BoE goes CBDC, BTC gets REKT and shorters takedown continues

In today’s Exponential Investor

  • It’s digital but not crypto
  • The red sea
  • Scorpion stings

The term “Taskforce” is menacing. It brings up emotive connotations of violence, authority and physical dominance.

It is the kind of thing the police would begin to investigate a murder, kidnapping or breaking up a global drug cartel.

It’s not the kind of term I’d expect from the Bank of England (BoE).

But it’s exactly what it proposes to tackle the issue of “central bank-backed digital currencies” head on.

On Monday the BoE released a statement about the creation of a Central Bank Digital Currency (CBDC) Taskforce.

The “Taskforce” will,

  • Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.
  • Guide evaluation of the design features a CBDC must display to achieve our goals.
  • Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC.
  • Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.

All very exciting stuff for them, I’m sure.

But what this is really about is exactly what we’ve been warning you of. This is part of a bigger authoritarian push to control your money.

You see my view is that a CBDC like this is merely another form of power and control. The reality is money as you know it now is digital already. It’s very much like this all over the world. In fact, in a 60 Minutes interview Jerome Powell explained how the US Federal Reserve creates money.

He said it outright, that it’s really just digital money. They don’t actually print physical cash when they add money into the financial system.

Hence a CBDC is not needed. What it will enable central banks to do is have far greater understanding of exactly where all money flows and who it flows to.

Also, if things head down what I see to be the inevitable pathway, it will also allow them to control how you spend your money. In China, there are rumours that the central bank will be able to put “timers” on the Chinese CBDC. That means you will have a set amount of time to spend that money before it simply vanishes.

That’s to promote spending in the economy, but is also the most financially authoritarian thing I’ve ever heard in my life.

So take this BoE taskforce as you will. But for me, those connotations mentioned earlier are apt. This isn’t some move into digital finance to make a better system. It’s a move to claw back control and authority over you and your money.

A money rest if you will that we’ve been warning you of for some time and you really should know how to fight back against it.

Bitcoin is dead (for the 400th time)

The timing of the BoE’s announcement is interesting to say the least.

It comes as the wider crypto markets have been in a state of “boom town”. Since the start of the year, crypto across the board has been moving at breakneck pace.

Bitcoin, the leader of them all, or at least the biggest of them all is no exception to this. It has risen from $29,000 to over $64,000 last week.

But these are crypto markets in the midst of rampant central bank “traditional” financial system manipulation.

That means “volatility” if everywhere. This weekend that was rammed home to crypto investors, traders, punters and “noobs” in full force.

The crypto market was a sea of red over the weekend. Some crypto falling over 25% in a matter of hours. It saw a lot of panic, hysteria and, of course, “weak hands” exit the market.

But why?

Well several factors really kicked in. Much of it misinformation and what we call “FUD” (fear, uncertainty and doubt).

There were ongoing reports about the bans on bitcoin in India and Turkey. Even though these stories and reports are now weeks old, mainstream sources decided best to bring them back into light. Again, these reports were public knowledge in the midst of crypto markets hitting all-time highs, so a strange time to rehash old news.

And speaking of rehashing… the bitcoin network hash rate (the total mining power of the bitcoin network) dropped away dramatically. This is believed to be the biggest kicker to price over the weekend.

It’s believed the reason was some power blackouts in China.

My take? So what. If all of China mining operations were to shut down overnight, there’s plenty of other places in the world ready to pick up the slack. Heck, it might even mean we can once again dust off the PC, graphics cards and mine bitcoin ourselves again.

The point is, even if the hash rate drops off, it quickly comes back and other network participants pick up the slack. In other words, temporarily significant, longer term, a non-event.

Oh, and also when markets fall like that fast, people in highly leveraged positions get liquidated equally as fast. In crypto we call that getting “rekt”.

It just amplified the volatility until those not in leveraged positions buy the dip…

Scorpion’s short sell takedown

On the subject of “rekt”, Scorpion Capital released a report last week taking aim at solid-state battery developer, QuantumScape.

QuantumScape has lit up the markets recently based on the progress of its solid-state battery tech. If it’s successful, it could be a game changer for the electric vehicle market.

The only problem is, Scorpion is saying it’s a house of cards. That its tech is built on lies and misinformation, deceptive charts and fraud.

Big accusations to make. And these reports are a mix of truth, hyperbole and utter fiction themselves. So it’s always a challenge on how to take it, and what to make of it all.

We’ve seen similar takedowns of other successful company launches including Nikola Motor and Lordstown Motors.

These short takedowns are more and more common. Sometimes they’re right, sometimes they’re not. But it definitely impacts the stock price which is probably the intended effect anyway.

It hit QuantumScape last week and will linger around in the minds of investors for some time. The only way to really know what the answer is, is to see what the company does next. Validate the tech, deliver on their promises or capitulate.

Big upside if the company is everything it says it is, big downside if it’s not. That kind of risk reward play is what makes markets so exciting, so interesting and such a fun, wild place to build wealth.

Regards,

Sam Volkering
Editor, Exponential Investor

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