Cabal currency control: and what it has to do with Ethereum

2020年8月21日

For a number of weeks now it has become clear that Ethereum ETHUSD has been outperforming Bitcoin BTCUSD in relative terms and in recovery from the March lows. I was strongly considering changing my opinion about Bitcoin always having the dominant allocation in a smart cryptocurrency Investment Portfolio. I even thought that perhaps it was time to overweight ETHUSD.

I polled my friends that are far smarter than myself about this thesis. My primary concern was the "scarcity" of Ethereum. I know very well that Bitcoin with its limited production gives it inherent scarcity and from that its value has a probable certainty. I was curious how Ethereum's scarcity was derived. I found that though there is much nuance the TL;DR of it is that Ethereum's supply is centrally controlled. This concerns me not just as an OG cryptocurrency philosopher but also as an investor.

On the left is the EURCHF. Following the Financial Crisis the Swiss National Bank instituted a peg of their currency to the Euro at 1.20. This ensured a "floor" of price that the pair would never trade below for many years.

This floor led traders to load up on long positions because they would be paid an interest rate daily for holding the position. The gravy train lasted for several years until one SNB meeting in January 2015 they decided to lift the peg. The shock was immediate and because so many people were in this "trade" they not only got stopped out but liquidated by margin calls (sound familiar). There were no orders to absorb the drop or "plunge protections" that some of the crypto exchanges employ.

The market cap of crypto is in the respectable billions... but what you see on THIS chart is in the TRILLIONS. Beware of currency that is centrally controlled for long term investments.