Recently, global stock markets have plummeted, U.S. stocks have triggered a second meltdown in history, 10-year U.S. Treasury yields hit a record low, crude oil plummeted by 30%, price wars began, gold oscillated, Bitcoin continued to fall … Is the global economic crisis coming? What about the blockchain? Who will become a safe-haven asset? How do ordinary people do asset allocation?
On March 12, Babbitt's SheKnows column invited Cao Yin, Managing Director of the Digital Renaissance Foundation, and a wealth history researcher, and financial rich self-media blogger Road Rich, to discuss the global economic situation and keep our wealth from shrinking. Click the link to watch the live broadcast: http://t.cn/A6z4G7tS .
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The following is the actual record:
Global assets have plummeted, is the economic crisis really coming?
Q1. The epic collapse of crude oil this Monday, where will oil prices go? Will the Saudi crude price war have a conductive effect on other assets?
Cao Yin : International oil and gas market trade is dominated by long-term agreements. Russia and OPEC only made strategic decisions to increase production and reduce prices and lock in long-term customers in advance, after seeing the prospect of a global recession. In other words, Russia and OPEC believe that there will be a long period of hardship in the future, so they will cut prices and lock in customers in advance. According to the latest data, the crude oil price war has reduced the oil and gas capital expenditure plans of American companies a lot. However, oil and gas is a very important industry in the United States, and there are many industries on which the upstream and downstream industries depend, which will have a substantial impact on the US macro.
In addition, international financial institutions also have a number of risk exposures on oil and gas assets. The general debt default of oil and gas companies will inevitably cause local systemic financial risks. Also, the fiscal revenue of some countries is highly dependent on oil and gas, such as Russia and the Gulf States. If the oil and gas price war becomes a coward game, everyone will wait for others to passively clear. Those involved in this game can only clenched their teeth to the end. The continuous deterioration of the domestic financial situation is the price of this cowardly game. This may lead to a sharp decline in the national debt of the relevant countries, and may even lead to a default of the national debt as in 1998. However, cheap crude oil will also reduce the CPI of oil importing countries accordingly, thus providing more room for countries to relax monetary policy in response to the epidemic.
So to summarize, the plunge in oil prices will be transmitted from multiple channels such as capital expenditures, financial markets, and national debt .
Rich man on the road : Of course, the collapse of oil prices was caused by the war between Saudi Arabia and Russia, but it is also possible that they have considered the slump in global crude oil demand. The slump in crude oil demand is affected by two factors. To superimpose the popularity of electric vehicles. If the price of crude oil is extremely low, it will also be transmitted to U.S. stocks, because a significant portion of high-yield bonds (commonly known as junk bonds) in the U.S. stock market are issued by shale oil companies. The oil price is too low, and shale oil companies cannot get cash flow. This will lead to bond defaults, and then US stocks will have a series of problems. Q2. Does the recent plunge in US stocks mean the end of a ten-year bull market, or is it a short-term technical correction?
Cao Yin : This plunge is both sudden and inevitable. The epidemic was unpredictable, but US stocks rose for ten consecutive years without a decent adjustment. At the same time, after the United States entered the rate cut cycle last year, it indicates that the US economy is no longer strong and the dollar index has weakened. The consensus of the long US stocks has been crumbling. As for whether we will lead to a downward trend or a short-term technical correction, it depends on whether Europe and the United States can control the epidemic as soon as possible before economic shocks deteriorate into financial risks, and a wartime mechanism must be activated. I emphasized with my European friends a long time ago, THIS IS A WAR !
However, the capital market can also see if Europe and the United States will launch QE. However, the U.S. stock market does not collapse, there is no reason to start QE. Anyway, this round of epidemic crisis is also a great test of the existing central bank's monetary policy system, but I am not optimistic.
Finance Minister Lu : I started to sing short U.S. stocks from the end of 2017. When I persisted for 3 years, when I could n’t continue, it finally collapsed. The key to US stocks still depends on the epidemic situation. If the epidemic eases or gets better, US stocks will not collapse, but if we analyzed just now (I think there is a high probability that this is true), then it is the moment of US stock market crash. I think the logic of short US stocks is the shiller price-earnings ratio and the Buffett indicator (stock market real value / GDP). Q3. Is Bitcoin bitcoin diving in recent days? How is its market affected?
Cao Yin : Even though Bitcoin has plummeted recently, this year's earnings are still positive, while US stocks have fallen by 30%. The recent performance of Bitcoin is the same as that of gold. There is an influx of funds and an outflow of funds. However, at present, in the eyes of most investors, btc is still a high-risk asset affected by the herd effect. Therefore, short-term speculative funds have recently flowed out. More.
However, from a logical point of view, btc's hedging is not in its value stability, but in its risk irrelevance . BTC is not so much risk safe as Risk irrelevant, which means that the fundamentals of the external world are not related to the BTC of native assets in the digital world. Crude oil, metals, stocks, affected by the external world supply and demand and profit fundamentals, BTC is not affected. Therefore, it is optimistic that BTC can quickly return to the average after this shock. Bitcoin, like viruses, only quietly acts according to its own logic.
The rich man of the road : Teacher Cao's term "risk irrelevance" is used very well. Bitcoin is an alternative asset. It also has its own price operation logic, but it cannot be classified as risky or non-risky assets. I am very personal Optimistic about the future of Bitcoin.
Bitcoin is a brand-new social experiment. In fact, if the epidemic continues, I think the value of Bitcoin is likely to rise, because Bitcoin's transfers and transactions do not depend on actual circulation, and there are enough people to trust .
According to my own system analysis, the price of bitcoin hit a new low recently. Without leverage, now is a good time to start . Q4. The stock market, crude oil, and bitcoin have all fallen sharply. If you are going to buy a bottom, which one do you choose?
Cao Yin : Ethereum. To be precise: ETH, DOT, Acala, MKR.
I never move the BTC, so why bother with the bottom line, the BTC in the wallet is a source of confidence and wisdom . The reason why ETH is worth a dip is because BTC essentially does not create wealth, but stores value ; however, Ethereum and Boca Networks, as infrastructure, can create value . Therefore, the best arrangement is to introduce BTC into the infrastructure of Ether or Poca, and DeFi projects like Acala are for this purpose. BTC is gold, Acala and MakerDAO are the Bank of England, Ethereum and Boca are the financial system, and the Trinity.
Rich man on the road : I still choose Bitcoin and bch. Q5. Global assets have plummeted, and US 10-year Treasury yields have hit record lows. Is the economic crisis really coming?
Cao Yin : Let's start with the conclusion. So far, the main cause of the epidemic has been a substantial contraction of both the supply and consumption sides, which has brought about economic shocks, and there has been no financial crisis .
However, if the epidemic continues and the relevant countries do not have unexpected relief measures, a large number of companies and individuals will go bankrupt and massive debt defaults will cause global systemic financial risks. Moreover, if you really reach that point, the financial crisis will be far greater than the last subprime mortgage storm, because the defaults caused by the epidemic will occur in various industries and countries around the world and will resonate with each other, instead of spreading from a single point like 08 . Even more frightening is that the epidemic may bring new black swans. If the epidemic causes catastrophic public health events in other countries, it may cause political turmoil in some countries. Once it occurs, it will undoubtedly bring new shocks to the already stressed global growth prospects.
Finance Minister Lu : I generally agree with Mr. Cao. However, if the concept of "crisis" is not accurately defined, I actually think we are now in the primary stage of crisis . You mentioned that oil prices plummeted 30% in one day, U.S. stocks fell sharply, and U.S. Treasury yields were at new lows. These are all manifestations of the initial stage of the crisis. As Teacher Cao said, if the epidemic continues to ferment, the entire world economy and finance will Being dragged into the water. So, the next thing is to see how the epidemic develops. This round of crisis, no one expected to be initiated by a virus. And I think that if the world doesn't take it seriously, our situation could all get worse.
Hedging, how reliable is Bitcoin?
Q1. In the face of the current turbulent situation, everyone went to buy US 10-year Treasury bonds with record-low yields, but the price of gold fell into shocks. Why did its safe-haven nature disappear?
Cao Yin : The hedging nature of gold is inherently relative . Gold not only has a hedge function but also a highly speculative financial asset. Therefore, when facing catastrophic risks like the New Crown epidemic, low-risk appetite funds will withdraw as gold and enter safer assets, such as US debt, Japanese debt, and bank savings. But at the same time, the funds originally in higher risk assets, such as the stock market, will enter gold, and once they go, it will cause the price of gold to fluctuate. Moreover, the risk appetite of funds has been changing with changes in the external environment. So this shock will continue.
Rich man on the road : For all assets, hedging or not, the key is to look at his own logic. The core of the price of gold is related to the US Treasury bond yield-inflation expectations. When the inflation expectations have not yet risen and the Treasury bond yields have continued to fall, gold has no risk-avoiding properties. The hedging is because of fear of currency issues. When the epidemic came out, everyone found that they needed cash, so they couldn't move gold. So the credit of paper money has strengthened! However, this is the beginning of the epidemic and may not be the case in the future. Q2. Bitcoin and gold, because they are often compared together, do you think their underlying logic is consistent? Is there a competitive relationship? Will Bitcoin replace gold as the next-generation safe haven?
Cao Yin : Both values are supported by consensus and trust , or belief. But gold has 10,000 years of trust, and BTC has only 10 years of faith, which remains to be tested . But BTC is more convenient to trade and use than gold. You ca n’t take ten kilograms of gold to run around, but you can take 21 million BTC to take a bath, and BTC has its own infrastructure. Gold trading and mortgage financing also depend on Reliable centralized infrastructure. Moreover, in addition to BTC, there are Ethereum and Boca as the financial layer of BTC. Moreover, in addition to BTC, there is this Ethereum and Boca, as the financial layer of BTC, much more advanced than gold.
Rich man on the road : The underlying logic of gold and Bitcoin is very similar, it is the most useless thing, but no one can increase or decrease it at will. I tend to think that the two have a competitive relationship, but the current market value of Bitcoin is too small to form an effective competitive relationship. Only when the two become rivals of the same level can we say that there is a substantial competitive relationship. Gold is one of the strongest non-government manufacturing and control of consensus, and Bitcoin consensus needs to continue to be strengthened. Q3. What impact will the macro economy have on the Bitcoin trend? Can Bitcoin get out of the independent market?
Cao Yin : What we are seeing now is the withdrawal of speculative funds that were expected to be withdrawn from BTC in the early stage, but the risk neutrality of BTC will attract diversified allocation of funds and the true believers of BTC. So the short-term correlation, the long-term will inevitably be independent . Bitcoin is like a buoy on the sea. When it is low, it falls quickly; but when it is high, it rises fast.
Now in the period of global panic spread, the liquidity on the market suddenly disappears, but the liquidity will always come back, and the government will provide more liquidity, and then the flooded liquidity will blow btc into the sky . Q4. How do ordinary people do asset allocation? How to reduce risk?
Cao Yin : In the early morning of this year's New Year's Eve, I sent a video New Year's message in my circle of friends. The vast majority of individuals and countries in the world are not ready to deal with the changing future. That seems to be the case now. As Teacher Lu said, for individuals, the most important thing is to update their cognition and adapt to changes.
In addition, I also said in the New Year's message that the next decade, the more knowledge, the more stupid. This is not to advocate anti-intellect, but to tell everyone that the paradigm has changed and can no longer depend on the path. It is time to get off the tree Walked upright.
Therefore, my suggestion is that it is difficult for individuals to avoid risks, so raise awareness and adapt to risks .
Finance Minister Lu : I think it is better to have a less confident spirit for the future. Bitcoin, Ethereum, bch, bsv all save a little bit, of course, Renminbi, dollar also have to save a little bit. The core of asset allocation is, in fact, one's own perception . No one can truly outperform others forever.
If the global economic crisis, what will the blockchain do?
Q1. What is the impact of the new crown epidemic on the global economy? How long is the impact expected to last?
Cao Yin : At present, it is mainly the economic shock caused by the simultaneous disappearance of both supply and demand. However, as the epidemic continues, if the relevant countries cannot correct their attitudes and immediately respond to the epidemic with a wartime mechanism, then tsunami-like global financial risks are at hand . This epidemic is different from the last sars. The last test was human immunity. This test tested national mobilization ability, governance ability, and civil organization ability. Its requirements on the state and government are no less than a general one. War . However, I have run through many countries around the world, especially in Europe, and I am not optimistic about the mobilization capabilities of governments in most countries. As for how long the epidemic will affect, this is hard to say. After all, we are not public health experts.
Rich man in the road : I personally think that if the epidemic is as hot as sars and disappears, this is a hazard for us human beings; but if the worst case happens, no one can say what will happen. When the epidemic will end, this is really a question that no one knows, but now the attitudes of European and American countries to the epidemic are too scornful, and it will make a big mistake. What Teacher Cao said just now is to start the wartime mode and learn from China. Q2. What are the swords of Damocles hanging on the head of the world economy? What are the best and worst effects possible?
Cao Yin : There are many swords of Damocles on our heads. The core problem is that fundamental problems have arisen in human society . Individuals have lost their self-reliance, increasingly rely on the government, and demand more and more, and most governments lack the ability and spirit to take responsibility and take care of all people, which has caused the seriousness we can now see around the world. Distribution imbalance. The gap between rich and poor nations, the gap between rich and poor in ethnic groups, the gap between rich and poor in regions, and the gap between rich and poor across generations are all widening. In the end, it will inevitably lead to a serious political crisis, and the epidemic is only a catalyst for exacerbating this crisis. We can imagine that the worst result is that everyone will shake the pot together, go crazy together, and a local or even global war will occur. Hopefully not.
Rich man on the road : It is possible that the US stock market's plunge is affected by the US election, but for now, the number one influence is the epidemic. The worst possibility is that the epidemic swept across the world like the 1918 flu, the medical systems of various countries collapsed, and then a large number of people could not be treated and died (the mortality rate may be higher than the war), and the entire world was plunged into an economic depression. The best thing is of course that the epidemic disappears naturally in summer. Q3. At present, governments of various countries have begun to respond to policies, such as cutting interest rates. Is it expected that there will be stronger measures next? Will the era of negative interest rates come?
Cao Yin : If the European and American countries can't even defeat the virus, it means that the society is suffering from illness and QE is not far away. Behind the negative interest rate is the government's great fear of falling into the deflation trap, and the negative interest rate has come . Looking at the auction of German government bonds last year, investors with negative interest rates and zero interest rates rushed to buy them. The question now is how much negative? And when business savings will fully enter negative interest rates.
As for whether China will enter a negative interest rate, I just want to quote three major points from Sun Guofeng, the director of the central bank ’s monetary policy department in his 2018 work paper: First, the central bank can implement a significantly lower zero interest rate policy in response to a deflationary recession; second, In the long run, due to the lower natural interest rate, the monetary authorities can incorporate the negative interest rate policy into the normal monetary policy toolbox. Third, the central bank's digital currency facilitates the implementation of the negative interest rate policy, so the central bank should accelerate the development of the central bank's digital currency.
Finance Minister Lu : I think the crisis this time was caused by a virus. Negative interest rate and negative interest rate are actually very minor. Both the government's fiscal policy and monetary policy have failed. In addition, entering the era of negative interest rates or zero interest rates also illustrates another problem. Human technology is indeed very developed, and the resources required for real life are extremely rich. Therefore, currency is a representative of wealth, and it can be produced by the government at will. Of course, it is not so scarce, and there may even be nowhere to invest. Q4. Each round of economic crisis is often accompanied by the bursting of at least one asset bubble. What are the assets with the biggest bubbles? For example, stock market, property market, Bitcoin?
Cao Yin : Some people say that US stocks, Japanese debt, and China Real Estate are all bubbles. But what is a bubble? Bubbles arise from blindness, bursting from panic, essentially amplifying emotions, and the result of the herd effect. Once burst, they will not resurrect within a short time. For now, Bitcoin is definitely not a bubble , because Bitcoin has skyrocketed several times, but it is still alive. Moreover, the number of accounts holding btc has been increasing. According to the latest data, there are 795,000 addresses holding more than one btc, and more than 2.97 million addresses holding more than 0.1 bitcoin. If BTC is really a bubble, it is definitely a bubble blown by graphene. In fact, the fiat currency credit and the things behind the fiat currency credit are the foam.
Rich man on the road : Real estate in US stocks and Japanese bonds is not so much a bubble as a bubble in the fiat currency system, a bubble under the government's control and since then . After all, it is the put options from the government and central bank that blow up these bubbles. In terms of Bitcoin, I agree with Mr. Cao. Q5. Is the digital currency market comparable to traditional financial markets? The macro economy is not good. Will the development of the blockchain industry be affected, such as business landing and investment and financing?
Cao Yin : The problem with digital currency now is that the endogenous economic cycle of the digital world has not yet been formed . Therefore, digital currency assets can only be priced in fiat currencies and rely on the infrastructure of the fiat currency world. influences. When will 1eth = 1eth, not 1eth = 180usd, be unaffected by the turbulence of the outside world.
Rich man on the road : If there is a problem with traditional finance, other options will be considered at this time. At present, only the blockchain is a technology that can really improve the existing financial system. So, my point is just the opposite Because the macro economy is not good, blockchain technology is just needed . Therefore, I personally think the future of blockchain is very optimistic. Q6. In addition to controlling with the "visible" hand, what other factors are really likely to drive economic recovery? For example, the development of new technology and new industries? Is it possible for the industrial blockchain to play a role?
Cao Yin : Population, management, and technological innovation are all important factors of production. These are developing, and the recovery will always come back. Looking at the major adjustments in US stocks every ten years, the world has not ended because of this; the big drop is actually cleared regularly every ten years. Big chance .
Optimistic about industrial blockchain, especially in developing countries, such as Southeast Asia, Africa and other places where centralized forces are relatively weak. Therefore, my suggestion is that the industrial blockchain should also adopt the strategy of surrounding the city by the countryside . To the periphery, the service really needs it .
Rich man in the road : I also think that a cycle has arrived. In particular, under the influence of the epidemic, I have more confidence in blockchain technology than all other new technologies.