Bitcoin Recovers After Dip to $40,000

Eth had an even worse night, with it dropping below $3,000 and continuing to fall until $2,800 held. It’s now back above $3,000 as a market wide recovery or relief rally takes hold.

During that Shanghai morning, Hang Seng futures dropped to as much as another -5%. Now they’re green at just about 0.12%.

What happened? Well, it’s not too clear. News from China can take some time to travel with some media there pointing out stock listed companies, like Tencent, have been buying up shares since September 17th.

Then Wall Street went out to reassure investors. Barclays, Citigroup, JP Morgan, Fidelity, UBS, and other analysts, were pretty much united in telling investors they don’t think this is a Lehman moment.

“The expectations of a broad contagion may be overdone. Clearly the impact on growth is there. But I think the key point here is I continue to believe this is not a moment like what we had in 2008. There has certainly been a subtle change of signal from the policy makers in China. A lot of that we think is already reflected in price,” Vishwanath Tirupattur of Morgan Stanley says.

China is on holiday with attention turning to Jerome Powell at the Fed and his carefully orchestrated concert of trying to please both the inflation hawks and the stimulus doves.

We’ve all heard inflation is at 5% now, but that’s over last year when there was a global depression. You’d kind of expect this therefore, and as far as Fed is concerned it may even be very good because there’s a lot they can do against inflation, but not really very much they can do against deflation.

In addition you’d think they’ll have a very difficult job of smoothing out the mass bond purchases as that may increase the level of interest paid by the government which would make the government poor.

So Biden is trying to increase taxes, by some $3 trillion if Democrats get ponies and unicorns, and that should go a long way towards reducing inflation, perhaps even too much.

All suggesting that Fed may keep on keeping on until the picture becomes a bit more clear both in regards to inflation and growth, with it now not very clear because it’s hardly one proper quarter into a potential recovery.

No surprises at the Fed thus, should be their motto, you’d think anyway. But it isn’t very clear whether we should expect any more non-surprises in the Indo-Pacific.

A new era is unfolding where America is not quite a superpower any more, at least not in the way it was, because it can’t quite totally dominate any longer in as far as its might is not so overwhelming that it would easily crush anyone it wants.

Instead it now needs allies, especially where it concerns China, which is surrounded by a sea neighborhood that if it united, it can even on its own stand up to China if it wants, but otherwise would be totally dominated.

So China naturally has used the pick them one by one strategy, bullying Australia for now months to make it kneel through economic sanctions of sorts.

Australia has now given them their answer in a big win for the island, with UK getting its global Britain as well while USA gets to show it does have not just some allies, but even a fairly direct foot into that whole maze of the South China Sea by selling Australia nuclear powered subs.

France though thought that direct foot was theirs, and now their whole strategy for the region is in disarray, or in a new opportunity.

America clearly has stepped on France’s interests by kicking them out of their partnership with Australia, and so the new question of our time: is the international order still on, or is it now each for themself?

You’d think a bit of both, with Australia still an ally of sorts and America, but this new world may be more a dance of alliances which comes with the huge danger of it unravelling as it did a century ago.

From a global perspective, this debacle may actually go more towards aiding peace than otherwise because a fully united EU-US in the maze may have led to a more provocative or aggressive USA at potentially huge cost.

So America has to be more tempered, while Europe has to learn that Europe’s interests are obviously secondary to America’s interest.

France also has to learn that when dealing with 2 billion people, one has to be extremely diplomatic. Indonesia is mostly muslim, as is Malaysia, both very fast growing economies and both potentially great allies for Europe because they are democracies.

Europe has Germany however which welcomed one million muslims escaping the war, so there isn’t much of a reason why Europe can’t have its own independent policy in the Asia Pacific.

All this comes back to bitcoin because geopolitics matters to the cryptocurrency, yet the unfolding here appears to be more an expected development despite the new era of new alliances that may include a Canada-Europe partnership.

Finally, El Salvador bought the dip and r/technology got to talk about it, as it often does nowadays where bitcoin is concerned.

Interestingly, the hive mind there is as if code boted to upvote bitcoin bad and downvote bitcoin good, with their arguments pretty much unchanged since a decade ago.

One of them did learn however that bitcoin transactions are now pretty much free on the Lightning Network. When you live in the past as it happens, you can’t see even the present let alone the future.

Yet they keep talking about bitcoin because things keep happening in bitcoin with the little boy now seemingly playing in macro.

As any kid trying to do physics, you’d probably get a bit puzzled at just what it is doing, and so here this little price movement is maybe more bitcoin figuring out just what this macro is.

Because it went down instead of up, and it went down presumably because ‘professional’ speculators see it as a ‘risky’ asset when individuals and those affected on the ground probably see it as a ‘safe’ asset when banks or fiat or in geopolitics the situation becomes a bit more unsafe.

Bitcoin thus has to kind of assert its independence and it may well do so if the market learns that although initially bitcoin might behave similar to stocks because those that have always traded stocks now trade bitcoin too, shortly after, bitcoin behaves very differently as it does serve an actual use on the ground unlike stocks which are more just speculative investments.

If bitcoin shows as much, you’d expect front-running during that ‘temporary’ window, and thus there wouldn’t be a temporary window at all.

But this temporary window is a bit new, so experience has to show whether it is indeed because of misjudgment by the ‘professional’ class, or whether that’s what you get with greater adoption.

Either way, bitcoin is growing and with growth do come changes, but not quite in essence. So just how much it is changing remains to be seen.