The Breakdown - Crypto Daily 3@3 - 7.18 | Libra Aftermath - G7, China, and Dalio's dystopia

Episode Date: July 18, 2019

Libra was a hotbutton issue at the G7 meetings - maybe the one thing they agreed on. Meanwhile, the project made news in China as Facebook's David Marcus revealed explicitly that it saw Alipay and Wechat as competitors. Meanwhile, the crypto community spilled ink discussing hedge fund titan Ray Dalio's latest missive on the coming financial paradigm shift.  Watch the live version at: https://www.youtube.com/nathanielwhittemorecrypto

All right, check check. What is going on, everyone? Welcome back to another Crypto Daily 3 at 3. So I swear, I was really intending today to not just focus on Libra again. We've had obviously nonstop Libra for the last couple of days with the Senate hearings and the House hearings. But the reality is that still we're in that cycle, right? And today is all about what happened after in the aftermath. So it's going to be a little bit about Libra. Again, I'm sure that we'll start to move into other areas. But, you know, this has elevated Bitcoin and crypto in a totally new way. And so we're just going to have to deal with it for a little bit. So let's dive in. So just to recap yesterday, kind of the sentiment coming out of this. I thought Ariana Simpson's tweet here really captured it. I was positive on Libra as an on-ramp for crypto.

I hadn't fully considered that it would push Bitcoin into the arms of regulators as the better option. Never thought I'd see the day. Now, not everyone in the comments agreed with her. Some really smart folks like Jake Trevinsky and Hsu didn't quite have the same interpretation. But I do think that a lot of us who are watching these hearings were stunned, frankly, with how many people were drawing comparisons between Libra and Bitcoin and with Bitcoin on the kind of the favorable side. That is obviously not the case for everyone. And there's a difference between the central bankers themselves and congressional representatives.

So, you know, one of the things that was kind of interesting about the timing of this is that it was right before the G7 meeting. And so you had Secretary Mnuchin, the Treasury Secretary today on Squawk Box on NBC. And here's a little clip of Joe Squawk talking to him. Cash itself or any other form of currency every time it's used for some nefarious activities if we weren't going to use it anymore. I'm not sure that maybe it's a little easier at this point in the technology for certain illicit activities, but that can't be the reason, you know, to say you're not going to use something. We wouldn't even use cash then, because cash is laundered all the time and used for nefarious activities. That's all we've ever used for nefarious activities, and we certainly had plenty of them.

I don't think that's accurate at all that cash has laundered all the time. We have the strongest AML system in the world. You know, we just came back from FAP. I love Joe's face right there when he says cash is not used for laundering all the time. So anyway, so this is one of the reactions that we saw is kind of the U.S. government outside of Congress, restating its position of the threat of kind of Libra and cryptocurrencies in general. But then you saw it beyond that as well. You saw the G7 ministers, I guess, kind of the, this was the common thread.

The one uniting factor in a lot of divisiveness seemed to be a sense of concern around Libra. So the Japan Times wrote about it here. And then Coin Desk wrote about it as well. French finance minister Bruno Lemaire, so he's been one of the biggest kind of antagonist towards cryptocurrencies. He's called for an outright ban of private cryptocurrencies in France. He's getting at kind of the sovereignty point, right? the sovereignty of nations might be weakened or jeopardized by these new currencies.

So I think that it's interesting and relevant to note that maybe the bullishness or the positive sentiment that we saw yesterday, it would be well for us not to over translate just how extensive that is, particularly among the central bankers themselves. So that wasn't the only place where there was a reaction, though. So let's move on to number two. So number two, the aftermath China, right? So I had asked a couple days ago whether just my friends and folks on Twitter who are in kind of those different language social media sites in particular, what the reaction, if any, had been to Libra, right? Were people even talking about it?

Did it matter? And so the first set of responses that I got was that no, no one was really talking about it. Maybe they were kind of paying attention, but mostly they were interested, as always, in price action, right? And to the extent that they were interested in Libra, it was as an explanation. for that dip we had where Bitcoin went under 10,000, right? Then yesterday that seemed to change. And it seems to have had to do with the fact that whereas in his Senate testimony, Marcus was, you know, didn't really bring up China except insofar as to say, I think once he

mentioned this kind of the specter of foreign powers doing this, or not even foreign powers, but just people whose values we didn't share, creating this sort of digital money, if we didn't do it first, that was like on display over and over and over again with these congressional hearings, right? China came up numerous times. He explicitly said that it will compete with AliPay and WeChat. Congressmen themselves were making that. Congresspeople were making that kind of statement. And so that apparently set off the triggers in a big way. So Dovi pointed out, Libra made the second top trending topic on Weibo, Chinese Twitter. Unlike the first hearing that didn't make much of a splash outside crypto groups.

In the second one, Marcus admitted Libra will compete, which triggered the attention bomb. And the total view on this was over 220 million discussions, comments over 17,000. Right? So this is fascinating. But what's also interesting is the nature of the responses. So again, this is all still kind of Dovey's thread. I checked out a few hot tweets in the narrative from their comments. Here are some typical ones. Competition. We can't even use Facebook. How can you promote Libra here?

In China, we chat and alley pay are quite dominant. Apple pay failed. Even the China Union pay failed. What's the magic of Libra? Don't fool us. There is no selective competition of a real currency. The dude first said it will be a global currency, then said won't compete with dollar. What BS?

This is fake news. I can't even open Facebook's website, Doge Face. The Libra thing basically pissed off all other 11 astrology signs. So basically, there's kind of just a lot of disbelief that Libra poses a real threat. But there's certainly more conversation. And this seems to be validated. I noticed a story on Coin Telegraph. China leads the world in Google searches for Facebook's Libra.

So yesterday the search terms for both Bitcoin and Libra blew up. And a lot of that activity was coming from China. And I guess this is what happens when you explicitly say and kind of make clear that this is the competition. So I think that the China mobile money, digital money, versus American digital money and Libra narrative is just beginning. I think we barely touched on it in the hearings. I think you're going to see a lot more of that. So interesting kind of news from the ground,

or at least from the social media ground, in a different part of the world. And with that, we'll move on to one that isn't strictly speaking about Libra. Yay! So another thing that kind of exploded and was something that a lot of folks were talking about yesterday was Ray Dalio, who's been in the news a lot. He wrote a book recently.

He's the founder of Bridgewater. He's a huge hedge fund guy. He wrote a really long piece. I mean, this is like a quintessential long read about paradigm shifts, economic paradigm shifts. And he kind of took both a historical perspective, but also a current perspective. And a lot of folks in the Bitcoin and Crypto community latched onto it.

And, you know, so if we look at, So yeah, I'll show you guys the piece itself. I mean, it's just huge, huge, huge, huge, huge. So a few folks pointed out kind of like the key lines. Tony Shang says, he pulls a quote, it is a good time to ask, what will be the next best currency or storehold of wealth to have when most of the reserve currency central bankers

want to devalue their currencies in a fiat currency system. Pomp says in pomp fashion, rocket fuel for Bitcoin, cut interest rates, print money, Bitcoin reward having, even Ray Dalio sees the perfect setup. Now we just have to get him on the Bitcoin train. Nick Carter goes a little bit more in depth. He says even Ray Dalio is talking about the cantalon effect now. The effects of monetary policy on society can't be ignored.

Ray Dalio is expecting wholesale currency devaluations, internecine class warfare and global conflict brought on by a slowdown in growth. He expects a gross societal immiseration over the next decade. And I think that, you know, Nick is only sort of dramatizing this, right? Like this is a pretty dystopian view, but one that's rooted, in, you know, real economics and sort of the rampant money printing that has been the dominant paradigm of the last decade post post-financial crisis. And effectively, what Dahlio is pointing out, if you really want the super, super simple TLDR, is that you can't print your way out of

things forever. And that at some point, there's no more ability to kind of take pressure off the economy in that way. Debt becomes due and then a whole set of effects happen. So anyways, there's a lot of good reasons, I think, for the crypto community to be not excited about this. That's the wrong way to look at it, but interested that someone in the mainstream financial circles who has, you know, huge credibility is speaking in a similar way. And I wanted to give voice to one kind of critique. Larry Sarkarnik, he wrote, so I see crypto Twitter has embraced Dahlio because his thinking reinforces their worldview. Sounds like a good. a bulletproof approach to me. When in doubt, outsource your thinking to someone else.

It's great because if you're not subscribed to one narrative in the minds of its holders, you're subscribed to the counter narrative, which in reality you're not really subscribed to. No such thing is subtlety or nuance here, only opinionated good time. And my response to that was like, look, you know, I do think that this is a memetic field, right? Crypto is ground zero for what it looks like to meme in self-fulfilling prophecy and idea into existence from nothing. that is its power, but it also can be its liability in some cases, obviously. We do tend to grab onto anything that reinforces our worldview. I think he's correct in that assessment in a general way.

However, I don't believe that's what it has happening here. I think that if you've been watching the last six months within the crypto community, in particular within the Bitcoin community, Dalia was repeating narratives that we've seen, I think most notably by Travis Kling, who's been all over this, right? This is the pin tweet on Travis's board. Central bankers have no plan to end the largest monetary policy experiment in human history. This is something that is being spoken about.

And the narrative of Bitcoin in particular over the last six months has taken a new step, not just from store of value, but to something that's more like store of value in a highly contentious, chaotic world. It is a step beyond. It is a hedge against rampant money. printing and instability. So I don't think that the point here is kind of shifting to latch on to a new figurehead. It's a, it's a kind of a gratification that someone with Dahlio's level of respect seems to be seeing things in a similar way to a lot of folks here. So I think that no matter what you think, and even if you think everyone in crypto is a poser, it's worth reading, right? You know,

he is not a doomsayer who makes his career on predicting things going back. he's a person whose job it is to understand markets and move money accordingly. So worth reading, worth checking out, worth engaging with, and maybe, yeah, use it as a long read this weekend. So with that, I appreciate you guys hanging out. Maybe we'll have something that's not about Libre tomorrow. I don't know. I can't promise anything. But either way, we'll be here again at 3 p.m. and I'll see you then. All right, cheers, guys.