China’s heavy-handed approach to cryptos continues… why digital currencies will drive money toward the crypto sector… a crypto announcement from Luke Lango
Last Friday and continuing through the weekend, the bitcoin roller coaster continued.
Investors saw massive whipsawing, with the crypto’s price falling to under $33,000… a leap back to nearly $39,000… then another crash taking it to about $31,000.
From top to bottom, this latest volatility registers an official 50%+ tumble for bitcoin.
As I write Monday around lunch, the crypto has rallied and is trading around $37,500.
This latest volatility is primarily attributed to ramped up calls from Chinese authorities for a crackdown on the mining and trading of cryptocurrencies.
From CNBC:
In a statement from Chinese Vice Premier Liu He and the State Council, authorities said tighter regulation is needed to protect the financial system.
The statement, released late Friday in China time, said it is necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.”
As we noted before in the Digest, this iciness from the Chinese government is no surprise.
***A thriving cryptocurrency market is the last thing Beijing wants
That’s because it wants to snuff out any alternative to its digital yuan.
For any readers less familiar, the digital yuan – basically the “crypto” version of China’s paper currency, the yuan – is controlled by China’s central bank.
What is does, practically-speaking, is give Beijing the ability to monitor everything about the economic activity of its citizens.
Though the digital yuan is expected to circulate alongside physical bills and coins for now, most analysts believe that Beijing’s ultimate goal is a complete digitization of its currency, which means complete control of its people.
From the Wall Street Journal:
Digitized money looks like a potential macroeconomic dream tool for the issuing government, usable to track people’s spending in real time, speed relief to disaster victims or flag criminal activity.
With it, Beijing stands to gain vast new powers to tighten President Xi Jinping’s authoritarian rule…
The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start.
It’s also trackable, adding another tool to China’s heavy state surveillance.
The government deploys hundreds of millions of facial-recognition cameras to monitor its population, sometimes using them to levy fines for activities such as jaywalking.
A digital currency would make it possible to both mete out and collect fines as soon as an infraction was detected.
***But Beijing’s crypto crackdown could fuel a crypto buying surge
It turns out people don’t want the government in every aspect of their business – shocking, right?
That’s why Beijing’s rollout of the digital yuan last year was met with a flurry of cash-accumulation by its citizens. China’s measure of yuan in circulation, or cash, jumped up 10% in 2020.
Beijing’s power-grab also will drive demand for cryptocurrencies in China in the future. Until the government actually imposes steep fines or jail time on citizens with a crypto account, we’ll see pockets of heavy crypto demand as Chinese citizens try to preserve some semblance of economic freedom and anonymity.
What’s happening in China is instructive for citizens around the world who don’t want the government in every aspect of their lives – and that will also funnel money into the crypto sector. You see, China is hardly alone in his digital currency efforts.
As I write, we’re seeing digital currency pilot programs in Australia, Bahrain, Bermuda, Estonia, Eswatini, the European Central Bank, France, Indonesia, Japan, Kenya, Lebanon, Malaysia, Pakistan, Rwanda, Singapore, South Africa, South Korea, Sweden, Thailand, Trinidad and Tobago, Ukraine, and Uruguay.
Meanwhile, there are development and/or research programs in Brazil, Curacao, Hong Kong, Mauritius, Turkey, Canada, Chile, England, Ghana, Haiti, Kazakhstan, Iceland, India, Israel, Jamaica, Lithuania, Malta, Morocco, Netherlands, North Korea, Norway, Palestine, Philippines, Russia, Spain, Switzerland, Tunisia, and yes, right here in the United States.
***Last Thursday, we learned the Fed will be launching a broad discussion of a digital dollar this summer
From MarketWatch:
The Federal Reserve will ramp up its exploration of a digital dollar later this summer, Federal Reserve Chairman Jerome Powell announced on Thursday.
In order to “help stimulate broad conversation,” the Fed will issue a discussion paper this summer outlining the central bank’s “current thinking” on digital payments and the benefits and tradeoffs of a central bank digital currency, or CBDC, Powell said in a statement.
This isn’t new. The Fed has been researching a digital dollar for years.
Federal Reserve Chairman, Jerome Powell, has stressed that a potential digital dollar would not be a replacement of cash, or deposits at commercial banks.
This morning, Federal Reserve Governor Lael Brainard echoed this sentiment. In pressing the case for a digital dollar, she said:
The Federal Reserve remains committed to ensuring that the public has access to safe, reliable, and secure means of payment, including cash. As part of this commitment, we must explore — and try to anticipate — the extent to which households’ and businesses’ needs and preferences may migrate further to digital payments over time.
While this is no guarantee that the Fed may not eventually want to go cashless, it’s not something that would happen anytime soon.
Reports suggest going cashless disadvantages the unbanked and communities of color. This reality would significantly slowdown a cashless rollout.
Plus, last year, Fortune reported that many cities, including Philadelphia, San Francisco, and New York, have passed legislation banning merchants from accepting only card and contactless payments. On a state level, New Jersey passed a similar bill in 2019.
Regardless, fears of government overreach will help support the crypto sector as it continues to offer something that sovereign digital currencies threaten – economic freedom.
So, while news from China bruises bitcoin and various altcoins, maintain an even perspective. This heavy-handed action is exactly why the demand for cryptos will only grow.
***Speaking of “perspective,” let’s turn to our expert team from Crypto Investor Network
Last week, as we tackled the selloff here in the Digest, we featured commentary from our crypto expert, Charlie Shrem, editor of Crypto Investor Network.
Here’s more from the Crypto team:
So, here’s the key word for all of us… new and old investors alike: PERSPECTIVE.
Yes, the crypto market is down big (last Wednesday). Yes, it’s a bad day for our investments. But anyone who has invested with us before knows that times like these mean one thing…
Now is the time to buy.
The long-term thesis behind each of our investments has not changed. Just their price has.
You know what else hasn’t changed? The power of altcoins and blockchain technology to improve processes and move the world into the next age of software and transactions.
Same hypergrowth theme. Same hypergrowth potential. Lower prices. Add those together and you get one inescapable conclusion… buying opportunity!
So if you’re not fully invested in the portfolio yet and have been waiting for the right opportunity… here’s a great chance to grab several altcoins back below their buy limits.
Could prices go even lower? Of course.
We can’t say with much confidence where the low will be this time around, but we can say with high confidence that prices will very likely be much higher over time.
***Before we wrap up, Luke Lango’s subscribers can begin getting excited about the crypto sector as well
For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind Innovation Investor. His specialty is finding market-leading tech innovators that are pioneering explosive trends.
Like Charlie, Luke believes the current sector weakness is offering a fantastic entry point for top-shelf altcoins. That’s why Luke has been wading into the crypto sector himself.
The challenge, of course, is identifying the altcoins with genuine value, versus all the “me too” imposters.
From Luke:
The strong cryptos will rebound from here, then go on to change the world and score early investors enormous gains.
The weak cryptos won’t. They’ll die. And dip-buyers will get burned as those coins plummet to zero
The key now, of course, is to buy the dip in the strong cryptos.
How do you know what qualifies as a strong crypto?
The short answer: You have to do a lot of work.
Forget following Reddit and buying meme coins because “everyone else is doing it.” You have to actually do your homework. You have to dig through the whitepapers, read them end-to-end, understand the technology, talk to experts, and extrapolate financial implications.
It’s a lot of work because cryptos are a complex science, especially for folks new to the industry.
Lucky for you, you don’t actually have to do that… because we’re doing it for you!
Luke is assembling a team of incredibly qualified cryptocurrency experts who understand blockchain technology at the most granular level.
These guys research cryptos all day, every day.
Back to Luke on what he envisions for this team:
The team’s goal?
Put together a portfolio of cryptos that aren’t all hype – and will instead, impact the world over the next two decades the same way that Amazon and Alphabet impacted the world over the past two decades.
And we are finding a few cryptos that we think – thanks to their technological superiority, clear value-props, and widespread use-cases – will be enormous winners over the next 3, 5, 10-plus years.
My team and I are currently doing the hard work of sorting through these potential cryptocurrencies and highlighting the best ones … the cryptos that will weather the coming cryptocurrency crash and emerge from it ready to soar 10X, 100X, or 1,000X over the next two decades.
Over the coming weeks and months, we’ll introduce these cryptocurrencies to Innovation Investor.
So, Innovation Investor subscribers have a lot to look forward to. If you’d like to learn how to sign up for Luke’s service, just click here.
Wrapping up, continue riding out the crypto volatility. It’s the price we must pay for being a part of a revolutionary asset class that will reward us handsomely in the years to come.
Have a good evening,
Jeff Remsburg
