The Breakdown - Bitcoin Soars on China President Xi's Blockchain Comments

Episode Date: October 26, 2019

On Wednesday, Zuckerberg responded to the largely hostile US Congress by reminding them that, if the US didn't proactively assert leadership around digital currencies, then China would be more than willing to fill the gap. As if they coordinated it, China's President Xi then made his first formal comments ever about blockchain, asserting that China needed to take a leadership role. Bitcoin soared 15% (although whether related or not isn't clear) and crypto Twitter debated: was this an indication of how far behind the US is getting; an affirmation that blockchain can be a tool of surveillance and control; or both?  Watch: https://www.youtube.com/channel/UCMKxYhVC2lJat7iB9Gec5kw/videos 

Let's say China. China, China, China, China, China, China, China, China, China, China, China. You go over to China, China, China, China, China, China, China, China, China, you take... Welcome back to another Crypto Daily 3 at 3. What's going on, guys? Yeah, so today, it's October 25th Friday, and we will be talking about China, because holy crap. What a, what a wild day. So let's, man, so much to talk about. Let's go back a couple days to Zuckerberg's testimony in front of Congress, right, about Libra. Obviously, you guys have all, you've been with me for the last couple days. You've heard both about what happened. And then

there are a reaction to it on crypto Twitter. But let's talk a little bit about this one aspect of it, which is really important, which is the role of China. So in the first set of hearings, as we talked about back then, David Marcus was a little bit more coy about the whole China question, right? He was mentioning other people were going to do it if we didn't. This time, Mark Zuckerberg was much, much more explicit. He talked about China explicitly. People asked him about China explicitly.

And it was really very clear that that was the big baddie that they were trying to position. Ryan Schott Adams here summed it up. Thusly, he says Zuckerberg's pitch to the U.S. government, you can't let China pull ahead. We'll bend the knee. You run the monetary policy. We build the tech. We keep U.S.D. as global king, get rid of cash, and 10x your financial surveillance. Your dollar plus our tech.

What do you say? Well, I summed it up a little bit differently. I said, Zuck says, quote, if we don't do it, China seriously will, guys. China the next day says, okay, let's do it. And pretty much that's where we are, right? So, well, one more little snarky on this, David Marcus sharing the news here with the little questioning face. So basically, news broke that the premier of China, the president of China, Xi Jinping says China will put focus on blockchain development. This is from Crypto Godfather. CN Ledger says,

Breaking. Chinese president Xi adopt blockchain as an important technology, as an important breakthrough for independent innovation of core technologies. Yesterday, the Political Bureau of the CPC Central Committee, i.e. the Politburo, conducted the 18th collective study on the status quo and trends of blockchain technology development. President Xi emphasized that the integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation. President Xi says, we must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain

and industrial innovation. This was echoed everywhere, right? So Coinbase wrote about this. And this to me is the key line. The Chinese president's statements on blockchain are believed to be his first in-depth remarks on the technology. And certainly for the first time they came through the Politburo. So basically, you have the Chinese president kind of following on from, you know, A few months ago, we remember what it was like when Donald Trump talked about Bitcoin and crypto and he did it in the context of Libra. The Chinese president is now kind of followed suit in some ways in saying that this is something major that they need to be involved in, not just involved in, but leading.

And so one more, I guess, kind of explanation thread. Dovi here says, she says, blockchain, blockchain, undertone is not Bitcoin as usual. More reads below. So just a couple more surveys of the reaction. Dovey says the very first piece of explosion today is from the official TV program on CCP on daily news updates, where she emphasizes on blockchain tech development and expect major tech through was mentioned.

One liner is enough as hopium for the entire blockchain, not crypto industry in China. If you want to know what pumps more than Bitcoin see below. XNet is what considers Chinese concept stop on NASDAQ. and it pumps 70% today. I personally, this is still Dovey, see it as a very positive sign for all blockchain but not crypto businesses, especially many enterprise blockchain companies

in mainland China. Whenever she is on to something, even tiny little preference, local governments will follow on massive sponsorship and subsidies. So, a lot going on. But then the craziest thing is, correlated or not,

the Bitcoin price exploded. It's up more than 15%. And everyone was like, is this the China effect, right? So Joseph Young says China effect. Bitcoin just went from 7600 to 8400. It's up even higher now. So this is all obviously a ton of stuff happening at once. We have a premiere of the country that along with the U.S. is kind of at the very center of the global economic stage talking explicitly about blockchain technology, not just in kind of these one-off tweets like Trump had to kind of diminish the whole cryptocurrency space, but in something that

is aggressive about Chinese leadership in that area. So four categories of responses from crypto Twitter that I wanted to talk through. The first one is, is this a big deal or not? And so on the is this a big deal side, you have folks like Nick Carter, who says, so just because she said blockchain, we're all going to pretend that it means something. And a lot of folks kind of said, well, actually, yeah. And I thought one of the better answers to this was from, from Shu who said, yes, actually, and he pointed to this other tweet from Tina at Yellow Hat Dow.

It's the first time at Politburo level and published by the party's official press, which signals a subtle message. My take reading news from China is reading the intent between the lines. She keeps going. He says, one billion plus people will see this news, search volumes and web traffic will balloon, bears will stubborn bears, bears will be covering shorts and flipping long, parents will be urging kids to learn crypto and blockchain. So basically, his point, here is that there is a there's an effect that will happen because people will be desperate to kind of read into this more so they'll be almost like a cascading effect right so that's kind of reaction one was just this initial debate about how

big a deal is this is this a really big deal or is this just a little deal is it you know just a normal hopium right the second response was the US is behind in the new space race that's how I characterize it so pomp here says breaking. Chinese President Xi, Jingping just publicly supported China going all in on blockchain technology across their economy. This will be the space race of our generation. America has to embrace the technology, including Bitcoin, or risk being left behind. Another person didn't say it quite as explicitly in terms of the space race analogy, but Eric Voorhees from, from Shape, Shift, says,

Trump, blockchain bad, she, blockchain good. And I think it's designed to make a point about just how off that feels and how weird that feels. So again, so first category of reaction is just trying to figure out whether it's a big deal or not. Second category of reaction is the U.S. is behind. But then there was a third category of reaction, which I saw from, I would say, kind of more, even more of the bitcoins in the crypto community, which was, this is a reminder that this is, blockchains are basically tools for surveillance in the wrong hands. So Alex Kruger says, assume China's president has private blockchains in mind, blockchain, not crypto, control and surveillance, not freedom and privacy.

Bully says, China likes blockchain because it dramatically improves its surveillance apparatus, perfect data forever. If we don't start prioritizing data privacy, we're handing authoritarian regimes an incredibly sophisticated tool to track and ultimately oppress their people. Jacob Kosteke says China is confiscation of property by the state, labor camps for ethnic minorities, the crackdown in Hong Kong, the violation of civil and human rights, etc. Getting excited that they're using blockchains and digital assets to support in support of an authority agenda is not the right take. And then there's one more that I want to bring up

from Alex Gladstein over at the Human Rights Foundation, who says, oh my God, Alex retweets so many things. Sorry, I had this pulled up before. In case you needed more evidence that blockchain technology is a semantic and technical construct of corporate and government surveillance and control and then tweets a link to the news. The fourth response is kind of an offshoot of this third response, which I'm going to summarize as buy Bitcoin. So this one from Pierre Richard, communist love, quote, blockchain technology and hate Bitcoin. Really makes you think. So what are my thoughts? I think on the first point, whether this is a big deal or not. I think that the world economic stage is going to be shaped over the next 10 to 15 years by the battle on multiple levels between China and the U.S.

So when one of the presidents of those countries says anything about this technology, it's a big deal. It may not be the big deal that we want. It may not be a big deal for the asset that we care most about. It may not be a big deal for Bitcoin, which might not care. But I think that in general it's a big deal. So I'm firmly in the big deal camp. Although I think that it would be very easy to overstate or try to add our own biases to in what way the deal is big rather than just kind of watching an understanding. I also think you have to, we don't have any idea about correlation, but you kind of have to watch this massive price uptick in just a few short hours and think that there's something going on.

So yes to big deal. Second, the U.S. behind in the new space race. I don't know if I'm ready to get on board with the analogy of the space race. race. But I do believe that the digital currency wars that are going on are going to have an outsize impact in what the kind of future economic global power looks like, right? You know, for a very long time in the history of the modern world, power globally is largely a byproduct of how you export your economy and then back it up with weapons. And, you know, in the modern, modern era, in the era post-World War II era, that's been a story of the U.S.

and the USX economic dominance and the dominance of the US dollar. I do believe that there are challenges to that, right? The Belt and Road Initiative is a really, it is a new type of post-American type of power that is using economic means around the world to bring countries into China's orbit. Winning the war for the convenience of currency around the world is something, that is, that has to be on the U.S.'s mind, right? So, you know, to the extent that you think that, you do kind of also have to think that the U.S. is behind in whatever this race is, whatever this battle is. Now, that doesn't mean that I think that the U.S. might have to be behind because

of the nature of democracy versus totalitarianism. So this is, I think, the more interesting question in some ways is not so much whether the U.S. is behind or not, but what it looks like, US's version of this. In fact, I think there was someone who is actually discussing, like, is it actually the most quintessentially American thing that it would be a private company that brings something like this new cryptocurrency to market versus the state-backed digital yuan that we're seeing? There's also a whole different dimension, which I don't even have, like, the space and certainly haven't prepared enough to go into where there's this question of where Ali Pay and WeChat fit into the plans that China has for a digital yuan.

Does it in some ways impact them negatively, right? Because of it's a potentially easier or a mandated system that works around them. So, you know, I think that there's the question of behind to me is more again about what we talked about earlier this week in narrative watch, which is the battle lines for the digital currency wars. Number three, this proves blockchain is a tool for censorship and control. This is one where I completely agree that that's the case. I think that the only thing that I would maybe disagree with the way that some people are writing about it is that we've always known that this technology is in the hands of the wrong people. It is an incredibly powerful tool for surveillance, right?

When you can put in the same, the other side of the coin of being able to have property records on the blockchain that mean that property can't be seizes easily because everyone has that record of who's supposed to own. own it, is that people who are misbehaving in a way that is not compatible with their social scores or whatever can also be listed on the blockchain for perpetuity and that can never be expunged and that can be destructive of their livelihoods, right? Like the idea of a transparent ledger at core is just an amoral tool that can be used for incredibly good things or incredibly bad things. And so, you know, we've known this. It's been there. The fact that, that you do see a very kind of strong authoritarian leaning power like China being so interested in it. The question in some ways is how did this not happen sooner? And it may just be that it was

too wrapped up and too caught up in the kind of the cryptocurrency as a manifestation and what you can do with blockchains versus blockchains themselves, right? Because Bitcoin is obviously the antithesis of central control. You can't. control the currency's valuation. You can't control the supply. It is mathematically mandated, which I think gets back to this fourth point of buy Bitcoin. I mean, obviously right now, you wish you had bought Bitcoin in the morning. But I do think that every time we see anything like this happen, when we see, you know, kind of Zuckerberg dragged before Congress and grilled, it is a reminder of the unique set of circumstances that Bitcoin has around it,

that went into the way that it was founded, the way that it is propagated, that are kind of irreplicable in the modern, in just the context that we have now. So, yeah, I think for me the biggest thing is, like, yeah, it's a big deal. Yeah, it's, of course, a tool for censorship, but we already always knew that blockchains could be a tool for censorship. And I think that we're still left with the biggest economic question in some ways of our times is who's, like, which currencies are going to propagate across the world? I mean, this even gets back to the other day Jack Dorsey was asked if Twitter would ever join Libra,

and he said, hell no, literally, this is his answer, because he finds it fundamentally incompatible with his beliefs that the native currency of the internet should be an internet-native protocol, not a protocol or a currency that serves or was just created by a single company as much as they try to say something else. So anyways, to me, that's the big question. We're still in this, the latest in the digital currency wars, is China, is in a whole new way, even though they're still couching it in the context of blockchain. So what do you think, guys? I think it's phenomenally interesting, and certainly our bags are all a little happier right now.

But I'm really interested to know where you land on this. The U.S. is behind in the space race versus this proves blockchain as a tool for surveillance conversation. So hit me up in the comments. Let me know on Twitter. And we'll be back on Sunday for what I can only imagine going to be a very interesting long read. Until then, guys, I will talk to you soon. Peace.