Ethereum is down nearly 15% today, while bitcoin is down around 10%, bringing out to play, at the end of the greatest summer this space has seen, our little bear friends.
They’ve taken charge in the past few days, wiping out some $40 billion from the global digital currencies market cap. Sending it down to $134 billion from around $170 billion. While volumes, interestingly, have slightly risen to $5 billion.
The question in everyone’s mind is whether this is the beginning of a bear market, or a cooling down known as a bear trap.
The answer, of course, we don’t know, but in the short term it appears sentiment has changed, for now. That’s most probably because of “likely-true-rumors” China is to ban crypto-exchanges.
Whether they can actually do so, considering just how massive the country is, remains to be seen. One loophole, for example, if they are to indeed allow off-the counter trading, is to just set shop in major cities, like Shanghai and Shenzhen, and sell them directly to the public.
If demand is there, pubs or cafes might start not just accepting bitcoin, but selling it. ATM machines, of course, could be set up everywhere.
So, in that old tradition, this could actually be good news. Instead of two-three main exchanges, the bitcoin/eth buying and selling activity could be dispersed, making the enforcement of outright criminalization as good as impossible.
That’s especially the case if Yuan does considerably devalue. The elite will certainly want a way out. The smarter of their citizens will too. For money, they’ll stay in queues and many of their citizens will risk imprisonment.
Their mining industry could power all these shops directly. The authoritarian government, therefore, would have to take the step of shutting them down, but this is China.
There have already been many reported cases of miners arrested for stealing electricity. That’s outright criminal behavior with their arrest supported by the public.
Imagine how many more will completely flaunt their law if the public actually supports it and those engaging in it see nothing wrong in conscience. To the opposite, they might even see it as their duty.
Moreover, if the electricity company is getting hundreds of thousands a month, do you think they’ll really turn to authorities?
The state simply can not enforce a law that does not have public support. Citizens will just call them bluff and ignore it, giving them no means of enforcement. Especially where money is to be made and the activity is objectively fully harmless.
So once they do get around to announcing their ban, we might soon after learn that they have unbanned it, or it’s not a ban at all. In a typical Chinese tradition, with their ambivalence to this space now a meme in itself.
That brings us to the old bankers, who apparently find it good publicity to align with authoritarian regimes and claim they told us so, the state will criminilize us all.
It all coming from Jamie Diamond makes it somewhat delicious. The old man has been crying about bitcoin for years now. He could have become a lot richer than he already is had he joined in when he first started crying, but old ways and their old foolishness never learns.
Hayek tells us to expect it. So while some bitcoiners may see an attack, we see an affirmation that this is all going in the right direction and as Hayek foresaw.
Especially because the general public will most likely do the exact opposite of anything an old banker tells them. Even his daughter is doing so.
“The older generation of bankers would probably be completely unable even to imagine how the new system would operate and therefore be practically unanimous in rejecting it. But this foreseeable opposition of the established practitioners ought not to deter us. I am also convinced that if a new generation of young bankers were given the opportunity they would rapidly develop techniques to make the new forms of banking not only safe and profitable but also much more beneficial to the whole community than the existing one.” – Hayek in the Denationalization of Money.
So we look to the young generation, his daughter, and the many young bankers that have fully embraced this space, expecting nothing more nor less from the old generation than what Diamond presented.
We also look to the Republicans, who are closely aligned with this space ideologically so favoring the free market, and to the conservatives in Britain.
And when we look at the whole picture, we see that we have never been stronger, but whether this is a bear market or a bear trap in the short term, we don’t know.