Whatever happened to M3? “Monetary authorities” won’t calculate M3 money supply ‘coz that includes crypto offerings like ETH and bitcoin, skewing Fed velocity and money supply calculations. Likewise, bitcoin/crypto is useful to the Fed for sterilizing capital as we’ve covered. Bitcoin is not a currency, is not used like a currency, and blockchain has zero regulatory requirement as a payment processor. So, as far as the Fed is concerned, BTC is a convenient dark pool for inflationary capital to accrue in such a way that it can hardly be used as inflationary capital.
By combining $USDT @Bitcoin and @ethereum market caps we are looking at nearly $1T US in blockchain tech. No counter-party risk. No accountability. No recourse. No regulation. That won’t change considering Mr ‘IndyMAC’ Mnuchin’s lame duck status, and his inability to act now. And Washington’s transition period is paramount to understanding present anomalous market circumstances.
Then in the beginning of her new term, Yellen will view Bitcoin the same way Mnuchin does now. At least for a while. Because Bitcoin is a convenient dark pool for potentially troublesome inflationary dollars to be cached, before they can become troublesome spent dollars at monetary levels 6,7, and 8.*
Recall, DXY is the standard to whit all else holds true. The Fed is alright with DXY 90, and will allow the dollar to slip to 80 before unease manifests. As I predicted on January 2nd, the Fed will allow BTC to advance to perhaps $60k USD and then consider BTC’s intersection with a declining DXY and act versus crypto components at the suitable cusp. Since BTC is already at $40K USd that timeline may not work, but the point stands. $60K BTC means a market cap in excess of $2Tn US, an amount that cannot be ignored by the Fed/Treasury.
So how will Yellen’s Treasury act versus Bitcoin? Blockchain is inviolate, so the Treasury can only act versus stable coin components, which allow Bitcoin to trade as it does. Since USDT and other stable coins are effectively securitized dollars, classifying them as such will be one first step to tame the Bitcoin Wild West.
The pace by which the Federal Reserve may target USDT is unclear, but there is no recourse or accountability where Bitcoin is concerned, and extinguishing BTC assets will prove effective in supporting the USd when the time comes, to reassert monetary authority and dominance. When BTC market capitalization and dollar weakness intersects at such a point, the importance (to the Fed) in extinguishing such capital cannot be estimated, calculated, or even imagined. But to name that precise date is of course the challenge!
Next step? … Will be Yellen’s enforced introduction of the Federal Reserve Digital Dollar to be used by all Americans, especially the two-thirds of all Americans who presently receive some form of federal payment. At that time, all blockchain crypto operating via US exchanges must adapt the Federal Reserve Digital Dollar, to comply with the new law.
Establishing the date by which the foregoing will occur is of course the rub, but there is no doubt that this will occur… key learning being that the US Treasury will not somehow roll over and allow Bitcoin to usurp the US dollar system. The United States fights wars and kills people to ensure global US dollar hegemony. When Bitcoin’s market cap sequesters enough dollars to make extinguishing them convenient in this brutally debased dollar environment, and when Bitcoin’s market share infringes on US dollar hegemony, Yellen’s Fed will act… somehow! Just as the Fed acted in 2017.
*Order of (domestic) $ US usage:
- US Treasury (ESF)
- Federal Reserve banks
- Federal Reserve “Desk”
- Primary Dealer Banks
- Commercial investment banks (including certain hedge funds)
- Non-dealer retail banks/credit unions
- Other financial entities
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.