Forgiving everyone for whom I owe?

November 30 – December 6, 2024

Big news. The rise in the value of Bitcoin to a symbolic level of $100,000 and a sharp decline at the end of the week. However, with a subsequent rise:

Let’s face it: it’s not an economic asset, it’s a tool that allows you to solve certain issues that are practically impossible to solve in dollars. More precisely, these issues are still being solved in bitcoins, although it’s becoming more and more difficult.

But in any case, it does not create added value, it is a purely speculative asset, which will not make much sense outside the modern economy of colossal emissions. And at any moment, at least theoretically, it can disappear. With all the problems that follow from this. Which is what we urge everyone to take into account.

Macroeconomics. Industrial production in France -0.6% per year, 6th consecutive monthly minus (or zero):

In Germany -4.5% per year, the 17th minus in a row; in general, in the last 6 years it has been falling almost all the time:

The unemployment rate in Italy (5.8%) is the lowest in all 42 years of statistics:

But in Canada it is (6.8%) at an 8-year high (excluding the Covid surge):

Hypothesis: entrepreneurs are fleeing Germany and the north of Europe in general to Italy, where things are easier, and from Canada to the USA.

By the way, all this joy in the European Union is against the backdrop of the annual peak in natural gas prices:

China’s official non-manufacturing PMI is 50.0, excluding Covid dips, a repeat of a 16-year low:

Japan’s household spending is down 1.3% per year, 16th in the last 18 months:

The Indian Central Bank left the rate unchanged, but cut the reserve requirement for banks.

But the US Federal Reserve continues to reduce its balance sheet, which was inflated by Covid – it has already shrunk by a quarter from its 2022 peak:

Given the US economic data (see, for example, the review for the previous week: https://fondmx.pro/en/weekly-wrap/things-are-a-little-harder-with-the-house/ ), the policy may not be the most far-sighted. However, the Fed’s management appreciates good advice. By the way, the length of the work week in the US did not increase in November. But it did not fall either:

True, there is a delicate nuance. If you look at the data from a month ago: https://fondmx.pro/en/weekly-wrap/all-quiet-on-the-economical-front/ , you can see that the October figures in the latest review were worsened. It is possible that the old data were actually adequate, but they really didn’t want to worsen the November figures… Accordingly, they were swapped.

Main conclusions. Since the week, as a whole, turned out to be rather boring, we will allow ourselves to give a fairly detailed analysis of the only interesting event from Pavel Ryabov.

“Why did the US take up crypto?

What Trump is doing is beyond reason. Almost all key figures in the financial and economic bloc of the new US administration are “cryptomaniacs”.

First, a little basic theory, otherwise it will be impossible to understand the contradictions between the two positions.

At its core, the crypto market is the antithesis of the dollar. This opposition is expressed in ideology, architecture, mechanisms for ensuring value and role in the global financial system.

▪️ Emission factor. The control and emission of the dollar is carried out by the Federal Reserve and the US financial system associated with the Federal Reserve. Decisions on rates, money supply and financial policy are made by a small circle of people. At the same time, the lever of uncontrolled emission is the main tool for counteracting the liquidity crisis (those same endless iterations of QE).

In crypto, the emission range is either initially limited (bitcoin), or declared at the time of token listing and cannot change uncontrollably, like the emission of the dollar.

▪️Trust factor. The value of the dollar is formed by the economic, financial, geopolitical power of the United States, international trade, financial ties and legislative support.

The value of crypto is due to open interest, excess liquidity and unstable trust of market participants, and interaction is carried out independently of the political and economic decisions of any government.

▪️Factor of international integration. The dollar is highly integrated into the international capital market, closing the trade turnover of goods and services, trading in financial instruments, derivatives, raw materials, being a link between countries, financial institutions and business.

In crypto, it is different. Decentralized finance (DeFi), decentralized exchanges, smart contracts – all this is created in order to bypass traditional intermediaries, national currency restrictions and infrastructure built around the dollar and traditional banks, eating up the commissions and income of traditional participants.

▪️Factor of geopolitical influence. Sanction ultimatums are possible only if there is direct control over financial chains and intermediaries, otherwise sanctions simply will not work. Given the monopoly position of the dollar, sanctions affect by restricting access to the dollar financial infrastructure with all the ensuing consequences.

The crypto market acts in the exact opposite way. Through decentralized technologies, it is possible to evade currency controls, sanctions and politically motivated restrictions, thereby undermining the monopoly position of the dollar as the main means of payment.

Crypto transactions occur directly between participants without intermediaries. It is impossible to block a transfer or account, with the exception of some tokens and stablecoins.

▪️ Identification factor and total transaction control. The dollar system is regulated by strict KYC and AML standards. Each transaction can be tracked, and access to banking services is controlled by government and regulatory authorities.

In crypto, it is often possible to work without providing personal data (if you use decentralized protocols and anonymous wallets). The absence of mandatory identification and central control is one of the principles that allows you to bypass traditional rules and borders.

What is a dollar? Centralized control of the Federal Reserve, unlimited emission as part of anti-crisis regulation, institutional support, control over commodity and cash flows, a universal unit of account, an instrument of sanctions pressure, full control of transactions and full identification of participants.

What is crypto? Decentralized structure, transparent emission mechanism, independence from the central authority and national restrictions, bypassing traditional intermediaries in the form of banks and regulators, a mechanism for bypassing sanctions and a high potential for anonymity.

Before moving on to possible motives, it is necessary to understand the current position of the United States.

Why the United States is extremely wary, skeptical, and in some ways hostile to the crypto market literally until the last moment (until the introduction of an ETF on Bitcoin in early 2024).

What could the legalization and implementation of cryptocurrency lead to?

🔘The threat of the dollar monopoly as the world reserve currency.

🔘Reduced US influence and control over international financial transactions and the risk of moving away from the dollar in cross-border settlements.

🔘Dilution of the dollar in national savings and national settlements – the more legal mechanisms and instruments in the distribution of cash flows, the less will go to dollar instruments.

🔘Loss of sanctions leverage, where the dollar plays a central role and the creation of space for bypassing sanctions restrictions.

🔘Growth of the shadow economy and increased risks of money laundering with the possibility of creating tools for financing illegal transactions and illegal activities.

🔘Difficulties in tax administration and an increase in tax crimes (tax evasion through crypto, especially for wealthy clients).

🔘Increased risks of cybercrime with the expansion of the superstructure over the traditional financial system, where with the help of decentralized finance, more simplified financing of cyber fraudsters is possible.

🔘The growing importance of stablecoins and DeFi platforms may pose a threat to the traditional banking system, undermine the monetary control of the Federal Reserve, and create instability during a liquidity crisis.

Currently, the United States does not prohibit the ownership and use of crypto assets, but American regulators (including the SEC, CFTC, FinCEN, and the Federal Reserve) are extremely cautious and seek to tighten supervision and regulation of the sector.

🔘This is expressed in increased requirements for compliance with anti-money laundering (AML) standards, KYC, as well as in law enforcement practices against a number of projects and platforms (what the SEC was doing and what Trump is actively opposed to).

🔘The United States opposes the “full liberalization” of cryptocurrencies and prefers a system of clear rules, partial restrictions, and enhanced reporting by crypto businesses.

🔘Mandatory registration of crypto exchanges, a ban on anonymous transactions, and taxation of crypto transactions.

The crypto market in 2024 is not the same crypto market that was in 2017. Now access to crypto exchanges undergoes strict authentication control, which is used in banks, and regulation is close to traditional exchanges.

If you can’t ban it, try to lead it, the US adheres to approximately this principle, but there are no incentives for full legalization.

Any attempt to expand the implementation and legalization of crypto is to undermine the status, capabilities and profitability of the dollar financial system, on which the financial and economic power of the United States is based.

So why did the US take up crypto together with Trump’s team? All their initiatives and actions directly damage national security, putting the dollar monopoly in a vulnerable position, and besides the dollar monopoly, the US does not have many levers. Crypto is the opposite of the dollar.

This could be considered pre-election populism, if not for the formation of a crypto-oriented team. The thesis about attracting financing is fantastically stupid, because the crypto architecture does not imply national borders, and the creation of reserves in bitcoin, as well as debt write-offs, are also out of the question.

All of Trump’s public statements on crypto are pure, highly concentrated stupidity, calculated for selfish, speculative, gambling interests (spitting out tweets and short-term pumping of crypto garbage on minute timeframes is what Musk and Trump have already done before).

There are no hidden motives here, because there is no strategy, and there is no strategy because the crypto architecture is completely opposed to the status and potential of the dollar.

Crypto is a blow to the dollar in conditions when the dollar is more vulnerable than ever in the last 70 years.

The costs of legalizing crypto in the US outweigh any potential benefit. Destruction and erosion of the dollar monopoly? Well…”

We have already noted that the US may be preparing serious restrictions on the circulation of “incorrect” (i.e., carried out with goals or persons criticized by the US) dollars outside their borders. And we do not rule out that all the rhetoric associated with cryptocurrencies is a “cover operation” for the introduction of these restrictions. No guarantees can be given here, but it is our duty to warn our readers about the potential danger. So that they can confidently look to the future during the work week, having had a good rest on the weekend!