What else can Bitcoin bring us if we can't hedge?

Production | CoinVoice

Text | Simba

To push humans into an orderly information and data society, we must get out of the misunderstanding of the blockchain.

On March 18, the fifth time the U.S. stock market blew up, the NYSE at 11 Wall Street became the epicenter of a tremor, and there were crowds of fear and helplessness. Our familiar life suddenly entered an unknown rhythm.

The need for asset hedging is even more urgent. However, safe-haven assets have fallen, and gold, government bonds, and bitcoin are no exceptions.

Why is it like this? Can Bitcoin carry Nakamoto's dream?

The truth behind the plunge

Regardless of whether the Bitcoin believers acknowledge it or not, in the face of economic risks, Bitcoin's plunge has greatly reduced its reputation for resistance to risks. This is also a challenge to Satoshi Nakamoto's original intention to issue bitcoin-the fixed amount of bitcoin issuance is fixed, there will be no oversupply and no inflation, and there will be moderate deflation.

In short, Satoshi Nakamoto issued bitcoin to resist the risk of depreciation caused by the centralized currency of the government. But this reality, slap face. Why is this happening?

There have been many articles on the analysis of Bitcoin's plunge. CoinVoice tried to analyze the truth behind this Bitcoin's plunge from the reasons behind the plunge in US stocks and the depreciation of gold.

On March 12, Eastern time, the S & P 500 index expanded to 7%, triggering a second blowout within a week. Three days later, U.S. stocks melted at the opening of the market. After 15 minutes of trading suspension, the three major index declines quickly expanded. As of the close, the Dow closed down about 3,000 points, down nearly 13%, the largest one-day drop since 1987. The Nasdaq pointed to a closing down of 970.28 points, a drop of approximately 12.3%; the S & P 500 closed down about 325 points, a drop of nearly 12%, the lowest level since December 2018, setting a record just set three days ago.

Within ten days and four fuses, the three major stock indexes entered a technical bear market-stock indexes fell more than 20% from their recent highs, technically establishing a bear market, and the real bear market was a sharp decline in the market caused by the economic crisis.

Economists believe that so far this stock disaster has not constituted an economic crisis, has not caused a large number of banks, company failures and workers to lose their jobs, but the stock disaster is pushing the world to the brink of danger.

This phenomenon-level performance deserves vigilance and reflection. Regarding the cause of the fuse, Wall Street hedge fund manager's point of view may help us open up the mystery-more than 80% of hedge funds are using programmatic trading models for stock investment, which has also upgraded its influence on US stock fluctuations from "quantitative change" To "qualitative change".

Every time U.S. stocks experience a big unilateral plunge in recent years, there is always a programmatic trading model that fuels the situation. This is because the programmatic trading models of most institutions have a high degree of convergence in their trading strategies during the stock market crash.

For example, after the oil price plummeted on March 9th, the programmatic trading models of various institutions would collectively short the stocks of energy listed companies to profit, but when the stocks of energy listed companies fell sharply, the stock index fell, triggering a loss of the fund's other US stock portfolios At that time, the programmatic trading model will automatically initiate a reduction and hedging operation. As a result, a large number of US stocks are automatically sold by them, triggering a sharp decline in the US stocks and melting.

If it is said that the first fuse has a certain contingency, it can be blamed for programmatic transactions to fuel the flames. Why does the continuous occurrence appear?

This is about the "suicide" rescue of the US government. The Federal Reserve cut interest rates sharply, directly reducing the federal funds rate to zero, and starting a 700 billion-scale quantitative easing. This frightened global capital to flee, and plunged directly into a liquidity black hole.

Don't give money, what is the market afraid of? We use gold's abnormal performance to further explore the reasons behind the Bitcoin crash.

In the traditional gold investment logic, when the Federal Reserve cuts interest rates and starts quantitative easing when a risk event occurs, gold will rise sharply because of its hedging nature. Judging from the results, since March 9, the biggest drop in the price of gold was close to 10%.

Regression in accordance with the reasons for the decline in gold-liquidity tightening, deflation expectations, seemingly contradicts the US quantitative interest rate easing. But in fact, some indicators are already showing the correctness of this logic.

  • Since March 12, the interbank interest rate in the US dollar has increased by nearly 10 BP at different maturities, indicating that the cost of funds has increased.
  • In the case of epidemic fermentation and low interest rates, the rebound in the yield of U.S. Treasury bonds with hedging characteristics indicates that the market needs cash to sell Treasury bonds. Moreover, the main signs of European bond markets such as the United Kingdom, France, and Germany have shown similar signs.
  • During this period, the United States has cut interest rates more sharply than Europe and Japan (the euro and yen account for more than 70% of the US dollar index). The US dollar index has not only weakened, but has also rebounded by 3.6%. Demand increases.

Although the Federal Reserve has cut interest rates on a large scale, the federal funds rate is a nominal interest rate. If it enters deflation, the real interest rate will not fall by the same extent as the nominal interest rate, and it may even rise. If real interest rates are expected to rise, the price of gold will be significantly suppressed.

Comprehensive analysis shows that the market is expected to enter a deflationary cycle globally: weak macro demand and the double suppression of global supply and demand by new crown pneumonia, and since the OPEC + conference broke down, global oil prices have fallen sharply, which has made deflation expectations stronger, so the price of gold Suppression.

Ironically, the Federal Reserve ’s quantitative easing behavior has become a basis for judging the tightening of liquidity in the market, which has accelerated the panic mentality, leading to the sell-off of safe-haven assets, such as gold, government bonds, and Bitcoin.

Misunderstood blockchain

In 2009, Satoshi Nakamoto launched the first cryptographic consensus system, Bitcoin, so people knew the blockchain. However, the cognition and pursuit of the blockchain has led us to misunderstand the real foundation of the birth of Bitcoin-the crypto economy. Cryptoeconomics began in the 1980s. Cryptoeconomics is not a branch of economics, but more like a cryptographic application that takes economic incentives and economic theory into account.

This is why so many people pay tribute to the genius of Satoshi Nakamoto-the "incentive" part of the Bitcoin white paper that is often mentioned. But this also caused the crypto economy to be skewed by Bitcoin and the blockchain.

Although a reliable incentive structure has undoubtedly played a role in the successful use of Bitcoin, the more important role of cryptocurrencies still exists at the low tide of society and economy.

Digital currencies minimize the corruption and self-interest of third parties, but so far they have not fully coordinated the motivations of all parties on the network. Although the goal of the transaction is a win-win-I give you a dollar and you give me a good thing, but the ledger continues to record transactions in a zero-sum manner, subtracting a bitcoin (or dollar) from this private key, And add it to another private key.

In the world of crypto economy, digital currency does not retain this economic model.

So far, wealth has been measured by a combination of debt instruments and valuable limited resources, because commodities are limited. But the world has entered a new era-the departure between the infinite nature of digital products and the limited nature of fiat money, which can be concretely reflected in the revenue of information giants such as Google and Facebook. They can repeatedly sell an infinitely reproducible product (advertiser-related user information), and the secret power of digital currency is that it can also be infinite.

Therefore, it can be concluded that the blockchain misleads the crypto economy.

  • Blockchain conceals asymmetric cryptography. People pay attention to the use of resources for on-chain, chain-building, cross-chain, construction of various public, private, alliance, parallel, parent-child chains, covering up the important issues of asymmetric cryptography to solve information security issues and achieve information authorization significance.
  • Blockchain conceals distributed consensus. People pay attention to the chain structure and ignore the fundamental meaning of distributed consensus or decentralization. Alliance chains and private chains are prevalent.
  • Internet thinking restricts the crypto economy. The blockchain misleads the crypto economy, resulting in the vast majority of crypto economic projects designing and promoting crypto applications with the idea of ​​Internet products, hiding the private keys that most require user control, and dissolving the true power of crypto consensus.
  • I think mining is the only source of value. In fact, in the world of the crypto economy, user participation, including consumption and giving behaviors, is a way to contribute value.

As an example, a tramp starved to death in front of a supermarket. Because supermarkets use food as collateral, homeless people need to pay ransom to get it. This is the basic law of transactions in the current economic world. In the supermarket, there may be some foods that are not sold within the fresh-keeping period and cause waste of resources.

If in the crypto economy world, supermarkets do n’t take bananas as collateral, tramps walk into the supermarket and grab a banana, and the digital ledger will add points to the supermarket without subtracting any points from the tramp-tramp Will be fed, and the supermarket will have a history of providing wealth to the world.

You might be worried, what if this homeless man took all the bananas from the supermarket? Good design is needed here-the basic materials for subsistence will be designed to be non-scoring, non-subsistence food will require 10 points, and luxury goods may require you at least 100 points; hoarding behavior will not be rewarded, and giving will be rewarded .

Cryptoeconomics is used to resolve the crisis, and to promote humanity into an orderly information and data society, we must get out of the blockchain misunderstanding and return to the crypto consensus.

A new world gate is opening. The chapter of humans entering the world of crypto economy has just begun.

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