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CBDCs: Incumbents market failing product to maintain control

As US authorities clamp down on crypto in 2023, we have observed a remarked uptick in articles, speeches, and searches for "central bank digital currencies". As I mentioned last month, I do not think these simultaneous trends are coincidental. "The incumbents are marketing their failing product and attacking the competitor." In this article we detail the arguments for and against CBDC's, providing evidence for our sceptical conclusion.  TLDR: Eventually the torrential tides of technology, freedom and crypto will prevail but, for now, authorities are trying to maintain control through marketing structurally unsound fiat money in digital form as a technological upgrade.

CONCLUSIONS

• Like many government programs, the proposed benefits of CBDCs disguise a different reality

• Centralisation (fiat CBDCs) and decentralisation (crypto) have trade-offs

• Central fiat and CBDCs favour control and efficiency over freedom, privacy, fairness and systemic robustness

• Bitcoin is not particularly efficient but is inclusive, respectful of privacy, fair and robust

• Governments will utilise CBDCs as another tool to try and maintain control during impending fiscal crisesFull article

Market review: BTC hits $30K resistance as Banking Crisis deepens

We suspect that further gains are probable in 2023 as the chances of Fed intervention increase in the face of a banking crisis, but short-term weakness towards $26K would be a healthy market event.

Bank Failures Visualised. Source: Mike Bostock

CONCLUSIONS

• The trad-fi banking crisis is now comparable with 2008 as First Republic Bank goes under

• More bank failures possible before the Fed eventually capitulates

• Fed balance sheet growth is pitiful compared to 2008 and 2020

• Operation Choke Point continues, highlighting bias towards control rather than logic

Full article

Until next time,

Rob Price, CFA

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