[Re-sent] Enhanced reserve asset credibility

SM (Market Review) Enhanced reserve asset credibility

April 04, 2022

Friends and associates,

Crypto specific news (Luna BTC purchases and ETH merge) drove strong BTC and ETH performance in March, but the sustainability of the rally remains in question over the coming quarters because of weak overall demand and tough macro conditions. Behind the scenes, bitcoin’s value proposition continues to grow. Each month there are signs that the global monetary system is shifting and evidence is stacking up that bitcoin has a role to play in that transition. I will be looking to make the most of the short-term rally, but I remain cautious for the coming months because a potential liquidity event remains a real risk. Nevertheless, I will remain biased towards the long-side long-term because larger nation-state purchases are not far away.Full article HERE.

Key Insights

  • Bitcoin experienced another strong month, rallying from lows of $38K to $48K. The monthly gain was only 9% because we opened the month at $42K after a 14.3% rally in Feb.

  • The primary drivers of bitcoin strength were twofold:

    • Equity markets rebounded in March and bitcoin experienced a relief rally in unison.

    • A supply squeeze took place on bitcoin exchanges after a large algorithmic stablecoin (Terra) started buying up large amounts of BTC.

  • ETH gained 15.2% in March, outperforming BTC as investors priced a more buoyant outlook ahead of the merge and transition from POW to POS.

  • Geopolitics of monetary regime change are intensifying as Russia tries to back RUB with gold and oil. Bitcoin is part of the conversation and has a role to play.

  • Trad-fi liquidity risks remain as yield curve inverts, global economy heads towards recession and BTC:S&P500 correlations remain strong

Full article HERE.

On the personal front, there are two random insights that I gleaned in the past month that I would like to share. First,

that the world was already at war before the Russian invasion of Ukraine.

Financial, economic and social imbalances have generated the conditions where conflict is a higher probability event. Viewing the world in some dichotomous condition where peace existed before "that madman Putin invaded Ukraine" is not helpful. We must rather accept the reality in which we live.- a time riddled with conflict. This does not imply we should live in a shelter and take cover the next 10 years. People have lived beautifully through all sorts of conditions.

Second, Raoul Pal commented that wars are filled with misinformation from all sides. Narratives rule the roost more than ever as sides jostle for the moral higher ground to back their position. Knowing the truth is particularly difficult under these conditions as fear will be used to direct attention and fear is a very powerful emotion.

The ability to remain calm, nonreactive and without fear is paramount to avoid being swept up my narratives. It might sound like a trite point but maintenance of physical, mental and emotion health is key in this endeavour.

My parents are visiting us in Southern California for the first time this month. I am looking forward to showing them a few of the sights, smells and sounds on this beautiful part of the world. Wishing you the very best for the month ahead wherever you may find yourself.

Chat soon.

Rob Price