At 6:30 pm on March 12, Bitcoin dropped from $ 7211 to $ 5555.55. The bitcoin price dived again this morning, slumping nearly $ 2,000 again in half an hour, the lowest fell to $ 3,782.13, a drop of more than 40% in 24 hours. According to the data of the contract emperor, only Huobi, OKEx, Binance, and BitMEX exchanges had a daily short position of 3.133 billion US dollars, which reached the highest in a single day in history. The number of liquidated positions exceeded 110,000, which was also the highest in a single day.
Also on March 12, the S & P index fell 260.74 points, triggering the fusing mechanism for the second time this week. The Dow hit its largest decline in history, at 2352.6 points. The Nasdaq fell 750.25 points to 7201.8 points. This is the third time in the history of US stocks. This fuse has been 33 years since the first fuse, but only 4 days have passed since the last fuse. Buffett shouted, "I only lived this way in 89 years." It is reported that Buffett lost $ 6.8 billion last night.
According to incomplete statistics, with the exception of the United States, the stock markets of 11 countries including Canada, Mexico, Japan, South Korea, Thailand, India, the Philippines, Indonesia, Brazil, and Pakistan plummeted. The five largest US technology companies, Apple, Amazon, Google, Facebook, and Microsoft, had a cumulative market value of $ 416.63 billion. The Bloomberg Billionaires Index shows that the top 15 richest people in the world lost a total of $ 46.4 billion.
Market panic or pullback demand? Regarding the meltdown of U.S. stocks this week, Yang Delong, chief economist of Qianhai Open Source Fund, believes that the spread of the epidemic is not the main reason. It is more a decade of bull market for U.S. stocks. Some factors driving the rise of U.S. stocks are quietly changing, such as the Federal Reserve ’s interest rate There is not much space. Regarding this crazy drop in Bitcoin, Apocalypse Capital told InfoQ that there are two main reasons for this drop in Bitcoin: on the one hand, the bearish demand caused by the expected global economic downturn, and on the other hand, Bitcoin Callback requirements themselves.
As we all know, Bitcoin will be halved in the second half of the year, but the trading market pays attention to speculation expectations. This round of rise has essentially halved the market. After hitting a high of 10500, Bitcoin is facing a callback demand. Of course, this round of downtrends is so rapid and there are only a handful of recurrences in the history of Bitcoin, which are inextricably linked to the decline in global stock markets, both of which are the result of expectations of a bearish global economy.
However, Johnson Xu, chief analyst of TokenInsight, told InfoQ that the Bitcoin dip was mainly due to market panic, because some market participants bought bitcoins by buying mining machines, borrowing, etc., and expected to reduce their expectations by half. A linkage effect caused by everyone being too optimistic about the market.
The market is overhyped because Bitcoin is halved, and some market participants are afraid to miss the opportunity to enter the market irrationally. The current market slump is driven by strong irrational behavior, which translates into a rapid downside response and quickly depletes market buyers' liquidity (flattening down). When the overall financial market panic or other unexpected events are caused by the New Crown virus and the global economic slowdown, market participants often seek to withdraw assets such as stocks and bitcoins and convert these assets into cash (cash is king). So has the recent gold sell-off.
When the market panics, people ask for cash in the beginning instead of investing in safe-haven assets such as gold. At the same time, because gold is considered a high-quality asset, investors usually start with liquidity crunch and market panic. Cash in on good assets (because inferior assets are more difficult to sell in panic times). The Bitcoin crash this time has a certain connection with the decline in global stock markets, because the entire financial market is a globalized market, and there is more or less linkage between each asset.
In addition, Forbes speculated that it may be because PlusToken scammers transferred bitcoins worth more than 100 million US dollars to the mixer, and then sold bitcoins, resulting in rising market supply.
Other people are greedy, I am afraid, others are afraid of me, greedy? In this case, should investors still expect "halving the market"? Johnson Xu believes that there is no such thing as a "half quotation", and most market participants are too optimistic about the halving of Bitcoin. Price fluctuations are not necessarily caused by halving, but may be caused by the sum of other factors. When everyone is saying that they are optimistic about the market, the existence of risk is ignored in the subconscious. At this time, the risk will be actually reflected, and the upside will gradually shrink. Bitcoin halving was written into the code, and it was not an accident. Bitcoin should be halved in a rational way. It is worth looking forward to, but not overly interpreting and speculation.
However, Tianqi Capital believes that this plunge is a callback period for bitcoin's halving of the market, and each round of sharp decline also indicates the opportunity of the market outlook: cheap chips will be hoarded, waiting for the next wave of hype and explosion. Therefore, Tianqi Capital still believes that the market outlook of Bitcoin is worth looking forward to, provided that it is not frightened by the current fierce washing of the chips, after all, when the bear market is the worst, it is also when gold is everywhere.
Regarding the future trend of Bitcoin, Apocalypse Capital stated that it should judge according to the current trend.
In this round of market, Apocalypse Capital initially chose to follow the downward trend of May 18, and Bitcoin has gradually dropped from a high of 10,000 to 3150 points, so the big support level predicted by this round happens to be 3700 today. Near the point. Data monitoring shows that some funds are involved in this price range. But whether it can hold on to this support remains to be tested. If the 3700 support cannot be maintained, it is very likely that it will hit the US $ 2000 level. Tianqi Capital believes that this is the market's last line of defense. Long-term investment is recommended to buy some relatively stable targets, such as BTC, ETH, etc. The bear market will eliminate many currencies, but if it survives, it will shine in the next round.
Johnson Xu believes that the plunge is also a test to promote the healthy development of the industry. Extreme market is a test for the entire industry, especially for infrastructure, risk management, etc., so it is still optimistic and supports the development of the industry for a long time.
For current investors, Johnson Xu offers the following suggestions:
- Other people are greedy, I am afraid, others are afraid of me, greedy.
- Global financial markets have also undergone major changes. From the data point of view, I don't think Bitcoin has the attributes of a safe-haven asset, but this market can test whether Bitcoin has a certain risk-avoidance capability. This is a global world. We need to analyze various markets, not just the digital asset market.
- In the long run, we are still optimistic about the digital asset industry.
Does Bitcoin have a fusing mechanism? On March 9, after the U.S. stock market crash triggered the fusing mechanism, the market began a discussion of "whether Bitcoin should set up a fusing mechanism". But at present, most people are not optimistic about the Bitcoin fusing mechanism. OKEx CEO Jay Hao said that the fusing mechanism is difficult to implement in the digital currency market. In the face of a highly volatile market, setting the fuse point is a difficult problem. At the same time, for a 7 * 24h market, when a certain exchange breaks down, the price difference between the digital currencies between the platforms will increase, leading to arbitrage, and the fuse mechanism will eventually become a decoration.
Du Wan, the co-founder of Contract Emperor, also said that it is unrealistic to use a fuse mechanism in the currency circle. The fusing mechanism first violates the original intention of the decentralization of the blockchain, and at the same time, it will touch the interests of the top of the currency circle ecological chain. For example, large trading teams can no longer use pins to obtain large profits. When the market is panic, exchanges with a fuse mechanism may lose traffic to exchanges without a fuse mechanism because of the run effect of traders.
It can be seen that the current risk aversion measures in the traditional stock market are difficult to transfer to the fickle currency market in a short time, and the regulation of this market still has a long way to go. Investors should still be cautious when investing.
Authored by Keith Weiner via Acting-Man.com, submitted by
Battles for Civilization
A major theme of my work — and _raison d’etre_ of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts. Battling the barbarians at the gate… [PT]There is the freedom of speech battle, with the forces of darkness advancing all over.
For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travelers to provide the password to their phones so the government can go through all your data, presumably including your gmail, Onedrive, Evernote, and WhatsApp. China is now developing a “social credit” system, to centrally plan the economy and control citizen behavior.
Canada has made it a crime to call someone by the wrong gender pronoun. Even in the US, whose First Amendment has (mostly) stood as a bulwark against censorship now has a president who threatens antitrust action against Amazon, because its CEO Jeff Bezos owns the Washington Post, which prints things he does not like. On college campuses, professors are harassed if they say one thing that the professional sensitives are sensitive to.
If a controversial speaker is invited, he risks an angry mob coming to disrupt his talk (or worse). Sacrifices on the road to Utopia. [PT]Then, there is the nearly-over war against patients’ rights to purchase health care services from the provider of their own choosing, and health care professionals’ right to sell services to patients at a price they prefer.
In the US, insurance companies are still forced (as under Obamacare) to provide insurance to anyone who applies, even those who have pre-existing conditions. This would be like forcing home insurance companies to issue policies to people whose houses are currently on fire. It is not insurance, but an unfunded welfare program.
The use of practical energy sources is in the battle for its life. Germany and Japan are de-nuclearizing. Other countries flirt with taxes designed, not to raise revenue, but to reduce the use of fossil fuels. While many may go along with this, thinking it is OK to pay another 50 cents a gallon for gasoline, this will not be nearly enough to force large numbers of people to do without. Gasoline for driving to work and oil for heating homes has a highly inelastic demand.
The price would have to rise enough to force people to change their lifestyles, abandoning their spacious houses in the suburbs to crowd into tiny urban apartments. In Europe this month, I saw petrol around $8 a gallon. And they use so much fossil fuels that more taxes are demanded to reduce carbon dioxide much further. Saying hello to European gas prices… [PT]
### Few Want a Free Market in Money And don’t even get us started on money.
Even otherwise-free-market economists, and even wealthy entrepreneurs and business leaders, are for a properly managed irredeemable currency. One prominent person who is all of the above recently declared that if the Fed adopted GDP targeting (it currently does its central planning based on inflation and unemployment) it would end the business cycle! He did not want to hear anything about GDP being an invalid measure, about eating the seed corn, declining marginal productivity of debt, etc. If you break a window, it does add to GDP. This is not a recommendation to break windows. It is a damning indictment of GDP as a measure.
Where tyranny, socialism, and central planning (we repeat ourselves) are on the rise, not only liberty and human happiness wither, but so does the ability of people to coordinate their productive activities. A major theme of my dissertation
is that government intervention promises improved outcomes, but always reduces coordination. Others, especially Ayn Rand, have noted that socialism sets man against man. They can no longer cooperate to enrich each other. So they are forced to squabble to loot each other through the apparatus of the state.
This is a formula for misery even in a primitive agricultural economy. Wherever it has been adopted, it has been lethal not just to those who think independently, but even to millions of loyal supporters of the regime. The death toll of the socialist regimes of the 20th century — both international and national, i.e. communist and fascist — was in the hundreds of millions. Central planning endpoint… [PT]
### Trust is Delicate It is also a formula to destroy trust between people. Trust is a necessary element for people to coordinate their activities, especially over time. There could be no mass produced food, much less computer chips, without both banking and equities markets.
In a world where no one trusts anyone else, everyone hoards their favorite commodity at home. They fear to give it to a fraudulent bank who will steal it. So, instead of financing business, production, inventory, trade and entrepreneurialism, they simply accumulate salt or silver or gold.
This is a picture of a miserably poor society, composed of small farm villages where life is barely above subsistence. And businesses are nothing more than a one- or two-man workshop. Think of Medieval Europe prior to the Italian Renaissance. What is now called the _developing world_ is significantly better off than this.
That’s because developed markets have produced goods that are so cheap that even laborers in India, even farmers squatting in a rice paddy can afford mobile phones (though not plumbing or toilets). Life all over the world will degrade back to the level of poverty that long prevailed — if the lights go out in the West.
Many in the gold community wish for everyone to dump their savings and investments, buy gold and silver metal, and take the metal home to put it under the mattress. It is true that, if even a small percentage of people did this, the prices of gold and silver would skyrocket.
These gold owners focus on this, but not on what we describe above. We have said before that they should be careful what they wish for, so we will not dwell on that point further here. We have a different point to make today. For the reasons of creeping central planning, socialism, government intervention in all markets, and artificial conflicts of interest between groups, there is a worldwide mega-trend of declining trust. I describe a collapse in trust as one of the eight indicators of financial implosion in my dissertation: “_(8) the willingness of people to trust one another falls to zero._”
This trend necessarily occurs so long as government interferes with production, and renders people less and less able to coordinate. Much has been written about how the banks privatize gains and socialize losses. Deposit insurance, not to mention central bank lenders-of-last-resort, provide a moral hazard to ignore risk and bet big with Other People’s Money. More recently, they are starting to enact policies that provide for bail-ins. This is when depositors lose their deposits and instead get (possibly worthless) shares in the bank. Modern-day bank robbery… [PT]
### Rational Response to an Irrational Social System
Something makes our mission, to reverse the trend and save civilization, damnably frustrating. That is, it is an entirely rational response of the individual to withdraw his trust when others demonstrate they are untrustworthy. It is entirely rational to withdraw his capital when counterparties demonstrate they are putting it at undue risk, or paying insufficient or negative real returns.
As an aside, by real return, we do not mean measuring the consumer price index and subtracting from the interest rate. Prices are measured in money. Money cannot be measured in prices. If you empty a bag of gummy bears, and line them up, you can measure the line with a steel meter stick, e.g. 500mm. You cannot invert this and say the meter stick is two bags-of-gummy-bears long.
We measure real returns in money terms — i.e., gold. If you have $1,200 and earn 3% interest on them, then at the end of a year you have $1,236. However, if the gold price goes to $2,472 (we do not predict this, but for sake of easy math), then you have gone from 1oz of gold capital to 0.5oz. You have lost 50%. You would have been (far) better off, to have a gold Krugerrand under the mattress. We won’t even talk about having gold vs. being an involuntary volunteer for a bail-in. So how do you fix a problem caused by people rationally responding to the perverse incentives imposed by an irrational system? You must offer them different incentives. You must appeal to their rationality, to their self-interest to trust, to invest.
What is the Gold Standard, Really? The gold standard is more than just sound money. If it is to serve the needs of people and support modern civilization, it must be based on honest credit. It is about honesty and moral rectitude.
We realize this is not sexy material. A headline screaming “gold to go to $5,000” with a subhead about people buying _phyzz_ will grab everyone’s attention. A sermon containing the words “moral rectitude,” not so much. But, in a way, this summarizes the two alternatives facing us. One is get-rich-quick speculation on Fed-induced asset price volatility, seeking to convert someone’s wealth to another’s income, and destruction of the capital that supports our way of life.
The other is the boring old-school values of honesty, fair dealing, sound credit, and continuing the growth that began in Florence in the 14th century. It may not be sexy, and it is a long and arduous road. Nevertheless, we hope you will join us in working to administer the gold cure to the dollar cancer
Supply and Demand – Something Is Different
The price of gold moved up two bucks, and the price of silver fell 14 cents. But the precious metals is not where the action occurred, this week. The S&P 500 was down 113 points, or -4.1%. Crude oil was down over five bucks, or -9.1%. Bitcoin was down from around $5,500 to around $4,200 or -24%. Welcome to deflation—a forcible contraction of credit.
The cause may lie elsewhere in the unsustainable debts of the many borrowers who now face rising interest expense when they already were marginal at the recent lower rates. However, remember the word contagion from the last bust/crisis of 2008? Credit stress propagates, because debtors are forced to liquidate and creditors want to contract their balance sheets.
And, interesting (no pun intended) that the price of gold is not much affected too.
We called all of this. We were way early (and this may not be it
yet in any case). But we have said many times credit is in danger of deflating. And it will impact stocks severely.
And bitcoin is unsound and has no firm bid. And the prices of the metals may not be so much affected this time as surely no one owns gold or silver with much leverage after all these years of bear markets. And those who love leverage in their portfolios have long ago discarded gold, out of favor. And now, maybe, here it is. Certainly _something_ has happened. The S&P is just about testing its crash low from the start of the year. Oil hasn’t looked like this since second half of 2014. And — no doubt bitcoin proponents could quibble — bitcoin has never looked like this.
The euro fell a penny (remember this is the second biggest currency in the world). The pound was unchanged, as was the Chinese yuan. The Swiss franc was up slightly. Speaking of the franc, we want to briefly address one argument against collapse.
_“The franc will not collapse, because the SNB and the Swiss banks have liabilities in francs and assets in euros. So the more the franc were to drop, the more the liability is falling / asset is rising. Therefore, any decline will be self-correcting, because it adds capital to the Swiss banking system balance sheet.”_We find this argument interesting. Much more interesting than the plain old “_everyone loves the franc, worldwide, so that keeps its value up_” argument. Clearly, people can stop loving something abruptly. But this argument is our kind of argument: not an appeal to speculators’ apparently permanent preference, but to the balance sheet.
And it’s true. A drop in the franc against other currencies (especially the euro) will add capital. As an aside, we just need to pause here to say two words. How perverse
. In an honest gold standard, there is no way a bank can profit from the decline in its liabilities. If its bond — or worse yet its note! — is being discounted by the market then it is in deep trouble. It cannot get out of trouble by a drop in its liabilities. By that point, it has already lost its equity capital.
And if its notes are impaired, it’s also lost its bondholders’ capital. By contrast, in irredeemable currencies, commercial and central banks have a perverse reason to want their currency to drop a little (sorry, that was more than two words).
Anyways, with that off our chest, we agree it does work. However, if the collapse is self-limiting due to capital gains when the currency falls, this mechanism also has a built-in limit. It only staves off banking system insolvency when the currency goes down.
That is, if SNB assets
There is a more inexorable force that opposes collapse. The negative interest rate, about which we have written so much, is reducing the banking system’s liabilities. While the yield of their asset, euro denominated bonds, is not as negative as the corresponding bond in Switzerland. And the yield of their dollar assets is positive. We plan to revisit the topic in the near future. Ultimately, all irredeemable currencies fail.
They rack up debt at an exponentially accelerating rate. And eventually they reach the point when it all must be defaulted. To hold the currency is to be a creditor, and it’s bad to be a creditor when there is a cascading systemic default of all debtors. There is no mechanism that can prevent this, though the mechanisms described above provide some color to Adam Smith’s “There is a great deal of ruin in a nation.”
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