisbane Airport last year
09:37
every shop there now accepts Bitcoin so
09:39
the merchants are now accepting it
09:41
directly as well as those other
09:42
intermediary services now some people
09:45
say that Bitcoin isn’t the best method
09:47
of payment it can get a bit expensive in
09:48
the networks a bit slow and that’s why
09:50
we’re working on things like the
09:51
Lightning Network as you see here so
09:53
that’s a layer that sits on top of the
09:55
Bitcoin network it’s not perfect like
09:57
the internet in the early days we’re
09:59
ironing out all the bugs and we’re
10:00
making this thing work better and better
10:01
over time but as long as you can find a
10:04
route to another person just like we
10:06
used with the internet you know it finds
10:08
a route to that website you want to use
10:09
you don’t even have to know what’s going
10:11
on your computer on the back end this is
10:12
what’s happening in the world of Bitcoin
10:14
and payments now those cycles that I
10:17
spoke about this chart huge is just
10:19
showing you the market cap of Bitcoin as
10:20
it as it grows compared to the realized
10:22
market cap so what that means is we can
10:25
look at the last time a Bitcoin moved
10:26
you know in a wallet when someone bought
10:28
it and if they bought it a hundred
10:30
dollars and then the price runs up to
10:31
$1,000 we can see that the actual market
10:34
cap is now a long way away from what
10:36
they last realized the price of their
10:37
Bitcoin app so people take profits when
10:40
that moves too far away and it reverts
10:42
back to the mean and we bottomed out
10:44
again last year in 2019 at around three
10:46
thousand dollars and the little orange
10:48
line you can see at the top there is is
10:50
that realize market cap so it basically
10:52
means where everyone’s had a chance to
10:54
sell now if they want to take profits
10:55
and whatnot and so the actual true value
10:57
that’s been realized at the Bitcoin
10:59
network is at all-time highs and
11:00
consistently increasing now people say
11:03
Bitcoin it’s not a good story value it’s
11:05
too volatile well it
11:07
we’re in a bear market we’ve been in a
11:08
bear market for almost two years and
11:10
it’s still been profitable for 90
11:11
percent of bitcoins life to buy Bitcoin
11:13
you’re still in profit and I believe
11:15
we’re gonna pass those all-time highs in
11:17
the next 12 or 24 months and that will
11:19
go back to a hundred percent of the time
11:21
becomes been a good store of value now a
11:23
lot of people to the Gold’s of a good
11:25
story value if you bought it over $1,900
11:27
and then it falls to a thousand well you
11:29
bought silver at fifteen and falls to
11:30
fifteen dollars but those same arguments
11:32
we can use for Bitcoin zoom-out look at
11:34
the longer-term chart over time it’s
11:36
consistently been a better story value
11:38
than every currency on the planet so
11:41
what happens when you’ve got an asset
11:42
that’s the best performing asset and
11:43
then planet every year buy one for ten
11:45
years or there’s a lot of copycats come
11:47
out and other coins so one of the
11:49
arguments often hears about Bitcoin
11:50
Forks someone can copy the network hands
11:53
up who’s heard of Bitcoin cash it’s a
11:55
it’s a fork of the Bitcoin network so a
11:58
community can say well we think Bitcoin
12:00
will be better if we have this feature
12:01
and they can split away and it’s up to
12:03
you then to convince everyone why your
12:05
coin is better so there’s over a hundred
12:07
Forks 99.9% of them are crap they have
12:10
zero value but it’s allowed people to
12:13
try and experiment with something
12:14
different now they pretty much extends
12:16
for all cryptocurrencies there’s over
12:18
ten thousand out there today the term
12:20
cryptocurrency probably doesn’t do it
12:21
justice because most of them aren’t
12:23
trying to be currencies these days
12:24
there’s just a lot of projects and
12:26
businesses in the real world that are
12:28
using a blockchain technology so we need
12:30
to start referring to these things as
12:31
digital assets they’re not trying to be
12:33
currencies and I think that confuses a
12:35
lot of people so Bitcoin cash has been
12:37
the most successful hard fork and that’s
12:39
only captured around two or three
12:40
percent of the network so Bitcoin
12:42
continues to get stronger and stronger
12:44
we call it anti fragile throw out any
12:46
attack he won on it or any copycat coin
12:48
and it continues to gain market share
12:50
and any feature that actually works
12:52
really well Bitcoin can update and
12:55
absorb that feature so now we see
12:59
everyone wanting to get into this space
13:00
the payment space banks have had it
13:02
pretty good for a fair while now so
13:04
Apple pay launch email card
13:05
recently Facebook came out with the
13:07
Libra cryptocurrency
13:09
now all these coming up with payment
13:12
coins stable coins JPMorgan have
13:15
launched their own coin so it’s very
13:16
different to what Bitcoin are trying to
13:18
do it’s not finite they can
13:20
as many of those stable coins as they
13:22
want and that’s just absorbing value and
13:25
it’s pegged to fiat currency that has
13:27
all the issues that I’ve been talking
13:28
about it’s no good being pegged to
13:29
something that’s going to be inflated
13:31
away over time and we’ve already seen
13:33
big regulatory pushback MasterCard Visa
13:36
PayPal they’ve all pulled out of this
13:38
labor project and Mark Zuckerberg was in
13:40
front of Congress getting and grilling
13:42
again yesterday one of the things that
13:44
actually said in that Congress hearing
13:46
was we can’t call the CEO of Bitcoin in
13:49
here they’re actually admitting that
13:51
there’s nothing they can really do about
13:52
it because it is truly decentralized so
13:55
for ten years now you know the big banks
13:57
have seen these huge profits the execs
13:59
get these huge bonuses and yet here we
14:01
are at the moment last night the Fed
14:03
prints another hundred billion dollars
14:05
and lend it out to banks because they
14:06
they’re crying poor we haven’t got
14:08
enough money to show up our books that
14:09
have been paying themselves these
14:10
enormous bonuses no one’s gone to jail
14:13
nothing’s been fixed since the GFC and
14:15
this is at a time when asset prices are
14:18
at record highs so the sp500 property
14:21
prices bonds you name it this has been
14:23
one of the periods of you know enormous
14:27
growth and your banks are still crying
14:28
for you know help us out print us some
14:31
more money now now people aren’t buying
14:34
this anymore
14:34
and it’s very very clear even the
14:36
Federal Reserve in their notes are
14:38
admitting that what they did didn’t work
14:40
it ended up with asset inflation and
14:42
it’s caused inequality so the top one
14:44
percent you know they’ve gained enormous
14:46
wealth the bottom 90% you know we see
14:48
this in Australia as well there’s no
14:49
wage growth it’s just getting harder and
14:51
harder for that average person to afford
14:53
to live and they report inflation at two
14:55
or three percent but if you look at a
14:57
lot of the work that’s been done by you
14:58
know alternate economist it’s far closer
15:01
to 7 or 9 percent when you see your pack
15:03
of the Tim Tams getting smaller
15:04
your bottle of coke getting smaller and
15:06
the price stays the same there’s ways
15:08
that they hide inflation from us so as I
15:12
said this period should be very
15:13
prosperous for banks they’ve got it very
15:15
good they get to create that money and
15:17
you know they should be really booming
15:19
but yet we see Deutsche Bank in these
15:21
European banks are on their knees we saw
15:23
a study come out this week that half the
15:25
world’s banks wouldn’t survive a
15:26
downturn now with markets at record
15:29
highs and we know that this is one of
15:31
the longest periods of expansion in
15:33
history
15:34
every day a recession is drawing near
15:36
it’s just a natural part of the business
15:37
cycle so they’re admitting that when
15:39
that hits half our banks aren’t going to
15:41
survive so at the moment they’re giving
15:42
them a hundred billion dollars a day I
15:44
very much think that the new QE
15:46
quantitative easing is going to be to
15:47
the tune of trillions of dollars to have
15:50
to say the bank’s now because they don’t
15:52
have those reserves and they’re so weak
15:54
we’re hoping to see them take measures
15:56
to force people to keep their money in
15:57
them and in the legislation we’re seeing
15:59
Balian laws being written in in
16:01
countries like Australia just like we
16:03
saw in Cyprus so this week ANZ
16:05
updated their terms where they can
16:06
freeze your account they can stop you
16:08
getting money out and they can close
16:10
your account altogether if it would mean
16:11
that they would suffer financial loss
16:13
we’re also seeing the the cash war in
16:17
Australia at the moment they’re trying
16:18
to ban those $10,000 payments they’re
16:20
already talking about dropping that to
16:21
five or two thousand dollars and where
16:23
this is all heading is negative interest
16:25
rates in all these countries around the
16:26
world that abandon cash the IMF wrote a
16:28
paper that said look negative interest
16:31
rates don’t work if cash exists because
16:33
people can pull money out and if we we
16:34
want to enforce negative interest rates
16:36
we need to keep people in banks so we
16:37
need to ban cash so whether it’s you
16:40
know banks or the well bond market this
16:42
is a virus that’s spreading and I think
16:44
people are asleep at the wheel because
16:46
we’ve had it pretty good in Australia
16:47
and and in the US but as soon as those
16:50
rates go negative in our country and in
16:52
the US it’s a big big wake-up call to
16:54
everyone that what what is going on
16:57
interest rates for the past 20-30 years
16:58
have been trending down people thought
17:00
they couldn’t go past zero and yet
17:02
they’re you know negative one percent or
17:03
greater in some of these countries now
17:05
that should be traditionally seen as
17:07
strong in Europe so the amount of
17:09
negative yielding debt in the world it
17:11
recently passed seventeen trillion
17:12
dollars you know how how easy is it to
17:15
park some money in gold or Bitcoin or
17:17
something that doesn’t have a negative
17:19
yield people are rushing into negative
yielding bonds because they think that
central banks are going to print money
out of thin air and buy those bonds off
them so everyone’s on the one side of
17:28
the boat and that what worries me with
17:29
this this bond bubble now at the same
17:32
time everyone’s playing happy faces here
17:34
where there’s never been greater
17:36
mistrust of banks and policymakers so
17:39
Commissioner Haynes said that trust has
17:41
been lost to all the corporations and
17:43
institutions and banks in Australia and
17:45
I very much agree
17:48
now for the first time ever we’re seeing
17:49
widespread civil unrest people say oh
17:52
you know it’s it’s just Argentina or
17:54
then it’s just Venezuela then it’s just
17:56
symbolic
17:57
this week it’s Chile Hong Kong you know
17:59
it’s coming to a city near you where
18:01
people and governments are saying well
18:03
what we gonna do here let’s just raise
18:05
taxes and people are saying no we’re not
18:07
going to stand for that anymore and and
18:09
everywhere Bitcoin is becoming part of
18:11
this social movement now at the same
18:13
time we’re seeing central bankers Mark
Carney from the Bank of England
literally saying that you know it isn’t
fair that the US dollar has this world
reserve currency they get way too much
an advantage here so this isn’t Russia
18:25
and China throwing this anymore this is
18:26
their best friend saying that you’ve had
18:28
it too good for too long now the u.s.
18:30
being a world reserve currency means
18:32
that all these other regional currencies
18:34
have their debt denominated in u.s.
18:35
dollars and as their currencies fall and
18:37
u.s. dollar gets stronger they owe more
18:39
and more money back in terms of their
18:41
local currency so when seeing the US
18:43
dollar strengthened at a time when he’s
18:45
really hurting everyone else and so
18:47
there’s questions around how long it can
18:49
remain the reserve currency and make
18:51
mark carney they’re calling for a new
reserve currency a digital currency to
replace the dollar we’re also seeing
calls for the u.s. we know that china
are launching their own cryptocurrency
19:02
we’ve seen venezuela launch theirs so
19:05
whether or not the US does it you know I
19:07
don’t really care it’s gonna be a case
19:09
of you know trust us again this is a new
19:11
currency the only difference is they’re
19:13
going to be able to monitor literally
19:14
everything you do on a blockchain versus
19:17
what they do already with the banks and
19:18
they’re going to print those hundreds of
19:20
trillions of dollars of digital US
19:22
dollars it’s nothing like Bitcoin that
19:24
has a set amount and Bitcoin just
19:26
becomes more and more scarce relative to
19:29
all these other currencies that banks
19:31
and governments and the Facebook’s of
19:33
the world want to create so at this time
19:36
when all our currencies are going
19:38
digital everyone uses their online
19:39
banking less people use cash everyone
19:42
does the pay past these days so money is
19:44
already digital but people still think
19:46
about it as as notes or people don’t
19:48
realize it’s not backbite by gold
19:50
anymore so we’re seeing penetrations of
19:53
smart phones you know 90 percent or
19:55
greater even in emerging markets even if
19:57
they don’t have a smartphone they’ve got
19:59
a basic phone these days and you don’t
20:00
need a good
20:01
their connection to the Bitcoin payments
20:02
you need a very basic mobile connection
20:04
is all you all you need to be able to
20:06
participate in this network and become
20:08
your own bank
20:09
so throughout these Asian countries you
20:11
know Hong Kong was another recent
20:12
example where they’ve had issues with
20:14
the ATMs and whatnot these people are
20:16
extremely familiar with digital payments
20:18
and scanning and shops with their QR
20:20
codes and Bitcoin is just the next step
20:22
in that evolution of money so the
20:25
greatest opportunity in lies in these
20:27
emerging market economies where there’s
20:29
billions of people so too often people
20:31
say are the government will never let
20:32
Bitcoin overtake you know things in
20:34
Australia or the u.s. it doesn’t matter
20:36
Bitcoin has already been used widely in
20:38
Venezuela and all these other countries
20:39
where there’s billions more people than
20:42
in Australia the u.s. all these these
20:44
Western countries that are unbanked so
20:46
just like they didn’t get phone lines
20:47
and they started using mobile phones
20:49
they’re not going to get banks they’re
20:51
just going to start using digital
20:52
currencies on their phones so the value
20:55
of the Bitcoin network comes from the
20:57
number of connections and that’s why we
20:58
see just like Facebook grow that any
21:00
good technology it grows exponentially
21:02
and the value comes from the number of
21:04
connections in the network that’s known
21:06
as Metcalfe’s law so as more and more
21:08
people use Bitcoin it means more people
21:10
can send it to each other you know my
21:12
business that I started we’ve got a
21:13
number of services from say nine dollars
21:16
a month to $50 a month our customers are
21:18
all over the globe how someone in Russia
21:20
meant to send me nine dollars a month
21:21
for my newsletter it’s not possible
21:23
without Bitcoin and digital currency so
21:25
my business and hundreds of others are
21:27
examples of what’s possible we’ve crypto
21:29
currencies without the banking system so
21:33
this is a screenshot of a blockchain
21:35
Explorer so just like you can search
21:37
something in Google with on the Bitcoin
21:39
blockchain you can search for
21:40
transactions now this is a good and bad
21:42
thing if you know anyone’s address you
21:44
can send anyone else on the network
21:46
money there’s no no I can sense of that
21:48
transaction or freeze your account and
21:49
in terms of crime just last week this
21:53
helped regulators catch the bad guys
21:55
this is their best friend they could
21:57
follow the bitcoins where they’ve paid
21:58
them to when they cash them out and they
22:01
catch these crooks so to say that
22:02
bitcoins bad because you get to use for
22:04
crime you know that it’s just simply not
22:06
true it’s a regulators best friend now
22:09
one of the big debates we are going to
22:11
have is once Bitcoin starts to implement
22:13
more privacy so it’s important for be
22:15
this is not to be able to see every
22:16
transaction that they do so whether the
22:18
privacy upgrades come on the main
22:20
Bitcoin chain or second layers that’s
22:23
going to be a big debate as we move
22:24
forward about giving Bitcoin more
22:26
privacy at the same time we’re going to
22:29
get rid of those long strings of letters
22:30
and numbers that you just saw that are
22:32
confusing you’re going to be able to
22:33
send your cryptocurrency to Nuggets news
22:36
Bitcoin or Alex Saunders crypto so human
22:39
readable names and addresses just like
22:41
you do in your phonebook click of a
22:42
button send money to anyone in the world
22:44
another argument often hear is that
22:46
bitcoins wasteful bitcoin uses you know
22:49
more energy than a small country these
22:51
days but what they won’t tell you in the
22:52
mainstream is that the vast majority of
22:54
that is spare capacity at reactors that
22:57
would already be gone waste or renewable
22:59
energy so pick coin is the fastest
23:01
growing renewable energy industry on the
23:03
planet people are actually going out and
23:05
and building renewable energy plants
23:07
because they can start to mine Bitcoin
23:09
and pay it off you know this is uses
23:11
expanding our renewable footprint at a
23:13
time when governments are being slow to
23:15
act now part of bitcoins one of the
23:19
features that keeps it so secure it’s
23:21
the most secure computer network on
23:23
earth so when you hear about hacks there
23:25
are people that left their password in
23:27
there in their email account well they
23:28
left their you know being logged in at
23:30
work Bitcoin network has never been
23:32
hacked because it is so secure all these
23:34
computers all 10,000 that I showed you
23:36
at the start on that world map they’re
23:38
all securing the network so unless you
23:40
can hack every one of those at once you
23:42
can’t hack the Bitcoin blockchain so
23:44
this feature of how much energy it uses
23:46
secures it if governments tried to
23:48
attack it with every supercomputer and
23:50
on earth it wouldn’t even put a dent in
23:53
Bitcoin there’s so many more computers
23:54
globally that are securing the network
23:57
all that money that has been invested by
23:59
those miners to buy those computers that
24:02
is all very important in terms of the
24:04
infrastructure of the Bitcoin network so
24:06
if I said to you I was here yesterday
24:08
for the panel discussion I think
24:11
yesterday I said what would it be worth
24:12
if Microsoft or Apple came out and said
24:15
hey guys we build a network that can’t
24:17
be hacked it’s got no down time that
24:19
would be worth hundreds of billions of
24:21
dollars so that is what the Bitcoin
24:22
network is it’s not just this payment
24:24
system or this store of value it’s the
24:26
most secure computer network in the
24:28
world and that
24:29
while we see someone like Microsoft say
24:31
geez this is better than anything we’ve
24:32
got let’s just our building our products
24:34
on top of the Bitcoin blockchain so
24:37
these household names like Microsoft
24:38
Vanek or one of the biggest providers in
24:40
the world of investment ETFs these are
24:43
the household names now that people are
24:45
realizing that oh this isn’t about this
24:47
isn’t a bubble they’re telling their
24:48
clients the investment case for Bitcoin
24:50
now a lot of people are tech savvy they
24:53
can’t figure out the hardware wallets
24:55
which is like a little USB stick where
24:57
you store your bitcoins yourself and has
24:58
your password on the device so it can’t
25:00
be hacked but not everyone wants to do
25:02
that you know we’ve done education
25:04
around all that sort of stuff if you’re
25:05
interested but some people they don’t
25:06
want to hold their own shares they just
25:08
want someone else to do it for him so
25:09
we’ve seen reputable companies like
25:11
Lloyds of London and bit go they’re
25:14
offering insurance and custody and
25:16
that’s why we’ve seen influx of high net
25:18
worth clients over the past 12 months
25:20
and in Australia our biggest growing
25:22
demographic is baby boomers so we did
25:24
one on one education we have a premium
25:27
community we’re but the number of over
25:29
65 now and they they’ve been through
25:31
cycles and crashes they see the
25:33
importance of gold and they’re starting
25:34
to understand the importance of Bitcoin
25:37
at the same time we’ve seen the futures
25:39
market take off as I said for I’m not a
25:41
big fan of that maybe it makes me quite
25:43
a bit more legitimate but I don’t like
25:44
those type of assets that are backed by
25:46
real Bitcoin but we’ve seen things like
25:48
option markets and even decentralized
25:50
option markets so it’s not one company
25:52
now anyone can create a market and a
25:55
theorem it’s the world’s second largest
25:57
cryptocurrency I’m also very bullish on
25:59
because the world of decentralized
26:01
finance is just exploding so instead of
26:03
paying $20 to calm sector trade shares
26:05
you’re gonna pay one cent and you’re
26:07
gonna buy them off someone else that’s a
26:08
shareholder and what blockchain does is
26:10
cut out the middleman of all these
26:12
services that are you know rent-seeking
26:14
and just taking their little clip each
26:15
time and it makes everything
26:17
peer-to-peer so tying this all together
26:21
we’ve seen the Federal Reserve start to
26:23
create billions of dollars each night to
26:25
help these banks and the old trustus you
26:27
know everything will be fine we’re gonna
26:28
normalize everything I think that’s why
26:30
we’ve seen gold correct over the past
26:32
few years as people thought oh it’s all
26:34
gonna go back to normal 3% growth 5% in
26:36
a bonding my retirement account
26:38
I don’t need gold or Bitcoin and now
26:40
that story is not being bought anymore
26:41
it’s qe4
26:43
you know they can’t stop printing this
26:44
money in the debt based system that 200
26:47
trillion dollar figure that I’ve spoken
26:48
about we have to continue to grow and
26:50
create debt if we’re going to pay all
26:52
these people so once again we’re seeing
26:54
a lot of tension whether it’s between
26:56
you know the US Fed who don’t want to
26:58
drop rates and Donald Trump saying let’s
26:59
get rates to zero or negative everything
27:01
will be growing even more for the first
27:03
time throughout history we’re seeing
27:04
real tension between governments and
27:06
central banks who are saying trust us
27:09
we’ll fix everything without two levers
27:11
and now they’re saying I think we’re out
27:13
of tools here government it’s up to you
27:15
you need to spend more we’ve done all we
27:16
can do pass the buck
27:17
so who’s going to be left holding the
27:19
back here we know governments are no
27:21
good at running those economies and it’s
27:22
up to them to try an ear trick or the
27:24
central bankers to try something even
27:26
more crazy and I think actually people’s
27:28
QE where they enough to hand out money
27:30
to people because it’s not going to be
27:32
politically acceptable to put money and
27:33
give it to the banks and then we run a
27:35
danger of inflation but people aren’t
27:37
going to let it fly printing money and
27:38
giving it to the banks so you guys know
27:40
the story every fiat currency throughout
27:42
history has been eroded away over time
27:44
this is just last year in terms of
27:46
inflation in in ten countries there for
27:48
example and with more and more people
27:50
that Tim Draper’s of the world
27:51
respectable investors Jack Dorsey the
27:54
founder of Twitter saying that there’s
27:56
you know we’re in this Internet age just
27:58
like the internet opened up the way we
27:59
transfer information across the world
28:01
everyone said oh you can’t do that the
28:03
bad guys were taught for each other
28:04
Bitcoin allows anyone to transfer value
28:06
to each other and then a theorem again
28:08
further expands what we can do
28:10
peer-to-peer so there’s going to be some
28:13
sort of world currency on the internet
28:15
and Bitcoin has the track record so the
28:17
biggest opportunity that I see is these
28:20
currencies there’s over 200 currencies
28:22
globally the top five that are the world
28:24
reserve currencies of the world sure
28:26
that they’re fairly strong and whether
28:28
the US you know you loses its purchasing
28:30
power with all that debt that’s another
28:32
story but who on earth is going to hold
28:34
these hundred Southeast Asian currencies
28:36
and when the government’s are saying
28:38
trust us with the currency wars heating
28:40
up it’s a race to debase their
28:41
currencies as economies weakened they
28:43
all try to get the value of their dollar
28:45
down to help their exports it’s
28:46
literally a race to the bottom and we’ve
28:48
seen Donald Trump tweet about this
28:49
so these currencies have all got market
28:51
caps in the hundreds of billions or
28:53
trillions of dollars with that little
28:54
blip down the bottom there called
28:56
Bitcoin when
28:57
in a country with a smartphone can
28:58
choose to park their wealth in something
29:00
that’s fixed and scarce
29:01
or Park their wealth in this this
29:03
currency that they’ve seen Harper
29:04
inflate away constantly throughout
29:06
history I think the choice is pretty
29:07
clear so we’re seeing this in Argentine
29:10
record volumes Chile you know the list
29:13
is very long the number of people that
29:15
are now choosing Bitcoin instead of
29:16
something else
29:17
so the having next May is very important
29:19
as I spoke about and then again four
29:21
years later and where to Bitcoin derives
29:24
its a lot of its value from similar to
29:25
gold on this chart which you see the
29:27
yellow block up the top right corner is
29:29
the scarcity of gold that is something
29:31
that makes it valuable
29:32
now if gold goes to $5,000 an ounce
29:35
maybe people are going to mine it maybe
29:36
the inflation of gold goes to three or
29:38
four percent silver we see there as well
29:40
gets a lot of its value because of its
29:42
scarcity but Bitcoin as we see it
29:45
trending up that chart over time as it
29:47
becomes more and more scarce it
29:49
increases in value and bitcoin is going
29:52
to surpass gold in terms of what we call
29:53
stock to flow the amount of new supply
29:55
coming into circulation compared to
29:57
what’s already exists and I think the
29:59
bitcoins going to surpass the market cap
30:01
of gold within five years so tying it
30:04
all together when you look at everything
30:06
else told you today it’s a payment
30:07
system the smartest minds in the world
30:10
are working on the cutting edges of
30:11
technology it’s a store of value it’s a
30:14
medium of exchange it’s the world’s most
30:15
secure computing network what’s all that
30:17
worth in a world where we’ve got a
30:19
hundred billion dollar market cap
30:20
compared to the hundreds of trillions of
30:23
dollars that exists in currency markets
30:24
stock markets these technology companies
30:28
I think it’s an absolute no-brainer to
30:30
park a little bit of your wealth in
30:32
Bitcoin and if you want any more
30:33
information on anything we do come and
30:35
see me or head to Nuggets news.com
30:37
today.you thank you
30:39
[Applause]
30:45
[Music]

Vanguard is reportedly testing a platform to compete with banks in the $6 trillion-a-day currency market

  • Vanguard Group is testing a blockchain-powered platform that would allow asset managers to trade currencies without using major banks as intermediariesBloomberg reported Thursday.
  • The currency market handles $6 trillion each day, and is currently dominated by firms like JPMorgan Chase and Citi.
  • Vanguard’s platform would skirt the banks’ fees through peer-to-peer trading, and has already handled a few trades, a source told Bloomberg.
  • Visit the Markets Insider homepage for more stories.

Vanguard Group is testing a blockchain-powered platform for asset managers to trade currencies, Bloomberg reported Thursday.

An entry into the sector from Vanguard could bring long-sought change to the bank-dominated currency market. The investing giant already disrupted the finance world by introducing low-cost index funds to the masses.

The currency market handles $6 trillion a day, according to Bloomberg, and requires banks like JPMorgan Chase and Citi to execute trades.

Asset managers currently rely on banks as intermediaries for currency trades, even after buy-side companies began matching trades on electronic services in the 2000s. The system being tested by Vanguard would sidestep the traditional players and their fees, Bloomberg reported.

The investing giant’s service has been working for two months and has already handled some trades, a source told Bloomberg. The platform uses the same blockchain technology behind bitcoin to match trades, and could cut trade expenses if enough users join the service.

“In theory, it sounds great because you can reduce your costs if you can match directly with someone else who has a countervailing interest,” Campbell Adams, a former Deutsche Bank senior currency trader and the founder of ParFX, told Bloomberg. However, such a platform “will require a critical mass of users” if it wants to bring a discount advantage to the massive sector, he added.

The investment advisor has previously hinted at efforts to compete in peer-to-peer trading. Andy Maack, Vanguard’s global head of foreign exchange trading, told The Trade there’s a “tremendous amount of interest in the potential for disintermediation.”

Peer-to-peer trade matching “is pretty intriguing, especially for the foreign exchange markets which only really started to seriously explore this topic in recent months,” he added in the September interview.

The company didn’t comment further on plans for the platform, but noted its interest in currency hedging and lowering “the cost of investing for all investors.”

“Vanguard is currently piloting a project focused on improving the efficiency and reducing risk of FX hedging,” Vanguard spokesperson Carolyn Wegemann said in a statement to Business Insider. “Given the project is still in the pilot stage, we can’t comment further.”

Vanguard has more than $5 trillion in worldwide assets and is the world’s largest provider of mutual funds. It also provides exchange-traded funds that track major stock indexes.

The Key to Bitcoin’s Future: Inflation

If the cryptocurrency is going to be used as widely as dollars, its fans must abandon the dream of deflationary digital gold.

Bitcoin is back, sort of. The original cryptocurrency hasn’t regained the lofty highs of its bubble peak in late 2017, but it has climbed back up to about $10,000:

Predictions that Bitcoin would collapse have not borne fruit. Despite its bubbles and crashes, the cryptocurrency is now a semi-permanent feature of the global financial landscape.

Neil Howe: “Deep Demographic Problems Plaguing The U.S. Economy” (Hedgeye Investing Summit)

32:29
great irony is that the real ideological
edge of the whole Bitcoin movement was
was guys like you know James Dale
Davidson and REE smog and they there
were sovereign individual these are
boomers and all the Xers that followed
them these are all libertarians they
believe radically in the idea of no
government you know and we’re just you
know the with no need for trust I mean
talk about an ideal Society for most Gen
Xers no trust necessary so so anyway
we’re gonna do a world with that trust
and and that was really it was it was
actually I think an ideological edge to
a lot of people’s interest in Bitcoin it
was sort of the kind of world socially
politically that they really wanted
and unfortunately ideology as you know
and you’ve often spoken about that in
your programs ideology always warps your
market driven judgment right big time
you don’t want to start with ideology if
you’re marketing an ideology and you’re
good at it you might make a lot of money
in a short period of time but that
doesn’t mean that your views on it or
going to be non cyclical and or crashing
and that’s that’s that’s what you know
sadly is happening a lot of purveyors or
34:47
and speaking about money and again this
is sort of very deep sort of
intellectual history there kind of two
theories about the origin of money
one is the barter theory you know we
started out bothering Bob Barton just
treating goods for goods and then you
know then gold and other things and so
on so it’s basically that’s the kind of
the libertarian theory so the Canadian
guy from like the Hudson’s Bay Company
like yeah you know forever that piece of
paper but then there’s a whole nother
theory which also has a long kind of
intellectual pedigree which is more the
purview of sociologists and that is
government the money was really creation
of governments and there’s a lot to say
for that because in fact that’s how
money was
really introduce now it’s the government
people right that whole theory that
whole that whole intellectual pedigree
kind of feeds into modern monetary
theory and that is its government that
creates money I mean forget this whole
idea that it all comes from gold and
there’s some intrinsic value no god it’s
a system of Social Credit and Society it
makes a collective decision to create it
they can do it as they wish all
government all currency has always been
fiat currency and this whole idea that
only recently we’ve had fiat currency so
anyway that’s the idea behind monetary
theory you don’t have to worry about how
much you issue because you can issue any
amount you want so long as the economy
is it is running at full employment and
so long as you keep inflation to you
know down to a reasonable degree now I
always say that the argument from
monetary theory post GFC is a lot better
than it was right because no matter how
low we get interest rates we had trouble
getting to full employment and inflation
never seemed to show up on our radar
screen so I think this is the reason why
modern monetary theory is so big if the
reason it’s going to be practically
important is not now when we’re you know
unemployment is down at 3% and although
it’s gonna be a big issue come the next
recession right that’s when it’s gonna
hit right and we haven’t even talked
about that when is the nest recession is
that gonna be perfectly time for the
next election or not right that’s going
to be fascinating there are many more
Democrats believe in this mmt then
certainly like you said libertarians but
their but their chances of introducing
that are going to be hugely improved at
the right political juncture with the
economy on the right conditions yeah
wait until the economy is flat on its
back with our unemployment rate up at 10
37:19
percent and 11 percent whatever it is
37:21
suddenly the Fed is sitting there
37:24
flatlining at SERP right not knowing
37:26
what more they come on yeah hundred
37:29
mandatory thirty would be back plus huge
37:33
fiscal spending and you know the two
37:35
kind of merged together right modern
37:36
monetary theory and huge
37:38
of fiscal deficits you’ve been greater
37:40
than we have now so long as you got the
37:42
economy back working again
37:44
what’s the matter we did it with in
37:46
World War two we did it during the New
37:48
Deal mm-hmm the green New Deal
37:50
come on you got bad you got a New Deal
37:52
and the green New Deal
37:53
actually we’re getting some questions on
37:54
that why there’s actually question on
37:57
climate change if it figures into your
37:59
outlook does it you know on climate
38:02
change I’m more of a I have a matt the
38:06
ridley you know the guy the the british
38:10
intellectual who who wrote a a number of
38:13
great books on on genetics and and
38:16
evolution and so I’ve been equine
38:17
deterrent because he he actually covered
38:19
climate change for many many years but
38:21
he coined the term Luke warming he said
38:24
he’s a lukewarm ER which means that he
38:27
thinks it he thinks that rising carbon
38:29
dioxide levels are responsible for a
38:31
little bit of warming but not not a lot
38:34
and not nearly the kind of alarmist
38:37
picture that people think I’m kind of
38:39
more of a lukewarm ER what interesting
38:42
thing warmer sounds like Luke Skywalker
38:43
it’s like an appeal to people because it
38:46
sounds like it makes some sense how’s it
38:49
look warmer yeah a little bit more of a
38:51
hot because you can’t you know we like
38:52
it you can’t be like a total like
38:54
Treehugger or you know you did you got a
38:57
it sounds like a little bit more neutral
38:59
yeah kind of sounds disgusting
39:02
anyway alright great thinking on the
39:05
economic Turan economic direction
39:08
long-term Neil Central Bank policy will
39:10
likely continue to counter the
39:12
demographic gravity and fall failure
39:14
will likely manifest in market and
39:16
monetary crises so slow with chaotic big
39:19
bumps ahead question mark sounds like
39:21
more of a comment but a lot of people
39:23
believe that I got into this with with
39:25
with Lakai a
39:27
lot of people believe that no worries
39:29
more cowbell markets could never go down
39:31
again no I clearly don’t believe that
39:34
and and actually I think around October
39:36
to December you were brown right you’re
39:39
on this side of the you know this side
39:40
of the earth on the right side of the
39:42
grass yeah the markets went down yes
39:47
this is memories are so short it’s
39:50
almost like people watch the market day
39:52
they completely forget what happens you
39:54
could have lot if you’re along the
39:55
Russell 2000 which is a pretty broad
39:56
index of US stocks and now 27 percent
39:59
from August the 30th to December the
40:01
24th what could go wrong that’s that’s
40:04
called a bear market yeah yeah I mean
40:06
it’s a rash so but I think what what
40:10
they’re referring to is the idea could
40:12
could the economy go down yeah and and
40:15
and not only do I think it will i
40:17
actually this is all a part with a lot
40:20
of people i think it’s a good thing I
40:21
actually do I think that is when we
40:24
correct institutions and we rebuild
40:26
institutions I think the idea that you
40:29
would have an economy just constantly
40:30
dribble along you know is actually not
40:34
good for us
40:34
well there’s many periods of
40:36
Reconstruction and and not only that but
40:38
the whole point about market crashes
40:41
depends which side you’re on if you’re
40:43
young and you’re being an invest you get
40:45
to buy into the American dream
40:47
at a discount there are always two sides
40:49
to a transaction and I do believe you
40:51
know when I’ve I see the media following
40:53
Wall Street all the time and every time
40:55
markets will go down a treeless type
40:56
price but whenever the prices go down
40:57
it’s like a terrible tragedy yeah for
41:00
all the older people that owned
41:01
everything but the next generation is
41:04
coming on right it’s their opportunity
41:05
there are always two sides to a
41:07
transaction and and for life to go on we
41:12
have to think about what’s coming on
41:13
after us well what you have seen is the
41:15
opposite like by virtue of not having a
41:17
recession this is the longest u.s.
41:18
economic expansion in US history
41:20
Republicans and Democrats when it comes
41:22
to monetary policy have gravitated to
41:24
the same thing there’s no difference you
41:26
know there’s no difference between
41:28
Donald Trump wanting more cowbell and
41:30
Barack Obama wanted more cowbell there’s
41:32
no difference between this the federal
41:34
reserve members how they go about their
41:37
day job that it’s all one in the same
41:40
thing totally but when the economy goes
41:45
down again and when we’re back at that
41:47
you know that zero bound then all this
41:50
other stuff comes back onto the table
41:51
and and I don’t believe by the way that
41:54
you know people talk about inflation the
41:58
governments can very easily engineer
42:00
inflation if there were enough I believe
42:02
Japan was very near that point a couple
42:04
of years ago and and the way they would
42:06
have done it was simply to say any
42:08
worker or anyone with a payroll you put
42:12
your stuff in a bank and we just we’re
42:13
gonna index it out by a percent a month
42:15
or something like I mean thank you guys
42:17
but but no in other words you can
42:20
engineer it if you if you have the
42:23
incentive to do so a Jubilee what are
42:25
the advantages of that well suddenly now
42:27
your monetary policy has teeth once you
42:31
get inflation going again then holding
42:33
that interest rate low right actually
42:36
gives traction to your monetary policy
42:39
and and we are gonna see that if this
42:44
next time puts us in that same situation
42:46
we were gonna see a lot of the stuff
42:47
that was only discussed before yeah and
42:49
and the inflation to be clear comes from
42:51
the deflation because the deflation is
42:53
what causes the inflation so I mean you
42:55
come from a very asymmetric point
42:56
there’s big opportunity politically in
42:58
that and you save the world according to
43:00
yourself let’s see here
43:05
there’s a lot of political questions and
43:07
I want to go there what what would be
43:11
here this is an interesting one given
43:13
you join the term Millennials what what
43:16
would be your biggest long-term bet as a
43:18
millennial investor given stagnation and
43:21
slowing growth if it comes to fruition
43:27
as a millennial so I assume they’re just
43:30
meaning if you’re Milan you’re looking
43:32
like what’s the best way to play your
43:33
outlook good answer I mean I you know
43:49
other than all the standard answers
43:51
about you know diversifying your assets
43:53
and being geographically diversified
43:55
obviously at a time of crisis you
43:57
certainly want to be geographically
43:59
diversified I mean I often get asked
44:01
which areas of the we you know you’re
44:03
the demographer which areas of the world
44:05
I should be you know invested in from
44:07
that point
44:07
view and you can see that I mean if you
44:09
just look at any of my you know 20
44:12
charts on the subject you can look at
44:14
you can look at areas which are
44:16
reasonably decent in terms of you know
44:22
security legal structure corruption and
44:25
all that and yet have high population
44:27
growth so if you’re really looking for
44:29
that wave you know you’re looking at the
44:31
at the Malaysia’s and Indonesia’s the
44:33
Philippines and so on there there is
44:35
there is again looking at quadrants
44:37
there is an area there where you can
44:40
find economies for the long run that are
44:43
probably going to you know they still
44:44
have a lot of catch-up to do in terms of
44:46
productivity they’re still gonna have a
44:47
proactivity you know dividend over the
44:50
so if you’re looking long term but be
44:53
diversified because you know how any one
44:55
of those countries is gonna go but there
44:57
are ease of the world where you where
44:59
you where you certainly particularly if
45:01
you know if your millennial you probably
45:02
have a target date fund you know out
45:04
there I don’t know
45:05
that’s tough hundred forty five or those
45:07
four old wall products like those are
45:09
like you can’t do it within that product
45:10
so I’m saying if you can take some money
45:12
out of that product yeah you you’d want
45:15
to diversify what is it one way to
45:17
things like Josephine’s for up Neil’s
45:19
four quadrant map with the countries
45:21
quickly if you can what I think you’re
45:23
saying – if I put it within the context
45:26
of my process is if we go to a slowdown
45:29
like one that’s beyond stagnating to
45:31
slow down in the US and then you have
45:33
political change and you have MMT the
45:37
dollar is going to get castrated in that
45:39
environment and those countries that are
45:41
in quod one that you just showed are
45:44
gonna have in dollars don’t forget that
45:46
eeehm does very well when when when the
45:49
US government is burning its currency at
45:51
the stake so you know that is you know
45:53
that is the units the rebalancing of
45:56
global power so rebalancing of
45:57
incentives it’s a rebalancing of growth
45:59
expectations to where you actually have
46:01
the population growth going okay so
46:04
that’s maybe another way to think about
46:06
yeah I I agree with that and it it
46:09
really depends a little bit on the
46:11
nature of the crisis I mean obviously at
46:13
the at the worst of the crisis the
46:14
dollar was strong because that was sort
46:17
of the the safe haven currency but as
46:19
things begin to sort out
46:21
the dollar may still be strong relative
46:23
– you’re absolutely right with regard to
46:25
the EMS but we have I mean if if we
46:27
follow our sector we you know not only
46:29
do I do this kind of long term general
46:31
stuff we actually have particular
46:33
industries we like and I’ll just mention
46:35
two of them here because we’ve written
46:36
about them yeah very particular
46:39
industries which we’re very bullish on
46:41
from from a demographic standpoint one
46:44
is pet care there are a lot of
46:47
interesting ways you know everyone’s
46:49
owning pets and boomers and Xers have
46:51
completely reimagined how we treat our
46:53
animals right I mean you know everything
46:55
about them is is you know the food and
46:57
you know it’s organic it’s every the
46:59
amount of money we spend on my father
47:02
treats my his two dogs better than I was
47:05
ever treated today they know if dogs
47:07
have now have parents and grandparents
47:09
and you know they weekend yeah but but
47:17
another is a huge change there and in
47:21
particularly assertive although I’m not
47:24
big social media generally they’ve got
47:26
the kind of Google Facebook duopoly I’m
47:28
not very positive on I think that you
47:34
know online dating is an incredible
47:37
growth opportunity and we had a piece
47:38
recently on that because you know
47:40
virtually everyone is waiting a lot
47:42
longer to get married older people are
47:45
getting divorced and that’s an entire
47:48
area where there’s been very little
47:49
market penetration in your long the
47:51
screening process I mean that’s that’s
47:52
pretty much the other one is cannabis
47:55
we’ve done a extensive amount of work
47:56
there you could see that the well we
47:58
have lifting we home security that does
48:01
that silly but but it’s it’s not
48:03
shocking to see Shane Laidlaw as hockey
48:07
sticking charts on cannabis consumption
48:09
relative to alcohol consumption yeah and
48:11
it is he calls it hit paper high or
48:14
whatever he calls it you know hit for I
48:16
yeah because it’s a lower it cost less
48:18
here’s a here’s another question this is
48:21
this is this is definitely this could
48:23
take you a whole day to answer this do
48:25
you need capitalism and favourable
48:26
demographics for GDP growth
48:32
well obviously not especially out the
48:34
GDP growth number you can have it all
48:36
the time
48:37
you need you need some form of
48:39
capitalism just to have any kind of
48:40
efficiency in your economy so that’s
48:42
kind of a loaded question I think the
48:44
more interesting question is do you need
48:45
democracy and I think that’s becoming a
48:48
bigger issue I’ve written about that you
know our Millennials giving up on
democracy I think that’s actually an
interesting global question now we know
from a lot of surveys that Millennials
are less interested in democracy than
older generations and you look at not
only is it true and the UK and in the
United States but it’s true around the
world now if you look at particularly
East Asian countries you know with these
new charismatic leaders in a Narendra
Modi and India appealing to the the
Hindu mainstream you look at you know
Burma they’re the Buddhist mainstream
and you know uncle she is appealing in
China to the great Han you know to all
of these leaders in Shinzo Ivy appealing
traditional right you and then you go to
this this this madman is in charge of
the Philippines now you know Rodrigo
Duterte dirty-dirty duterte as they call
it but my point is is that you have
these charismatic authoritarian leaders
who are appealing to the mainstream of
their countries don’t give a damn about
who’s on the fringes right who is voting
most for them younger voters and that is
fascinating to me because earlier in the
post-war era the authoritarian leaders
mainly were voted for him only about the
older voters younger people didn’t want
them and that’s changing around and I
people often asked me this question when
do we know when the world is going from
host word of pre war you know when when
are we going from a post-war mood to a
pre well it’s kind of hard to tell until
you have the next big crisis right but
one key is is that in a in a post-war
era it’s the the generation that just
created the new era they were just went
through the crisis so they really
identify with the institution‘s they
build and generally younger people tend
to want more freedom they want less
order they want less rules that well
write less conformity and all that but
eventually as time goes by right
those younger leaders are in power and
generally have a pretty less a fair you
know libertarian world it’s younger
people who want more order more
certainty more route you soon I’m going
with this that is a sign you’re in a
pre-war little pre-crisis does that line
up with the fourth term absolutely yeah
that’s that’s well that you know I don’t
say pre-war because that kind of
predisposes about kind of crisis but I I
say pre-crisis pre-crisis yeah for those
of you that haven’t read the fourth
turning that I’m biased because I think
that’s your favorite book I think that’s
my favorite book I think that would
probably be a consensus though is it not
your favorite people’s favorite book
51:20
that you write it’s it’s either that or
51:22
the original one we did generations
51:24
generation shoes yeah that was kind of
51:27
the first big book I guess we’ve had
51:29
this question and maybe a good one to
51:31
wrap up on here because people are
51:33
constantly asking where do you think
51:35
Trump the Trump administration fits
51:37
within your framework of what is the
51:39
fourth turning I you know Trump and I
51:43
thought that the two most interesting
51:46
fascinating and path breaking
developments in 2016 were Bernie Sanders
and Donald Trump because there’s a
recurring edge on both the left and the
right of this whole new kind of populism
and authoritarianism right the three
chairs on the left every bit as much of
possibilities of thorough tourism on the
right and you know Bernie Bernie Sanders
is a guy who believes in top-down
government just you know government and
baking big decisions creating winners
and losers and you always have to admire
the guy I mean when was the last time we
had leaders just say this is how it’s
gonna be
single-payer you know and and
Millennials actually gravitate toward
that yeah you know the paradox of choice
why have so many choices is something
small one choice but it works really
well right at least and you find this
now becoming a very dominant view on the
52:36
left so I think just like Jeremy Corbyn
52:39
now sort of the you know the elder sort
52:40
of great champion in the UK of the left
52:42
of the millennial left and you have
52:45
Bernie Sanders here but I think that
52:47
that
that Donald Trump is the kind of the
exponent of the leader the first one who
really galvanized this new populism but
if I had to bet I would say that when
those final populism finally takes shape
in America it’s gonna be a little
afternoon on the right so this is this
is why the you know 2020 election looms
really large and when you look at you
know futures markets and remember again
I come back to this the economy is now
53:19
at three point something percent
53:21
unemployment and already you have
53:23
futures markets predicting right that
53:26
that Democrats are going to come in and
53:28
sweep in 2020 wait and until the economy
53:32
is yeah a little more negative you take
53:34
that outlook and maybe last question on
53:36
this if you take that out looking again
53:37
we’re not I’m not trying to be political
53:39
I’m not a Republican or Democrat I’m
53:40
Canadian I’ve said that all the time
53:41
because it’s it’s it’s of course true
53:43
but if you look at them if you take that
53:46
let’s say the economy’s long we have
53:47
quad three four three quarters in a row
53:49
that’s my outlook and if that’s the path
53:51
and and what you just said is still the
53:53
truth you know what kind of a candidate
53:56
and what generation could or should they
53:58
be from within your lens would come out
54:01
of the Democratic Democratic Party as
54:03
the as the as a front-runner well this
54:06
is the big moment for Generation X right
54:09
you got a lot of candidates in yeah Gen
54:12
Xers you know you have you have you know
54:17
Camilla Harris and Bader O’Rourke and
54:19
you know you know what’s-his-name from
54:21
New Jersey you know they’re all my age
54:23
so you’ve Pro cannabis to New Jersey guy
54:27
yeah but interestingly enough you have a
54:33
millennial candidate running you know
54:35
this guy Pete Bennett reach out of South
54:37
Bend Indiana he’s 37 years old and just
54:42
to show you and I actually had a piece
54:44
on that recently I think he came out
54:46
yesterday but an amazing stat l just
54:48
leave people this one amazing statistic
54:51
and that is as as proof of how
54:54
absolutely disinterested Generation X
54:57
has been in politics you know they’re
54:59
way behind the age curve it actually
55:01
in Congress you know taking the house
55:02
taking the Senate taking us governor’s
55:04
at their current age you know boomers
55:07
had already we’re into the third
55:08
president and already at pluralities in
55:11
both the house in the Senate Gen Xers
55:13
have been so slow
55:14
you know Gen X is in both parties tend
55:16
toward the libertarian edge of their
55:18
party right
55:19
but as proof positive of how
55:21
disinterested Gen Xers are in politics
55:24
we look back and found we looked at all
55:26
of the contenders for the primaries in
55:28
the every presidential election since
55:33
1986
55:34
and for the past almost 30 years
55:37
the youngest contender in either party
55:41
was a Boomer all the way up through all
55:45
the way up through 2012 there were no
55:48
gen extra candidates actually contending
55:51
for the presidency obviously in 2016 you
55:54
had a lot of them the two younger ones
55:55
were Marco Rubio and that guy from
55:57
Louisiana you know the governor from
55:59
louisiana agenda button bobby Jindal
56:03
they were born in 1975 and interesting
56:07
Lena 2020 we have a millennial contender
56:10
so only one year only one president of
56:13
presidential election was a gen Xer the
56:16
youngest contender and it’s already
56:19
moving on to Millennials and this is
56:21
what anyone who’s read the fourth
56:22
turning or my books knows we bill and I
56:25
used to always make the point that
56:27
Millennials are destined to make an
56:29
early and strong entrance into politics
56:33
as a generation and basically filling
56:35
the vacuum that Gen Xers have left
56:38
behind even to some extent so they could
56:39
circumvent Gen X presidential candidates
56:42
altogether and you know most references
56:43
and most Gen Xers always knew it was
56:45
cutting in the cards you know by Stan
56:49
1975 yeah I have a genuine I do not hate
56:54
but I genuinely don’t like any
56:57
politician like that I don’t like their
56:59
parties I don’t like either party and
57:01
the ones that ran to your point
57:03
Gen X Rubio like those are like wet
57:07
Kleenex they feel like that’s not a
57:09
leader that’s not like you know you
57:11
don’t memorize your lines and
57:12
you know so I think that you’re right I
57:14
mean if you certainly if you take
57:15
somebody like me I’m just like disgusted
57:17
by politics and politicians so maybe
57:19
there is somebody there to inspire
57:21
somebody because I’d love to change my
57:22
mind we do we do talk in our ratings
57:24
about dominant and recessive generations
57:26
so between the GI generation which
57:30
fought in World War two you know the
57:31
so-called greatest generation right of
57:33
that was in the white house for a long
57:36
time from John Kennedy you know born in
57:38
the century all the way up through you
57:40
know George Bush Senior and then we had
57:43
a Boomer that completely bypassed the
57:46
Silent Generation yeah anyone who
57:48
remembers the Great Depression and World
57:50
War two as children but were you know
57:53
not old enough to serve that an entire
57:57
generation nearly twenty years was
57:59
completely bypassed for the White House
58:01
and look what’s coming up they say we we
58:04
do this we have dominant generations we
58:07
have recessive generations that’s uh I
58:10
don’t know if that’s a good or a bad way
58:12
to end today’s discussion but for us Gen
58:15
Xers we’re just going to go back into
58:16
our a political holes and we’re gonna
58:18
keep you data dependent as we tried to
58:20
keep you across by the way durations
58:22
today don’t forget we’re trying to talk
58:23
about a multi duration framework so
58:25
whether it’s short term intermediate
58:26
term or Neil House super long term there
58:29
are so many different things for us
58:30
human beings to attempt to contextualize
58:32
it at the end of the day we don’t know
58:34
what the real answers are gonna be but
58:36
we can probability wait how we go along
58:38
the way in terms of positioning
58:40
ourselves and being in better spots oops
58:42
would have been if we were ignorant of a
58:44
lot of these data’s and economic facts
58:50
[Music]
58:59
[Music]

Libra Crypto Curreny: The Spanish Prisoner

Seven or eight years ago, I was on a commuter flight, sitting in an aisle seat. Two rows ahead of me, across the aisle on my right, a guy was arguing with his wife/girlfriend. It wasn’t a ferocious argument, but any sort of personal disagreement is noticeable in these circumstances, and it had been simmering since I noticed them boarding the plane.

There were two other things I noticed when they sat down. The wife/girlfriend had the husband/boyfriend’s name – Randy – tattooed on the back of her neck, and Randy had the letters T – R – U – S – T tattooed on the fingers of his left hand. I remember smiling to myself when I saw this. Obviously these two were from a very different background than me, but I really appreciated the public display of commitment they had made by getting these tattoos. I remember thinking to myself that I bet their relationship was a strong one, even though the disagreement seemed to simmer throughout the flight.

The plane landed and we all stood up. And then I saw the letters tattooed on Randy’s right hand.

N – O – O – N – E

All of a sudden, I was pretty sure this guy’s name wasn’t Randy. All of a sudden, I was pretty sure this relationship wasn’t likely to last.

I feel like I have TRUST NO ONE tattooed on my hands today, and if you’ve been working in finance for more than 10 years, I bet you feel exactly the same way.

Used to work for Bear? I know you feel this way.

Used to work for Lehman? I know you feel this way.

Used to work for Citi? I know you feel this way.

Used to work for Merrill? I know you feel this way.

Used to work for Deutsche Bank? I know you feel this way.

Yeah, we’ve all got these tattoos today. We have them as a reminder, as a figurative reminder (or literal in the case of “Randy”), that we really really really shouldn’t trust anyone AGAIN.

Because we need a reminder. Because we want to trust again.

Jimmy Dell is the con man in the 1997 David Mamet movie, played by Steve Martin in his finest dramatic role. In lines like above and below, Jimmy builds a personal trust with the mark by calling his attention to the lack of trust in business relationships. Effective consultants do this a lot, speaking of confidence games.

Jimmy Dell: Always do business as if the person you’re doing business with is trying to screw you, because he probably is. And if he’s not, you can be pleasantly surprised.

That’s the thing about the Spanish Prisoner con. It doesn’t work on saints. It doesn’t work on people who forgive and forget, who turn the other cheek and have an unending reservoir of faith in their fellow humans. It also doesn’t work on sociopaths. It doesn’t work on people who truly trust no one, who can lie to themselves and others without consequence or remorse.

The Spanish Prisoner con works best on smart and accomplished people who think they have TRUST NO ONE figuratively tattooed on their hands, who think they’re too clever to be fooled again, but end up only being too clever by half.

The Spanish Prisoner con works best on coyotes.

Too Clever By Half

Who is a coyote? A coyote is a clever puzzle-solver who really has the best of intentions. Who really wants to be successful for the right reasons. Who really wants to accomplish something of meaning in the world. Who is smart and aware and nobody’s fool. Who has been beaten up professionally a bit and has a healthy skepticism about the business and political world.

And who is just a little bit on the make.

The defining characteristic of the Spanish Prisoner con is that the mark believes he is doing well while doing good. The mark believes that he is doing the right thing, that he’s the good guy in this story. And if the liberated Prisoner is financially grateful, or if the Prisoner’s sister is grateful in her own way if you know what I mean and I think you do … well, that seems only fair, right?

Now the Spanish Prisoner doesn’t have to be an actual person that needs rescuing. That’s a con for the rubes. The Spanish Prisoner is what Alfred Hitchcock called a MacGuffin – anything that serves as an Object of Desire for the mark, anything that motivates the mark and furthers the narrative arc of the con.

In fact, the most effective MacGuffins are rarely simple signifiers of wealth like an rich Spanish dude. No, the most compelling Spanish Prisoners are Big Ideas like social justice or making America great again or resisting the Man. That’s what gets a coyote’s juices going. Especially if there’s also a pot of gold associated with being on the right side of that Big Idea.

The most successful con operators are the Nudging State and the Nudging Oligarchy. Why? Well, partially because you’ve gotta have some heft to credibly commit to rescuing a Big Idea from the clutches of whatever Big Baddie has it now. But mostly because running the con for money is just thinking waaaay too small.

The Nudging State and the Nudging Oligarchy don’t need your money. They already have it!

The con here is to gain your trust – again – so that you willingly hand over your autonomy of mind. So that you accept without thought or reflection the naturalness of your current relationship to the State and the Oligarchy.

You’d never fall for this con if it were part of a straightforward commercial arrangement like a job or a purchase. Please! You’re much too savvy for that. You have TRUST NO ONE tattooed on your hands, remember?

But for the chance to help rescue a Big Idea …

But for the chance to make a few bucks or enjoy yourself a bit more as part of doing the right thing …

There’s not a coyote in the world that can resist that bait. And that’s why once you start looking for the Spanish Prisoner con, you will see it everywhere.

Libra, the cryptocoin promoted by Facebook, is a Spanish Prisoner con.
What’s the Big Idea? Why it’s banking the unbanked. It’s facilitating cross-border remittances. It’s bringing the benefits of crypto to the global masses. ALL OF THIS IS TRUE. So far as it goes.

And if it facilitates e-commerce along the way? if it’s possible to make a few bucks or enjoy some greater conveniences as part of Facebook and its partners executing on this Big Idea? Well, what’s wrong with that?

What’s wrong is that this is how Bitcoin dies.

This is how a censorship-embracing coin replaces a censorship-resistant coin. This is how the State and the Oligarchy co-opt crypto. Not with the heel of a jackboot. But with the glamour of convenience and narrative.

And in a few years it will all seem so natural to you.

Using government-approved electronic money will be the water in which you and your children swim. You will not be able to imagine a world where a censorship-embracing coin is not everywhere.

Libra was designed to co-opt Bitcoin.

Libra was designed to allow government oversight over your economic transactions.

Libra was designed to provide a transparent regulatory window and control mechanism over your money.

Libra was designed for Caesar.

“Boo, terrorists!”

A year from now, the narrative story arc regarding “criminal activity” through cash transaction networks AND censorship-resistant transaction networks like Bitcoin will be louder, not softer. In three years, it will be deafening.

Libra and its e-commerce convenience, together with its Big Idea skin of helping The Poors … that’s the carrot.

The “Boo, terrorists!“ narrative … that’s the stick.

Will Bitcoin itself be outlawed? Maybe. But I really doubt it. It’s too useful as a societal steam valve, now that we’ve got Libra and (soon) other Oligarchy-sponsored and State-supported cryptos in circulation.

What does Bitcoin become in a world where state-approved e-money is in wide circulation?

It becomes an act of effete rebellion, like a non-threatening tattoo on your upper arm that you can cover up with a shirt if you like.

Bitcoin becomes a signifier of Resistance rather than a tool of Resistance.

Owning Bitcoin will make you a Bad Boy! or a Bad Girl! … a safe malcontent that the Nudging State and Nudging Oligarchy are delighted to preserve.

What’s my message to the true-believers who continue to see Bitcoin as a tool for Resistance?

For the next fifty years, you get to play the role of the grumpy old man yelling at clouds.

You know, the role that gold true-believers got to play for the past fifty years.

It’s a miserable way to live.

It’s a miserable way to live for two reasons.

First, and most crucially, this role that the Nudging State is laying out for you is steeped in negative energy. You will find yourself rooting for catastrophe. You will find yourself hoping for decline and collapse. You will find yourself conflating justice with loss and comeuppance. You will take on sadness and schadenfreude as your resting psychic state. Trust me when I say that I know of which I speak. Negative energy is deadly. That is not a figurative statement. It will literally kill you.

Second, you’ll be infested by raccoons, which will be tolerated if not encouraged by regulators, in exactly the same way they are tolerated if not encouraged by regulators in gold-world. Sure, you’ll have the occasional show trial of egregiously aggressive security frauds and Crypto-Funded Criminals ™, but the run of the mill hucksters and con men will walk with impunity.

Because this is what ALWAYS happens.

The money quote from Too Clever By Half:

And that brings me to what is personally the most frustrating aspect of all this. The inevitable result of financial innovation gone awry, which it ALWAYS does, is that it ALWAYS ends up empowering the State. And not just empowering the State, but empowering the State in a specific way, where it becomes harder and harder to be a non-domesticated, clever coyote, even as the non-clever, criminal raccoons flourish.

That’s not an accident. The State doesn’t really care about the raccoons, precisely because they’re NOT clever. The State — particularly the Nudging State — cares very much about co-opting an Idea That Changes Things, whether it changes things in a modest way or massively. It cares very much about coyote population control.

It’s all about coyote population control. It always is.

Is there a way out of this for Bitcoin? No. Co-option by the State and Oligarchy was the Doom of Bitcoin from the beginning.

I mean … I say “Doom” like it’s going to be hurled into the fires of Mordor, but that’s not it at all. There will still be true-believers and raccoons alike generating tradable narratives. You’ll still be able to make money by trading Bitcoin on these narratives (and altcoins, too, I’d expect, although I have no idea how you generate a compelling altcoin narrative these days).

It’s not like Bitcoin is going to go away.

But Bitcoin is going to be permanently diminished in its social importance by the adoption of Libra and other Oligarchy-sponsored and State-embracing crypto currencies. Bitcoin will never again mean what it used to mean.

You know … just like gold was permanently diminished in its social importance by the adoption of Oligarchy-sponsored and State-embracing fiat currencies. Just like gold will never again mean what it used to mean.

I wrote this note six years ago. It was the first Epsilon Theory note to get widespread recognition. You’ll see hints – more than hints, actually – of all the big ET themes over the past few years, particularly The Three-Body Problem.

How Gold Lost Its Luster, How the All-Weather Fund Got Wet, and Other Just-So Stories

The core of this note is a quote by Bob Prince, Bridgewater’s co-CIO and an actual prince of a guy. I just think he’s wrong when he says this:

The relationships of asset performance to growth and inflation are reliable – indeed, timeless and universal – and knowable, rooted in the durations and sources of variability of the assets’ cash flows.

I think Bob Prince is wrong in exactly the same way that JP “Jupiter” Morgan was wrong when he said this:

Gold is money. Everything else is credit.

If you get nothing else from Epsilon Theory, get this:

There are no timeless and universal relationships between asset performance and ANYTHING.

The only determinant of price for a non-cash-flowing thing is Narrative. Actually, the only determinant of price for a cash-flowing thing is Narrative, too, but we can save that argument for another day. And what I am saying about these non-cash-flowing things is this:

The introduction of Libra changes the Bitcoin narrative in exactly the same way that the introduction of fiat currency changed the gold narrative. And by change I mean crush.

That makes me sad. That makes me angry. I am convinced that it is part and parcel of a Spanish Prisoner con game. But I refuse to give into the negative energy of that realization AND I refuse to give up on the Big Ideas that I believe in.

So what do I do?

I con the con man.

I know what Mark and Sheryl and all the other Davos-going Team Elite sociopaths are about.

I see what they are offering me and I TAKE it. Without hesitation. Without remorse. I take it just as they are trying to take from me … in full sociopathic bloom.

And what do I give them in return?

NOTHING.

Do I care about banking the unbanked and cross-border remittances? Yes, I do. Very much. So I will TAKE the protocols and the KYC procedures and everything else Libra offers, and I will USE all of that to further the social justice goals that I maintain. And they will get NOTHING from me in return. I will keep my autonomy of mind. I do NOT forget what they are trying to steal from me. I do not ALLOW them to steal that from me.

I refuse to give them my trust.

And I will look for every opportunity to destroy their Little Kingdom.

Seriously.

Do I really have TRUST NO ONE tattooed on my hands? No.

I trust lots of people. I trust my pack.

But Mark and Sheryl and Christine and Jay and Donald and Barack are not in my pack. And they never will be.

Trust no one? No.

I just don’t trust THEM.

Is There a Big Short in Bitcoin?

Trading activity has grown in CME’s bitcoin futures in recent months, along with the rebound in the cryptocurrency’s price

Other large traders were even more bearish. “Other reportables”—a loose category of firms that don’t necessarily manage money for outside investors—held more than three times as many short positions in bitcoin futures as long ones, the CFTC report shows.

So who is the optimist? The report shows it is mostly small investors taking the other side of the trade. Among traders with fewer than 25 bitcoin contracts, a category that likely captures many individuals placing bets in bitcoin, long wagers outnumbered short bets by 4 to 1.