What Happens When TradFi Collides with Crypto?

In today’s Money Morning…crypto for the masses…capitalism was meant be Darwinian…a collision like no other…and more…

Yesterday, I brought you correspondence with a reader regarding crypto pessimism emanating from our sister publication, The Rum Rebellion.

If you didn’t catch yesterday’s piece, the point is that Vern Gowdie and I have very different opinions regarding crypto.

And debate, we will.

It’s not just crypto, though, it’s the market, the economy, and everything in between. Wisdom of age versus youthful exuberance, call it what you will.

I have immense respect for Vern as he has seen it all — particularly the crashes.

Within the context of polarising markets — you need to hear the full gamut of perspectives.

So today, I bring you this…

Crypto for the masses

Here’s the news that barely gets an in, in the Australian Financial Review, as they lead with internecine Liberal party emissions bickering instead of this (CoinDesk):

The first bitcoin (futures) ETF in the U.S. began trading today, bookending an eight-year effort to launch a widely accessible, regulated bitcoin investment product.

This is the real deal.

A crypto product for the masses.

It also signals the beginning of a monumental collision between traditional finance (TradFi) and blockchain.

And it’s popular.

As CoinDesk explains:

The ProShares Bitcoin Strategy exchange-traded fund’s (ETF) trading volume topped $1 billion on its first day, ranking the investment vehicle as one of the top ETF launches in history.

As of 4:27 p.m. ET, after the close of U.S. stock markets on Tuesday, trading volume in the ProShares ETF (BITO) had reached 24.1 million shares, worth more than $1 billion based on the closing price.

The fund’s price rose to $41.94 at the close, up 4.9% from the initial $40 net asset value.

Based on first-day trading volume, the launch would rank the new ETF as one of the top two or three ever.

Meanwhile, Bitcoin [BTC] is pumping:


Fat Tail Investment Research

Source: Tradingview.com

[Click to open in a new window]

Wild stuff.

But consider this.

As per Barron’s:

Global wealth soared last year, even during the economy-straining pandemic, with financial assets held by individuals jumping 8.3% to a record US$250 trillion, Boston Consulting Group (BCG) reported on Thursday.

Combined with real assets—primarily real estate—and excluding liabilities (such as mortgages), total global wealth rose 7.9% to US$431 trillion, BCG said in its 22nd annual global wealth report. Real assets, in fact, effectively doubled the size of the global wealth pool last year, the firm reported, generating US$235 trillion in wealth.

And considering the total global crypto market cap stands at US$2.5 trillion and BTC stands at US$1.2 trillion as per CoinMarketCap, this is still small-fry stuff in the grand scheme of things.

Meaning that for crypto to dominate today’s total global wealth, it would still need to go around 200 times.

By the time it does that, and with the money printer shenanigans running rampant, it would need to go well north of 200 times.

Take that in for a moment.

If crypto is the new money, it’s got that far to go.

For crypto maximalists and optimists, that’s not beyond the realm of imagination.

Pessimists, well that’s another story.

The implication of this comparison — for the whole of global wealth to transfer to the chain — is that crypto isn’t just an investment relative to fiat.

It could eclipse fiat, so much so that fiat doesn’t exist.

Or if fiat survives, it will be in backwaters or isolated economies that don’t get with the program.

Crazy to think about, but over the next 10 years, I challenge you to stop thinking in terms of fiat and in terms of crypto as a thing in itself.

Here’s the key point.

Capitalism was meant to be Darwinian

For too long, the middlemen and supposed bastions of wisdom have taken their clip.

I’m talking about the Jamie Dimons of the world, the Peter Schiffs, you name ‘em.

These are the real protected species out there.

And when Ryan Dinse and I argue for crypto optimism, we do so from the deeply ingrained cynicism that is part and parcel of seeing the manipulation that takes place in the TradFi system.

GameStop trading countered with NASDAQ’s AI-powered social media monitoring systems, spoofing in commodities, dark pools, etc…the list goes on.

Crypto is the nuclear option for a rigged system.

Scrap everything, start afresh.

There isn’t going to be a moment of clarity for central bankers and financial middlemen where they return to sound monetary policy, avoid debasement, and protect savers.

This is the last shot we have at legitimate capitalism that the masses can subscribe to.

If all of that sounds like hyperbole, then consider this…

A collision like no other

When TradFi foot soldiers realise their last hope of keeping a job is to get the SEC to bring in paperwork and regulation, they will take the offer.

The BTC futures product is only the beginning.

BTC ETFs, ETH ETFs, LINK ETFs, this is how the new clean slate for capitalism starts.

So go ahead, regulate it. Bring in paperwork, desperately try and protect the relevance of fiat in a world of CBDCs that no one trusts.

But in 5–10 years, after TradFi is done colliding with crypto and we live in a quasi-TradFi (CBDC)-crypto amalgamation, at least the banks won’t matter.

These are the same banks that have sucked wallets dry for centuries.

I think people will vote on what money is with their current wallets.

And in doing so, they might just reinvigorate the dying beast that is capitalism in the 21st century.

Regards,

Lachlann Tierney Signature

Lachlann Tierney,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


Money Morning Australia