The Breakdown - CLASH! The State vs. Crypto | BTC futures & DeFi Robo Advisors | Invest:Asia trend recap

Episode Date: September 13, 2019

The clash of global state power and crypto seems more inevitable than ever. Germany joins France in declaring that they will block Libra (all the while being interested to explore their own digital currency). We look at not only the news, but what people like Ben Hunt and Nic Carter think it all means. We also focus on some of the new tools - BTC futures and a DeFi robo advisor - helping us not only opt out, but build alliances with the traditional financial world. Finally, we look at the trends coming out of CoinDesk's Invest:Asia event. Has the center of crypto gravity moved to Asia? Some new evidence suggests yes.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another crypto Daily 3 at 3. All right, everyone, happy Friday the 13th, an inauspicious day, day when the Templars were destroyed by the state reclaiming their wealth, which feels appropriate for our first topic, Crypto versus the state. But in addition to that, we're also going to talk about Bitcoin futures and robo advisors, and we're going to talk about a quick invest Asia recap. We've got through the summer and now we're back in event season. There's going to be a lot of interesting events coming up.

And I like using them as a way to just check in on trends and see what people are talking about, what people are thinking, what people are feeling. And particularly this kind of Asia content, I think, is relevant. But let's start on topic number one. I think it's been a recurring topic across three at threes and certainly this week. Crypto versus the state. So I was re-listening to the Hidden Forces podcast between with Dimitri, the host of Hidden Forces and Ben Hunt.

Ben Hunt is a ex-money manager who now writes the very popular Epsilon Theory blog and newsletter. And he, like me, actually, focuses a lot on narratives. And his kind of awakening came from just watching how fundamentals no longer matter and the traditional pattern of things that had previously dictated price and finance no longer mattered and everything was about narrative. And so Ben has a lot of interesting ideas. I think it's worth spending some time with them. But, you know, his position on Bitcoin is interesting. He's kind of very interested in the idea of it and the idea underlying it. However, he believes, and he articulated this on this podcast, that it is on a collision course with the state.

And that in his estimation, that is a battle it cannot win. And that's, I think, a line where lots of us would agree with the first part, but I think a lot of us who have spent our time or who are dedicating our professional lives to this space don't agree with the second part. But it's an interesting position nonetheless. And for him, his feeling is, and this is kind of from a narrative perspective, that what happens if we allow ourselves to be just stuck in the digital gold narrative, which is the only choice when you compete with the state for money in his estimation,

where the state doesn't just crush you, is that we become ghettoized in the sense of just being stuck in one spot in that little crappy part of the neighborhood. and we're just waiting and screaming for the sky to fall. So really interesting stuff. I wouldn't necessarily say I agree with all of it, but I think that it's a super valuable perspective and just a different take and a really valuable lens through which to come.

And I think it was particularly relevant because I've been thinking about this a lot in the context of both some of the content that I've been reading and also some of the kind of news and announcements that we've been seeing. So this piece by Nick Carter, we talked about it a little bit before, but one of those kind of viral pieces of the last few weeks, And in it, Nick also, like Ben, argues that cryptocurrency is on a collision course with a state.

Nick, like Ben, thinks that the stakes of that are incredibly high. Nick doesn't, I don't believe, agree with Ben that there is no hope or else I don't believe he'd be doing what he's doing. And in fact, the point of this essay, the best that I can tell, is to effectively try to get the whole industry on the same page that this is a serious battle that is going to have serious implications. vis-a-vis the state and with regard to the state. Nick was also on Laura Shin this week, kind of clarifying and talking about this, discussing about the implications of cryptocurrencies for the state. So highly recommend you go check that out.

It's super valuable. The Laura podcast is a really great compliment to the original piece, so really excellent stuff. But of course, this isn't just theorizing, right? Like, we are seeing this now. So I wrote today that the Libra was a starting gun for every state thinking about. its own sovereign fiat digital currency and I believe that that's what we're seeing

this week so yesterday we talked about it here at the 3 at 3 France said that it would be trying to block basically would be blocking Libra from from coming to its coming to coming to France coming to Europe a mean yesterday he wrote this thread an official at the French embassy just reached out to me in an official capacity today to talk about crypto feels like the French government is trying to figure out the state of crypto and is trying to formulate what its response ought to be. They cannot be won over with memes, Muntalk, and Maximilus Banter.

This is the time for coordinated, unified cross-coin response to educate them, ideally coming from multiple people who have the credentials to sway governments. But this, I think, is the most important tweet that he shared. Libra awakened the sovereigns. While this tech cannot be stopped, its reach can be limited by clamping down on ramps. Heck, a country can wreak havoc by making the tax treatment arcane. Just ask any American. So this idea of Libra awakening the sovereigns, I think, is dead on, right?

So we saw this yesterday with France, and then just today, it came out that Germany will follow France's plan, right? That they will also basically try to block this. And their reasoning is, and this is a quote from Rhythm Trader, he posted kind of the core of the news, he says, or this is a quote from the German official, as soon as an issue of a digital currency dominates the market, it becomes difficult. for competitors. Speaking of competitors, and this I think is the key point, both in the case of France yesterday and in the case of Germany today, they're talking now actively about state-run cryptocurrencies. The reason that this matters is that right now we live in a world where we have some protection from the surveillance power of the state because of cash, because of paper money. And as soon as all fiat

becomes cashless, that totally changes, right? Everything is trackable, everything is traceable. In fact, part of Libra's core pitch to the U.S. government is that it's good for law enforcement, that it is more enforceable when it comes to anti-money laundering and things like that. But of course, that creates the potential for abuse. So Meltem says, ICO initial country offering. This came from a tweet that I had, and it came from a, originally from a podcast that she and Jill Carlson did. She says, we are now in the stage where every government will run the

dystopia and penopticon playbook. The tools we are building have never been more important to helping people maintain their sovereignty or some semblance of it. So just quickly to recap, I believe that the crypto versus state battle is heating up. I think that Libra was a starting gun for it. I think that what it's creating is every state wondering what their policy vis-a-vis digital currency is going to be. I believe that it's going to make most states, if not all states, highly consider creating their own form of fiat digital currency. I believe that fiat digital currency, if it's conceived as it looks like it will be now, is going to be one of the most powerful forces for surveillance of all time,

maybe ever, of any tool that the state has ever created. And I think that that has potentially disastrous consequences for people. And so in a nutshell, that's why I'm interested in Bitcoin. And luckily, for us, all the while this is happening, a permissionless censorship-resistant form of money is building at the same time. And we have the chance to buy into it. So with that, let's move on to number two for the day. So number two, Bitcoin Futures and Defi-Robo advisors.

So these are actually, we're going to shift gears a little bit from the highly dramatic world of what might happen in a surveillance state. And when the Panopticon comes to fruition, thanks to, you know, convenient fiat surveillance money. and into a couple kind of products that are mainstreaming or have the potential to help mainstream crypto assets in particular Bitcoin and Ethereum in the form of D5. So Bitcoin futures. So this is something that I've been watching closely with the emergence of BACT and with the CME, feeling the pressure and trying to increase its role in the space.

So CoinDesk reported today that CME, the Chicago Mercantile Exchange, who is the best-known Bitcoin, futures out there is trying to basically allow traders a greater number of open positions to reduce the restrictions on how many open positions traders can have. So the proposal is for limits to move from 1,000 contracts per spot month to 2,000 for any single investor. That's the difference between effectively $50 million at current prices worth of Bitcoin or $100 million of Bitcoin or at current prices. And as the article points out, there's not a lot of people.

who have that sort of size and scale of open position right now. But what it shows, and I think this is the key point that Nick from Coin desk made, is that he says, by the way, there is a reason why CME Group decided to boost its max limit for Bitcoin futures contracts. It could indicate both the Bitcoin market is maturing, i.e. less concern about manipulation and that its customers better understand futures. So these are really positive signs, right? Because it looks like this move is going to go through with the full approval and blessing. of the CFTC. So really interesting and powerful and positive signals around Bitcoin futures. Speaking of Bitcoin futures, obviously kind of the most anticipated launch in that space comes

from backed, or will come from backed, I should say. Not this week, but theoretically the week after, backed future should go live. And to get ready for that, anticipation of that, in preparation for that, they launched custody in their warehouse. And that is officially live as well as of this week. So again, a lot of positive indicators. And I think for me, part of what makes something like future so valuable is that, you know, even if your interest in Bitcoin is not trading, and it's not just pure financial speculation in markets, there has to be some sort of alliances from kind of that set of ideological visionaries with someone in power, in some form of power, if something like Bitcoin is going to compete against the state, not just be banned out of existence.

And I think that in a weird way right now, what's happening is that you're seeing the kind of purest bitcoinsers ally with the financial markets. And to the extent that the financial markets build products on top of Bitcoin, find it useful, find it valuable, they are a valuable ally in the fight against making sure that it allows, is allowed to continue to develop and build. So really interesting stuff. I think positive signs for not just the price of Bitcoin, but the long-term health. I did want to point out one product not in the Bisccoin space, in the DFI space,

just because futures are kind of an interesting derivative product for these crypto assets. Along those lines, but in a different way, is I thought this new product from Staked is really interesting. They call it Ray, so a Robo advisor for yield. Jonathan Marcus, who's one of the founders of Staked, tweeted about it and then Spencer Noon summed it up. He says Ray is a set of smart contracts that automatically allocate crypto assets to the highest yielding opportunities. So obviously right now, there's lots and lots of these different kind of staking and lending and, you know, different protocols and tools that are being built for people to explore and get yield from

their parked crypto assets. And this is kind of a next generation product built on top of that. I think that all of the, you know, for me, a lot of the defy stuff continues to be in the realm of the experimental and really only for people who have the skin to lose, you know, if it comes to that. But I think that it's exciting to see this sort of development. I think that these products will pull people more in, anything that kind of has this layer of automation on top of what crypto assets naturally offer is really interesting. So kudos to staked for that launch. It's going to be really interesting to see that develop. And I am personally excited to see what comes of it. And with that, let's move on to number three so we can get you off for your Friday afternoon. So number three, Invest Asia was this week in Singapore.

It was, I think, Wednesday and Thursday. And lots and lots of different content. It was interesting. CoinDesk actually swipped it originally. It was going to be a consensus event. And then they announced that it would become Invest Asia because so much of the interest and focus was on markets, was on exchanges. And this is kind of echoed in June's, you know, Coin Desk, he was formerly a reporter, then he went to Courts as a reporter, and he's been running

events for consensus, rather for CoinDesk for a little while now. And he wrote an essay called The Future of Money is being built in Asia. And his argument is basically that a huge amount of, not just the kind of financial activity in the trading sense, but also in terms of the infrastructure of mining, in terms of experimentation with new legal forms, in terms of just, you know, creating regulatory experimental sandboxes, such as South Korea's. They have a lot of new regulation-free zones for experimentation, like in Busan. They just announced, I think, maybe last month or the month before that. His argument is that the future of money is being built in Asia. And I think that there's a lot of us who are sitting here and kind of watching the slow-moving regulatory

regime of the U.S. and thinking that that may be true. Now, at Invest Asia, there was also some evidence presented to this effect. So Pricewaterhouse-Coupers, or maybe they're just called PWC now, but whatever, they presented a report that said that had a lot of interesting things to say about the state of kind of fundraising deals in the crypto space. And basically their argument is that the center of gravity has moved away from North America and in the Americas to Asia. So they said that, yeah, so similarly, cryptocurrency fundraisers in the Asian market have jumped significantly, accounting for 26% of deals in quarter two, combined the two regions accounted for 67% of the action. Yeah, so this is, meanwhile, the report identifies a significant drop in

crypto fundraising deals in the Americas. While the region accounted for 51% of global deals in Q2, 2018, the Americas captured just 28% in Q2 2019. So, you know, there's a lot to be said about this. I think that the cynical take is that it has to do with just, you know, the type of deals and the quality of deals, but I think that that would be writing it off too easily. And I think that even to the extent that there is a different position in the Americas as there is in Asia with regard to how crypto assets should be regulated. I don't think it's as simple as just dismissing those projects because the regulatory regimes are more favorable, right? So interesting numbers, no matter what. A few more little data points, interesting stories that came out of Invest Asia.

One, Coinbase, their head of institutional trading, I think, for Asia, kind of hinted or intimated that they were exploring initial exchange offerings and maybe launching an IEO platform. I think there's probably a lot of really big questions as it relates to securities law in the U.S. about that. But regardless of that, it definitely shows the influence that Asian-based or Asia-initiated exchanges have had on the world markets that Coinbase is really having to think about following suit to this sort of idea of an exchange token in IEOs. And then finally, just sort of circling it back to our original topic, the Marshall Islands, why the Marshall Islands is doing a pre-sale for its national crypto. So Marshall Islands has

has been public for the last about year and a half about doing a cryptocurrency. They posted on Coin desk earlier this week or maybe last week about why they're doing a cryptocurrency, how they're designing the monetary, monetary policies that it can't be debased and more printed. And they are now announced that they had plans to do a presale, basically, an initial country offering. And so I think that regardless of what you think, and I definitely don't have time. I want to wrap up for everyone's Friday to get into the specifics of that. This is that initial country offering. Now, the Marshall Islands is very small. It's not likely to move the needle in terms of global policy. But this is no longer just in the realm of the theoretical.

It's happening. It's real. It's here. And it is just, again, one more example of how the world is changing before our eyes when it comes to who has the power to print money and what money means. With that, I'll leave you guys. I hope you. You are going to have a great weekend. Go see a movie. Enjoy the beginnings of fall, the last little gasps of summer. I know that's what we'll be doing up here in the Hudson Valley. But until Monday, I'm off.

And thanks for listening. Thanks for watching. And I will talk to you guys soon. Peace.