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On December 15, in the “Global Fund Manager Survey” conducted by Bank of America/Bank of America Securities this month on fund managers, the top three most popular transactions were: long technology stocks, short US dollars, and long Bitcoin.
“Long Bitcoin” and “Short USD” can be among the most popular transactions, behind the scenes are the decline of legal tender represented by the U.S. dollar, and the rise of Internet currency represented by Bitcoin.
The decline of the dollar
The currency itself is changing with the development of society. Currency was originally shells or salt, and then copper and iron also served as currency for a period of time; before the 19th century, the foundation of the world monetary system was the silver standard; Newton proposed the gold standard (Newton proposed that the price of gold per ounce was fixed at 3 pounds, 17 shillings, 10.5 pence After that, the world monetary system began to turn to the gold standard; in July 1944, the Bretton Woods system determined that the U.S. dollar was the basis of the international monetary system (1 ounce of gold can be exchanged for 35 U.S. dollars); since August 15, 1971, the U.S. dollar and gold were decoupled , The U.S. dollar, a banknote issued on national credit, depreciated about 98%.
The already precarious paper currency system was further hit hard by the impact of the epidemic at the beginning of the year. With the repeated epidemics, central banks of various countries are still rushing to print banknotes to “promote” currency devaluation.
According to the statement of the latest meeting of the European Central Bank in December, “in view of the economic impact of the return of the (coronavirus) pandemic”, the Council of the European Central Bank decided on the same day to expand the size of the emergency asset purchase program from the previous 1.35 trillion euros to 1.85 trillion. In the euro, debt purchases will last until at least March 2022. At the same time, the European Central Bank also announced the extension of a number of preferential financing measures implemented during the epidemic, such as the third batch of targeted long-term refinancing operations.
According to Jinshi reports, on December 16, US House Speaker Pelosi invited leaders of the Democratic and Republican parties to discuss a new round of rescue plans. US Senate Majority Leader McConnell said that everyone has reached an agreement on “not leaving Washington unless an agreement is reached.” It is reported that the plan may be implemented within this week.
Buffett’s close friend and Berkshire Hathaway vice chairman Munger warned of unprecedented quantitative easing (QE) and fiscal deficits at an online event held at the California Institute of Technology on Monday. Munger said: “We are in uncharted waters. No one has ever printed money on a large scale without causing trouble like we are now. I think we are close to the edge of playing with fire.”
The rise of Bitcoin
The Internet economy has been deeply integrated into our economic life, but this social change has actually only occurred gradually in the last ten years. The following figure shows the changes in the ranking of the top ten companies in the world by market value in the past 30 years.
Most of the Internet giants we currently know have grown rapidly in this decade, and Bitcoin is the same. On November 1, 2008, Satoshi Nakamoto released the Bitcoin white paper. On January 3, 2009, Bitcoin was officially born. From the very beginning, it was less than a few cents and rose to $19,370.
With the rapid development of blockchain technology and the Internet economy, the value of Bitcoin, the native currency of the Internet, has been recognized by more and more people, especially the rapid increase in the world’s richest people who bought it; besides this, the traditional financial market has also begun to all-round Accept Bitcoin, which includes investment institutions, banks, traditional financial trading markets, family wealth management funds, and national social security funds.
From the change of the founder of Bridgewater Fund Dario, we can see the change in the attitude of the entire market. Last month, Dalio hinted that Bitcoin is not a good store of value due to its high volatility and potential for government bans. But this month, Dario stated that Bitcoin (and some other digital currencies) has established itself in the past decade as a meaningful asset substitute similar to gold. Bitcoin has similarities and differences with gold and other mobile wealth assets with limited supply (unlike real estate). I have to say that the learning speed of the rich is very fast.
Wealth will not disappear out of thin air
When you feel that the money in your hand is not worth it, it’s no use blaming others. Human wealth will not disappear out of thin air, but wealth will transfer. What we have to do is to think about where wealth begins to flow.
In today’s society, human beings are undergoing a major Internet migration. Many of the original offline lifestyles have been replaced by new lifestyles on the Internet, and there will be more in the future, which naturally also contains currency. In some countries, central bank digital currencies with limited credit will continue to depreciate and may even disappear in competition; however, Bitcoin will not completely replace the central bank digital currencies of powerful countries, but will appear more diversified competition under the distributed nature of the Internet.