gold - Pwim.Net

Malaysia’s Prime Minister Seeking a New Gold Standard

Reportedly Malaysia’s Prime Minister Dr Mahathir Mohamad indicated that he is agreeable to a single currency for the East Asian region backed by gold but critically it would not become the national cash of any current nation.

Speaking recently in Tokyo at the 25th International Conference on The Future of Asia he stressed that the currency would be mainly used for bilateral trade between countries. The new currency would relate to the local currency exchange rate indicating the economic performance of that country and clear evidence of how much each country owes to each other to be paid in the ‘special currency of East Asia’.

How much appetite there is for this outside of Malaysia is yet to be seen as under a classic gold standard a country’s purchasing power is directly proportional to the real strength of its economy. When an economy generates wealth, the wealth is generated in gold however the crunch comes when wealth contracts because you don’t have the option to create more gold out of thin air.

Mahathir has considered the use of digital currencies in the past, but he favours gold as a universal commodity especially as it is free from the control of any one government – or more accurately its value cannot be influenced by any one government. A common currency for East Asia is an ambitious vision from Mahathir who surely must have studied the economic frailties famously displayed by the Euro before putting forward such an idea.

Meanwhile, the Securities Commission Malaysia (SC) recently registered a number of exchanges which now nine months to achieve compliance with the SC. Luno Malaysia, Sinegy Technologies and Tokenise Technology become the only digital asset exchanges registered to operate out of Malaysia with Malaysian Finance Minister, Lim Guan Eng said that all cryptocurrencies must go through the country’s central bank, before being issued to the public.

The aim is to make Bank Negara Malaysia the ultimate authority for anybody seeking to introduce any form of digital currencies in a move widely regarded as one to protect from users from less reputable coins. Lim Gaun Eng stated that Malaysia doesn’t want to obstruct digital currencies but added “it is still subject to existing laws” but has not yet made it clear precisely how regulation will (or could) be applied. If you can look past the irony that digital currencies have to gain approval from the Malaysian central bank before being issued perhaps we are seeing the birth of regulation in Asia which may trigger a ‘fight or flight’ response that will be heard around the world.

Fighting for Monetary and Financial Freedom

If we want to understand why blockchain will disrupt and uproot our current monetary and financial system, we need to understand the following: the history of currency; what is a currency; why currency exists; and the relationship between currency and wealth. Then we look at three key aspects (money form, money issuance, and the flow of money as Influence Observation Factors, IOF for short) of our monetary and financial system where the blockchain technology may have a significant impact. We believe blockchain will eventually bring about the best form of “freedom” that is most desirable of any monetary and financial system.

Currency and money form

Historically, humans needed to exchange commodities. The earliest form of exchange was barter. Barter trade is completed if only the two sides have complementary needs, or both parties need to trade the third commodity. As the frequency of exchange increased rapidly, that the third commodity, being a medium of exchange, which everyone wanted to possess became crucial. This “general purpose” commodity which is particularly handy for exchange activities then became what we now call the “currency”. In theory, if the commodity is treated as a medium of exchange, it can function as a currency. The commodity with attributes like scarcity, limited supply, and physical stability eventually turned up as the winner. There were once shell, silver, gold, stone, bronze, among others. As time passed and through what we may call natural selection of currency form, gold then became the most accepted form of currency around the world. It is extremely important that the currency as a form of wealth be kept stable for wealth inheritance. Historically, it was very difficult to refine aluminum, and so its price exceeded that of gold soon after its discovery. So aluminum was once a form of wealth. However, after the mass adoption of electrolytic production, the price of aluminum declined drastically. So, as a generally adopted currency and as a form of wealth, the currency form is of uppermost importance.

Money issuance

Using heavy metal as a form of currency, for example, gold had led to several important considerations in practice.

(1) Standardization. The authority normalized and unified the weight and measurement of gold, which was required for money flow, thus the exchange of commodity. Naturally, the power of supervision was vested in the authority.

(2) Non-equivalent exchange. The authority used less gold than what is needed in a fair deal or even other heavy metals in lieu of the gold. This way, by using less valuable currency in exchange for commodities, the authority stole value from us and gained their benefit stealthily. The authority could do that, perhaps illegally, because they control the currency issuance to a certain extent.

(3) Gold standard. For easy circulation, a handier form of currency such as paper was introduced, which is backed by fixed amounts of gold. Since the paper was much easier for exchange and to carry, it accelerated trade. This was a very drastic change. We needed to trust the institutions issuing the paper currency in terms of their worth as measured in gold.

With the development of international trade, gold became the most recognized heavy metal currency around the world. Also needed was a method to measure money and wealth that would be accepted by all. In 1867, the first monetary conference was held in Paris where participating countries agreed to a single gold standard, for the very first time [2]. Currency systems built around that gold standard prevailed. After WWII (or in 1944 to be exact), a world monetary system was built based on US dollars, which in turn was, as claimed, backed by the gold standard under Bretton Woods Agreements. Many countries then fixed their exchange rate relative to the US dollar, thus making all currencies pegged to gold at a fixed rate indirectly. This was the so-called Bretton Woods System. In 1971 with “Nixon shock”, US President Richard Nixon abolished the international convertibility of the US dollar to gold [1]. In March 1973, the fixed exchange rate system was abandoned. “By 1973, the Bretton Woods system was replaced de facto by the current regime based on freely floating fiat currencies”, which let the free market determine the US dollar exchange rates for other countries’ currencies. This marked the beginning of the collapse of the Bretton Woods System. Gradually, the whole world converged to the “national credit standard” where currency issuance was backed by national credit.

Flow of money

Traditionally, exchanging gold for the commodity is completed simultaneously in terms of ownership. Over time, we added more concepts to financialize our service: credit, mortgage, mismatch, leverage, futures, etc. Then the concepts of “payment, settlement, clearance” were introduced to describe the whole cycle of transacting. With more financial derivatives, we added substantially to the complexity of our financial system logic and its implementation. Consider any of today’s banking systems, it is virtually impossible to rebuild it with so many legacy data and subsystems. For cross border service among financial institutions, we are still using the arguably low-efficiency SWIFT protocol, which was first adopted in Brussels in 1973 as “a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.” [3] Because of all these complex systems and protocols, the bank charges us when we make payments, exchange foreign currency, and when we do remittance of any kind. They charge us for even the pettiest flow of money, and by that, they reap huge profits for their inherent low-efficiency services. Moreover, the poor suffered the most from these charges, who became slaves of the currency financial system. In the new blockchain system, both sides trade directly without a third party involved, and thus the trade could finish spontaneously. The concept of payment-settlement-clearance becomes redundant in the blockchain system, leading to a much-simplified money flow cycle. The cost of payment, trade, remittance, and even foreign exchange is nearly 0.

Blockchain and cryptocurrency

In 2008, Satoshi Nakamoto invented bitcoin, a peer-to-peer electronic cash system [4] and described blockchain the underpinning technology. Since then, bitcoin and blockchain have taken the world by storm and is hailed to be the answer for a perfect currency and financial system in the future. The issuance of bitcoins is by POW, a proof of work algorithm first proposed in 1993. By the algorithm, the issuance is reduced to the task of mining. This is an entirely new way of currency issuance. Gold mining is measured by human labor, whereas bitcoin mining is measured by computation power. The emergence of bitcoin and blockchain thus marked the beginning of the transition from a carbon-based civilization to a silicon-based civilization. A person tries to maximize their profit and wealth that is generally proportional to human labor. With currency being the main carrier of wealth can lead to different perceptions of money and wealth by the method of issuance of currency. Adopting the bitcoin method shifts our focus to computation power, for which there is still plenty of room for further advancement and innovation. The big open question here is that can we create a new world currency that can benefit (in terms of much-improved features and services) human as a whole in the long run? What currency issue rules should we adopt? Besides the traditional gold standard and then the current national credit standard, bitcoin and blockchain represent the third generation of currency issuance. Bitcoin is a kind of cryptocurrency, of which the ownership depends on a private key. Without the correct private key, there is no way to move bitcoins around, even if it is by means of law. This brings to us the notion of “absolutely private property”, for the first time in human history! Bitcoin is innovative in all IOF factors. Use IOF, For Facebook’s Libra, it is creative in money form and flow of money, leaving money issuance unchanged. Blockchain has the potential to provide us with much better solution in terms of IOF.

With blockchain, we put an end to the monopoly of government-issued currency as suggested by the title of Hayek’s book – “denationalization of money”. Blockchain will simplify the set of concepts revolving around financial services and the complexity of the IT system. With blockchain, we have cryptocurrency that is more stable and safer than any currency that has ever existed before. This is “monetary and financial freedom”!

To learn what else Bitcoin and blockchain can bring to humanity, stay tuned for the next article in the “Blockchain in Human History” series.

About the Authors:

Kun Hu

CEO of Blockchain.News

Professor Francis Lau

Associate dean of Faculty of Engineering, HKU; Former Department Head of Computer Sciences; Former vice president of the IEEE Computer Society.

Source:

[1] Nixon’s Economic Policies Return to Haunt the G. O. P., New York Times

[2] HKEX museum To learn what else Bitcoin and blockchain can bring to humanity

[3] SWIFT

[4] Bitcoin Whitepaper

[5] Dwork, Cynthia; Naor, Moni (1993). “Pricing via Processing, Or, Combatting Junk Mail Advances in Cryptology”

Images via Shutterstock

Gold Price Hits New Six-Year High But Fake Bars May Benefit Bitcoin

Apparently gold falls into the category of one of the few assets which investors find as safe havens when political and economic tensions begin to escalate. Having an intrinsic value happens to make it compared to gold more often than not, however, this seems to be changing with the introduction of fake bars which clearly differentiates the two assets, this is due to the fact that it cannot be copied or forged and is completely immutable. According to Reuters, gold bars have been seen to fraudulently get stamped with the logos of major refineries are entering the market.

Gold touches 2019 all-time high

There seems to be no slowing down behind the sentiments driving the Increase in the price of the precious metal. Recently Goldbug Peter Schiff has been seen to be making headlines on the news, shilling his baby and expressing his admiration for his virtue of hedging against Central Banks.

Going by the chart on goldprice.org as shown below, the commodity has been able to break a strong resistant price level of $1545/Oz which is the highest it has seen since March 2013 and has gained 20% this year.Source: goldprice.org

According to an interview with RT Schiff, he said that people are beginning to develop a growing concern about the central bank and federal reserve and that all of these is a reaction to the looming recession, this is why he thinks that this price upsurge is not set to stop anytime soon. He said:

“They’re worried about what the central banks, and in particular the Federal Reserve, is going to do about the next recession. That’s why the price of gold is going up — because the Fed is going to be going back to zero; they’re going to be going back to quantitative easing and all of this is good for gold.”

What is good for gold is good for Bitcoin

Considering that these two assets undeniably saber the similarly of serving as a safe haven for investors seeking to secure themselves from the government or any centralized body. Schiff also added that the trade war has escalated the problem but the US economy seems to be going into a recession regardless.

Even the stock market is not exempted from major price manipulation from a centralized figure as the only way to limit the damage of a stock market crash would be to print more money and inject into the system and drop the rates, which are still good for both Bitcoin and Gold.

NYDFS Approved: Binance and Paxos New Stablecoin Collab & Paxos Gold-Backed Token

Binance and Paxos Team Up to Launch a New USD-Backed Stablecoin

Crypto exchange giant Binance, and digital asset trust company Paxos recently announced their partnership to launch a USD-backed stablecoin. The announcement comes after the approval from the New York State Department of Financial Services (NYDPS).

The new stablecoin, Binance USD (BUSD) is reportedly available later this month for direct purchase and redemption 1:1 for US dollars on the Paxos platform. Trading will be available against Bitcoin, Binance Coin, and Ripple on the Binance.com platform.

Changpeng Zhao, CEO of Binance, mentioned that Paxos is a leader in the digital trust sector and has expressed excitement to work with them in the development of their native stablecoin.

Paxos co-founder and CEO Asia Rich Teo shared with the Cointelegraph that gaining the NYDFS’s approval for the BUSD was a crucial step head for the stability of the global digital currency market.

He mentioned:

“We are proud that our stablecoin as a service offering enables trusted companies like Binance to introduce products customized for their users. The Paxos brand symbolizes regulatory integrity, consumer protection, and transparency for all of our partners.”

Paxos to Launch Gold-Backed Ethereum Token, PAX Gold

New York-based exchange and stablecoin operator, Paxos launched a gold-backed Ethereum-based token named Pax Gold (PAXG). Each token will be backed by a physical bar of gold stored in the Brink’s London vault. PAX Gold will be pegged one-to-one to an ounce of gold.

The NYDFS also approved of the issuance, stating it as the “first gold-backed virtual currency in New York State.” In a press release, Paxos also announced that the product is “the first crypto-asset redeemable for physical gold.”

Charles Cascarilla, CEO of Paxos mentioned to Coindesk:

“It’s not a representation of the commodity and its actual legal title to it. This is the exact point of the blockchain, the exact premise, that you can now make [assets] easily moveable and divisible and not be tied to a manual, physical process. We’re going to do more products like this where we are taking real-world assets and putting them on the blockchain.”

Paxos will be charging fees on on-chain transactions involving the token, including PAX Gold creation and destruction.

Images via Shutterstock and Business Insider

A New World of Money – Blockchain in Human History Series

In the previous episode of “Blockchain in Human History” series, we have used 3 influence observation factor (IoF): money form, money issuance and money flow to examine the significance of blockchain in achieving monetary and financial freedom. In this article we take a deep dive in money issuance standard to witness the evolution of money. The evolution of money issuance standard can be summarized in four phases:

1. Barter

Barter trading involves the trade of physical commodities. It was first recorded in Egypt in 9000 B.C. which farmers used grain, wheat and cattle to barter other goods and services. There was no medium of exchange involved in the barter trade. The concept of commodity money emerged in 3000 B.C., which the Mesopotamians used shekel, a specific weight of barley grain to develop a large-scale economy.

2. Gold Standard

Prior to the emergence of coins as money, money was in forms of other physical objects. In 1200 B.C., cowrie shells were used as a medium of exchange across coastal regions across the Indian Ocean. In 1000 B.C., China used metallic cowries using bronze and copper as money. Coins first appeared in 500 B.C. in Lydia (in Turkey) which were made using a mixture of gold and silver. Due to the bulkiness of coins as medium of exchange, paper money was first introduced in the Song dynasty in China. Macro polo’s travels to Eastern Asia have brought the idea of paper currency back to the Europeans. Sweden has issued the first banknote in Europe in 1661 and other countries started to follow. However, as there was a lack of regulation in the printing of paper money, the face value of banknotes was determined by the reputation of the issuer and many banknotes became almost meaningless.

The limitations of banknotes led to the establishment of gold standard by countries. Gold standard is the monetary system which the country’s currency is pegged to physical gold. In 1816, Britain recognized gold as the official standard of value and they minted one pound gold coin named the Sovereign. In 1821, Britain became the first country to formally adopt a gold standard.

In 1867, the first International Monetary Conference was held in Paris. Félix Esquirou de Parieu, the French statesman who originated the Latin Monetary Union, proposed a single gold standard and decimalization of currencies and were approved by principal countries of the conference. The America enacted the Gold Standard Act in 1900, which led to the establishment of central bank. During the Great Depression in 1930s, both Britain and the America abolished the gold standard in 1931 and 1933.

Gold standard was once again adopted by nations following the Bretton Woods Agreement signed in 1944. Delegates from 44 countries attended the United Nations Monetary and Financial Conference in Bretton Woods. The Bretton Woods Agreement led to the establishment of the International Monetary Fund and the World Bank. Moreover, it was agreed that the value of other currencies was pegged to the value of USD, which is indirectly pegged to the price of gold at $35 per ounce.

The Bretton Wood System became fully functional in 1958 which countries settled their international balances in USD which could be fully convertible to gold. The U.S. government was responsible to adjust the USD supply and maintain the conversion rate between USD and gold. The Bretton Wood system collapsed in the early 1970s.

3. National Credit Standard

The drawbacks of Bretton Wood system surfaced in 1960s, which the USD was in surplus due to the increase on federal spending such as foreign aid, military expenditures, foreign investments and domestic programs. The USD became overvalued as a result which could undermine the foreign trading position of the United States.

Spoken on 15 Aug 1971, U.S. President Richard Nixon believed “The time has come for a new economic policy, targeting unemployment, inflation and international speculation.” He then directed Secretary Connally to abolish the conversion of gold and USD in the interests of monetary stability, which led to the collapse of the Bretton Woods system. This is referred as the ‘Nixon Shock’. In response to Nixon Shock, the Group of Ten (G-10) set up the Smithsonian Agreement, a temporary agreement to set the new exchange rate based on the devalued USD, which was proven unsuccessful at the end.

In Mar 1973, the G-10 called for six European members to adopt a floating exchange rate system against the USD. This means the exchange rate is determined by the market forces, which marked the end of fixed exchange rate system and the Bretton Woods system. Since then, the value of currency is determined by the national credit and its credibility as the payment and settlement currency, as well as the unit of account.

Following the collapse of Bretton Woods system, the U.S. struck the deal with Saudi Arabia which oil prices were standardized in USD terms and oil revenues are denominated in USD. The USD became the “petrodollar” and the purchasing power of petrodollar relied on the U.S. core inflation rate and the value of USD. The petrodollar elevated USD as the world’s reserve currency. The 2016 Triennial Central Bank Survey by the Bank for International Settlements (BIS) revealed that USD remains the dominant currency as 88% foreign exchange deals involved USD. The monetary policy by U.S. federal reserve plays an important role in determining today’s monetary system.

4. Blockchain based standard

With the advent of blockchain technology, we can foresee the vision set by Nobel-prize winner Friedrich A. Hayek: Denationalization of Money, can become a reality in future. If denationalization of money is said to be a reality, we can expect that blockchain will be the basis of issuance for corporations or individuals launching their own currencies. Here are some of the observations why blockchain can be the next money issuance standard:

a) Stability of Fiat Currencies given Macroeconomic Turmoil

With the ongoing trade war between China and the U.S., the UBS predicts that the GDP growth of the US will slip to 1.8% in Q4 2019 and 0.3% of Q2 2020. The trade war adds further uncertainty to US businesses as Donald Trump lifted up import tariffs of Chinese goods by 5%, which in turn US businesses will pass on the higher costs to consumers.

The recent macroeconomic turmoil led us to rethink the stability of existing fiat currencies. For instance:

i) The collapse of Argentine Peso following the defeat of Marci’s presidential election, which the Argentinian stock market plummets by almost 14%;

ii) The ongoing depreciation of Chinese Yuan against USD

As the trade war escalates, Chinese Yuan dropped below 7 to USD in Aug 2019, the first time since Feb 2008. Donald Trump claimed China as the “currency manipulator”, which China was accused of breaking the promise in the G20 summit of staying away from competitive devaluation;

iii) Surging volatility of British Pounds (GBP) with Brexit fiascoIf a “hard Brexit” is set to happen, it may costs the U.K. of GBP $190B in economic fallout by 2030;

iv)Debt crisis in ItalyItaly owes 2.3T in public debt, which amounts to 133% of its GDP.

The instability of fiat currencies declines public trust in governments. As a result, they are starting to explore cryptocurrencies as an alternative as medium of exchange and storage of value.

b) Central bank digital currency?

We can foresee that central banks accelerate their plans to launch their CBDC especially following the announcement of Facebook’s Libra. People’s Bank of China, for example, proposed a Chinese CBDC backed 1:1 by fiat reserves (M0 supply). This CBDC will be based on a two-tier system for issuance and redemptions, with manageable anonymity and encryption features. It is noteworthy that CBDC is mostly built on permissioned instead of public blockchains.

c) Own digital currency by corporations and individuals

With the advent of blockchain, we have witnessed several traditional giants announced their own digital currencies, most notably Facebook’s Libra and JP Morgan coin (JPM). Individuals such as Manny Pacquiao also launched his own digital currency. Both public and permissioned blockchain are used to launch digital currencies for corporations and individuals.

d) Proof-of-work: the new issuance standard on blockchain?

Compared to the money issuance standard in the past, Bitcoin as the flagship cryptocurrency is built using the Proof-of-work (PoW) consensus mechanism. However, with the high energy consumption and limited efficiency, PoW is not the optimal token issuance standard on blockchain while other consensus algorithm such as Proof-of-stake. Currently there is no consensus in the optimal money issuance standard using blockchain.

e) The Future of Financial Infrastructure

We believe the use of blockchain will streamline financial services industry and revolutionize the existing financial structure. The payment and settlement process of digital currencies are streamlined using blockchain without intermediaries involved.

Apart from real time settlement and removal of counterparty risks, compliance processes are standardized in payments and trade finance using blockchain. In future, we can foresee a distributed financial infrastructure by blockchain, in convergence with other technologies such as artificial intelligence and internet of things (IoT).

In future, whether denationalization of money becomes a reality remains to be seen. However, it is evident that blockchain-based currency will be the new money issuance standard and we will witness a new world of money!

Crypto OTC Trading Platform B2C2 Launches New Bitcoin-Settled Gold Derivative

Cryptocurrency over-the-counter (OTC) trading platform B2C2 created the first gold derivative product, priced and settled in Bitcoin.

B2C2 stated that the gold-bitcoin derivative would allow institutional clients to trade gold via its OTC trading operations regulated and licensed by the United Kingdom’s Financial Conduct Authority (FCA).

Max Boonen, founder and CEO of B2C2 explained that the move for the launch of the product was due to the increasing demand from large-volume traders:

“Clients trade an ounce of gold (minimum trade size) priced in bitcoin, and the derivative is settled in bitcoin. The clients we are seeing demand from are those who have their own user base of traders and macro hedge funds.”

Boonen clarified on the benefits of the product, “the benefits of trading gold (or bitcoin) in a derivative form (synthetically) is that it’s simpler to trade than the cash underlier for a variety of operational reasons, and typically represents the majority of activity in the product/asset.

With the fear of the impact of the US-China trade war and other macroeconomic factors, the price of gold has climbed to a great degree. Boonen further explained:

“The current macro environment, dominated by uncertainty over economic growth and inflation, is prompting central banks to rethink monetary policy and market participants to reassess the likely path of interest rates. Conflicting narratives abound, fueling market activity, and we expect demand to only grow for ways to gain and manage exposure to deflationary assets such as gold and bitcoin.”

Pax Gold, which was launched recently as a gold-pegged token issued by stablecoin firm Paxos, also allows clients to settle trades in tokens. Boonen told The Block, “we are agnostic as to which of the major tokens our clients choose to use to settle their trades with us, be it Paxos Gold or another. These tokens will give them access to the underlying metal since they correspond to ownership of physical gold in vaults.”

ETH 2.0 Gold-Backed Stablecoin

Ethereum blockchain goes gold

Cryptocurrency is not stable. It can not be a store of value. These are the remarks of fiat and gold holders everywhere. InfiniGold, working with the Perth Gold Mint has created the Ethereum based ERC 20 token, PMGT. Finally combining cryptocurrency and gold.

Gold vs Crypto continues to be a common investment debate. Which is better? With both sides of the argument having strong opinions.

Is the need to argue over?

PMGT token overview — how gold-backed tokens work

PMGT is the first ERC20 government gold-backed coin. Forming a strong foundation, teaming up with minting company Perth Mint, Perth Australia.

The Perth Mint is Australia’s largest precious metals company. Offering markets throughout the world. Distributing a reported 18 billion USD of rare metals around the world each year.

Gold has always been one of the most effective stores of value. With countless generations valuing its design, use cases in medicine, electronics, and jewelry. Many still store gold, as the best way to keep wealth and added security during uncertain markets.

In cryptocurrency, the popular USD backed USDT sable coin, created by Tether. Is king. But if gold is better than fiat, will that change?

InfiniGold is a bar of electronic physical gold. Using digital certificates on the blockchain. Investors receive all benefits from cryptography and security systems. Running 24/7 365 days per year on Ethereums blockchain.

Transaction speeds, ease of verification and trading gold all become much simpler. PMGT does not have transaction fees. Storage fees or management fees. Making it a strong alternative to traditional gold products.

PMGT may offer a new alternative to the popular stablecoins, backed to fiat around the world. Even those in world finance, have considered if the gold standard should come back. As governments and fiat continue to have many problems. Including Inflation. Money printing and Fraud. The call for gold’s return is strong. But will it be enough to make PMGT a success? Do people want this?

Tether, crypto’s stablecoin giant, has had many problems. They claim to have a 1:1 backed token, but there have been reports that this may not be true. Continuing court cases and allegations against the parent company, Biftinex are also constant.

Andreas Ruf, CEO of InfiniGold said:

“We’ve been looking forward to unveiling PMGT, an exciting result of our collaboration with The Perth Mint — the preeminent precious metals institution in the world. With the Perth Mint as custodian of the underlying physical gold that backs PMGT, buyers will be able to access a secure and reliable token representing the strongest asset class to date — gold.

Gold, hailed by many, is the best asset. Citing; It has history. Global demand. Stable value. Finite and last but not least, strong appeal and connections to wealth.

If PMGT or other gold-backed tokens appear to act as a new stable coin in the market. Will it help adaption? Will those in gold make the move across from other gold products?

Let us know your take below.

Personally. Gold back crypto sounds great to me.

Image via Shutterstock

COVID-19 Market Climate Perfect Catalyst for Bitcoin Demand Says Binance.US CEO

The coronavirus panic-driven frenzy to acquire assets of lasting bona-fide value has put the traditional gold market to the test and may be creating the perfect catalyst for Bitcoin according to Binance.US CEO Catherine Coley.

COVID Grounds Gold

Gold is the world’s traditional safe-haven asset but according to a report by Bloomberg on March 26, the commodity is struggling under the combined weight of coronavirus fears and central bank money printing.

As the coronavirus has grounded most airlines and continues to wreak havoc on logistics and supply chains, moving physical bars of gold has become the challenge.

In the report, Vincent Tie, Sales Manager, Silver Bullion Pte Ltd was quoted saying “Since last week, face masks, hand sanitizers, toilet rolls, and bullion have something new in common – they run out when everyone tries to buy them.”

Coronavirus may Create Perfect Climate for Bitcoin

After initially trading down heavily in correlation with equities and other risk-on assets, the price of gold has bounced back over 10% in the past week.

The price patterns of the traditional safe haven asset, since the markets began to crash, have resembled those of Bitcoin, which also fell precipitously before recovering.

Typically people buy gold futures due to the inconvenience of having gold bars physically delivered. But with a slowdown in the deliverability of gold bars due to airport disruption comes the risk that futures prices may rise excessively over gold prices.

The coronavirus pandemic is a black swan event and the entire global market is in new territory, but gold has not proven immune to that. However, many crypto industry insiders believe that cryptocurrency and Bitcoin have the potential to benefit.

The combination of the digital nature of Bitcoin, the search for value in the troubled markets and gold’s inability to effectively meet demand could be the catalyst that the original cryptocurrency needs, according to Catherine Coley the CEO of Binance.US.

Coley said, “Despite the market downturn, Binance.US is seeing unprecedented trading volumes, with especially active trading in Bitcoin. We are also seeing heightened interest in stablecoins as investors recognize the importance of hedging volatility during highly uncertain times.” She added, “ Bitcoin has always been built on the idea of a need to send and receive value in a safe and secure way and that’s not going anywhere.”

Coming Inflation Shock Will be Bitcoin’s Safe Haven Catalyst

While we will have to wait and see if the confusion in the gold market brings the Bitcoin safe have narrative to fruition, recent research by BitMEX see Bitcoin achieving its potential during the times of shock inflation they have predicted will follow the central banks’ stimulus packages and excessive currency creation.

The BitMEX Research published their analysis, Inflation is Coming, on March 17, outlining that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise. It will be within this oncoming financial environment that Bitcoin’s true nature should finally be revealed.

The researchers claim that not only will inflation come, “it will be a shock” as inflation has been low and stable for 30 years and our collective memory does not nor recall the consequences of digging ourselves into such a financial hole. Although they do not specify exactly when the inflation will hit, BitMEX predicts it will be “similar to the 1970s where it went as high as 15%.”

The analysis by BitMEX’s research arm stated, “In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.”

Image via Shutterstock

Bitcoin Is Better Than Gold: Crypto Exchange Coinbase

On May 1, the world’s leading cryptocurrency exchange, Coinbase, published an article claiming Bitcoin to be superior to gold. The crypto exchange had earlier published a similar article where they supported Bitcoin over Gold due to its ease of audit, anonymity, low transaction fee, and ease to be fragmented into smaller fractions. “In the wake of the market meltdown, many investors are pouring their money into gold as a so-called “safe haven”, in the hopes that its value won’t waver like fiat currency. But there isn’t enough physical gold to meet demand right now,” read the Coinbase blog post.

Coinbase highlighted LA Times’ article which described the current gold crisis as ‘historic squeeze’ and said that the news of gold bars being sent from Australia’s Perth Mint to New York to fill in the shortage affirms the fact that Bitcoin’s digital nature and ease of transfer at low cost makes it better than gold in terms of value storage.”The recent challenges of the gold market reveals Bitcoin’s distinct advantage over gold: Bitcoin does not rely on fragile physical supply chains and is truly globally accessible,” stated the Coinbase post.

Coinbase also went on to highlight the difference in the value of gold in the CME’s Comex (New York) Exchange and London Gold Spot market due to hampered supply chain and gold refineries operation due to COVID-19 outbreak. The crypto exchange later pointed out that the Bitcoin algorithm is still working to generate 12.5 Units of Bitcoin in every 10 minutes, thus keeping the supply intact, unlike gold.

“Today, Bitcoin’s rate of new supply is ~3.6% per year and will soon drop to ~1.7% on May 12th, setting it on par with gold’s historic scarcity,” Coinbase wrote.

The blog post also highlighted the return on the investment aspect of Bitcoin and compared it with gold. According to Coinbase, in terms of return in the year 2020, Bitcoin has outperformed gold and S&P 500 where Bitcoin has a +20% return while gold and S&P 500 have +12% and -8% returns respectively as of April 29, 2020.

Image via Shutterstock

University of Sussex Researchers Say Blatant Market Manipulation is a Disaster to Traditional Safe Havens

The University of Sussex Business School recently published an analysis indicating that widespread market manipulation is a serious problem that regulators should deal with so that to confront false prices and avoid distorting the minds of investors.

According to the report, the COVID-19 pandemic has created huge volatility in global financial markets. But as one might expect, prices of safe-haven assets like Bitcoin and gold are not surging, a problem that is caused by large-scale and intense manipulation.

Insider dealing and market abuse

In recent months, the CryptoMarketRisk team at the University of Sussex Business School has been tracking trades on these markets and have identified massive dump and pump on copper futures, huge sell orders on gold futures, and large spoofing orders on key cryptocurrency exchanges.

The team identified that some single trade on COMEX has been so huge as to move prices, which is a clear contravention of US laws on market abuse. The COMEX, commonly known as The Commodity Exchange, is a division of the New York Mercantile Exchange, which trades futures in metals like aluminum, silver, gold, and copper.

The rampant market turmoil implies that regulators like the Commodity Futures Trading Commission (CFTC) have a lot of work to do as large-scale manipulation of such markets remain below the surveillance of regulators.

Carol Alexander, a professor at the Business school said, “As funds flow out of equities, one would expect demand for gold and Bitcoin to increase. But this time around, safe havens have behaved completely differently. Gold and Bitcoin have fallen at the same time as US equities. As the S&P 500 crashed in March 2020, gold had its worst week in eight years when it should have been the best, because of massive shorts on COMEX gold futures. Bitcoin has also been driven down by some pretty obvious manipulation bots on the unregistered crypto derivatives exchanges, especially BitMEX.”

Alexander added that the world is experiencing financial market manipulations on a frequency and scale that have rarely been witnessed before. The professor mentioned that a few powerful market players lack integrity, a phenomenon causing a major financial market meltdown of the current global economy.

Beyond those placing the trades, the biggest beneficiaries of such market attacks are holders of US assets and US dollars. These become the key sources of positive returns for global investors attempting to curtail the recent trend of some central banks to diversify their reserve holdings away from the US dollar.

Bitfinex and tether face market manipulation class-action lawsuit

With the expansion of crypto markets and also the existence of several sellers and buyers who are looking to gain from their trades, manipulation has taken a new display. Forgers are able to manipulate the trading activities of the crypto market and provide a false display and mislead investors and encourage them to buy their digital assets. Manipulation is an obstacle to market depth and a serious concern to investors.

Last year, New York-based legal firm Roche Freedman filed a lawsuit against Tether and Bitfinex for crypto manipulation and creating bubbles to profit from boom and bust cycles they created. The lawsuit stated that Tether and Bitfinex were involved in money laundering, pumping, and dumping cryptocurrencies, and engaged in a sophisticated scheme to defraud investors. It is, therefore, upon regulators’ responsibility to protect crypto consumers and investors and promote an environment of innovation to maximize the potential of blockchain technological advances.

Image via Shutterstock