The Biggest Game-Change in 328 Years? Yeah, It’s Gonna Be Volatile ...

One of the more compelling aspects of cryptocurrency is the market literally never sleeps.

Crypto simply does not operate according to rhythms established by the opening and closing bells on the New York Stock Exchange. Call it a “feature” or a “bug,” it’s the unregulated reality.

That reality made for another tough weekend for crypto investors.

As Thursday, May 20, turned to Friday, May 21, Bitcoin (BTC, Tech/Adoption Grade “A-”), the world’s largest cryptocurrency by market capitalization was trading north of $40,000. By Sunday morning, it had plumbed as low as $31,227.34.

From Friday’s high of $42,172.17, BTC slid 26%, most of during non-traditional hours.

So, is it “the biggest game-changer since the Bank of England invented the paper currency in 1693,” as Jim Bianco has said? Or is it just internet money blown up into the biggest bubble anybody ever saw?

Well, context is critical. Dr. Martin Weiss provided a lot in yesterday’s issue.

It’s important to note as well that Jim Bianco’s observation was about decentralized finance (DeFi), the promise beyond Bitcoin represented most prominently by Ethereum (ETH, Tech/Adoption Grade “A-”).

Here’s how Bianco put it in a March 31 interview with Howard Gold of MarketWatch:

Gold: 

So, now we have crypto currencies. And you have written that crypto “is going to be the biggest game changer since the Bank of England invented the paper currency in 1693.”

Bianco:

They developed the modern version of paper currencies. I think that crypto is going to be the most significant macro event of my career of the last 30 years, and it probably goes back even further. A lot of people think cryptos are a naked speculation on Bitcoin, whether it will go up or down.

If you dig into the crypto universe, and you understand the phrase “decentralized finance,” or “DeFi,” you will find that they are recreating the entire financial system in a decentralized way, complete with borrowing, lending, derivatives trading, insurance, lotteries and automatic market making, as well.

When Mark Cuban in the mid-1990s started looking at streaming video, you had to download and configure the browser, download and configure an application, download special files and run them on this application. They were grainy, and you could only do about five minutes at a time.

And then he concluded, “This is going to change everything.” You could have said, “Are you kidding me? This is hard. This is not very efficient.” But he said, “Look, they’re going to solve all those problems. And we’re going to get something that’s going to be useful,” and that’s what he turned into broadcast.com, which he sold to Yahoo and became a billionaire.

I see crypto the same way. It is difficult to use. It is fraught with fraud and potential for being hacked. It’s not ready for prime time. But beyond that is a complete remaking of the financial system from the ground up in a decentralized, digital way. I would be very worried if I was at a traditional commercial bank. You would be somewhere between where a traditional newspaper is, traditional nightly news and a yellow taxi. They still exist, but they’re shells of what they used to be because we’ve gone to a new digital world.

The biggest problem that I see with the crypto space is the American anti-money laundering and know-your-customer regulations. Because of those rules, you can run afoul of American regulations.

Now, the way you get around that is you can transfer your money to an unregulated wallet and connect to these decentralized exchanges, but that’s really hard. And there’s risk that you do it wrong and you lose your money. I’ve already lost some money, because I’ve done it wrong, too.

But you’re left with a “holy s–t” moment: “This is going to change everything once they get it solved.”

Gold: 

So, nothing but blue skies?

Bianco: 

Here’s the risk: There are lots of different systems out there, and there are a lot more coming. Most of them will go to zero. And the few that make it are going to redefine everything.

Here’s how Sam Blumenfeld surveyed the landscape ahead of what was another wild weekend for cryptocurrency markets:

Last week, we mentioned that we could face significant volatility in the short term. We definitely saw that this week, with the broader crypto market suffering a significant pullback.

Substantial corrections of up to 40% happen in this still-nascent space, and there were multiple declines of this size during the 2017 bull run.

Bitcoin has seemingly found a bottom, and there may be an extended period of consolidation before a second — and potentially more explosive — phase of this bull market.

The negative headlines coming from China should have only a short-term impact. For those who have been following the crypto market for a long time, this is nothing new. China has repeatedly taken an anti-crypto stance, and none of this is particularly surprising.

Altseason appears to be on hold for now, but that could change if Bitcoin manages to find its momentum again. For now, fundamentals are strong, adoption is increasing, and central bank printing presses are firing on all cylinders.

Click here to follow Weiss Crypto Alert for daily updates on and real analysis of Ethereum, Bitcoin, altseason and the rapidly unfolding decentralized finance revolution.

Best,

David Dittman