What is Bitcoin’s place in the macro? – Bitcoin Magazine
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“Fed Watch” is a macro podcast, true to bitcoin’s insurgent nature. Each episode we question mainstream and bitcoin narratives by examining macro current events from around the world, with an emphasis on central banks and currencies.
In this episode, Christian Keroles and I go over several charts and provide market updates on bitcoin, the dollar index (DXY) and the Hong Kong dollar. Next, we examine the worsening situation in Pakistan and ask the question: “Is it the next Sri Lanka?” Finally, we discuss the Taiwan/China situation, and I read several key excerpts, one from Chinese Foreign Minister Wang Yi and the other from think tank expert Wang Wen.
Bitcoin and other currencies
We open by looking at a weekly chart of bitcoin. We’ve done this for the last few shows because it’s a good way to anchor our conversation. As you can see below, the price has been very stable, sitting on the fence relative to the volume-for-price indicator on the right.
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If we zoom out, the last period of weekly candles corresponded to the time of recording back in September-October 2020, just before the monster rally from $10,000 to $40,000. Of course, we are not saying that it will happen again exactly like this, but it is possible.
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The Dollar Index (DXY) is the other major currency we’re taking a look at today. I think it is important to check the dollar almost every episode because it is the main competition for bitcoin.
It seems like it has peaked for now, but there are no signs that it will crash. Instead, it is most likely that the dollar will form a new elevated area above 100 in the next few years. This is similar to how it formed a new higher area from 2015 to 2021.
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I would add that a strong dollar is not bearish for bitcoin. Perhaps initially a strong dollar is correlated to lower bitcoin, but after the dollar has stabilized in a higher range that is when bitcoin has traditionally rallied.
Below is a screenshot from the Hong Kong Monetary Authority website. Every month they release statistics on their foreign exchange reserves, which they use to stabilize the peg. On August 3, 2022, I speculated that maintaining the Hong Kong dollar (HKD) is quickly depleting their reserves. However, according to this press release, they only used a little more than 1% of their reserves in July to maintain the bond. That means HKD is probably able to keep the pin (if they want to) for several years.
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Pakistan on the brink
The development situation in Pakistan has many things in common with the recent collapse in Sri Lanka. In the podcast, I refer to their involvement in the World Economic Forum (WEF). Pakistan has received hundreds of millions of dollars in funding to revamp its agricultural sector and add national parks.
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Another similarity between Pakistan and Sri Lanka is the important role Chinese funding has played over the past decade. Sri Lanka lost control of its major port because it could not repay Chinese loans, and now Pakistan is saddled with approximately $20 billion in high-interest loans to China and Chinese companies.
Pakistan has just two months left in its budget and is desperately courting new lenders. The Chinese have turned them down, the Arab states are thinking twice. The only place to turn is back to the IMF – and that means tough austerity.
Perhaps unsurprisingly, both Sri Lanka and Pakistan are important nodes in China’s Belt and Road Initiative (BRI).
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As I have said on many occasions, the BRI is doomed to failure. They try to make places and routes economically viable where the long span of history has not already made itself. No amount of money can overturn millennia of culture and eons of geography.
Once again, one of the important links in the BRI has been bankrupted by the Chinese central planners.
Taiwan/China situation
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I have been discussing the Nancy Pelosi situation and the Chinese response for several days on my Telegram live streams.
In this episode of the podcast, I read some excerpts from a well-known Chinese minister and a Chinese think tank expert. You can read Wang Yi’s full comments here. Suffice it to say for this article, he repeated “One China” many times and said that the US is the side trying to change the status quo. He also had very harsh words for Tsai Ing-wen, the sitting president of Taiwan. He said she “betrayed the ancestors.” In another translation, I heard that Yi’s original comments also said that she betrayed her ancestors [and her race].
The next comments I read were from Wang Wen, executive dean of the Chongyang Institute for Financial Studies at Renmin University of China (RDCY) and executive director of the China-US People-to-People Exchange Research Center. He tries to explain why China’s response was so weak and that China should not provoke an armed conflict with the United States until it can “surpass the United States in terms of economic power, achieve economic and military strength comparable to that of the United States, and develop an overwhelming capacity to to counter international sanctions.”
Sounds far away to me. I would simply advise the reader not to get caught up in fear-mongering rhetoric about Taiwan and China. They are disciples of Sun Tzu, who said “act strong when you are weak.” Wen also quoted Sun Tzu.
“A major military clash with the United States is not the goal of China’s foreign policy, nor is it the path to a better life for ordinary people. Remember what Sun Tzu wrote in The Art of War: ‘Do not act unless there is something to gain 非利不动; do not use military force without certainty of victory 非得不用; don’t go to war unless the situation is critical 非危不战.’”
We ended the podcast talking about the upcoming release of consumer price index data and other things relevant to bitcoin. All in all, a must listen episode!
That does it for this week. Thanks to the viewers and listeners. If you like this content, please subscribe, review and share! Don’t forget to check out Fed Watch Clips on YouTube. Liking and sharing videos is the best way for us to reach new people.
This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
