n Financial services firm Morningstar is developing a blockchain platform for debt securitiesn
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Crypto Crisis: Pro Trader Compares Altcoins To Crushing Student Debt
Back at the end of the crypto hype bubble in 2017, altcoins like Ethereum, Litecoin, and Ripple, and even more obscure altcoins were all expected to be a revolutionary breakthrough in financial technology. Hopes were high for the emerging asset class, and retail investors flocked to the crypto market in hopes of finding the next Bitcoin.
These days, altcoins are failing to deliver on the utility they promised during that time period, and most have since fallen over 90% or more from the all-time highs set back then. The negativity surrounding the alternative crypto assets sparked one professional career trader to compare altcoins to student debt as the two things victimizing millennials currently.
Peter Brandt Compares Altcoins to Crushing Student Debt
Every generation suffers some sort of challenge or atrocity, where an entire subset of people falls victim to specific emerging trends. During the early 2000s, acts of terrorism changed humanity. Later in the decade, recession hit and jobs were difficult to come by.
Related Reading | Bitcoin and Crypto Has Introduced Millennials to Investing in Markets, Despite Fears
Fast forward to now, student debt has climbed to all-time highs, and its causing widespread issues in the growth of the economy, and has impacted everything from job selection to choice in housing – more and more millennials are opting for apartments so they can pay down student debt, which is crushing the housing market.
Student debt, is without a doubt, a crisis that is spiraling out of control that will have long-term implications for the future of the entire world. Global debt as a whole is problematic, but for young students just starting out in life, student debt can be a crushing reality that can take years and even decades to escape.
That’s why it’s shocking to read that altcoins – an entire asset class of cryptocurrencies – have been compared to something so inherently bad as student debt. The comparison was made by professional trader, Peter Brandt, who regularly bashes altcoins while being extremely bullish on Bitcoin long-term.
Every generation has their own victim class. For millennial, the predators will be student loans and alt-coins.
— Peter Brandt (@PeterLBrandt) September 12, 2019
Continued Crypto Crash Fueling Negative Comparisons
Sentiment in the crypto market is at extreme lows, and not because Bitcoin is on shaky ground. The negative sentiment is mostly due to altcoins, such as Ethereum, Litecoin, and Ripple, struggling to find support and continuing to crash.
Altcoin investors who bought the top of the crypto hype bubble need to deal with the harsh reality that many of their investments may never again grow in value and are likely to never again set a new all-time high.
Related Reading | Peter Brandt: 99% of Altcoins Will Be Forgotten in Five Years
Unfortunately, these investors did indeed fall victim to hype and the promise altcoin companies were pitching to investors who bought in hoping to strike it rich. Instead of striking it rich, their money was nearly wiped out entirely.
With the fact that altcoins may never recover, the comparison to student debt victimizing millennials may not be so far off after all.
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Bitcoin Need Accentuated as Negative-Yielding Debt Hits $17 Trillion
If you told economists twenty years ago about Bitcoin (BTC) and negative-yielding debt, they would be shocked.
In the 1990s or even the 2000s, decentralized digital money and a bond that made your money disappear with time would have seemed abstract — quite abstract. Now, however, these two financial trends, which came to fruition mostly over the last decade, have become widely recognized.
Related Reading: Bitcoin Becoming a Better Hedge as US National Debt Hits .5 Trillion
On Friday, Bloomberg reported that the negative-yielding bond situation has just developed. Their report, which cites the Bloomberg Barclays Global-Aggregate bond index, shows that trillion worth of bonds is negative-yielding.
#Bloomberg re "unstoppable surge in negative yields."
Universe of negative-yielding bonds–once unthinkable (after all, who would pay rather than receive interest when #lending money)–reached trillion at the end of August; and it's spreading its wingshttps://t.co/B6IhuYwUZc pic.twitter.com/P44I7G5ZeV— Mohamed A. El-Erian (@elerianm) August 31, 2019
To describe how crazy negative interest rates are, here’s Bitcoin commentator Rhythm to explain. As he explained in a recent tweet, it’s essentially like lending someone your capital and expecting to receive less of it back in a few years’ time. In no world does this make sense. After all, investments are supposed to yield a return, not result in you slowly losing your capital.
What if I said I wanted to borrow 0 from you and pay you back five years later?
Would you do it? Of course not.
Yet, this is happening right now with ,000,000,000,000 of debt with negative yields.
The mother of all financial bubbles.
— Rhythm (@Rhythmtrader) August 31, 2019
There’s a silver lining in all this: the demand for Bitcoin and other alternative assets should only grow.
Bitcoin Demand to Grow Amid Bond Crisis
Raoul Pal, the former head of Goldman Sachs’s hedge funds sales business, recently sat down with Bitcoin podcaster Stephen Livera to talk investments. The economist explained that as it stands, the most popular asset classes make no sense for millenials with ten- to 20-year outlooks.
Equities, he remarked, are roughly at all-time highs, and are pushing extreme valuations for relatively little profit and potential. As Ray Dalio, a legendary hedge fund manager,explained earlier this year:
“There are a lot of parallels between now and the late 1930s. From 1929 to 1932 we had a debt crisis — interest rates hit zero. Then there was a lot of printing of money, and purchases of financial assets brought their prices higher.”
Bonds aren’t much better, Pal opines, drawing attention to the “virtually zero yields” — and negative yields in some cases — that debt deemed safe provides.
Even real estate isn’t attractive, with the prominent investor calling this asset class “unaffordable”, adding that it makes even less sense to purchase homes because they’re trading near all-time highs. Enter Bitcoin. Pal quipped:
“So what the hell does a millennial do to save for your future, when almost all assets have negative imputed returns for the next 20 years, 10 years? And the answer is well, you take the optionality of cryptocurrency and Bitcoin.”
He went on to explain the rationality of why buying Bitcoin as a millennial (and under) makes sense. Pal remarked that nothing like digital assets provide “that risk-reward profile where you can be wrong but you do it earlier on, you’ve still got plenty of time to accumulate wealth in other assets too.”
Featured Image from Shutterstock
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Bitcoin Becoming a Better Hedge as US National Debt Hits $22.5 Trillion
Bitcoin can be many things depending on how it is used. A form of digital money, a trading vehicle for short term gains, a long term investment, or as we have seen more recently, a hedge against government instigated economic hardships.
US Debt Skyrocketing
According to statistics from usdebtclock.org the total US national debt has now hit a monumental .5 trillion. This shocking figure equates to over ,000 of debt per citizen. The ratio of debt to GDP is now over 105 percent and does not look to be slowing down. There is an ever-increasing debt ceiling in the US as they spiral out of control which could trigger another financial crisis.
The US is not alone and government debt is out of control in most major global economies. Global debt has reached an all-time high of over 0 trillion. The US is one of many countries that have been using financial markets to borrow excessive amounts of money. The debt is so large now that governments cannot meet their financial liabilities and it has gone into a negative return.
In a 2016 interview with the Washington Post presidential candidate Donald Trump predicted a ‘very massive recession’ but added that he would eliminate the national debt within 8 years. Three years later a further trillion has been added to the debt which is deepening by over a trillion dollars a year. The debt clock counter predicts a debt of trillion by 2023 and it is clearly not going away.
In addition to escalating national debt is a bond bubble that has hitting record highs. According to RT anchor and bitcoin bull, Max Keiser, it will lead to a massive global wipeout
“Bond prices are hitting highs not seen in… 3,000 years. That’s right, the bond bubble is hitting a 3,000 yr high. When it pops, more than 0 trillion gets wiped out.”
Bond prices are hitting highs not seen in… 3,000 years. That’s right, the bond bubble is hitting a 3,000 yr high. When it pops, more than 0 trillion gets wiped out. #Bitcoin #Gold
— Max Keiser, tweet poet. (@maxkeiser) August 12, 2019
According to Forbes, the US student loan debt is adding fuel to the fire. A report earlier this year suggested that there are over 44 million borrowers who collectively owe in excess of .5 trillion in student loan debt. It is the second highest debt category in the US behind mortgages.
Bitcoin a Better Hedge
Bitcoin has a lot going for it when considered as a hedge against monumental debt and devaluation of fiat currencies. With its finite supply, upcoming halving event, mathematical integrity, immunity from the political and banking systems, and a growing mainstream and institutional interest, BTC could be the place to go when the economies of the world start to crumble.
Image from Shutterstock
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Why Bitcoin Matters: Negative Yielding Debt Balloons to $13.5 Trillion
If you told economists twenty years ago about Bitcoin (BTC) and negative-yielding debt, they would be shocked. In the 1990s or even the 2000s, decentralized digital money and a bond that made your money disappear with time would have seemed abstract — quite abstract. Now, however, these two financial trends, which came to fruition mostly over the last decade, have become widely recognized.
Related Reading: Bitcoin (BTC) Loses Multiple Parabolic Trend Lines as Bears Roar
Odd Macroeconomic Trends
What’s weird, Bitcoin and negative-yielding bonds, which are assets that inherently are vastly different, seemingly have the same origins: the 2008 Great Recession. After this horrible financial dilemma, which cost mom & pop investors billions upon billions, the world’s central banks and governments were forced to take drastic action.
The United States’ Federal Reserve started injecting money into the economy through a monetary strategy called “quantitative easing”, better known as QE or open market operations (OMOs).
The European Central Bank (ECB) and Bank of Japan (BOJ) followed suit, also embarking on QE operations to bolster their balance sheet, resulting in a monumental surge in the stock market, and risk-on assets like Bitcoin too.
Related Reading: Cryptocurrency is Part of the Global Currency War, Says Federal Reserve Branch Head
As a result of this and other political and economic factors, there began the era of negative-yielding debt. Now, according to Bloomberg, there exists over .4 trillion worth of debt that is negative-yielding — an all-time high for a type of asset that, per normal economic theories, makes no damn sense. What’s weird is that much of this debt is issued by governments or top-graded firms.
Global Negative Yielding Debt rises to record high .41 Trillion pic.twitter.com/0Wo5B8ZE0y
— Eric Pomboy (@epomboy) July 24, 2019
That’s not the only odd trend in global finance. As Ikigai’s Travis Kling notes, a Federal Funds rate that is above the IOER — the rate which consumer banks holding money with the Fed get paid; and the expectations of more QE are signs that we live in “weird times” from a global macro standpoint.
We talked about it on our quarterly call, but these are weird times we live in for global macro, and the stage is set for them to get meaningfully weirder.
tn negative yielding debt. A Fed Funds consistently above the IOER. And the whole world is about to juice more QE. pic.twitter.com/L2MDFuuSPo
— Travis Kling (@Travis_Kling) July 24, 2019
According to Kling and many other investors, these odd macroeconomic trends are clear signs to start to build allocations of safe havens, these being gold and, of course, Bitcoin.
Buy Gold, Buy Bitcoin
In a recent LinkedIn post from Ray Dalio, the co-chairman of massive hedge fund Bridgewater Associates, the billionaire warned of central banks’ effort to devalue their currencies and inflate the economy somewhat artificially.
He also used historical shifts in the macroeconomic and geopolitical climate, like the World Wars and the Great Depression, to explain that the economy is poised to see a “paradigm shift”.
This paradigm shift, per the legendary investor, who sports a net worth of over billion, will see “the value of money depreciate ” and “significant domestic and international conflicts. In other words, the writing is on the wall for an alternative asset and stores of value, like gold or Bitcoin, to gain traction.
Dalio recommends gold, writing that it may be “risk-reducing and return-enhancing” for investors to add the precious metal to their portfolio. The Bridgewater Associates lead adds that normal securities and bonds could see diminishing returns, requiring investors to diversify.
ROCKET FUEL FOR BITCOIN:
– Cut interest rates
– Print money (QE)
– Bitcoin reward halvingEven @RayDalio sees the perfect setup. Now we just need to get him on the Bitcoin train
https://t.co/nTcn33Mx5A
— Pomp
(@APompliano) July 17, 2019
Arguably, Dalio’s post could also be seen as a tacit recommendation to purchase Bitcoin. You see, the inflationary policies currently being enlisted don’t directly affect BTC.
Unlike traditional fiat currencies, the supply of the cryptocurrency is algorithmically-enforced and the network isn’t controlled by a central authority, giving it the potential to truly gain traction in a world with an uncertain geopolitical atmosphere and questionable macroeconomic health.
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Cadence Launches Blockchain-Based Tokenized Debt Marketplace
n Cadence, a Coinbase Ventures-backed alternative investment provider, launched a blockchain-based investment platform for private creditn
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Bitcoin Price Rising Alongside Negative-Yielding Government Debt
The pool of government debt with negative yields pushed past the trillion-level last week, after the dovish outlooks in both the US and Europe intensified concerns over the health of the economy. Around the same time, a market that is entirely independent of the impacts the central banks’ policies netted approx a 275 percent year-to-date return.
Bitcoin on Wednesday settled a fresh 2019 peak just shy of the ,000 level, erasing about 70 percent of the total losses incurred during a very depressive 2018, wherein the price fell from ,000 to ,100. The digital asset market allegedly reacted to a string of events that took place on a macroeconomic scale, which include the Federal Reserve’s declaration last week to cut interest rates in July, and the probability of the European Central Bank (ECB) to initiate a new round of quantitative easing program.
Bitcoin vs global aggregate negative yielding sovereign debt. Real straightforward situation. pic.twitter.com/Obmhnkbrf7
— Travis Kling (@Travis_Kling) June 27, 2019
Seemingly, the global sovereign debts were, too, reacting to the same set of events, surging by over .3 trillion soon after the Fed and ECB declared their monetary easing strategies.
Bond Yields Fall to Record Lows
The interim government bond yields of many western European nations to record lows. Swedish and French 10-year yields dropped below an embarrassing zero for the first time. At the same time, almost 100 percent of the bonds issued by the Switzerland government now bears a negative yield. In Sweden, it is 91 percent of all debt — and in Germany, it is 88 percent.
![bitcoin, bitcoin news, gold](https://www.newsbtc.com/wp-content/uploads/2019/06/sovereign-debt-yield-860x465.jpg)
Western European Government Returning Record Low Yields on their Bonds | Image Credits: Bloomberg, US Global Investors
In the United States, meanwhile, analysts predicted that bond yields, which are already near their historic low, could fall below the 1 percent level.
“If we’re in a world where the Fed is seen as returning to the zero lower bound, and then starting another QE program, that could easily be enough to push 10-year yields below 1%,” Jon Hill of BMO Capital Markets told Bloomberg. “Although not our base case, it is possible that scenario could play out in the next 12 to 18 months.”
Bearish Gold Gets a Boost, Bitcoin Up
The Gold market, containing the spot as well as stocks, flew all over the place last week — same as bitcoin. The XAUUSD spot exchange rate surged above ,400 an ounce for the first time since 2013 soon after the Fed announced a rate cut. Meanwhile, gold stocks also rallied with the FTSE Gold Mines Index appreciating by more than 5.3 percent on Thursday, its best since January 2017.
Gold companies also fared well, with stocks of Eldorado Gold closing at a 12 percent high on Thursday. The sentiment also pushed the shares of Coeur Mining, Yamana Gold, Hecla Mining, and IAMGOLD, higher in the range of 6.7 and 11.1 percent.
The moves explained investors’ imminent interest in the precious metal amidst a gloomy economic outlook. That also evidently demonstrated from where the bitcoin market was catching its bullish sentiment as of late.
Bitcoin vs global aggregate negative yielding sovereign debt. Real straightforward situation. pic.twitter.com/Obmhnkbrf7
— Travis Kling (@Travis_Kling) June 27, 2019
As of 0841 UTC, the bitcoin price was trading at ,191 on San Francisco cryptocurrency exchange, Coinbase.
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Bloomberg Terminal Lists Ethereum-Based Debt Instrument
In a blockchain first, Cadence has obtained a Financial Instrument Global Identifier FIGI and can be easily found on Bloomberg Terminal.
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Credit Card Debt at All-Time High, Should Crypto Investors Really Buy Bitcoin With it?
It’s not just the just United States debt reaching an all-time high, individual credit card debt is also breaking new records in 2019. With credit card debt mounting, and a potential economic recession looming on the horizon, should crypto investors really be buying Bitcoin with their credit cards?
Those that have already loaded up on crypto with their credit cards during the 2017 bull run may be sorely regretting it now that Bitcoin has repeatedly painted new lows since.
American Credit Card Debt Reaches New High, Average of ,375 Per Person
While Bitcoin may be hitting new lows, American credit card is reaching new highs. According to new data, American credit card debt is up 3% year-over-year, with the average individual wracking up a balance of ,375 in debt.
The Federal Reserve says that total credit card debt hit trillion in 2017, the highest ever on record.
Related Reading | Fed Chair Concerned About Trillion US Debt, is Bitcoin a Viable Alternative?
It’s not all bad for those in debt. The VantageScore consumer credit-scoring model used by credit reporting firms Equifax, Experian and more, is also at the highest it has been in the past decade. The increase suggests that consumers have again become comfortable and competent at managing their debt.
Why Investors Should Never Buy Bitcoin or Crypto on Credit
Despite clearly being better at managing debt, investors mistakenly purchased crypto at the height of the Bitcoin bull run with their credit cards, ruining many financially in the process.
Take one Redditor’s story for example, which adds validity to the old adage to “never invest more than you can afford to lose.” Reddit user appropriately named u/DeforestedMoon claims he is ,000 in debt due to his “tale of youth and financial irresponsibility” involving credit cards and crypto.
This person revealed they nearly made a profit of ,000 from investing in XRP, and another ,000 from “other coins.” Hype and irrational exuberance, which happens at the peak of market cycles, got the best of him, and he further loaded up on various cryptocurrencies using his credit card and even took out some loans.
“At first I would make Coinbase purchases with credit cards, then I moved on to taking out loans after Visa started considering credit card crypto purchases as cash advances,” he explained.
The story isn’t uncommon. Many investors were purchasing cryptocurrencies with credit cards, prompting credit card companies to step in and block the transactions from happening. While the crypto community was quick to point fingers at credit card firms for being in fear of crypto unseating them from the financial throne they currently enjoy, credit card companies really had their best interest in mind and may have saved many investors from further financial distress.
Crypto is a risky, speculate asset class, and in a sense, could be considered gambling in some way. And gambling on a credit card is incredibly dangerous. Even many U.S. states prevent individuals from purchasing something as innocent as lottery tickets with a credit card.
Related Reading | Can Crypto Credit Cards Bridge The Two Financial Realms?
Bitcoin and crypto is far worse to put on a credit card. Should the market turn as it did in 2018, causing the value of most cryptocurrencies feel as much as 95%, it could spell financial disaster. It’s bad enough to lose money on an investment, but it’s far worse to pay an annual percentage rate of as much as 36% on value that essentially evaporated into thin air.
While it is never recommended that investors should buy crypto on a credit card, it very well can be done responsibly, and in the case with the recent news with Binance adding credit card purchases of crypto, it does help with crypto adoption and creates positive market movement by adding another fiat on-ramp for investors to take advantage of.
If one should consider investing in crypto using a credit card, one should also understand the risks involved with both cryptocurrencies and credit card debt, and have a clear plan on how to pay that debt down. Relying on the crypto market to revive is not a sound debt elimination strategy and is gambling with one’s finances.
A much safer strategy to invest in crypto and Bitcoin is to dollar cost average – buying a set amount of crypto at regularly scheduled intervals.
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Fed Chair Concerned About $22 Trillion US Debt, is Bitcoin a Viable Alternative?
The US national debt now stands at .974 trillion, a 10% increase since President Donald Trump took over the oval office. And according to Jake Chervinsky, bitcoin is just the needle people need to pop the debt bubble.
Fed Chair Jerome Powell, talking about the trillion US debt:
"I'm very worried about it, but from the Fed's standpoint . . . the long-run fiscal non-sustainability of the US federal government isn't really something that plays into . . . our policy decisions."
Buy bitcoin.
— Jake Chervinsky (@jchervinsky) February 1, 2019
The securities lawyer of Kobre & Kim LLP said Friday that investors should buy Bitcoin, a stateless digital asset, to protect their portfolios against the budget deficit. He advised after Federal Reserve chief Jerome Powell said at The Economic Club of Washington, D.C. that he was worried about the ballooning government debt.
“From the Fed’s standpoint, we’re looking at a business cycle length: that’s our frame of reference,” Powell said. “The long-run fiscal, non-sustainability of the U.S. federal government isn’t [really] something that plays into the medium term that is relevant for our policy decisions.”
Understanding the Debt Bubble
In retrospective, the national debt is a way of measuring what the US government owes to its creditors. Since the government always spends more than what it takes, the said debt continues to rise. For instance, under the Obama administration, the national debt had increased from to trillion – a spotless 100 percent.
In the past 60 years, the US government has struggled to balance the budget – by spending and earning at an equal level. Every passing administration left a higher debt burden for the next, starting with President Ronald Reagan via President Clinton to President Obama. The US never came out of the so-called debt bubble.
But it doesn’t necessarily mean that they cannot. After all, the US is sitting atop a dollar printing press.
Ideally, Uncle Sam can print its own money, unlike other nations. The size of their debts – arguably – does not matter because the government can pay its debt any day it wants. They would not have to impact the standard of living. According to the Bretton-Woods agreement, the World Bank and the IMF made US Dollar as the world’s only global reserve currency. That led governments across the globe to stash the greenback in their central banks. It created demand, and the US Federal Reserve limited supply.
As of now, there are approximately 1.2 trillion US Dollars in circulation. That is not enough to settle day-to-day global trades: to purchase oil, gas, coffee, corns, and even iPhones. Countries, on the other hand, are sitting atop larger dollar reserves. China, for instance, has trillion; Japan has over trillion – and so on.
Why Bitcoin?
The only thing that changed between then and now is the internet. The millennials now have information about the debt bubble. They understand how every dollar in their pocket is indebted. They also realize that their own national currency is indebted to an-already indebted US Dollar.
Bitcoin enthusiasts project the digital currency as a solution to beat down the dollar hegemony. It expects millennials to exchange their national fiats for a technology that is independent of the US debts, government policies, Federal rate hikes, and whatnot.
Vinny Lingham, the founder of Civic, said that bitcoin’s intrinsic attractiveness against the debt bubble would attract more wealth.
“More wealth will be created in crypto over the next 10 years, than over the prior 10 years,” said Lingham. But remember, like any success story, it’s not going to be a straight line up. Keep believing and just be patient.”
Erik Voorhees, the founder of Shapeshift, hoped that the world would hedge their savings into bitcoin once the next financial crisis hits.
When the next global financial crisis occurs, and the world realizes organizations with trillion in debt can't possibly ever pay it back, and thus must print it instead, and thus fiat is doomed… watch what happens to crypto.
— Erik Voorhees (@ErikVoorhees) November 8, 2018
“They,” Voorhees said while referring to cryptocurrencies like Bitcoin, “may drop during the early phase liquidity crunch, but ultimately the world will move away from fiat money (printed without end, trending toward zero) toward crypto money (known, transparent, fixed supply, not subject to politicians’ opportunism).”
At the same time, economists have a different opinion. Nouriel Roubini, a New York-based financial expert, said that bitcoin was a mother of all scams. He added that cryptocurrencies were a wet dream of individuals with zero financial literacy. Warren Buffet, a Wall Street investment giant, refused to consider Bitcoin as an investment.
“If you buy something like bitcoin or some cryptocurrency, you don’t have anything that is producing anything,” Buffett said in an interview with Yahoo Finance. “You’re just hoping the next guy pays more. And you only feel you’ll find the next guy to pay more if he thinks he’s going to find someone that’s going to pay more.”
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