In today’s Money Morning…the first episode of our podcast…recent pullback in bitcoin has something to do with India…this time it’s different…and more…
Editor’s note: In our first episode of the Money Morning Podcast, I speak to Leigh Travers who is Executive Director of DigitalX Ltd [ASX:DCC]. Among other projects, DigitalX runs a bitcoin fund. We discuss the recent impact of Elon Musk and Tesla on the bitcoin price as well as a range of topics in the world of cryptocurrencies, including monetary policy, institutional sentiment, and what DigitalX is doing to capitalise on trends within the market.
There’s a podcast in this editorial for the first time, be sure to watch it.
Speaking of bitcoin…
I spend enough time looking at charts and financial statements for those things to occasionally enter my subconscious.
And a couple months ago, I had a dream about the Bitcoin [BTC] price chart.
Wow! It just keeps going up, I thought.
We won’t get too deep into Freud and Jung today, but suffice to say bitcoin is on a lot of people’s minds at the moment.
I dare say a lot of retail investors out there are looking at the chart below thinking they have missed the boat:
To be clear, I don’t think you’ve missed the boat yet, depending on how long you HODL.
And this is the bitcoin price in AUD, which will look slightly more subdued than the BTC price in USD.
Which is because of the relative weakness/strength of the USD and the Aussie dollar.
If you’re a true crypto believer you probably think of crypto in terms of crypto, not crypto relative to fiat.
But what happens if crypto and fiat go to war?
Recent pullback in bitcoin price has something to do with India
Here’s a quick explainer of what India is up to with regards to crypto via Reuters:
‘India will propose a law banning cryptocurrencies, fining anyone trading in the country or even holding such digital assets…
‘The bill, one of the world’s strictest policies against cryptocurrencies, would criminalise possession, issuance, mining, trading and transferring crypto-assets…the bill would give holders of cryptocurrencies up to six months to liquidate, after which penalties will be levied, said the official, who asked not to be named as the contents of the bill are not public.
‘Officials are confident of getting the bill enacted into law as Prime Minister Narendra Modi’s government holds a comfortable majority in parliament.
‘If the ban becomes law, India would be the first major economy to make holding cryptocurrency illegal. Even China, which has banned mining and trading, does not penalise possession.’
Even China doesn’t do this…
Nice one, India.
To be fair, this kind of move was always on the cards.
Fiat was not going to walk quietly into the night.
And paradoxically, I think moves like this will actually accelerate the adoption of cryptocurrency rather than its demise.
Investors will likely turn up their nose at draconian policies that favour fiat.
More pressure means a quicker exit from fiat.
It’s like a desperate salesman using the wrong tactics on a potential buyer — push too hard and the buyer will walk.
It’s classic government behaviour, really.
As Leigh Travers noted in our podcast chat, bitcoin is directly benefitting from central bank monetary policy and government behaviour.
This time it’s different
India won’t be alone.
Others will come forward trying to stop the inevitable.
You can’t turn off the Internet. At least, not without revealing that the emperor has no clothes.
And by that, I mean that if democracies engage in authoritarian behaviour to protect the value of fiat which they have spent the last few decades devaluing — people will vote with their feet.
They will emigrate to crypto-friendly jurisdictions.
They may even form their own countries without the traditional nation state borders.
The nation state will sign its own death warrant if it pushes ahead with crypto crackdowns.
It’s a scary prospect, but one you should be prepared for.
We’ve got a new service in the pipeline (in the coming months) to guide you through the age of techno-monetary competition.
Remember, central bank and government behaviour is largely predictable.
It’s what you do in light of this behaviour that really matters.
Finally, if you want an in-depth look at the world of crypto, be sure to check out that podcast.
For Money Morning
Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.