10th May 2024 > > The UK.

tl;dr

The UK is unknowingly encouraging UK investors to load up on cryptos.

Market Snap

Market Wrap

Two months of sideways movement doesn’t look like it’s going to change anytime soon.

Curious Cryptos’ Commentary – SAB 121

Wall Street is limbering up for another go at 40,000. Risk assets can reasonably be described as being on-fire (10% stock return in four months is not a common occurrence). But then I check the bond markets and see that 2s/10s remains inverted by 36bps, making a mockery of my understanding of markets after decades of experience. Best I stick to the simple stuff and just buy cryptos.

Curious Cryptos’ Commentary – Hong Kong BTC ETFs

The recently launched ETFs in Hong Kong now own as much BTC as has been mined since the ETFs were launched.

Curious Cryptos’ Commentary – The UK

I feel I must restate once more that the CCC remains – as ever – fiercely apolitical. The editorial and journalistic team based as CC Towers is a model of how to be politically unbiased, one that the overlords of the BBC could learn a lot from.

However, we cannot avoid discussing politics for a number of reasons.

In the US, the polarisation between the two different strands of political thinking in support of, or a wish to deny, financial freedom for individuals is jaw-dropping to watch. Elsewhere, the political decision-making abilities (ahem) and policies of those in power, or who might be in power, directly affect the scale and speed of the crypto revolution.

The CCC can be critical of actions and words that are not in favour of cryptos, but our objective is not to be crypto-impartial. The CCC gives credit where credit is due. We have often praised the EU for MiCA, for providing global leadership in the subject of crypto regulation. It is hard to think of any other activity or purpose in which the EU has been quite so excellent, but that does stop the CCC appreciating the work of the EU in this particular area.

Now we have that cleared up, let us crack on.

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The UK is a particularly unwelcoming environment for crypto supporters and crypto businesses. There is unlikely to be any change to that stance anytime soon.

But UK politicians are inadvertently and unknowingly encouraging UK investors to buy USD denominated assets. Apart from buying barrels of oil to store in your garden (about which your local council’s environmental officer is going to get upset) then really your choices are limited to buying USD denominated stocks, and cryptos, which are priced in USD, though you can use any fiat you like.

But why do I make this claim? If you read the comments made by Andrew Bailey, Governor of the Bank of England, and those in response from Jeremy “not my real surname but this is a friendly family publication” Hunt, current Chancellor of the Exchequer, you will see what I mean.

Bailey failed to understand that printing money in an open economy leads only to asset inflation, making the rich richer and the poor poorer. Bailey failed to understand that printing even more money in a closed economy (aka lockdown) would lead to commodity inflation. Bailey also believes that UK interest rates can affect commodity prices and supply chains globally. Indeed, his only achievement of note is to be even more incompetent than his predecessor Mark Carney, a feat no-one ever thought remotely possible.

Bailey chose this week to keep UK interest rates at 5.25% even though he said he expects inflation to return to the mandated level of 2% next month or soon thereafter. In what world does that make sense to anyone? If you want to create an environment that could beget a recession beginning just after the next Labour government takes power, Bailey is your man.

In response Hunt stated he did not want to see interest rates be preemptively lowered, ministerial code for “Be a good boy and get cutting, I am your political master”. At least Hunt is advertising the fact that central bank independence is a mere façade.

What all this means is that there will likely be a series of panicky, and deep, interest rate cuts from June or July onwards nicely timed for the general election. More importantly, as a result the pound’s future prospects versus the dollar look rather unenticing.

Which is why you should consider pivoting towards USD denominated assets. As an example, over the last year BTC is up 130% in dollar terms, but 300% in Turkish Lira terms. I doubt even Hunt and Bailey can trash the UK economy as badly as Turkey’s leaders in the time remaining to them, but the point remains valid nonetheless.