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Friday, July 19, 2019 - 22:48 SGT
Posted By: Gilbert

Signs Of Life

Too much has passed in these few weeks to be adequately covered, really - there's the graduation from my Masters in English Language & Linguistics, but that deserves multiple recaps of its own. And then there was WWE Live! back in Singapore, which however was probably not quite up to their visit in 2017. The high point for me was when Cesaro drew out a Singapore Cane from under the ring in his bout with Strowman, before shaking his head and flinging it aside, which was about as subtle an in-joke as could be expected in pro wrestling. That aside, I was rooting for Alexa against "The Man" Becky Lynch (who, I daresay, is making a refreshing statement in an age where men are proving to be better women than actual women in sports), but yeah, no way they were having the title change hands during a house show. Other than that, Ricochet laid on the acrobatics, but overall it was relatively meh - which was reflected in the attendance.

Where The Action's At

"The world that Satoshi Nakamoto, author of the Bitcoin white paper, envisioned is an unstoppable force. We should not attempt to deter this innovation... those who have tried have already failed."

- Rep. Patrick McHenry (R-N.C.),
during Libra Congressional hearings

The trouble with juggling too many balls at a go, has always been deciding what section of the to-do list to knock off first - and the list's been getting quite long as it is. Good trading, however, demands a non-negotiable urgency. Among Livermore's timeless gems in Reminiscences of a Stock Operator is a warning against trying to force trades in a market that doesn't support it: "...the desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages". This is also implied in Buffett's baseball analogy - in a world where institutions have the advantage of capital and brokers the advantage of controlling the order flow, retail has only one real saving grace: that of being able to decide whether or not to take a swing. And since there are no outs, one can be very, very patient indeed.

Well, the Bitcoin market's time had come in the past couple of weeks, which put the firm of H.L. Ham back on high alert.

Illustration of concepts, Bitfinex daily chart
(Source: bitcoinwisdom.io)
[N.B. From the Financial Econs intro module, Dead Zones can technically be profited from by means of short straddling, which one supposes is approximated by providing funding in the crypto markets. Gains, however, are generally nowhere near when there's actual movement]


Mr. Ham: Sheesh, I'm here, you didn't have to yell.

Me: So how's the swing & scalp going?

Mr. Ham: On track for a few M's, looks like a classic double top's playing out. You won't believe the crap that's still going on, though, take the rise on the eighth - who the f**k market buys that way?! And even that doesn't come close to the latest bullshit, when it pumped back up a thousand bucks in half an hour, with buywalls set up to defend each hundred-dollar checkpoint along the way. You gotta watch it happening live to truly appreciate the magnitude of the asslordery. But yeah, we don't go on margin here, so we can wait it out.

Me: Good job, Mr. Ham. And what of our analyst?

Mr. Ham: Mr. Robo? he's still running about in circles screaming, from when that first big dump hit. Should be back operational in some hours, not that there's much to do now.

Me: True that. In any case, our consistent stand on Bitcoin's value proposition over that of altcoins appears to have played out more or less as anticipated. While Bitcoin has managed to recover to nearly 70% of its all-time high on this run (and over 66% dominance), before resting about 50% currently, I daresay almost all altcoins have remained down by 80% or more from their ATH, while still bleeding on the Satoshi ratio. But it's not as if all this hasn't happened with the first alt wave, way back in 2014. It's a whole different mentality required for dabbling with alts successfully, I'll leave it at that.

The State Of The Alt

"There's Bitcoin, and then there's shitcoin."

- Rep. Warren Davidson (R-Ohio), ibid

It should be clarified here that Facebook's proposed Libra cryptocurrency doesn't belong in the latter category... but only because it doesn't exist as yet. By the way, recall when we professed to be "eager to see how various governments deal with the new sound money" just a couple of months ago? Turns out that we've gotten some big answers since then:

[N.B. Superb follow-up comedy by the Treasury Secretary there too: "I don't think money laundering and nefarious activity has been successfully done with cash". Why, this is golden, people! Move over, Jon Stewart.]

Yup, things are getting serious quickly, with the U.S. Congress demanding public hearings with Facebook over their proposed Libra cryptocurrency (as to why the name, there's speculation that it's a reference to the Winklevii's groundbreaking regulated crypto exchange, Gemini; perhaps a sequel to The Social Network in the making?). With Zuckerberg having apparently tired of the seats in D.C. after his grilling last year, it was David Marcus who had to face the marathon gauntlet this time, testifying first before the Senate, and then the House.

Unavoidably, there was the usual showboating from a selection of the politicos, with more than a few demanding vaguely-defined Yes or No commitments that the Facebook rep had little option but to deflect, and others launching into lavishly-prepared one-way condemnations of Libra and Facebook that brooked no reply (note, I'm not saying that Facebook doesn't deserve it, which is why I have weaned myself almost completely off the platform, save for the odd like and troll post). There was no shortage of posturing on Facebook's end either, as they touted Libra as a remittance method benefitting women, and that they would only have a single vote in the cryptocurrency's managing coalition. Of course, the last time that happened with their Internet access initiative, they were in sole charge pretty quickly.

It was kinda painful watching Marcus dissimulate poorly on why Libra would be based out of Switzerland, since he couldn't very well admit that it was to be out of Uncle Sam's reach. AOC's critique that Libra would be "controlled by an undemocratic selection of largely massive corporations" was unintentionally amusing, given that this also mostly describes the Federal Reserve system. Privacy and censorship concerns aside, though, the main objections boiled down to: why a new currency, and why crypto-currency?

On the first point, it was noted that Facebook's marketing use-case of cheap and fast money transfer doesn't actually require a new currency; services such as Venmo and WeChat already provide such a functionality with the U.S. dollar, Chinese yuan, etc, while possibly earning from the reserve float. As such, it is difficult not to suppose that Facebook's attempt to create a fiat money from fiat is basically a play at appropriating a power that has been reserved for nation-states in the modern era: that of fiat money creation. Sure, Libra will be backed by a basket of major currencies and commodities, but that just means that they will be able to implement monetary policy through adjusting that basket - curiously, likely similar to how Singapore operates.

Having a private entity issue money is not all that uncommon in history, mind - for example, the United States had a Free Banking era in the mid nineteenth century. Methinks Marcus had sneakily dodged a bullet by placing the focus on regulating onramps and offramps; personally, the goal was always to create a self-sustaining financial ecosystem here. Instead of Toshiba having to buy Taiwanese dollars to pay say Microtek for sensors, and buy Euros to pay maybe Bosch for other components, and then have to exchange the American dollars they received for their washing machines back to Japanese yen, all these trades could be conducted in Libra, if it gets big enough; if Toshiba and Microtek and Bosch and thousands of other companies figure that they can just use the Libra that they earned directly on business expenses and inputs, instead of paying exchange fees, one can imagine them maintaining a fair portion of their reserves in Libra.

One question here would be why these companies aren't doing that with the current king - the U.S. dollar - and the answer is that they probably are. However, it can be argued that private companies such as Facebook can be international in a way that countries can't. For one, they have no true dependants (i.e. citizens), and far fewer critical responsibilities. This, indeed, has also been realized by some House representatives, who recognized that "[Libra] may lend [itself] to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar".

Which brings us to the second point, that Libra isn't actually even a cryptocurrency. Fundamentally, any realistic regulations placed on it, however minimal, would destroy its ability to be open, public and permissionless, properties that the O.G. Bitcoin has preserved to this day. In fact, the nature of such regulations tend to destroy decentralized crypto's advantages over centralized money transfer systems such as Venmo/WeChat, which is part of why we asserted that state-sponsored and/or regulated crypto products would not be able to directly compete with Bitcoin etc, back in 2018 (save for special China logic). But might the U.S. government come to regard Libra and the like as a compromise against true crypto such as Bitcoin? We will see...

Here's to a possible alt-season, but if it doesn't transpire, losing shirts & pants can be an experience too...
[N.B. They're all over the radio again with a pending visit.]

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Next: Career Advice

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The Third H.L. Ham AGM
A Game Of Cryptos
Crypto In 2019, Continued
Crypto In 2019
The Firm Meets Again

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