The Cypto-universe is experiencing what can only be described as a storm of epic proportions. Fueled primarily by warm positively-charged air coming from the launch of the Libra project, and cool negatively-charged air from the dramatic price volatility and speculation in the market. Contrary to some testaments, the likelihood of the former impacting the latter is about as much as the correlation between the price's of Bitcoin and avocados (see here). However, the coincidence of these two developments does speak to how they both capture elements of a massive, worldwide financial transformation, all happening at a time of rising global economic instability and uncertainty.
Let’s start with the mainstream global money movements over the next decade being channeled through a mix of Blockchain-era stable-money services that operate along a centralization-to-decentralization spectrum — from JPMorgan’s JPM Coin and the new Swift Blockchain project at one end, to Facebook's Libra project and more open-standard Crypto stablecoin projects such as CENTRE’s USDC at the other. And it would be safe to assume that as these projects grow in usage and adoption, so too will the demand for Bitcoin as the digital asset hedge of choice. Emphasizing this point was the recent news that the US banking giant Goldman Sachs reportedly wants in on Blockchain now more than ever, with in-depth research going into the concept of tokenization. For the Blockchain community this is Good, for the Crypto community is this Great? According to David Solomon, Goldman Sachs will be using the Blockchain to reduce its transaction costs, and improve access to and overall efficiency of services to clients. More specifically, providing greater transparency, speed of settlement, and more resilient compliance procedures. Such a move will put Goldman in line with JP Morgan, Fidelity, and Citi who have all made huge strides in the space. This is not to discount the fact that the incumbent bank has already backed stablecoin startup Circle, and toyed with the idea of launching its own over-the-counter Crypto trading desk. Yet, Goldman has failed to reveal what exactly they’re working on, and very few are waiting on baited breath. Progress in Blockchain and decentralised ledger technology has recently been so rapid to the point where news of a major financial incumbent signing on is treated as a non-event.
The wider point merges the above with significant global economic uncertainty stemming from US-China trade tensions and the significant capital flight out of China and Hong Kong. This new round of global economic uncertainty is occurring at the same time that Cryptocurrency and Blockchains are establishing themselves as key elements of the emerging financial architecture of the world. Shortly following the financial crisis of 2008, Satoshi Nakamoto posted his/her/their white paper to a select number of online cryptography experts, also known as cypherpunks. Little did they know that such an alternative model for global finance would shift the direction of large institutions and regulators alike -- with projects like Libra playing a critical role in elevating the profile of this new model. As the global economic and political stages continue to experience massive shifts caused by the vested interests of the few, so the instability independent benefits of digital assets and Blockchain are realized. As proven by the chart below indicating a strong negative correlation between Bitcoin and the S&P500.
Source: SFOX (Crypto Market Volatility Report: May 2019)