Bank of Singapore’s Chief Economist Says Cryptocurrencies Could Edge Out Gold

Bank of Singapore’s Chief Economist Says Cryptocurrencies Could Edge Out Gold

But certain risks, such as trust, volatility, and regulatory clarity, need to be addressed first.

The Bank of Singapore is the latest institution to favor cryptocurrencies in its push to usurp gold. Optimism over the asset class is high, with the industry showing signs of more growth.

While Bitcoin and several other large-cap cryptos appear to be on the upsurge again, sentiment about the crypto market is gaining momentum.

However, many are still hung up on the leading cryptocurrency’s recent performance, and talks of the asset usurping gold as the global reserve currency have continued.

No Way Over Fiat, but Time’s Up for Gold

The latest body to weigh in on the prospect of Bitcoin overtaking gold is the Bank of Singapore. According to a report from The National news, the bank recently published a research note where it touted cryptocurrencies as a possible replacement for gold down the line.

In the report, the Bank of Singapore argues that cryptocurrencies are unlikely to replace fiat currencies – practically pouring cold water on the hopes of those who are touting the digital yuan and other Central Bank Digital Currencies (CBDCs).

Mansoor Mohi-uddin, the bank’s chief economist, explained that cryptocurrencies are an inefficient unit of exchange, and central banks won’t be able to print them at will in times of crisis. However, he also explained that digital assets are more likely to become the major safe-haven asset. With the market showing significant potential over the past few years, there is every reason to believe that cryptocurrencies could easily overtake gold.

To do this, the bank believes that cryptocurrencies will need to overcome some hurdles. For one, it pointed out the need for trusted institutions that will provide custody for investors. Many cryptocurrencies would also need to be more liquid, allowing high levels of trading and other activities to take place. Improved liquidity will also reduce volatility, a problem that the crypto industry has had for years.

Everyone Loves Crypto

The Bank of Singapore isn’t the only institution pumping Bitcoin to overtake gold eventually. In a recent opinion piece, Anthony Scaramucci and Brett Messing, two executives at New York-based hedge fund SkyBridge Capital, explained that Bitcoin is ripe for investment as its ownership is now as safe as gold and government bonds.

SkyBridge Capital filed with the Securities and Exchange Commission to launch its Bitcoin fund last December. When the fund launched fully earlier this month, the New York firm claimed that it had as much as $310 million in exposure to the leading cryptocurrency.

Investment banking giant JP Morgan has also touted Bitcoin’s chances of taking up more of gold’s market share. In an investment note, the company’s strategists said:

“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”

Institutional investment is sure to push Bitcoin and the entire crypto market even higher. With government regulation expected soon, the future definitely looks bright for this fledgling market.

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Author: Jimmy Aki

Canada’s Central Bank Seeks an Economist to Monitor Digital Currencies and FinTech

The Bank of Canada is hiring an economist for “Digital Currencies and Financial Technologies.”

As per the official page, Canada’s central bank is currently engaged in a “large-scale research program to analyze the risks and opportunities” of the new developments in the fintech sector.

The idea is to ride the wave of innovation in fintech that is transforming the landscape of currency, payments systems, and financial intermediation. “This is a program of major social significance and will require us to break new ground,” says the bank.

The key part of this program is the monitoring framework for money and payments and the “contingency planning” for a Central Bank Digital Currency (CBDC).

Earlier this week, Deputy Governor Tim Lane said the COVID-19 pandemic is accelerating public use of online services, which means the central bank must move quickly to research how a CBDC works.

CBDC “looking a lot more urgent”

Under this position, the economist will be monitoring and analyzing developments in electronic money and payments, including CBDCs, cryptocurrencies, stablecoins, crypto exchanges, and others, develop tools for analysis, develop a policy to help maintain Canadian monetary sovereignty, and work on the “the potential development of a CBDC.”

The job position is for a 3 year time period with the possibility of extension and permanence that requires the knowledge of Bitcoin, Ethereum, and other networks and have experience in handling and analyzing public blockchain data besides the usual master’s degree in the relevant field.

With the closing date of October 25, the security level required for the position of “FSS Analyst, CBDC” is “Secret.” Currently, there is no specific time frame for the launch of a CBDC, Lane said,

“The main point, I think, is this is all looking a lot more urgent because of the speed with which technology is evolving.”

On Wednesday, during the panel discussion on the future of money, Lane also said that they are talking to several companies, including tech companies, banks, and financial institutions that are developing products or advising on the related things, on issuing a CBDC.

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Author: AnTy

Bank of Japan (BoJ) Appoints its Top Economist as the New Head to Oversee Digital Yen

The top economist of the Bank of Japan (BoJ) has been appointed as head of department overseeing research on central bank digital currencies (CBDC), as the central bank steps its efforts to join the race to embrace financial innovation.

Kazushige Kamiyama will be heading the payments and settlement department of BOJ, which has conducted joint research with other central banks on state-backed digital currencies and looked into how the growing presence of cryptocurrencies affect central banking.

As the central bank’s top economist, Kamiyama has spearheaded efforts to use big data in analyzing the economy, an approach that helped Bank of Japan catch real-time changes affecting the country’s economy amidst the ongoing coronavirus pandemic.

BOJ also shared that Seisaky Kameda will be succeeding Kamiyama as its top economist and head of the statistics department.

This move comes at a time when BOJ is working on testing a digital yen. Earlier this month, the central bank released a report about the technical hurdles for CBDC, where it discussed checking the feasibility of such digital money from a technical perspective and considering whether or not to use blockchain for it.

The bank also set up a task force a couple of weeks back that was said to belong to the BOJ’s payment and settlement systems department. The new team is looking more closely into the CBDC by following up on BOJ’s efforts, including joint research it has been conducting with other major central banks since January.

Japan has been cautious about its digital currencies approach, given that it has the most cash-loving population in the world. But the fact that China is making steady progress towards issuing its digital yuan, having chosen the companies to test the CBDC, it has prompted not just BOJ but other central banks and governments to look into the idea of issuing CBDCs more closely.

BOJ has said although it has no immediate plans to issue its own digital currency, it has been conducting research on the issue with other central banks.

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Author: AnTy

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