17th February 2023 > > Crypto adoption.

tl;dr

Crypto adoption in the financial markets will be revolutionary.

Market Snap

Market Wrap

A brief foray into the land of $25k was met with a wall of selling. Stocks had already taken a tumble a few hours beforehand as a reaction to a 19bps sell off in 10-years over the last few days. That lack of confidence in risk markets encouraged weak hands to panic sell at a price they could only dream of at the end of last year.

A decisive breach to the upside will be difficult unless economic data encourages bond investors to return.

Occasional Series – Milk Road does it again

https://www.milkroad.com/subscribe?ref=o5CmCFhBAK

Occasional Series – King Charles III

Royal watchers, and many others too it is true, will have seen so-called “protesters” holding up a series of placards spelling out “NOT MY KING” during a walkabout yesterday in Milton Keynes by the recently elevated King Charles III.

I can’t help but be convinced that the popular media narrative has got this story very wrong. And no, that is not because you can label me as an adherent to conspiracy theories. Let me explain.

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Any passport carrying member of the UK or of the 15 commonwealth realms has a Head of State in the name of King Charles III, whether they like it or not.

This is a fact that is indisputable, much like the fact that Isla Bryson has XY chromosomes and a penis. The latter is a fact of nature that Nicola Sturgeon has plenty of time to reflect upon now that her daily task list comprises no more than lobbying for a role as Head of Gender Equality at the UN (*).

Moving quickly on, in almost all situations I have learnt that at first one should give the benefit of doubt, and that one should take a stranger at face value.

With that approach in mind, it is clear to me that those holding up the placards are telling the world that their country of origin is a land that does not recognise Charles as Head of State, otherwise they would be telling porky pies. I refuse to label them as liars without very strong evidence beforehand to do so.

Which leaves one to ponder that it is remarkable that they have gone to such lengths to advertise their own personal situation (and seemingly huge frustration) of not having Charles as King.

After much thought, the only justification I can see for this huge effort of making placards, travelling to Milton Keynes, then getting in line to spell out their message, is that they want Charles to become Head of State of whichever country has issued their passport.

In short, it is clear they were not protesting against King Charles III.

They were protesting because they want more of King Charles III. Perhaps a rerun of the old Boston Tea Party with a slightly different outcome, for instance.

Honestly, the standard of news editors today is frankly quite shocking when they miss the central message sent by those legitimately exercising their democratic right to make the world a better place.

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(*) I kid you not. You cannot make this stuff up.

Curious Cryptos’ Commentary – We all love a bit of crypto adoption

Siemens, a large engineering company in Germany which has much greater public recognition on that side of Europe compared to this side, has issued a bond using blockchain technology.

Germany’s Electronic Securities Act – just two years old – allows companies to issue short-term debt of less than one year (for now) using the blockchain to not only bypass the need for physical paperwork (so twentieth century) but also without a centralised clearing house.

Investors in Germany and Italy, and to a slightly lesser extent France, are very familiar with bond markets.

The same cannot be said for the UK.

Though pension funds are usually stuffed full of gilts (how’s that trade working out?), most of the retail investors in the UK know only of stocks. And this is a phenomenon mostly unique to the UK. In the US for example, retail investors are very familiar with municipal bonds, along with Fannie Mae and Freddie Mac.

The point is that investors outside the UK will be much more interested in applying blockchain technology to bonds than your average Brit.

But breaking out of the mould is surely just one of the myriad reasons you are a dedicated follower of the CCC.

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The press release for today’s news is somewhat underwhelming (https://press.siemens.com/global/en/pressrelease/siemens-issues-first-digital-bond-blockchain).

I suspect its lack of glitz and glamour is probably a function of securities laws in Germany.

Despite this I sense Siemens are signposting a better future and better way forward for investors. I concede that is a tall claim but hear me out please.

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The first key point I note is this one right at the very end of the press release:

“DekaBank, DZ Bank, and Union Investment invested in the bond.”

Those with a passable knowledge of the German investor market understand immediately what this comment means.

The three banks mentioned in the statement are all heavily focussed on retail. Domestic banks in both Germany and Italy share many common characteristics (apart from solvency but that is a discussion for another day), particularly regarding the retail investor. Those three banks probably took down the entire holding of these new bonds to distribute to their retail network.

Their grip on the retail market has always been so strong that it would be pointless to put in the manhours to challenge their combined hegemony, despite the very fat and juicy margins they enjoy.

And it seems that even now – even with the application of blockchain technology – that their undisputed leadership remains intact.

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Which would be a depressing conclusion unless you happen to be a trader/salesman/manager at one of those three banks.

But this press release tells us that all is not lost. In the first paragraph it states:

“What’s more, the bond can be sold directly to investors without needing a bank to function as an intermediary. “

This is Siemens’ ambition.

To sell retail bonds directly to retail investors, cutting out the middlemen represented by DekaBank et al, reducing the cost to Siemens (good for their shareholders who are also mostly their bond investors) and good for the bond investors in terms of a better return.

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Blockchain technology is simply awesome.

Every day it improves everyone’s lives.