Headline, June 24 2022/ ''' '' CRYPTO MYTH CROWNS '' '''

''' '' CRYPTO MYTH

 CROWNS '' '''

ON THE WORLD STUDENTS SOCIETY : The advanced crypto research work is headed by some very genius global students that I hand picked. We went about determined to outsmart and out meaneuvre some of the world's most successful wealth creating techniques.

WE AWAIT the start of our global elections. The work is under wraps and the research is very cool. Welcome, to The World Students Society, the exclusive ownership of every student in the world.

And You. Global Founder Framers of !WOW!, and the students of the entire world, success is written in the stars. 

THERE'S A FINANCIAL JOKE - WHOSE ORIGIN I DON'T KNOW, THAT has been making the rounds lately. It goes like this :

If inflation continues at current rates, the purchasing power of wealth held in dollars will be cut in half over the next eight years. BUT cryptocurrencies can beat that : They can lose their value in just a few months.

Haha. But crypto enthusiasts have indeed marketed their products as an inflation hedge. Coinbase, the biggest United States crypto exchange, declares that crypto currencies are appealing because ''they're more resistant to inflation than fiat currencies like the U.S.dollar."

This is, not incidentally, the same argument people used to make for holding gold.

So why have crypto prices crashed at exactly the moment inflation has taken off?  To some extent it maybe a coincidence : If you believe, as I do, that crypto is a to a large extent a Ponzi scheme, this may just happen to be the moment when the scheme has run out of new suckers.

But there's also a more fundamental issue : People who touted cryptocurrencies as a hedge against fiat -currency inflation - sort of a digital equivalent of gold - fundamentally misunderstood how fiat currency system work, and also, for what it's worth, misunderstand what has historically driven the price of gold.

It was, in fact, predictable that an upsurge in inflation would drive the price of Bitcoin down - although maybe not that it would produce such an epic crash.

The key point to understand is that while the dollar is indeed a fiat currency - that is, the authorities can issue more dollars at will, without the need to back those additional dollars with some kind of collateral - America isn't Venezuela or the Weimar Republic, a nation that prints money to pay the government's bills.

In America, money supply is a policy tool used by the Federal Reserve to help keep prices fairly stable - actually, rising around 2 percent a year - while avoiding recessions. Sometimes the Fed pets it wrong, as it did over the past year, when it [and I] failed to see the inflation surge coming. But when it does, it tries to correct the mistake.

What this means, in turn, is that an inflationary outbreak doesn't presage a spiral of ever-rising prices, which you can avoid by buying crypto. On the contrary, markets believe that the Fed will do whatever it takes to bring inflation back down to normal levels :

The five-year forward inflation expectation rate, a measure derived from spreads between regular U.S. bonds and bonds indexed to the Consumer Price Index, has barely moved through this whole episode.

And saying that the Fed will do '' what-ever it takes '' means that it will raise interest rates until there are clear signs that inflation is cooling off. The Fed only has direct control over the short-term rates, but long-term rates have already soared in anticipation of continued Fed tightening.

WHAT DOES this mean for crypto? Well, the rate of return investors can get by buying bonds is up, which makes buying other assets, like stocks and, yes, cryptocurrency less attractive.

So cryptocurrency isn't a hedge against inflation, it's the opposite. When inflation goes up, the Fed responds by raising interest rates, which makes cryptocurrencies go down.

RECENTLY, the legendary short-seller Jim Chanos gave Bloomberg a wide ranging interview in which, speaking of cryptocurrency, he pointed out that ''a lot of the concepts behind its adoption early on have proven to basically be, you know, not there or wanting.

You know, it was going to be a replacement currency. Well, no, it's not. Well, going to be a diversifying asset. Well, no, its hasn't been.'' And now we know it isn't an inflation bridge either.

Chanos went on to call crypto a ''predatory junkyard.'' Well, I wouldn't go that far. Actually, on second thought, I would.

The Honour and Serving of the Latest Global Operational Research on Crypto, Interfacing, Integration and the Markets, continues. The World Students Society thanks author Professor Paul Krugman for his opinion.

With respectful dedication to the Students, Professors and Teachers of the world. See Ya all prepare and register for Great Global Elections on The World Students Society : wssciw.blogspot.com and Twitter - !E-WOW! - The Ecosystem 2011 :

Good Night and God Bless

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