On China vs Crypto
Happy Monday!
When it comes to cutting-edge technology, China has a pretty poor track record of being on the right side of the trend. A famous investor once said “anything that China bans, invest in it”. Over the past decade and a half, this strategy alone would have made you one of the best fund managers on Wall St.
You might notice from the chart above that China has already “banned” Bitcoin 3 times (in fact, the number is much higher!) since 2013… so what’s the big deal this time? Well, not much…
There has been no change in China’s overall policy toward crypto/Bitcoin since at least 2017, yet China has had to come down again and again with more and more severe enforcement, why? They only had to ban Snapchat and Facebook once – why ban Bitcon again and again? The answer is because: it is very, very hard to ban crypto.
There is no CEO you can jail, no company you can threaten, no central server you can take down. There is no physical asset that can be seized - the password that controls a crypto wallet, whether that wallet has $10 or $10 million, can be memorized. How do you ban a technology that can secure $10 million in the confines of your very mind? You simply can’t.
But you can make it very hard, painful, or frusturating to try and use this technology within the broader context of your life – and that is what China is doing (again and again) within its borders. The most recent (and drastic) action from a couple of weeks ago made all crypto transactions illegal in China. According to the Chinese government, any citizen or business that makes a crypto transaction is now breaking the law. It is definitely China’s most absolute, severe action against crypto yet (and that’s saying something!).
As I’ve outlined before, China’s motivation here is likely twofold: 1. they want maximum control over their financial system - from which pubic cryptoassets are an escape hatch, and 2. They want to stifle any competition for their upcoming rollout of the digital Yuan.
None of this was news to the market of course, we’ve seen China ban crypto again and again and and nothing about their stance or approach has really changed. So why should we care about this if the market doesn’t? Because it presents us (read: the US and Western Society) with an unbelievable opportunity.
The Western system is built on a set of values – openness, transparency, privacy, free market competition, and personal freedom. The open internet facilitates these values, and this is why China has long opposed it. Crypto and blockchain is an extension of the internet that enshrines these values into our very infrastructure. It is the biggest threat to China’s ongoing assault.
And thus, it is the greatest tool the US has ever had to make our values, not China’s, foundational to society and the world. In short, our shared values have the best hope of being extended by embracing these open, public blockchain-based systems. In my opinion, this is what our leaders and lawmakers, and all of us, should be doing, post-haste. We ignore this opportunity at our own peril.
Thoughts on the Market:
I pointed out in last week’s article how crypto historically crushes it in the 4th Quarter… Just as we flipped the calendar to October - right on cue – Bitcoin and Ethereum spiked 10%+. The technical picture is getting better, we could very well be setting up for some real fireworks to end 2021.
If you have been DCAing throughout the year – as I’ve recommended many times – you should be in a great position to benefit if we do get another run to end the year.
Crypto News:
Coinbase to Allow US Users to Deposit Paychecks Directly in Crypto (LEARN MORE)
Morgan Stanley doubles exposure to Bitcoin through Grayscale shares (LEARN MORE)
Visa Working on Interoperability Platform for Stablecoins, CBDCs (LEARN MORE)
Gensler Reiterates Support for Futures-Based Bitcoin ETFs (LEARN MORE)
Have a great week!
Shahar
This newsletter is meant for informational purposes only. It is not meant to serve as financial advice. If you are interested in financial advice, please schedule a personal consultation with me, and be sure to read the accompanying disclaimer.
