Economist Survey Suggests Users Trust CBDC’s (54%) Twice As Much As Private Crypto’s (26%)

A recent survey conducted on crypto assets and investment by Crypto.com and The Economist saw participation from over 3,000 users.

The survey shed some interesting light on how the general public perceives cryptocurrencies. The most surprising part was that the majority of those surveyed expressed far more interest and confidence in Central Bank Issued Digital Currencies than more popular decentralized crypto assets.

The survey revealed:

  • 38% of the people did not consider decentralized crypto as a safe investment against
  • 26% of people who believed that decentralized crypto tokens are a safe form of investments while
  • 25% of those surveyed were in the middle and the remaining
  • 11% had no idea whether they are safe or not.

On the other hand, 54% of the surveyed people showed trust in CBDC and believed that a token issued by their government or central bank would be a more secure form of investment, while 14% believed CBDCs are not that safe. 23% of the correspondent was in-between and the remaining 9% had no idea.

Use-frequency-for-payment-methods
Source: Economist

Why People Trust CBDCs More than Decentralized Currency?

Survey respondent rating of trustworthiness

The cryptocurrency space emerged with the launch of Bitcoin after the financial crisis of 2008/9. It only gained the attention of the large public after the massive rise in 2017.

At the same time, Bitcoin and cryptocurrencies received a lot of negative press, perpetuated by central banks, commercial banks and even governments who called it a mere internet bubble.

However, in the following years, these critics realized that cryptocurrencies, like any other new asset, are volatile and not just an internet bubble and thus a lot of them changed their stance including governments.

These cryptocurrencies have been advertised as an alternative form of currency by many proponents. But because of their high volatility (which has come down significantly) it still cannot be used as a direct form of exchange.

Thus a majority of the people use it as an instrument for investment diversification. Along with the volatility issues, and passive regulatory stances of governments, even in developed nations, it makes it tough for the common public to look at it as a safe bet.

The lack of knowledge among the broader public, whose only aim is to see Bitcoin rise to 2017 level highs as a quick profit maker, in addition to evolving scams involving crypto, wreaks havoc on the underlying trust in digital asset classes.

On the other hand, Central Bank Issued Digital Currencies (CBDC or DC/EP) offer that sense of security that at least their asset won’t be under the scanner of authorities.

Apart from that CBDCs are basically digitized fiat that runs on the common credit system of the country and thus people won’t have to worry about high volatility or their investment getting to zero.

Apart from that, a majority of the countries are looking to launch their own CBDCs. China currently at the top, having already started trials for its national digitized yuan. Other countries, meanwhile, have either started research for the same or are looking to study the pros and cons of launching CBDCs.

The Rate of Crypto Adoption in Developed Nations Are High

The survey found that there is a 20% deviation in the rate of adoption between developed and developing nations. Meaning that the chances of consumers in developed nations of adopting crypto was 20% higher than developing nations.

The survey revealed that 23% of the surveyed consumers in developed nations owned cryptocurrencies, while only 19% of people in developing nations had already invested in digital assets.

The study also revealed that 60% of crypto owners were aged between 18 and 38 years old while only 40% above 39 years owned crypto.

Digital Currency Survey By Economist.com

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Author: Rebecca Asseh

Even At Sub $200B Market Cap, Bitcoin is A Store of Value Now: Macro Trader Dan Tapiero

  • The Fed is being too “aggressive” and responding “wrongly” – chief financial economist of MUFG Union Bank
  • 200 billion bitcoin means it’s SoV now – macro trader Dan Tapiero
  • Coinbase CEO Brian Armstrong believes falling stock market and interest rate cuts may lead to growth in crypto this year

While the US stock market has been recording considerable losses despite the Federal reserve’s emergency 50 basis point rate cut, investors have piled into the safe haven asset Treasuries to combat the economic impact of the deadly coronavirus (covid-19).

The two-year Treasury yield has dropped to 0.70% while the 10-year plunged for the first time ever to below 1%. Investors have fled from the risk assets as the spreading virus threatens to derail global growth. The other safe haven asset, gold, has also been rising during this time, climbing to a 7-year high.

According to Chris Rupkey, chief financial economist for MUFG Union Bank, the Fed is being too “aggressive” and responding “wrongly” to the financial markets. “We aren’t in a recession yet,” and Fed cutting rates won’t keep it from coming. He added,

“Moving between meetings with a bigger than normal interest rate cut looks like Fed officials are panicking as much as stock market investors did last week.”

Bitcoin is a SoV

Macro trader Dan Tapiero says on Twitter,

However, this could be good for the crypto market, bitcoin especially, as the crypto asset like gold have non-negative yields.

Bitcoin currently is a store of value as Tapiero explains,

The Year of Crypto

Coinbase CEO Brian Armstrong also feels,

“A down stock market and interest rate cuts may lead to growth in crypto this year. Governments around the world are likely to look to stimulate the economy in any way they can, including using quantitative easing and expanding the money supply (printing money).”

He pointed out how China has already printed $173 billion which may lead to the movement of these finds into cryptocurrencies, which,

“Are viewed as a hedge against inflation.”

“This could be the year where the mindset of institutional investors begins to shift, from crypto as a venture bet, to crypto as a reserve currency.”

However, the crypto community was quick to point out that it isn’t crypto rather bitcoin. Today, Amstrong again took to Twitter,

It is interesting that “the CEO of the world’s most prominent Bitcoin-related company seems so skeptical of Bitcoin” said Joe Weisenthal Co-host of ‘What’d You Miss?’ on Bloomberg TV.

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Author: AnTy

BoE Economist; Speculation in Crypto Markets Reduces Bitcoin’s Transactional Value

A senior Economist at U.K’s central bank has published a working paper on how speculation affects the value of digital currencies. Peter Zimmerman, a BoE economist, highlighted that crypto coin users are mostly speculative making it hard to realize the transactional value of digital assets like Bitcoin.

According to the paper, a speculative approach to the crypto market has seen more people acquire digital currencies for hoarding purposes. This traffic has however become overwhelming for some blockchain platforms that host the cryptocurrencies. Zimmerman argues in his paper that the decentralized networks become less efficient in process execution owing to the high number of participants.

It therefore beats logic for users to opt for a slower network when they need it most; if the assumption is crypto utility is based on transactions. The paper further emphasized that congesting the blockchain networks creates a competition for space eventually wiping out the monetary value of cryptocurrencies;

“Limited settlement space creates competition between users of the currency, so speculative activity can crowd out monetary usage.”

The ‘Digital Gold’ PoV on Bitcoin

Zimmerman also observed that some Bitcoin and other token HODLers are now viewing the assets as ‘digital gold’. As mentioned earlier, the majority of BTC investors are looking to make a kill with this ‘investment product’. The paper explains this in basic household economics;

“When cryptocurrency is more valuable, households become reluctant to spend it on fees. Instead, they prefer to hoard it and endure slower settlement times. I call this a ‘digital gold’ effect: when cryptocurrency is more valuable, agents view it as an asset to store, rather than money to spend.”

A solution was also offered in the paper to help realize the value of cryptocurrencies in transactions. Notably was the diversification of speculative risk through derivatives that are settled on the crypto market. In addition, implementing the new lighting network could improve the operating capacities of platform’s like Bitcoin blockchain. The views in Zimmerman’s paper however do not represent those of the Bank of England (BoE).

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Author: Edwin Munyui

Crypto’s Have ‘Intriguing Possibilities’ But Won’t Replace USD As Global Reserve Currency: IMF Chief

International Monetary Fund’s (IMF) chief economist, Gita Gopinath, said on Tuesday that digital currencies aren’t threatening the US dollar’s role in the global trade.

She also mentioned that while cryptocurrencies seem to offer intriguing possibilities, they still aren’t globally accepted and lack the infrastructure they need to defeat the US dollar in order to become a global reserve currency. Many voices in the financial sector have expressed the notion that virtual currency may challenge the power of the US dollar, including Mark Carney, Bank of England’s governor. Gopinath thinks that even if SHCs would rebalance the global trade, they’d need to be accepted on the global market, and this isn’t very likely to happen.

Many Central Banks Talking about Releasing Their Own Digital Currency in 2019

As reported by IMF, the US dollar represented more than 60% of the global exchange reserves in the third quarter of 2019, while the Euro comprised 20% of the same reserves. Also last year, many central banks have openly spoke of launching digital currencies, with People’s Bank of China (PBOC) noting this past summer it’s intention of issuing the digital Yuan in order to compete with private initiatives such as Libra.

Federal Reserve Chairman Jay Powell mentioned in Nov 2019 that even the US central bank is looking into how a digital dollar would bring benefits to the country’s economy, not to mention that Christine Lagarde, European Central Bank’s chief, has talked about a potential digital Euro.

The IMF Is Researching Digital Currencies

Back when Christine Lagarde was running the IMF in 2018, she said central banks should be serious about exploring the possibility of issuing CBDCs that would permit financial inclusion and increase payments’ privacy. However, the same IMF said CBDCs shouldn’t be adopted prematurely either.

Back in Sept 2018, it advised Marshall Islands officials to rethink the launch of a digital currency that would work together with the US dollar, as the country needed to introduce stricter anti-money laundering regulations. IMF mentioned that in case this wouldn’t happen, banking relationships with US banks would be lost and access to the US dollar decreased, which would cut the country from the global financial system.

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Author: Oana Ularu

The Best Investment of the Last Decade is a “Pyramid Scheme” with “No Real Utility”: Economist

  • LendingTree Chief Economist Tendayi Kapfidze says in Bitcoin, “You only make money based on people who enter after you.”
  • Bitcoiners, he says has been trying to create a utility for it for ten years now
  • Though a speculative asset class, speculation is the way to get educated on it

2019 has come to an end and we have entered a new decade. During the past decade, Bitcoin went through three bull cycles, where each one has been of more than 10,000% of upside, with as much as 300,000%.

Overall in Bitcoin’s decade long history, it registered gains of 9,000,000%.

However, during its recent bear market, Bitcoin price lost 84% of its value. But what’s more important is that almost every year, Bitcoin made a higher low.

  • $0.05 in 2010
  • $0.29 in 2011
  • $4.19 in 2012
  • $13.29 in 2013
  • $314.69 in 2014
  • $201.29 in 2015
  • $374.06 in 2016
  • $784.75 in 2017
  • $3,232.93 in 2018
  • $3,385.97 in 2019

A recent report from Bank of America had Bitcoin as the winner of the decade as the best investment for the last decade.

But still, according to some critics like LendingTree Chief Economist Tendayi Kapfidze, Bitcoin is “a pyramid scheme. “You only make money based on people who enter after you.”

According to Lapfidze, it has no real utility in the real world.

“It has no real utility in the world. They’ve been trying to create a utility for it for ten years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve.”

But when it comes to utility, neither does have gold or cash. Only 15% of gold is used in industries, the majority is used for making jewelry, and gold coins and bars. As for paper money, the Federal Reserve says it costs only about 14.2 cents to create a $100 bill, so the remaining $99.85 comes from the trust people place in it.

Despite Bitcoin adoption within some of the world’s largest financial institutions and central banks eagerly making their way to creating their own digital currencies, experts still emphasize that investing in this asset class is just speculation.

As an investor and Chief Market Strategist of Bruderman Asset Management, Oliver Pursche says he owns several cryptocurrencies but doesn’t know what it is.

And though he does say it is “purely speculative” as “you can lose all of your principle,” Pursche says,

“it’s also a way to get educated on it… to me, if you want to learn about it, you’ve got to own it because that’s the only way you’re going to truly educate yourself and pay attention.”

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Author: AnTy

Ripple SWELL 2019 Update: Economist Dr. Raghuram Rajan Talks Blockchain Financial Inclusion

Dr Raghuram Rajan, economist and financial analyst, took the stage at the Swell 2019 conference this month that was held in Singapore. During his talk, Rajan, explained the importance of blockchain technology in the financial sector and how it’s poised to revolutionize businesses around the world.

One specific note of Rajan’s talk was the application of blockchain tech in the existing financial system as well as the impact that globalization will have on world markets.

“We are due for stronger productivity,” began Rajan.

“Tech innovation doesn’t always translate to actual productivity growth. For corporations to really learn how to use emerging technology, they need to reinvent the system. Once this is managed, we will see the pace of growth increase—not the moderate growth we see today.”

The power of banking establishments were also highlighted as a potential problem by Rajan. He stated that these centralized institutions create “fear and fury” amongst the populace, while decentralized blockchain solutions can be used to help bridge this gap of fear.

“At an abstract level, what we see today is increased fear and fury at centralized banks. Across the world, there is a break down in globalization and a worry from businesses about adhering to rules, set by another country. The answer is more decentralized solutions, like blockchain technology—that people trust,”

said Dr. Rajan.

The topic of micropayments was brought up by Rajan as a possible area for disruption by blockchain and cryptocurrency technology.

“We’re going to see intermediaries negotiate for payments with information. If data belongs to the individual then it can be exchanged through micropayments and doesn’t become a source of monopoly. In this way, decentralization disperses trust and power, and ultimately breaks up monopolies.”

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Author: Matthew North

Many Reasons To Be Bearish On Bitcoin Price But GBTC Premium Isn’t One Of Them, Economist

  • As GBTC premium drops, analyst Timothy Peterson BTC’s drop to $6,000
  • According to economist and trader Alex Kruger, this is plain “nonsense.”
  • GBTC premium “not useful for making price calls,” Kruger said

Bitcoin is currently trading below $8,000 at $7,948, as per Coincodex and at the moment, there are “many reasons to be bearish,” says economist and trader Alex Kruger.

But the GBTC premium is not one of the reasons that will drive BTC price down as it just reflects current conditions and “not useful for making price calls.”

Recently, Timothy Peterson at cane Island Alternative Advisors published a blog post where talks about the relationship between the premium investors pay on Grayscale Bitcoin Trust (GBTC)’s OTC shares and the leading cryptocurrency’s price.

Based on this relation, it is likely the Bitcoin price could drop as much as 30-40% in the coming months as the GBTC premium has fallen from $4.00 per share to $2.00 per share.

“Bitcoin’s price should fall from about $12,000 to $6,000,”

he concluded.

Although the analyst says the relationship between GBTC premium and BTC price hasn’t been predictable and stable over time, fundamentals models also suggest BTC’s value at $6,000.

“It appears that institutional and long-term US investors in GBTC are expecting this price level for bitcoin as well,” he wrote.

However, according to Kruger that is simply “nonsense.”

“Many are now talking about how BTC may drop to $6,000 according to GBTC’s premium. That, my friends, is nonsense.”

The correlation between Bitcoin and lagged GBTC variables, Kruger explains is “consistently zero.” As such, predicting the value based on GBTC has no value.

He points out that the correlation between BTC and GBTC premium is moderate, 0.25 in the last year and “statistically significant.” But correlations with lagged premiums hover around zero and not statistically significant, he added.

“Predicting the value of bitcoin-based on GBTC premiums widening/narrowing has no value.”

The GBTC premium to NAV, he says is reflective of current market conditions and not a leading indicator for the flagship cryptocurrency.

Using the GBTC premium to find BTC value would be analyzing how weather affects BTC.

“The tail does not wag the dog,” concluded Kruger.

However, Tom Lee, the managing partner and head of research at Fundstrat says, “Low premium has been an interesting time to watch bitcoin—not sure if it’s tail wagging dog but low premium does tell us a bit the weakness of sentiment.”

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Author: AnTy

Russian Central Bank Head Says “No Obvious Need” to Issue a National Cryptocurrency

Speaking at the Finopolis forum of innovative financial technologies, Elvira Nabiullina, Russian economist and head of the Central Bank of the country said the regulator doesn’t see a need to issue a national cryptocurrency, reported Russian News Agency, Tass.

“As Russia’s Central Bank, we have been studying this topic and the need to issue a national cryptocurrency is not obvious for us,”

said Nabiullina addressing Deputy Governor of the People’s Bank of China Fan Yifei.

“Not only for technological reasons, but also because it is (difficult) to really estimate what advantages will the national digital currency give, for example, in comparison with existing electronic non-cash payments. There are many risks, and the advantages may not be obvious enough,”

she added.

Back in July, Nabiullina said that one day the institution could launch its own digital currency but the technology must ensure “reliability and continuity.” But at that time as well, she said that fiat currency settlement systems are improving and already have

“good dynamics.”

She has repeatedly pointed out in the past that the regulator does not support the legalization of cryptocurrencies as a legitimate payment facility.

Earlier the lower house of the Russian parliament, the State Duma adopted a bill on digital assets.

Meanwhile, Fan Yifei said China is exploring the possibility of creating a national cryptocurrency. He believes it is important to cooperate with other countries so that regulatory standards could be developed.

After five years of research, China is finally ready with its cryptocurrency which is expected to launch soon.

Fan YiFei didn’t specify the launch date but said first there is a need to conduct studies and also take into account other countries’ experience.

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Author: AnTy

ING Chief Economist: Central Bank Cryptocurrency Developments Will Happen in Next 2-3 Years

Mark Cliffe, chief economist of ING bank believe that central banks around the globe would move towards creating their own digital currency. Cliffe was responding to a question on when would a central bank among G20 nations can launch a full-fledged digital currency.

2019 has been the year of crypto adoption despite the ups and downs of the trade market. Private technology giants like Facebook and Telegram have announced the launch of their digital tokens, while many others are pondering over the same. SoFi, a financing firm added crypto to its trading platform, Bakkt launched “physically” settled bitcoin futures contracts.

Many governments around the globe who were either skeptical over regulating cryptocurrencies or were watching from the sidelines have decided to regulate it. China has fast-tracked its stable coin launch after Libra’s announcement, France and Portugal have made crypto transactions tax-free while Russia has proposed to tax crypto under property tax code.

Banks must strategize their digital currency plans in the same timeline as private sectors

ING last week released a report in which it discussed the growing trend of private firms releasing their own stablecoin, especially focusing on the recent announcement of Libra. The report pointed out that central banks around the globe must start thinking more seriously towards adopting the modern fintech trend before the private sector captures the future financial market.

The report also hinted that Libra is putting pressure on these central banks to start mulling about the ongoing trend of crypto. However, the report also downplayed the argument of future being cashless.

Cliffe’s response came during an event organized joint event held by ING and the central bank thinktank, OMFIF. The meeting was to discuss,

“Rapid advances in distributed ledger technology have spurred debate about the possibilities, advantages, and drawbacks of central bank digital currencies. The principal limits and trade-offs seem to stem from CBDC’s economic, monetary and financial contexts, and depend on underlying policy and political preferences concerning privacy, data administration, market power, cybersecurity, and the division of labor between the public and private sector.”

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Author: Gabriel Machado

Blockchain’s ‘Embedded Supervision’ Could Allow For Easier And Faster Compliance: BIS Economist

Raphael Auer, an important economist of the Bank for International Settlements (BIS), has recently devised a new low-cost solution for compliance in the financial market. The BIS, which is known as the central bank of all central banks, has an interest in the stability of the world economy and has been recently interested in the blockchain, too.

The Economist has called this new method “embedded supervision” and affirmed that this new way of being compliant is different from regulatory technology and supervisory technology. Auer is the principal economist of the monetary department of the BIS, so his paper will possibly be read by several important people in the market.

He affirmed on the paper that the current compliance procedures are very expensive. They include gathering all the data and delivering it to a lot of people. With embedded supervision, however, the cost of checking and distributing the data would be drastically lowered. This, he affirmed, would be important to keep the process cheap, private and trustworthy.

This new technique uses machine learning to monitor the industry and automate the process. This reduces the need that companies have to actively work on collecting and sending the data, as the algorithm will do most of the work for them. According to Auer, some countries such as Lithuania are already using this kind of solution.

It is also important to see that this is not the first time that Auer publishes a study on blockchain technology. He also published one related to proof of work algorithms and showed some of its inefficiencies.

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Author: Hank Klinger