Geo Political Risk

[moka]

Lyn Alden on Japan's Unwinding, US Recession & Social Unrest. Aug 8, 2024
https://www.youtube.com/watch?v=I8JzsnZVylY

48:14 One thing I point out is that there's pro- liquidity crises and then there's anti- liquidity crises. Most crises are anti- liquidity, which is to say that Bitcoin's biggest correlation from what I found is liquidity. And when a crisis breaks out normally it's not good for liquidity and so Bitcoin is going be one of the first things sold. Especially because you sell what you have to, not what you want to.
Especially if we're talking about a 24/7 market on a weekend and just a volatile asset as long as Bitcoin has upward volatility, which you want it to have because we want it to get much larger, that's going to come with of downside volatility. And then as long as it has both upside and downside volatility in large amounts people are going to often treat it like a risk asset until it kind of reaches some much larger, more distributed steady state or at least like gold.

An example of a of a pro- liquidity crisis was ironically in the 2023 American Regional Bank crisis. Bitcoin performed poorly in late February and early March because that's where liquidity was worsening under the surface, but when the crisis actually hit Bitcoin did well. And that's because the market immediately realized okay the Fed and Treasury going to provide liquidity. Things broke and they knew that's something they had to respond to and they did. And so Bitcoin did quite well after some some hours. It actually did quite well pretty quickly because that was a pro- liquidity crisis.

49:51 Things like the covid crash or things like this dislocation we just saw these are generally anti- liquidity events, so we should not expect Bitcoin to do particularly well during them. It still serves its function of giving people 24/7 liquidity should they need it or want it.

I think Parker Lewis has said this - it's not a hedge, it's a solution in the sense that this is an alternative system that's being built. And so I wouldn't think of Bitcoin in anything less than four-year increments, because it's a structural as long as the thesis is correct. It's a structural growth story, but one that is likely to be sold during most negative liquidity crises.

So you're buying for problems four years down the line. You're buying a solution for if money's broken. You buy the least broken money, buy the good money.

When people ask me what do you think about this recent Bitcoin price drop, and my answer is I hold key and geographically separated areas. I invest in venture for decade long extended timelines. That's the kind of the time frame I'm thinking of when it comes to bitcoin.

And I generally warn that in any sort of intermediate term sense Bitcoin is highly correlated with liquidity, does not do well usually during bad liquidity environments. If we do get this more gradual rotation, if for example the US trims interest rates in response to weakening US activity and we start to get some life out of emerging markets because their dollar denominated debts are eased a little bit, that would be probably quite good environment for Bitcoin.

51:38 Say I can take some money out of overvalued US stocks and put it into country XYZ then that ironically strengthens their currency even more and weakens the dollar even more, which is good for their dollar denominated debts and so that would be probably quite good environment for Bitcoin.

That would be an environment where foreign equities are doing decent, gold's probably doing decent, bitcoin's probably doing great.

As good as Bitcoin was in dollar terms it was even better in Yen terms. If you're a Japanese person holding Bitcoin you're like a king or a queen relative to what most people around you are experiencing. If we get that other type of rotation you could have a similar thing, so I'm quite bullish on bitcoin, with the shortest time frame I give is maybe two years.

I'm saying okay I'm bullish on bitcoin with a two-year view, but more realistically I look out several years and say well I think global equity is going on to be higher years from now. I think Bitcoin is going to be higher, but I don't expect it to be a risk off play in the price sense unless a particular crisis happens.
The end

[Davexl]

ICYMI RNZ Audio

David Sanger is the White House and National Security Correspondent for the New York Times, where he's worked for more than four decades and covered five American presidents.

His latest book 'New Cold Wars' examines the relationship between the U.S., Russia and China and looks at how technology, military intelligence and economic sanctions play into the conflict.

https://www.rnz.co.nz/national/progr...t-david-sanger