对冲基金兄弟1号徐翔，如上图所示，曾经是一个高飞的对冲基金经理，从来没有输过。有一天，他失踪了。 他被控证券欺诈后，现在坐在监狱，并在他几个月后复出。一些人担心比特币交易所负责人可能面临同样的命运。 但是，人民银行显示了怜悯。
在“友好”会议后，宣布无限期暂停比特币提款。 没有进一步提示何时恢复比特币提款。 价格下跌了一点，然后就被忘掉。 到上周末，比特币将以美元计算，创下新高。
通过取消杠杆和零费用交易的灵丹妙药，只有具有多元化业务线的交易所才能生存。 现货收益比特币交易只对最大的交易所（BTCC，Huobi和OKCoin）有利。 不在该列表上的交易所将很可能2018年前消失。
从较长的时间来看，过去三个月的发展是积极的。 但是比特币不会被监管机构“禁止”。 他们认识到底层技术的力量，并试图在现有的中国货币体系目标范围内使比特币合理化。
（交易平台/网站）只能在被部门允许之下称为交易所。 许多人认为比特币在线交易平台作为交易所。 这些实际上是两个不同的概念。
目前的炼狱将会在中国人民银行的调整过人民币后结束。平静必须保持到10月全国代表大会。10月以后，北京将开放中国人民银行，缓解压力和贬值。 在大幅贬值后，中国人民银行可以放松资本管制，届时逃离的中国资本控制的动力就会减少。 届时比特币提款将重新启用。
Mt. Gox的长期高位过后，我们正处在长期反弹的开始。这个反弹将完全重新评估整个加密货币的币值。Ether Market 最大市值为20亿美元。DASH将会继续攀升。三个具有超过 10 亿美元市值的加密货币是值得关注的。为山寨币喝采。
令人鼓舞的是，2017年的比特币反弹是实现波动性减弱。 上图显示了30天实现的波动率和XBT / USD价格。当中国人民银行首次打击时波动增强，但随后便下跌，比特币价值更超过$1200。
对于比特币，这个反弹是平静的。 投资者对此仍感怀疑。虽然价格继续攀升，仇恨者因为中国，监管机构扩大和缺乏合法性继续仇恨着比特币。当他们等待时候，别人变得富有。 结果，裂纹爆炸（也称为Fomo）阶段尚未开始。
另一个令人鼓舞的是期货合约所显示的相对较低的基准水平。 在第一季度，BitMEX比特币/ USD 2017年3月31日期货合约XBTH17，占最大直接交易的10％ – 13％。
自那时起，市场已经成熟。 然而，市场的恐慌将在 2017年6月30日 期货合约XBTM17的基差显示。即使有现金不断的抛售压力，进行套利的基础上，基差可以变的相当高，因为附带了 100X 杠杆。
零售比特币ETF被证明是难以进入监管领域。美国证券交易委员会发出了严厉的斥责，解释他们为什么不允许 Bats 改变交易所规则，而该改变如通过会允许COIN ETF挂牌。SEC给出的拒绝理由显示出比特币市场结构上的根本问题。
阅读文档后，很明显，SolidX 和 GreyScale ETF 的申请也会直接发往垃圾箱里。改变监管机构的思维过程需要多年。 美国上市的比特币ETF将不会很快出现。
COIN ETF每日净资产价值使用每日 Gemini 拍卖价格计算。 要创建和兑换单位，授权参与者（AP）必须在拍卖中交易。
此外，Gemini Exchange的自我报告统计数据显示，Gemini Exchange交易所拍卖的数量相对于比特币的每日交易以及信托基金的创作或赎回篮子中的比特币数量都小。截至2017年2月28日，Gemini Exchange交易所拍卖会自2016年9月21日成立以来的平均每日交易量为1195.72比特币，而在2017年2月28日前的6个月内，平均每日全球交易量约为340万比特币。截至2017年2月28日，在一个工作日的Gemini 拍卖的比特币交易额中位数只有1,061.99比特币，相比在创造或赎回篮子里1000比特币仅多出129个。
Gemini的交易量非常低，他们几乎不能处理一个创造或赎回篮子。Gemini Exchange 无法获得流动性，AP将被迫在其他交易所交易。 这些“其他”交易所的位置使SEC犹豫。
即使Gemini Exchange拥有由纽约证券交易所监管的信托牌照，证券交易委员也会发现，Gemini Exchange的交易不符合国家交易所（如纽约证券交易所或纳斯达克）规则和程序。
交易所表示，它已经与Gemini Exchange就基金信托的比特币资产交易达成了全面的监督共享协议，Gemini Exchange会由NYSDFS监督。此外，交易所在其评论信中声明，“同意流动性较低的市场，比如比特币市场，可能更容易被受操作，但认为…这些担忧被减轻，因为它涉及Gemini Exchange的信托，股票和交易活动“。然而，如下所述，委员会不认为这种监督分享协议是足够的，因为Gemini Exchange交易所只在世界范围内进行比特币交易的一小部分，并且因为Gemini Exchange交易所不是与国家证券交易所或与迄今已批准的商品信托 ETP 标的资产相关的期货交易所相当的 “监管市场”。
要再一次申请，ETF 申请人必须证明如何建立现货比特币交易所，而受到与大型及公认的交易所如纽约证券交易所同等的监管，并在全球拥有显着的市场份额。 这几乎是不可能的。
在严格监管的总部设在美国的交易缺乏保证金或其他杠杆交易产品，意味着他们的交易将永远屈居亚洲和欧洲。考虑到美国国家监管机构的“美国是最好的”心态，说服他们允许一个资产的价格是由“诡诈的中国”设定的（insert the international boogiemen of the year）是一个艰巨的任务。
然而，这不是末路。SEC和其他组织是大型既得金融参与者的木偶。在比特币太大而不能忽视的时刻，ETF基金管理行业的 iShares，Vangaurd 和 Spd r将支持比特币 ETF。
投资者交易所有限责任公司（IEX）申请并获准由SEC指定为国家交易所。 这不是一个容易的过程。 IEX，在Michael Lewis的书“Flash Boys”中写道，旨在通过制定平衡低和高延迟交易者之间的交易的政策来平衡竞争环境。 高频交易 HFT 大厅快速阻止 SEC 批准 IEX 应用程序。
IEX 使零售投资者对 HFT 公司有一个公平的竞争环境。不利于公平的竞争环境的老奶奶和爷爷的。然而，这是一个非常热烈和拉长的批准过程。 SEC最后做了正确的事情，但是大男孩们拿出了所有的枪。
“If you mess with the bull, You get the horns!”
A managing director on the sales trading desk at Deutsche Bank used to scream that out when the market ripped higher. Equities almost makes up for the lack of pay vs. fixed income by employing some of the most colourful characters.
What do you call Bitcoin sans China or an ETF approval? All Time High. Two of the most central bullish tenants have been removed, yet Bitcoin still trades above $1,200.
The next issue that could crater the price is the ongoing scaling debate. The Segwit vs. Bitcoin Unlimited civil war is spoken of not only where internet trolls hide, but also in mainstream financial news outlets such as Bloomberg. No matter, the price continues to slowly grind higher.
With the Mt. Gox all time high surpassed, we are in the beginning stages of a secular rally. This rally will completely re-rate the entire cryptocurrency complex. The Ether market cap is now over $2 billion. DASH continues to rip higher. Three cryptocurrencies with >$1 billion market caps would be something to behold. All hail Shitcoins.
What is encouraging about the 2017 Bitcoin rally is that realised volatility is muted. The above chart displays the 30 day realised volatility and the XBT/USD price. Volatility rose during the initial PBOC crackdown, but then continued to fall as the price surpassed $1,200.
For Bitcoin, this rally was calm. Traders are still in disbelief. While the price continues to crawl higher, haters keep hatin’ because of China, scaling, and or lack of legitimisation by regulators. While they wait, others get rich. As a result, the crack up boom (aka Fomo) phase has yet to begin.
Another encouraging sign is the relatively low basis level exhibited by futures contracts. During the first quarter, the BitMEX Bitcoin / USD 31 March 2017 Futures Contract, XBTH17, traded with a maximum outright basis of 10% – 13%.
During the 2013 bubble, the ICBIT March 2014 quarterly future, featuring only 3x leverage, traded at a 100% outright basis at the end of December 2013. Shortly thereafter, the price crashed below $1,000 then $800 then $600, and finally we entered a nuclear winter for two years.
The market has matured since then. However, the market fomo will manifest itself in a sky high basis for the soon to be listed 30 June 2017 futures contract, XBTM17. Basis even with constant selling pressure from cash and carry arbitrageurs, can and will go substantially high due to 100x leverage engjoyed by longs.
A sustained 30 day realised volatility over 100%, and elevated outright basis levels of over 30% on XBTM17, will provide clues during the second quarter as to whether Bitcoin’s run is nearing completion. As the intensity of price action accelerates, the next upside physiological barrier is $2,000.
A retail Bitcoin ETF is proving as elusive as entrance into the Elysian fields. The SEC issued a scathing rebuke as to why they disapproved a Bats exchange rule change that would have allowed the COIN ETF to list. The reasons for denial given by the SEC display a fundamental problem with the market structure of Bitcoin.
After reading the document, it is clear that the SolidX and Greyscale ETF applications are destined for the dustbin as well. Changing the thought process of a regulatory body takes years. A US-listed Bitcoin ETF will not be forthcoming any time soon.
Bitcoin Exchanges and Trading Volume
The COIN ETF daily Net Asset Value is calculated using the daily Gemini Bitcoin auction price. To create and redeem units, Authorised Participants (AP) must trade in the auction.
The SEC’s major issue with the application was that the auction volume was insufficient to support trading.
From the SEC:
Moreover, self-reported statistics from the Gemini Exchange show that volume in the Gemini Exchange Auction is small relative to daily trading in bitcoin and to the number of bitcoin in a creation or redemption basket for the Trust. As of February 28, 2017, the average daily volume in the Gemini Exchange Auction, since its inception on September 21, 2016, has been 1195.72 bitcoins, compared to average daily worldwide volume of approximately 3.4 million bitcoins in the six months preceding February 28, 2017. Also, as of February 28, 2017, the median number of bitcoins traded in the Gemini Exchange Auction on a business day (when a creation or redemption request might be submitted to the Trust) has been just 1,061.99 bitcoins,129 barely larger than the 1,000 bitcoins in a creation or redemption basket.
Gemini’s volumes are so low they barely can transact one creation or redemption basket. Unable to obtain liquidity on Gemini, AP’s would be forced to transact on other exchanges. The location of these “other” exchanges gave the SEC pause.
US-based and regulated exchanges account for a relatively small percentage of global Bitcoin / USD spot trading volumes. The most liquid exchanges are based in Asia or Europe. Bitfinex, the largest Bitcoin / USD spot exchange by volume, is insolvent. These facts are troubling to the SEC.
The agency worries that the majority of trading volume occurs on “unregulated” (read: Non-US domiciled) exchanges and this could endanger ETF investors. The agency cited inadequate surveillance of the major trading centers.
Even though Gemini has a trust license and is overseen by the NYDFS, the SEC found that even Gemini’s exchange was not on par with national exchanges such as the New York Stock Exchange or Nasdaq in terms of trading rules and procedures.
From the SEC:
The Exchange represents that it has entered into a comprehensive surveillance-sharing agreement with the Gemini Exchange with respect to trading of the bitcoin asset underlying the Trust and that the Gemini Exchange is supervised by the NYSDFS. Additionally, the Exchange states in its comment letter that it “agrees that less liquid markets, such as the market for bitcoin, may be more manipulable, but believes that … such concerns are mitigated as it relates to the Shares of the Trust and trading activity on the Gemini Exchange.” As explained below, however, the Commission does not believe this surveillance-sharing agreement to be sufficient, because the Gemini Exchange conducts only a small fraction of the worldwide trading in bitcoin, and because the Gemini Exchange is not a “regulated market” comparable to a national securities exchange or to the futures exchanges that are associated with the underlying assets of the commodity-trust ETPs approved to date.
In order to be in the running again, an ETF sponsor must demonstrate how the proposed venue for the trading of physical Bitcoin is regulated on-par with large established exchanges such as the NYSE, and has a significant market share globally. That will be almost impossible.
If Bitcoin traders desired heavily regulated exchanges, they wouldn’t prefer trading on an insolvent exchange over one registered with various alphabet letter agencies. Many large Bitcoin traders trade Bitcoin expressly because the trading venues are less regulated. They believe the operators are allowed to focus more on the customer experience and provide exactly what traders desire instead of fluffing regulators.
The absence of margin or other leveraged trading products on heavily regulated US-based exchanges means they will forever play second fiddle to Asian and European exchanges. Given the “America is the best” mentality of its national regulators, convincing them to allow an asset whose price is set by the “shifty Chinese” (insert the international boogiemen of the year) is a tall order.
However, this is not a death sentence. The SEC and other organisations are puppets of the large vested financial players. At the point when Bitcoin is too large to ignore, and daily trading volumes are robust and healthy, the iShares, Vangaurd, and Spdr’s of the ETF fund management industry will sponsor a Bitcoin ETF.
These heavyweights only care about generating fees. The underlying asset is an afterthought. When Bitcoin is large enough to support a healthy AUM that generates large management fees, they will get behind Bitcoin.
Unfortunately the biggest problem with the Winklevoss’ application was their outsider status. The objections put forward by the SEC could easily apply to any number of currently listed ETFs. If the fund manager was one of the good ‘ole boys, the ETF would stand a chance of approval.
The Investors’ Exchange LLC (IEX) applied and was approved to be designated a National Exchange by the SEC. This was not an easy process. IEX, written about in the Michael Lewis’ book Flash Boys, aims to level the playing field by enacting policies that equalise trading between low and high latency traders. The HFT lobby went into overdrive to dissuade the SEC from approving the IEX application.
IEX gives retail investors a level playing field against HFT firms. Who doesn’t favor leveling the playing field for the grannies and grandpa’s. However, this was a very heated and drawn out approval process. The SEC did the right thing in the end, but the big boys brought out all the guns.
Imagine if the big boys wanted a Bitcoin ETF. They would get it.
Hedge Fund Brother No. 1 Xu Xiang, pictured above, was once a high flying hedge fund manager who never lost. Then one day he was disappeared. He resurfaced months later, after being convicted of securities fraud and now sits in jail. Some feared Bitcoin exchange heads could face a similar fate; however, the PBOC showed mercy.
Another week, another “meeting” between the PBOC and the heads of large Bitcoin exchanges in China. Shortly after the meeting held on March 7th, the PBOC released a statement reiterating that they have the authority to shut down errant exchanges. A list of actionable offences surfaced a few days later via Caixin. [News.bitcoin.com]
The following activities are prohibited:
- Offering leverage and margin trades.
- Producing fake volume and manipulating the market using zero fees.
- Violating AML laws.
- Violating regulations on foreign currency management and cross-border capital transfer with bitcoin.
- Replacing fiat by using bitcoin to purchase goods.
- Tax Evasion.
- Engaging in false advertising or participating in Ponzi schemes.
- Providing financial services without a permit, including credit, securities, and futures trading.
After the “friendly” meeting, exchange after exchange announced an indefinite suspension of Bitcoin withdrawals. No further guidance was given as to when Bitcoin withdrawals would resume. The price sagged a bit, then shrugged off the news. By the end of last week, Bitcoin would hit fresh all time highs in USD terms.
Chinese regulators recognise that they cannot shut down the exchanges. Regarding said exchanges, one regulator noted:
If oversimplified measures such as closing them down were taken, [investors] will be led into the underground black market or OTC markets, which are more difficult to control. Therefore, it is necessary to explore the establishment of long-term regulatory mechanisms. [News.bitcoin.com]
The new strategy is to starve the weak, and regulate the strong. This strategy is classic China. The government lets an industry compete unimpeded for a time, then they pick the strongest companies and destroy the rest through denial of critical licenses or enforcement of opaque regulations.
By removing the elixir of leveraged and zero fee trading, only exchanges with diversified business lines will survive. Earnings from spot Bitcoin trading will only be significant for the largest of exchanges (BTCC, Huobi, and OKCoin). Exchanges not on that list, will most likely not exist in 2018.
All three of those exchanges either have mining operations, payment solutions, and or offshore derivatives trading markets. Once the weaklings fold, the PBOC will bless the large incumbents and subject them to rigorous monitoring.
Viewed on a longer time frame, the developments over the past three months are positive. One of the Damocles swords hovering over Bitcoin slowly is being removed. Bitcoin will not be “banned” by the regulators. They recognise the power of the underlying technology and are attempting to rationalise Bitcoin within existing goals for China’s monetary system.
PBOC Governor Zhou in a recent interview stated that China Bitcoin trading platforms are not exchanges but rather only “websites”.
If it (trading platform/website) is called an exchange, it is not allowed unless a relevant department of our country permits it. Many people regard bitcoin online trading platforms as exchanges. These are actually two different concepts. [News.bitcoin.com]
That is encouraging that the PBOC permits mere “websites” to accept deposits like banks, and offer the trading of currency like an exchange. There is a bright future for Bitcoin in China for those who can survive. The PBOC tacitly approves Chinese people trading Bitcoin.
The current purgatory will end once the PBOC right sizes the Yuan. Calm must be maintained up until the October National Congress. After October, Beijing will greenlight the PBOC to relieve the pressure and devalue. After a large devaluation, the PBOC can loosen capital controls because once the damage is done the desire to flee is lessened. At that time Bitcoin withdrawals will be re-enabled.
BitMEX CEO, Arthur Hayes, will lead an interactive seminar on the basics of algo trading and market making in the Bitcoin markets.
Arthur will touch on API connectivity through the use of an example python trading bot. He will also talk about the basic principles of market making Bitcoin spot and derivatives.
Participants should bring a laptop, and visit this GitHub repository for the example trading bot.
Date: Wednesday 22 March 2017
Time: 7pm to 9pm
Location: The Hive, 23 Luard Rd, 21/F The Phoenix, Wanchai, Hong Kong
Please RSVP on Eventbrite.
增长是光荣的，而现实是该死的！中国将继续试图以不可持续的水平增长。这是中国总理李克强在本周二的两会演讲中给出的信息。他指出，年度 GDP 增长目标为+ 6.5％，略低于最近报告的+ 6.7％的增长率。[ZH]
当有疑问时，世界各国政府，不管他们的经济主义是否采取猖獗的货币印刷来增加 “增长” 数字。
下一个“最重要的”美联储利率决定日将讽刺地发生在凯撒大帝被刺死的日子。那是3月15日。各美联储总督表示支持在下次会议上加息。耶伦在最近的演讲中没有对加息谈话作出任何调解。联邦基金期货价格预测了 80％ 的机率在3月加息 0.25％。加息将对中国造成毁灭性影响。 [CME]
当投资者认为有 >75％ 的加息可能性时，美联储很少会给市场落空。标准普尔500处于强势，投资者似乎愿意忽视现实; 案例来看，Snap 的新股发行。该公司的专业知识是有风格的化钱。狂潮的投资者推动最新的科技从新发行股价格上涨超过50％。
如果美国证券交易委员会批准美国第四大证券交易所 Bats 改变规则，所有美国入门散户可以通过受管制的交易基金进入比特币市场。能够轻易获得比特币的货币将令比特币价格急剧上升。现在有各种预测散户流入比特币市场的可能性。总之，这笔钱将会是庞大的。
那些希望梭哈做多的应该购买 BitMEX 比特币/美元 2017年3月31日期货合约 XBTH17。基金何时和如何推出的资讯可能会有莫大的影响。那些怕错过热潮的会到期货做多，给于了做多收取从价格和基差利润的机会。
那些看好中期的投资者应该购买 BitMEX 比特币/美元2017年6月30日期货合约 XBTM17。 XBTM17将在 2017年3月17日星期五挂牌。在基差或隐含利息做多将支付了三个月头寸的资金成本，合约将会高位开市，并积极上升。
在2013年12月泡沫高峰期间，ICBIT 2014年3月期货合约交易 100％ 的基差徘徊。通过卖出期货和买盘，你的美元资金会变成翻倍。 ICBIT当时只有3倍的杠杆，想象100倍的基差可以走多远。 XBTM17 基差可以在整个合约到期之前在100个百分点基差交易。
证交会为何不应列出交易基金的原因与赞成批准的原因一样多。大量的交易者没有喝了吉姆·琼斯的钱。 BitMEX COIN预测期货合约，COIN_BH17，将这个概率预测为50％。
比特币取款在中国停止后，价格跌破1,000美元，并迅速恢复到千位。这是 ETF 挂牌失败的基准支持位。
如果规则更改被拒绝，价格将快速考验千元的价位。由于市场看涨，投资者将暴力抄底。如果不是现在砸，普遍的共识将会落于另一个基金申请的批准。市场将重点关注 SolidX 或 Greyscale 基金的申请批准截止日期。
（50％* 100％价格上涨）+（50％* -30％价格下跌）= + 35％ 预期价值
After the PBOC curtailed Bitcoin trading inside China, America reasserted itself as the most important price setting location. The SEC’s decision on a rule change that could allow the listing of the world’s first Bitcoin ETF is the most anticipated binary outcome of 2017. Traders will make and lose tremendous sums over the next few weeks.
If the SEC approves the Bats rule change, all manner of American muppet retail investors can yolo into Bitcoin via a regulated ETF. The pool of eligible money that can easily obtain exposure to Bitcoin will dramatically rise. There are various predictions about the amount of money that could flow into Bitcoin. In short, it will be Yuge.
I expect the price to appreciate by at least 100% by the end of March. This is pure speculation as no actual cash will flow into Bitcoin until the ETF begins trading later this year. The price may go up well over 100% only to sharply correct as animal spirits are tamed.
Those wishing to play the initial pump should buy the BitMEX Bitcoin / USD 31 March 2017 futures contract, XBTH17. The nitty gritty of when and how the ETF will be launched may dampen enthusiasm in the medium term. A future that expires during the height of the fomo leaves the best chance for longs to be forced into closing at a profit.
Those bullish over the medium-term, should purchase the BitMEX Bitcoin / USD 30 June 2017 futures contract, XBTM17. XBTM17 will list Friday 17 March 2017. The basis or implied interest longs pay for three month exposure will open high and rise aggressively.
During the height of the December 2013 bubble, the ICBIT March 2014 futures contract traded at an outright 100% basis. By selling futures and buying spot, you would double your money in USD terms. ICBIT only featured 3x leverage at the time, imagine how high basis could go with 100x. XBTM17 basis could trade into 100’s of percentage points throughout the contract’s life.
The number of reasons why the SEC should not list the ETF is as numerous as those in favor of an approval. A significant amount of traders have not drank the Jim Jones koolaid. The BitMEX COIN Prediction Futures Contract, COIN_BH17, places the probability at 50%.
China took a backseat in this first quarter rally due to the actions by the PBOC. Since Bitcoin withdrawals were shut in February, hope of an ETF approval became the bullish narrative.
After Bitcoin withdrawals ceased in China, the price fell below $1,000 and quickly recovered to the kilo mark (who isn’t in love with the CoCo). That is the baseline support level sans an ETF approval.
If the rule change is denied, the price will quickly test $1,000. Due to the underlying bullishness of the market, traders will BTFD. If not now, the general consensus is that one of the many ETF applications will be approved. The market will focus on the next application approval deadline for the SolidX or Greyscale ETF.
One Week Expected Value (EV)
Assuming a 50% probability of approval, traders must compute the EV of the looming decision.
(50% * 100% Price Appreciation) + (50% * -30% Price Depreciation) = +35% EV
The EV is positive, meaning it behooves traders to be net long Bitcoin into the decision.
BitMEX offers a complete Bitcoin / Fiat trading suite. The most liquid option is to buy the Bicoin / USD Swap, XBTUSD. Be early. The enthusiasm and hype surrounding the decision will only grow throughout the week. Every major financial paper is covering this event. I have never seen so much interest in a mundane exchange rule change before.
Glory be to growth. Reality be damned, China will continue attempting to grow at unsustainable levels. That is the message from the Chinese Premier Li Keqiang given this Sunday during his Two Sessions speech. He decreed that annual GDP growth target is +6.5%, which is slightly lower than the recently reported growth of +6.7%, [ZH]
China is not alone in its adherence to the gospel of growth. Real growth can only be achieved by productivity and population gains. These two factors are very difficult to predict or command and control with success over a long period of time. Many have tried, all of have failed.
When in doubt, governments world-wide regardless of their economic “ism” resort to rampant money printing to goose up “growth” numbers. GDP measures of the flow of goods, it is a poor yardstick for the real health of an economy. With more money, more goods flow. Voila, growth!
China did miraculously transform itself over the last 30 years. However, recent growth is merely the result of aggressive money printing. The Party talks the talk about reining in credit growth; however, in practice they are impotent to stop it.
Xi Jinping is one of the most powerful Chinese leaders since Mao. However, even he cannot politically stop the expansion of bank credit. If he were confident in his ability to, he would proclaim a more realistic growth target.
Michael Pettis, professor at Peking University and former Bear Stearns bond trader, argues that real growth over the next 10 years cannot rise above 3% to 5% without a financial crisis. The financial crises is predicated on too much credit chasing too few positive yielding investments.
Beijing knows this. The PBOC continues to slay paper tigers by removing liquidity on hand, and increasing it in other ways. For Bitcoin traders, it means that one of the main drivers of global monetary policy will continue to act as they have done in the past.
Yuan liquidity and loans will continue to be provided to zombie state owned enterprises (SOE). The iron rice bowl must hold, or peasants will reassert their displeasure with immense wealth big city elites amassed by depressing wage growth and financially repressing savers.
Excessive Yuan liquidity will push up inflation. The escape valve will be a devaluation of the Renminbi. Premier Li implicitly confirmed that arguments I have been presenting for almost two years will continue to be relevant.
The Ides of March
The next “most important ever” Federal Reserve rate decision will ironically occur on the Ides of March. That is March 15th. Various Fed governors voiced support of a hike at the next meeting. Grandma Yellen in her recent speeches has done nothing to temper the rate hike talk.
Fed Funds futures price in an 80% chance of a March 0.25% rate hike. A rate hike would be devastating to China. [CME]
Beijing refuses to use political capital to put forward economic policies to rebalance growth. They refuse to drastically curtail banks’ issuance of credit. From Queen Victoria to Chairwoman Yellen, China is once again at the mercy of an old white lady.
The Fed rarely disappoints the market when traders price in a >75% probability of a rate hike. The S&P 500 is strong, and investors seem willing to ignore reality; case and point, the Snap IPO. The company’s expertise is losing money with style. Masochistic investors propelled the latest tech darling up over 50% from the IPO price.
The Fed has perfect rate hike cover. The amount of balance sheet pain the PBOC endures to save face internationally is unimaginable. Calm must remain before the October National Congress. The lack of a pressure releasing devaluation in the face of a market assured rate hike, means when it comes it will be enormous.
The Bitcoin angle is well known. USD up, CNY down, Bitcoin moon!