Posted by on January 8, 2017 3:14 pm
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Categories: B+ Bad Bank Bank of England Bank of Japan Bitcoin Blockchain BOE Capital Markets Central Banks China Chinese government Coinbase Counterparty Cryptocurrencies Digital currency Economy European Central Bank European monetary union European Union International Monetary Fund money P2P Paid Content peer-to-peer Reggie Middleton Reserve Currency Software Twitter US Federal Reserve Yuan

Bitcoin has dropped precipitously, and as is usual, we have the cacophony of instant digital currency pundits cackling about as if they had a clue. This is the inaugural post for the re-opening of BoomBustBlog’s proprietary research (fresh paid content will be added over the next 24 hrs) and as such I want to kick it off with an indepth analysis of my Twitter stream on Bitcoin from this week.

 Bitcoin has been on a tear in 2016, particularly for the second half. 2017 started off strong, a bit too strong, so a pullback was obvious and inevitable. This is what I Tweeted on the 4th. If I’m not mistaken, it pulled back on the 5th. 

Of course, previous to that it roared. It actually roared for macro and fundamental reasons that many “experts” insisted on denying. 

Seeing is believing… 

2017 promises to be a tumultous year of geopolitical uncertainty and macro risk. This is an environment in which Bitcoin thrives. 

 China’s remnimbi has finally received reserve currency status, but with said status comes certain responsbilities that is running counter to the controlling methods China has employed in the past. Oh no! It’s…. the Trilemma!

 

 Mucho yuan fiat was leaking (gushing?) into the bitcoin blockchain. Bitcoin’s blockchain is already a global, anitfragile, counterparty risk-free P2P value exchange. This is what our technology, Veritaseum, is built upon.

 Here, I warned that the Chinese government would likely step in. Quite the prescient comment, since lo and hehold several days later… 

Chinese Regulators Exploring Bitcoin Connection to Capital Flight, and then we got China to Restrict Bitcoin Marketing, But Blockchain Firms Unaffected. Again, I was right on point!Restrict Bitcoin Marketing, But Blockchain Firms Unaffected

 As I’ve been warnng, think tanks and research firms interviewed by Bloomberg agree.

 Reference my notes above…

 This is something you dont’ see in the mainstream media or most research notes. If China doesn’t completely shut down bitcoin AND get the cooperation of other major offshore centers, any half assed attempt will simply increase the draw to bitcoin due to its very unique properties. China can actually usher in the P2P economy, by mistake. Reference  The Onramp to Peer-to-Peer Capital Markets

 Uh huh…

 Again, I reiterate the significant and material macro component in Bitcoin adoption, use and pricing…

This is the point, chronologically, where I warned about the BTC pullback… 

For those (apparently the majority of the punditry who choose to opine) who don’t know what Bitcoin is…. 

 

BTC 1 7 17 picsay

Even with the pullback and (now, 15%) drop, Bitcoin has performed very well…. 

I’ve seen reports on the ground in China that way capital control avoidance was not a major contributor to Bitcoin activity. Well, the evidence that I’ve found says otherwise. 

Here comes the benefit of doing macro analysis. It all fits in… 

 China is painting itself into a corner with thier old school policies on capital controls… The amount of money they are spending is stupendous. The problems is, no matter how much they spend, the fundamentals are still going to be the fundamentals.

Of course, in the short run, their brute force methodology is working as yuan spikes and availability offshore dwindles. 

Here you go… 

I suppose a little strongarming doesn’t hurt, no? 

The problem is, when you have to go to such extreme measures to draw currency back into the country, it becomse quite obvious to the prudent speculator that… 

Like I said earlier it will obviously work for the short run, but in the medium term, look out below! 

The Chinse are painting themselves into a tight corner, and telegraphing it to boot.

 

This is probably the most important tweet of the series. The FUNDAMENTALS HAVE NOT CHANGED!!! No matter how much money China spends, or how draconian they decide to become to trap capital, it’s all about the fundamentals, silly! 

 thumb Chinas foreign reserves drop

 This is the Trilemma in effect!

We’ve seen this movie a few decades before. Remember when the Band of England was determined to join the EMU by any means necessary? They said they would defend the pound no matter what, foolishly and simultanesouly telegrpaphing the promise to feed trades from macro funds such as Soros & Co. all day long. So guess what? That’s exactly what happened until the BOE tapped out, permanently pushed out of the EMU. As it turned out, that was actually a good thing for the Brits, but that’s a story for another time. If you really must here the reason, view…

 thumb Soros breaking BOE

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