Will the Crypto-Ruble Kill Bitcoin?

In today’s Money Morning…Russia getting in on the crypto game…a different breed of digital currency…who wants to buy a central-bank controlled cryptocurrency?…and more…

The Russian government is getting in on the crypto boom.

First Deputy Prime Minister Igor Shuvalov was quoted by Russian news agency RBC saying he supported a ‘crypto-ruble’. A Russian national cryptocurrency. ‘But it should develop in such a way that the national economy cannot be put under attack, but rather make it stronger.’ (Translated.)

Is this the moment that crypto truly goes legit? Or are they missing the point entirely?

Let’s look at a little bit of history to find out.

Bitcoin was born in obscurity eight years ago, somewhere on the internet. Some details are vague, and probably always will be. Even the creator (or creators) remain a mystery. We only know their pseudonym, Satoshi Nakamoto.

One thing that we know for sure are the reasons it was created. Bitcoin was, originally at least, an alternative to central banks and government controlled currencies. That’s clear from the original whitepaper when it was launched. And it’s always been a major theme in online discussions around bitcoin and other cryptos.

Today, the crypto world is closer than ever to becoming a full alternative. But it’s not there yet.

As far as we know, there’s no one on earth who has migrated fully into bitcoin, or any other currency. There are an increasing number of retailers accepting bitcoin, especially online. But I suspect that it still isn’t possible to live your whole life in the crypto-economy, without ever resorting to fiat currency.

We’re on the way, but nowhere near that world yet.

A major nation producing their own officially-approved cryptocurrency would definitely accelerate mainstream adoption. Many of the conveniences of cryptocurrencies would be a part of this proposed Russian crypto. Fast, more secure online transactions with vastly lower costs. A purely digital currency without as much need for physical infrastructure.

But distributed, community led control of the currency is, obviously, not part of the plan. First Deputy Prime Minister Shuvalov says that this is to prevent the economy being attacked, and make it stronger.

That doesn’t sound to me like someone who intends to let the crowd freely decide what they want.

The focus on anonymity for users will also likely fall by the wayside. Governments don’t typically like to trust people with anonymous transactions. And the Russian government doesn’t strike me as a likely exception.

Anonymity and freedom from central control are vital to the appeal of bitcoin, and other cryptos. I don’t see many international users dropping bitcoin for ‘crypto-rubles’, or whatever it will be called.

With the full backing of the Russian government, their state crypto is likely to succeed. Within Russia, at least. But what happens to every other cryptocurrency? Would the Russian government allow Russians to keep using bitcoin alongside their more restricted, supervised crypto?

In reality, they probably couldn’t stop them. Cryptos haven’t had much trouble spreading around the world without government blessing so far. I can’t see anyone successfully regulating a digital asset designed from the start to be anonymous and beyond government control.

Any more than I can imagine the global crypto community embracing a government controlled crypto.

Obviously I can’t see the future, but I don’t predict that ‘crypto-rubles’ will make a serious dent in other cryptocurrencies, or their increasing place in the online economy.

To learn more about cryptocurrency’s incredible potential, and the very real risks for investors, check out Sam Volkering’s latest special report.

This week in Money Morning

On Monday Ryan wrote about the efficient market hypothesis, and why he doesn’t think it’s all that it’s made out to be. Ryan argues that, in reality, information is consumed and understood at different rates by different people. And those people come to wildly different conclusions based on the same information. Simple examples from real life show why. And Ryan explains why this means you have a unique advantage as an individual investor. An advantage that most investors fail to use. To read how you can use it to your benefit, check out Monday’s Money Morning here.

Are electric cars killing the oil market? Will they?

It’s not hard to find headlines claiming that they are, or soon will. But Ryan argues that this story may be overblown. And he’s got the numbers to back him up. In Tuesday’s article, he explains why you should take another look at oil.

Your own expectations can be your greatest enemies when investing. The collective expectations of the markets can lead to disaster — or opportunity. On Wednesday Ryan looked at how cognitive biases can anchor or shift our expectations as investors. And he explains why it’s the truly unexpected events, not the ones that everyone is already wary of, that can confound expectations, and really move the markets. Read the details here.

Thursday’s article looked at insiders, and why you should pay attention to their actions. Ryan isn’t suggesting that these insiders are illegally trading based on information that hasn’t been disclosed to the market. No, it’s just that the CEO and board of a company are more likely to fully understand that information, understand its context, and invest accordingly.

This isn’t just speculation on Ryan’s part. As he explained, a recent Harvard Business School study of US stock markets showed that insiders trading their own company’s stock beat the index by 6% a year.

Which is interesting, when you look at the oil sector. As was discussed earlier in the week, the oil sector is pretty unloved at the moment. Popular sentiment isn’t strong.

So why, then, are ‘insiders’ across the oil industry buying? Ryan thinks he knows. To read his explanation, you can find Thursday’s Money Morning here.

On Friday, Ryan looked at how one commodity’s strong performance could be a bullish sign for the global economy. And an indicator of a recovery for the wider resources market.

It’s a big call.

Ryan does note that it’s too early to be sure. But if you wait until everything is certain, the best opportunities will be gone. To read Ryan’s argument, and the possibilities for your investments, click here.


Tyler Jefferson,
Editor, Money Weekend

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia