Floating currencies – Last Jeudi http://lastjeudi.org/ Sun, 16 Jan 2022 10:42:50 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://lastjeudi.org/wp-content/uploads/2021/03/cropped-icon-1-32x32.png Floating currencies – Last Jeudi http://lastjeudi.org/ 32 32 What could stop the momentum of cryptocurrency? https://lastjeudi.org/what-could-stop-the-momentum-of-cryptocurrency/ Sat, 15 Jan 2022 15:12:59 +0000 https://lastjeudi.org/what-could-stop-the-momentum-of-cryptocurrency/ Millions of crypto investors, speculators, and enthusiasts have bought and sold cryptocurrency over the past decade, hoping that crypto would be both a powerful investment and a currency of the future. As a result, the cryptocurrency market is booming. Bitcoin, the most recognizable crypto name, has gone from a low of around $5,000 in March […]]]>

Millions of crypto investors, speculators, and enthusiasts have bought and sold cryptocurrency over the past decade, hoping that crypto would be both a powerful investment and a currency of the future. As a result, the cryptocurrency market is booming.

Bitcoin, the most recognizable crypto name, has gone from a low of around $5,000 in March 2020 to a price over $51,000 at the time of writing this article. Rival currencies including Ethereum and Litecoin have become realistic contenders – and even similar currencies like Dogecoin are still floating around.

On top of that, an increasing number of merchants are accepting cryptocurrency as a form of payment. Almost one-third of all American small businesses currently accept crypto as a form of payment – ​​and that number keeps growing. Crypto optimists suggest this is natural momentum and it is only a matter of time before crypto really becomes mainstream.

There is a lot of momentum pushing the crypto movement forward. So what, if anything, could stop this momentum?

watch signals

First of all, what do we mean by “momentum” and what could really stop it?

Most investors will tell you that price is the most crucial variable, and they’re certainly right. The price of an asset is usually a good signal of both trading volume and consumer confidence; the more people have confidence in a given asset, the more its price will rise.

The prices of Bitcoin and other major coins have risen steadily over the past few years; if prices stabilize or start falling (without a quick recovery), this could indicate that confidence in the crypto is wavering.

We can also look at more sophisticated signals, like detecting when an asset is overbought or oversold. Price fluctuations are not always directly correlated with market attitudes towards an asset or the value of that asset.

If we notice that the price of Bitcoin is rising explosively, but is “overbought”, we can expect its true momentum to be slower than its perceived momentum – and the price will soon come back down to a reasonable level. .

If we notice that it is “oversold”, on the other hand, a sudden drop in price may not be an accurate reflection of stalled or lost momentum; it could just be a temporary setback in the middle of a long stream of growth.

In any case, it is not easy to concretely define the upper and lower bounds of the crypto’s growth trajectory or momentum. Even considering this, some clearly disruptive events and developments could test the optimism of even the most loyal investors.

New regulations or laws

New regulations or laws could have a pronounced effect on public trust in crypto. Most of the world’s developed countries are crypto agnostic, and some have even created their own cryptocurrencies (more on that later). But some countries have crypto trading banned outright for their citizens.

Suppose highly developed countries start bringing down the hammer on crypto trading. In this case, it could start with something of a domino effect, ultimately threatening the future of crypto’s usefulness as a decentralized currency.

A major security issue

So far, crypto has been hailed as inherently safer than conventional forms of exchanging money. And anyone familiar with the decentralized ledger at the heart of blockchain technology knows that security vulnerabilities are few and far between.

That said, a legitimate security threat (such as a 51% prominent attack or something similar) could shake consumer confidence in crypto as a secure asset.

The attack or security threat need not be particularly threatening or damaging; it is enough to force investors to reconsider their perceptions.

Keystones in decline

The crypto world currently revolves around Bitcoinand to a lesser extent Ethereum, Litecoin and a handful of other major players. They are the headliners of the crypto community, although dozens of promising young candidates have emerged.

If any of these “keystone” currencies dip significantly, it could have a ripple effect on the entire crypto market. This would slow the growth momentum that the market has been experiencing for several years.

Overcrowding

Competition and overcrowding in the crypto market could also be an issue. Thousands of new currencies claim market share. This ultimately makes it harder for individual currencies to stand out, confusing newcomers.

  • ICOs Thousands of new crypto projects are deployed every year. While most deplete within months, the cryptocurrency landscape is ever-expanding.
  • National digital currencies. Some countries, including Venezuela, Ecuador and China, have published their own government backed cryptocurrency. While this in some ways defeats the purpose of crypto, enough support for these projects could legitimately threaten the decentralized currencies we have come to enjoy.

A wider economic collapse

As you can imagine, cryptocurrency growth could also come to a halt in the event of a broader economic collapse. If people start to fear for their economic future, they might pull out of the crypto markets. And, they can return to the comfort and security of more familiar financial systems.

  • Federal Reserve action. The Federal Reserve kept interest rates low for many years to avoid an economic recession. Recently, the institution announced its intention to steadily increase rates over time; rate hikes that are too sudden or too extreme could have a lingering effect on the overall market.
  • A real estate/stock market crash. While crypto should hypothetically operate independently of other markets, a major crash in another financial market would likely have a noticeable effect on crypto prices. For example, if there is a stock market crash or another real estate bubble forms and bursts (like in 2008), the crypto’s momentum could collapse.
  • Geopolitical events. Major geopolitical events, such as the outbreak of another major war or other forms of economic turmoil, could also have a deteriorating effect on almost all financial markets. These, of course, are largely unpredictable, but they could have a powerful impact on the future of crypto.

What to do if you anticipate an accident

What if you notice some of these developments and suspect an upcoming crash?

There are a few actions that can help you if your prediction turns out to be correct:

  • Diversify your holdings. Portfolio diversification is a good strategy for any investor, even if you don’t hold any crypto. This is even more critical if you have risky holdings.
  • Table of regular withdrawals. If you want to recognize your profits and minimize losses, you can start slowly withdrawing your investments in small installments.
  • Influence what you can. If you believe in the future of cryptocurrency, be active. Evangelize the benefits of currency and denounce new regulations that could threaten it.

The world is getting more and more used to the presence of cryptocurrency, but crypto is still relatively new financial tool. As a result, there is a lot we don’t understand about crypto’s eventual place in the world. And, there are many unknown variables that will influence its development.

For this reason, it is essential to continue to treat crypto as a volatile and risky asset, even if it looks like crypto’s momentum will continue to pick up in the future.

Image Credit: unDraw; Thank you!


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BUZZ-COMMENT-FX Traders Should Think About Risk, Not Rates https://lastjeudi.org/buzz-comment-fx-traders-should-think-about-risk-not-rates/ Fri, 14 Jan 2022 09:42:08 +0000 https://lastjeudi.org/buzz-comment-fx-traders-should-think-about-risk-not-rates/ January 14 (Reuters) – Traders who view the level of risk appetite as more important than the direction interest rates might take should fare better in the coming year. Soaring inflation has triggered a wave of monetary policy tightening, but this has not derailed the underlying positive bias in financial markets, where the huge stimulus […]]]>

January 14 (Reuters)Traders who view the level of risk appetite as more important than the direction interest rates might take should fare better in the coming year.

Soaring inflation has triggered a wave of monetary policy tightening, but this has not derailed the underlying positive bias in financial markets, where the huge stimulus that has been rolled out is expected to continue to operate. magic.

Rather than falter in the face of rising interest rates, equities and commodities soared and risky emerging market currencies gained.

This extremely powerful positive trend is likely to continue as the terminal rate envisaged for US interest rates in this tightening cycle is relatively low at around 2.5%, while rates in the Eurozone, Switzerland and Japan are expected to stay much lower.

Interest rates for free-floating currencies such as the South African rand, Mexican peso and Czech koruna are already higher and are expected to match, if not exceed, any rise in US rates. Carry trades against funding currencies such as the Euro, Yen and Swissy could prosper.

For more click FXBUZ

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(Jeremy Boulton is a market analyst at Reuters. Opinions expressed are his own)

((jeremy.boulton@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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UNP renews call for Sri Lanka to participate in IMF support program https://lastjeudi.org/unp-renews-call-for-sri-lanka-to-participate-in-imf-support-program/ Wed, 12 Jan 2022 20:14:08 +0000 https://lastjeudi.org/unp-renews-call-for-sri-lanka-to-participate-in-imf-support-program/ Most people question the role of the United National Party in stabilizing the economy. It was the UNP that introduced discipline both in the economy and in tax expenditures. This may have caused additional stress for some parties who sought to achieve their own ends through deceptive means. However, it is only the United National […]]]>
Most people question the role of the United National Party in stabilizing the economy. It was the UNP that introduced discipline both in the economy and in tax expenditures. This may have caused additional stress for some parties who sought to achieve their own ends through deceptive means. However, it is only the United National Party that has always endeavored to safeguard the interests of the public. This becomes clear when one studies the period 2001-2004 during which the opportune measures of Prime Minister Ranil Wickremesinghe enabled the public to be deleveraged.
  • Here is a statement issued yesterday by the Chairman of the United National Party, Wajira Abeywardana, former Minister of Interior and Home Affairs.

UNP leader Ranil Wickremesinghe


United National Party leader and former prime minister Ranil Wickremesinghe said the International Monetary Fund (IMF) never intervened in Sri Lanka’s economic affairs or development activities during the period the UNP government was in power. . He made this statement in the radio program “Dasa Desin 7” broadcast recently.

This is in fact a reality, because during the period 1977-1994, the World Bank, the Asian Development Bank and other globally recognized monetary institutions were actively engaged in the country’s economic development activities.

However, it should be clarified that the government must maintain economic activities within a certain framework and must not seek to falsify the data concerning the monetary agreements concluded. Thus, it is evident that the economic and developmental activities of Sri Lanka were carried out within a regulated framework with appropriate economic and monetary parameters during the era of the UNP government. It is therefore imperative to reiterate the facts stated by Ranil Wickremesinghe, in order to raise public awareness of the true situation of resorting to the IMF to request financial assistance, during the current economic crisis.

The IMF is an international organization that promotes global economic growth and financial stability, encourages international trade, and reduces poverty. It was founded in 1944 under the Bretton Woods agreement with the World Bank, with 44 member states. He encouraged international financial cooperation by introducing a system of convertible currencies with fixed exchange rates. The Fund currently comprises 189 Member States. The IMF began promoting floating exchange rates after the collapse of the Bretton Woods system in the 1970s and this system continues to this day.

Among the main functions of the IMF are monitoring, capacity building and lending.

IMF lending facilities for low-income countries

1. Extended credit facility – sustained medium to long term commitment.

2. Standby Credit Facility – financing for low income countries with actual or potential balance of payments needs.

3. Rapid Credit Facility – a one-time upfront payment for countries facing urgent balance of payments needs.

RCF bears zero interest from 2015, ECF and SCF bear zero percent interest from June 2021 and a grace period of 5½ and 4 years respectively and the final maturity period is 10 and 8 years respectively. The grace period and the maturity period of the RCF are 5.5 years and 10 years respectively.

In addition, the Fund also provides relief to poor countries hit by the worst catastrophic natural disasters as well as those battling public health crises, under the Catastrophe Containment and Relief Trust under which Guinea, Liberia and Sierra Leone received $100 million each in February-March. 2015 to fight Ebola.

Sri Lanka and the IMF

Sri Lanka became a member of the IMF on August 29, 1950 and has a quota of 578.8 million (SDR) and the amount of purchases and loans outstanding in September 2021 is 922.26 million (SDR) . Sri Lanka has entered into 16 financing agreements since joining.

Awareness of the same:

Before requesting IMF assistance, the member state and the IMF must agree on an economic policy program. The member state’s commitment to implement certain economic policies is an integral part of the system and is known as “policy conditionality”.

This political program is then presented to the Board of Directors of the Fund by a letter of intent and detailed in a memorandum of understanding.

Conditions imposed by the IMF in Sri Lanka lately

There happens to be an attempt to propagate misconceptions regarding the conditions imposed by the IMF in Sri Lanka, and hence it is important to gain a clear understanding of the same.

The 2016 government under Prime Minister Ranil Wickremesinghe secured an expanded financing facility of $1.5 billion for a period of 36 months, starting in June 2016. In granting the said facility, the IMF imposed four motives to which the government had to conform. These are:

1. Cover the country’s public deficit by structurally rebuilding existing foreign exchange reserves.

2. Reduce the decline in foreign exchange reserves held by the Central Bank.

3. Reduce the budget deficit relative to Sri Lanka’s GDP.

4. Effective management of public enterprises (SOE) through effective management of public funds.

It is clear that the four recommendations above must be implemented in the public interest. I would like to emphatically state that it is a common characteristic of schemer politicians to create ghosts in the minds of the public, in order to achieve their petty means.

Sri Lanka accepted the following six principles in order to obtain the said loan in 2016:

1. Advance fiscal consolidation.

2. Mobilization of State revenue.

3. Introduce reforms for the management of Public Finances.

4. Introduce reforms for the management of public enterprises (SOE).

5. Control inflation through a flexible exchange rate.

6. Introduce reforms in the country’s trade and investment sectors.

However, the overthrow of our government in 2019 caused Sri Lanka to lose the second quarter of said loan repayment, which meant a massive loss of foreign currency for the country. It is therefore imperative that the public be made aware of this reality.

At present, the IMF is providing financial assistance and debt service relief to member states experiencing economic crisis due to the pandemic. Overall, the IMF earns about $250 billion, a quarter of its $1 trillion lending capacity. In total, the IMF provides financial assistance to 87 countries for an amount of 167,729.14 million dollars.

In the Asia-Pacific region, countries such as Afghanistan, Bangladesh, Nepal and Myanmar are currently receiving monetary assistance under the Rapid Credit Facility and the Rapid Financing Instrument.

In addition, the IMF asked China and other developed countries to suspend debt collection from poor countries during this period, which was approved at the G-20 summit. G-7 countries have also pledged an additional $100 billion in special drawing rights, which are an internal currency of the IMF, to finance poor countries in June 2021.

The most important factor to keep in mind is that getting an IMF loan would attract developing countries to invest in Sri Lanka. The reforms introduced by the IMF would help to reduce the country’s budget deficit and therefore, it is unjustified to instill fear in the minds of the public by seeking assistance from the IMF.

It is in the light of the above circumstances that the leader of the United National Party, Ranil Wickremesinghe, reiterated that it is the responsibility of the government in place to request assistance from the IMF, for more than a year to date. It is the surest road that will save the country from falling into ruin.

It is up to the public to decide the fate of those who propagate falsehoods about the IMF; because these factions are prejudiced against creating appropriate financial and economic reforms, which will stabilize the country and exclude the possibility of corruption and unjust enrichment.

Sri Lanka requested help from the IMF, the public was freed from scarcity and the need to stand in long queues for basic necessities. Political parties that oppose the request for such assistance from world-renowned sources such as the IMF, have wrecked the economy, creating increased financial stress and further burdening the public with excess debt.

It is evident that after looking at the cases where Sri Lanka has requested IMF assistance, the public has been freed from the scarcity and the need to stand in long queues for basic necessities. Political parties that oppose the request for such assistance from world-renowned sources such as the IMF, have wrecked the economy, creating increased financial stress and further burdening the public with excess debt.

Most people question the role of the United National Party in stabilizing the economy. It was the UNP that introduced discipline both in the economy and in tax expenditures. This may have caused additional stress for some parties who sought to achieve their own ends through deceptive means. However, it is only the United National Party that has always endeavored to safeguard the interests of the public. This becomes clear when one studies the period 2001-2004 during which the opportune measures of Prime Minister Ranil Wickremesinghe enabled the public to be deleveraged.

Ranil Wickremesinghe proved that it is indeed possible to steer the economy in the right direction and manage the increased pressure on the economy, when the UNP took over the reins of the country on January 8, 2015. So I ask the public to make use of the knowledge of such a visionary leader in the new year of 2022.

UNP Chairman Wajira Abeywardana shows off a cut pumpkin during yesterday’s press conference to drive home the soaring cost of living in the country


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Govt. the heaviness to blame for exchange rate problems https://lastjeudi.org/govt-the-heaviness-to-blame-for-exchange-rate-problems/ Thu, 06 Jan 2022 18:59:38 +0000 https://lastjeudi.org/govt-the-heaviness-to-blame-for-exchange-rate-problems/ There is a lot of talk these days about the pressures the Sri Lankan Rupee faces, but it is important that we understand the mechanics and the broader economic context. Currency crises have been common in our modern history with countries facing sudden devaluations to the point where we can predict trends. There was the […]]]>

There is a lot of talk these days about the pressures the Sri Lankan Rupee faces, but it is important that we understand the mechanics and the broader economic context. Currency crises have been common in our modern history with countries facing sudden devaluations to the point where we can predict trends. There was the Mexican peso crisis of 1994 and the Asian financial crisis of 1997. Both examples may highlight the dangers of maintaining an exchange ratio that does not reflect the real value of the currency.

A currency can fulfill its function if it constitutes a stable store of value. If there is a sudden divergence from the market, it threatens savings. The reason I am writing today’s article is to assert that the lens through which we view economic phenomena is narrow. Some believe that the government should be at the center of the economy and that it must take measures to respond to the external economic environment. This is true in a relatively controlled economy, but it is far from the only means by which prosperous economies operate.

The problem with putting government at the center of economic decision-making is that the economy has to be monitored and operated by individuals who have to make decisions while many countries let markets decide what prices and other parameters should be. The best markets are by no means perfect and need a correction sometimes, but in many ways, it’s better to be reactionary than to have a poorly managed economy.

Exchange rates are determined in different ways. Many developed countries have floating systems where buyers and sellers of currencies can step in and buy and sell at a rate determined by the free market, but our currency is severely constrained compared to free-floating currencies. What can happen in situations like ours is that the central bank tries to keep the rate at the level it wants, but at some point you have to accept reality. As much as you want $ 1 to be around Rs. 200, you need the reality to be on your side. In a healthy economic system, your cash inflows and outflows would naturally determine that $ 1 is worth around Rs. 200. You may also have a scenario where the government has large reserves to be able to support its valuation of the currency by buying and selling. reserves, and unfortunately we do not have that credibility. This is why countries with currency problems have exchange rates parallel to the black market.

It is better to face the reality of the situation and not try to force things to turn out the way we would like. The reality is that we have a debt burden that needs to be paid off, and we need imports to live on which we should not be particularly wary of either. Imports play an important role in any dynamic economy. Add to that the lax monetary policy that has been used to ease the burden of the pandemic. Countries typically raise rates when the currency faces pressure related to how Turkish President Erdogan is asked to raise rates in defense of the Turkish lira.

I believe that any help the IMF is prepared to provide is crucial to get us back on track and correct the mistakes in our economic management. The downside of trying to fix the problem rather than kicking the box is that the immediate consequences can be hard to swallow, but it’s reasonable to believe it’s way better than having to react. to the suddenly arising problem where the fallout would be much worse.

Just like a business, we have to make sure that our fundamentals are worked out, because the day of the accounts of each country or company is inevitable if the fundamentals diverge too sharply. Not so long ago, Black Wednesday was when the UK government had to take the pound sterling out of the ERM (exchange rate mechanism) for failing to keep the pound within a certain range due to the pressures. against the currency.

History has repeatedly shown us the fallout from poorly managed currency valuations. While economic turmoil affects all countries, it is important to note that our problems are not simply the consequence of negative external factors but made worse by our own underlying shortcomings.


(Vinuja Singharachchige was a former Research Fellow at the Advocata Institute and is currently a Forex Analyst at JP Morgan. He can be contacted at vinujawin@gmail.com. The opinions expressed are those of the author and do not reflect those of associated organizations.)



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FY22 budget deficit could narrow with higher tax collection, India Ratings says https://lastjeudi.org/fy22-budget-deficit-could-narrow-with-higher-tax-collection-india-ratings-says/ Mon, 03 Jan 2022 06:15:45 +0000 https://lastjeudi.org/fy22-budget-deficit-could-narrow-with-higher-tax-collection-india-ratings-says/ Global developments 2022 appears to start with a sense of global risk that continues despite a surge in COVID cases across the world. Although US nominal yields have risen in the short end, real rates remain deep in negative territory. This weighs on the dollar which has weakened overall except against the JPY which is […]]]>

Global developments

2022 appears to start with a sense of global risk that continues despite a surge in COVID cases across the world. Although US nominal yields have risen in the short end, real rates remain deep in negative territory. This weighs on the dollar which has weakened overall except against the JPY which is more sensitive to US nominal rates. The JPY was the worst performing G10 currency in 2021. The Euro is trading near the high end of its recent 1.1260-1.1360 trading range. The British pound fell back to 1.35 from around 1.1340 during the Asian session. Commodity currencies, the Canadian dollar in particular, are showing strength. The CAD was the only G10 currency that appreciated against the dollar in 2021.

Domestic developments

Basic sector output rose 3.1% in November, a sign that domestic growth is under pressure. However, the TPS collections for December amounted to 129000crs, just slightly below the November collections. Given strong direct and indirect tax collections, the budget deficit from April to November was only 46% of that budgeted for the full year. Foreign exchange reserves held steady at $ 635 billion at the end of the week of December 24.

Actions

The Nifty gained 0.9% on Friday to close at 17354. US stocks ended modestly in the red on Friday. Asian stocks are also trading mixed.

Bonds and rates

The benchmark and floating rate bond auction was canceled on Friday. The benchmark return fell 4 basis points from the day’s highs to end at 6.45%. The 14d VRRR has seen low adoption as the liquidity of the banking system is still low due to higher government cash balances with the RBI.

USD / INR

The rupee had strengthened to 74.10 against the dollar on month-end exporters’ sales and dollar cash sales by foreign banks on Friday. USD / INR, however, experienced a short aggressive hedge towards the end of the session, which allowed the pair to close at 74.34. The 73.90-74.10 area is strong technical support.

Strategy: Exporters are advised to hedge increases to the 75.50 levels. Importers are advised to hedge dips towards the 74.30 level. The 3M range for the USDINR is 73.80 to 76.00 and the 6M range is 73.50 to 76.50.

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As we move into 2022, know how Bitcoin stacks up against the US dollar https://lastjeudi.org/as-we-move-into-2022-know-how-bitcoin-stacks-up-against-the-us-dollar/ Sat, 01 Jan 2022 03:30:37 +0000 https://lastjeudi.org/as-we-move-into-2022-know-how-bitcoin-stacks-up-against-the-us-dollar/ 2021 has been a year dominated by cryptocurrencies, so much so that a few countries have announced a crypto ban and a few have hotly debated how to regulate their trade. Now, as we move into 2022, the crypto market is likely to enter a new phase. This phase will focus less on the altcoin […]]]>

2021 has been a year dominated by cryptocurrencies, so much so that a few countries have announced a crypto ban and a few have hotly debated how to regulate their trade.

Now, as we move into 2022, the crypto market is likely to enter a new phase. This phase will focus less on the altcoin vs. Bitcoin debate, and more on Bitcoin against USD. Bitcoin speculative trading can only last a little longer. Ultimately, Bitcoin must become what Satoshi Nakamoto has always envisioned – legal tender that could either work alongside the US dollar or even replace it altogether.

That said, crypto enthusiasts probably have enough time to speculate on the value of Bitcoin, before it stabilizes in light of the fact that Bitcoin is finally making forays into the legal tender space. Today, let’s find out how Bitcoin is different from the USD.

Read also: Is Investing In Altcoins Better Than Bitcoin?

Bitcoin vs USD – Back to basics

Bitcoin is backed by the blockchain, not the dollar.

Bitcoin is essentially a digital currency that can be transferred using distributed ledger technology.

Can USD also be transferred digitally? Yes, but at this time it’s not on the Distributed Ledger.

Bitcoin started in 2009. In its early days, it was of little value. Hal Finney, a developer, is said to have been the first beneficiary of Bitcoin after contributing to the network’s underlying proof-of-work consensus mechanism.

The US dollar, on the other hand, has a long, illustrious history. The 18e Century Coinage Act established the USD, when pegged to the Spanish dollar.

Read also: Blockchain, crypto-currencies, NFT & CBDC: Difference explained in 4 paragraphs

Bitcoin regulation

If it hadn’t been for the regulatory part, there’s no point in discussing Bitcoin against USD. Bitcoin’s biggest Unique Selling Proposition (USP) is the absence of any regulatory authority. The US Federal Reserve, which is the regulator of the USD, has no control over Bitcoin. This is due to the underlying blockchain technology of Bitcoin which has decentralization at its heart.

The US dollar is regulated by the central bank, as a free supply of the greenback can cause a series of problems. For example, if there are enough US dollars floating around in the economy, the purchasing power of people will increase beyond the limits. Enough money can lead to high prices because supply will never be able to meet demand. In contrast, a low availability of the US dollar can lead to a shortage of capital for private companies. This can deal a severe blow to job creation and economic growth.

For now, Bitcoin supporters are avoiding the debate over how the unregulated supply of Bitcoin can become an economic problem. Bitcoin will have a limited supply of BTC tokens, but their movement from party to party would still be unlimited. This is what can lead to either too much cash or too little cash. The lack of regulatory oversight over Bitcoin has not yet been fully understood, and the dust will only settle when more countries make it legal tender.

Read also: Does Bitcoin even have a resistance level? Let’s find out

Does Bitcoin have a guarantee?

The US dollar is a fiat currency. The latter term means that the issuing government guarantees payment to the holder of a USD note.

In Bitcoin, such a sovereign guarantee does not exist. It gets more complex because of the wallet. Any investor in Bitcoin must store the assets in a crypto wallet. Wallets have a private key for each user. There have been many instances across the world where wallet owners failed to recall the private key and lost access to stored BTCs.

As Bitcoin is a digital-only currency, there have also been cases of hacking. Although cryptocurrency proponents claim that it is possible to locate any stolen Bitcoin, this remains a controversial part that still plagues cryptos. Bitcoin has yet to demonstrate its ability to guarantee the value of the holding to the user.

Read also: Is Bitcoin Better Than Gold As A Hedge Against High Inflation?

Acceptance of Bitcoin

There is little sense in using a currency that does not have wide acceptability.

The US dollar has a significant advantage in this category. It is the most powerful currency in the world. Any holder can be sure of its acceptance throughout the world. Several commodities, including crude oil, are denominated in USD. Banks easily exchange USD for any other fiat currency. In fact, the USD is not used as a regular currency in the United States, but it is also the only currency in many other jurisdictions. El Salvador, a country that legalized Bitcoin, used the USD because it did not have a local fiat currency.

Bitcoin is far from becoming a universally accepted currency. For now, a few big companies like airBaltic are accepting Bitcoin from customers, but mainstream adoption remains elusive.

The acceptance of Bitcoin is just in pieces. A “Bitcoin city” in El Salvador with Bitcoin bonds has yet to demonstrate long-term success.

Read also: Is Canada working on its own CBDC?

To take with

Bitcoin, for now, remains a tradable asset. For some, it may be digital gold and an inflation hedge. Unlike this, the USD is not a tradable asset. The US dollar is found in people’s pockets and is used to make purchases for a good or service. Countries maintain their reserves in US dollars in order to have a cushion in cross-border trade, where most commodities are valued in USD.

Bitcoin’s road to becoming such a powerful legal tender is filled with several roadblocks. First, the absence of any regulatory oversight makes economies vulnerable to having Bitcoin as a medium of exchange. But that doesn’t mean that Bitcoin can’t achieve the feat. Central banks are considering the launch of CBDCs (central bank digital currencies), which are likely to rely on blockchain. In this way, the digital version of fiat currencies can come with the same decentralized ledger attributes. These currencies can then be pegged to Bitcoin.

Finally, Bitcoin – there is a near consensus on this – makes remittances cheaper and faster. The presence of intermediaries such as commercial banks in USD payments adds time and expense. This is one thing that could be Bitcoin’s true USP against the USD.


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Some companies are ready for Libor demise, but not all https://lastjeudi.org/some-companies-are-ready-for-libor-demise-but-not-all/ Thu, 30 Dec 2021 13:00:00 +0000 https://lastjeudi.org/some-companies-are-ready-for-libor-demise-but-not-all/ Wall Street’s abandonment of the London Interbank Offered Rate takes effect at the start of the new year. Some companies are better prepared for it than others. From January 1, US banks will no longer be allowed to issue new debt linked to Libor, the global benchmark underpinning billions of dollars in financial contracts. Financial […]]]>

Wall Street’s abandonment of the London Interbank Offered Rate takes effect at the start of the new year. Some companies are better prepared for it than others.

From January 1, US banks will no longer be allowed to issue new debt linked to Libor, the global benchmark underpinning billions of dollars in financial contracts. Financial authorities began phasing out Libor in 2017 after discovering that traders at major banks had manipulated the rate by submitting fake data.

Major US financial institutions have been preparing for the transition for years. Many of them have replaced Libor with alternative benchmarks, including the Secured Overnight Financing Rate – Wall Street’s preferred choice – for some of their assets, including interest rate swaps and bank-backed securities. mortgage claims.

Meanwhile, non-financial corporations and smaller institutions such as regional banks are at various stages of selecting a replacement rate and updating their systems to handle the change, analysts say. Some companies have hung on to Libor, making another new deal before the end of the year, as debt sold before the deadline may continue to refer to the rate until June 2023.

Executives, lawyers and investors expect these companies to make further strides to move away from Libor in early 2022. But for some non-financial companies, preparation could lead to distractions from their core business. , and worse yet, lack of preparation can raise financial questions. regulators on their ability to manage the transition, said Venetia Woo, senior global advisor Libor at consulting firm Accenture.

“These changes may look very minor from the outside, but they have big ripple effects,” Ms. Woo said.

Freddie Mac’s headquarters in McLean, Virginia.


Photo:

Andrew Harrer / Bloomberg News

Many products, including currency swaps and floating rate notes, have been replaced by Libor, Michael Gibson, director of the Federal Reserve’s supervisory and regulatory division, said at a board meeting. at the beginning of the month. All new mortgage-backed securities issued by Fannie Mae and Freddie Mac are now tied to SOFR, he said, and about 90% of recently issued floating rate notes.

The value of interest rate swaps referencing SOFR has grown from less than $ 1,000 billion in September 2020 to over $ 7 trillion through November 2021, Gibson said. Currency swaps, where one party borrows one currency from another and lends another currency in return, between the US dollar and other currencies have almost entirely shifted to SOFR or other benchmarks, has t -he adds.

But for business loans, the transition has been slower. According to Leveraged Commentary & Data, of the $ 598.59 billion in junk food listed business loans sold this year through December 27, only 2.6% referred to SOFR. Leverage loans are typically issued by companies with high earnings leverage and used by private equity firms to help fund business buyouts.

Earlier this month, WideOpenWest Inc.,

an Englewood, Colo.-based cable operator launched a $ 730 million loan maturing in 2028 to refinance an existing line of credit. The company chose SOFR over other replacement rates because it is based on observable transactions and large volumes, said CFO John Rego.

“We believe that the key characteristics of SOFR underpin its strong presence and acceptance in the market, and will be the main benchmark in a post-Libor era,” said Mr. Rego.

Also this month, medical device maker ICU Medical Inc.

sold an $ 850 million leveraged loan to help finance its pending $ 2.35 billion acquisition of the medical division of Smiths Group PLC, an engineering company. Executives at the San Clemente, Calif., Based company chose SOFR after their lenders told them it was the most accepted replacement rate in the leveraged loan market, the leveraged loan market said. CFO Brian Bonnell. ICU Medical did not consider credit sensitive alternatives, said Bonnell.

“We weren’t looking to do something exotic just for the sake of being unique,” ​​he said.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com and Mark Maurer at mark.maurer@wsj.com

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8


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USD Fundamental Forecast for Q1 2022: The dollar’s Hawkish path is … https://lastjeudi.org/usd-fundamental-forecast-for-q1-2022-the-dollars-hawkish-path-is/ Tue, 28 Dec 2021 12:21:01 +0000 https://lastjeudi.org/usd-fundamental-forecast-for-q1-2022-the-dollars-hawkish-path-is/ (MENAFN – DailyFX) The US central bank announced a significant change in its monetary policy stance for the end of 2021, but the ultimate impact of the more hawkish stance hardly seemed to be felt for the dollar and risky assets in general. If we were to take the lack of direction of this systemically […]]]>

(MENAFN – DailyFX)

The US central bank announced a significant change in its monetary policy stance for the end of 2021, but the ultimate impact of the more hawkish stance hardly seemed to be felt for the dollar and risky assets in general. If we were to take the lack of direction of this systemically important shift at face value, it would be easy to interpret that another fundamental consideration is driving the greenback – or that we have simply disengaged from economic and financial currents. However, it would be myopic to believe that some of the most influential winds in the market no longer matter. Expectations bolstered by forward guidance certainly helped soften the shock of the latest news, but thin liquidity was arguably the most distorting aspect. As we move into 2022, markets will fill up again and the Fed will find itself near the hawkish end of the pack. So what price will the dollar follow in the new year?

Monetary policy depth charts

As we enter a new trading year, we also appear to be moving into different waters when it comes to monetary policy. Although there are still some very notable doves among the major central banks (such as the European Central Bank and the Bank of Japan); the majority of them are tapering off, forecasting short-term rate hikes, or already raising their benchmarks. This backdrop is important because it gives context of relative value. If it was only the Federal Reserve poised to hike rates as other major peers were static or easing, would the greenback have a distinct carry advantage? This is, of course, a favorable tailwind as long as the appetite for post-pandemic risk continues unabated into the New Year. As it stands, some of the currencies that have enjoyed a carry advantage over the dollar in the past – including the British pound, New Zealand dollar and Canadian dollar – again hold a performance premium. current and forecasted, but this is also where the dollar gained ground more aggressively over the last two months of last year.

Figure 1: Relative stance of monetary policy – by John Kicklighter

Forecasts carry more weight in future movements than current performance differences. This represents a greater downside risk for the US dollar in the first three months of the year. In the FOMC’s Dec. 15 rate decision, the policy statement announced the accelerated rate of cut ($ 30 billion per month) that would end QE by the end of March, while the summary of Economic Projections (SEP) raised expectations for rate hikes. in 2022 to three increases of 25 basis points. It’s slightly more aggressive than the market expected the central bank to adjust – from a single 25bp hike in September – so there may be a bit more upside on this fundamental dimension in the future. However, a further acceleration in rate forecasts is unlikely without representing alternative issues. If the Fed is increasing at a faster rate than three hikes over a 9 month period, considering that the first move comes after the tapering ends, it’s pretty aggressive with the state of economic uncertainty. Such a move would likely only come in an environment where other central banks rise under the same constraint of inflation, which would temper carry potential. Alternatively, if financial pressures intensify and the US central bank cuts its forecast, it would likely cause a significant loss of elevation for the greenback.

Chart 2: Implied US rate change forecast from the 2022 federal funds change – Daily period (August to December 2021)

Source: TradingView; Prepared by John Kicklighter

Add risk trends to the mix

There has been a change in the pace of monetary policy in the second half of 2022 for a reason: Inflation has proven to be more persistent than the authorities expected. While some view inflation only in what it means for central bank policy, it’s important to remember that there are very real economic implications. Rising costs of goods at the wholesale, corporate and consumer level are slowing economic activity. If the slowdown in the recovery is too sharp, it can easily worsen existing concerns in the market and the level of wealth in the markets as a whole, in turn causing the market to pull back. As a carry currency, the dollar has a lot of ground to lose following the dollar’s charge during the second half of last year. For those who have traded during more extreme market times, a bearish view of the US dollar during risk aversion may seem contrary to everything the textbooks suggest; but the greenback is more of a haven of last resort. If we slip into a “risk free” period that encompasses the entire financial system, then the dollar can resort to its more rudimentary role. Otherwise, treat it as a risky asset.

Chart 3: DXY Dollar Index overlaid with VIX and correlation over 20 weeks (weekly)

Source: TradingView; Prepared by John Kicklighter

External risks that are not anchored by the central bank

With the safe-haven status of the dollar in mind and a shift in focus from localized monetary policy, there are other questions dollar traders need to consider throughout the opening run. 2022. The complication of the impending US debt limit is a deadline that keeps on resetting. After another last-minute delay, the threat of an unthinkable US default has shifted to the first quarter of 2022. In all likelihood, the government will find enough support for another delay, but markets won’t. will never doubt this decision. More uncertain is the situation with the new wave of coronavirus. The omicron variant has seen a resurgence in infections on the coast as some countries across the ocean have already acted to shut down their economies to stop the spread. Will US officials ultimately be forced to follow a similar solution?

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Business group calls for immediate price cuts https://lastjeudi.org/business-group-calls-for-immediate-price-cuts/ Fri, 24 Dec 2021 14:07:11 +0000 https://lastjeudi.org/business-group-calls-for-immediate-price-cuts/ ISTANBUL The Association of Independent Industrialists and Businessmen (MÜSİAD) called on its members and the business community to reduce their prices following the fall in exchange rates. class = “cf”> “We will show our determination in the fight against inflation by announcing our members, who have taken responsibility and revised their prices down due to […]]]>
ISTANBUL

The Association of Independent Industrialists and Businessmen (MÜSİAD) called on its members and the business community to reduce their prices following the fall in exchange rates.

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“We will show our determination in the fight against inflation by announcing our members, who have taken responsibility and revised their prices down due to the alleviation of the pressure of the exchange rate on the costs, through our accounts of social media, ”he said in a statement.

MÜSİAD, which was founded in 1990, has over 11,000 members representing over 60,000 companies.
“We are proud that our call was answered quickly. Our members have started to support our call with price reductions, ”said Mahmut Asmalı, Director of MÜSİAD.

“I think our campaign will continue to snowball, and not only MÜSİAD members but all companies operating in our country will join it,” he added.

The Turkish lira has gained nearly 44% against foreign currencies this week, hovering around 11.45 against the US dollar and 13.03 against the euro on December 24.

Apple also announced that it would cut the prices of its products by about 25%.

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Many car brands have started to lower car prices between 10% and 40%, according to media reports.

The Confederation of Building Contractors (İMKON) called on suppliers to reduce material costs. The price of iron has fallen from 14,150 lire per ton to 10,000 lire per ton since December 20, İMKON director Tahir Tellioğlu told the daily Hürriyet.

Gasoline prices have been lowered from Lit 1.63 per liter to around Lit 11.61 in Istanbul and Lit 11.69 in Ankara, however, these reductions will not be passed on to prices at the pump due to a regulation which adds the deduction to the special consumption tax.

Turkey, economy,


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Fear of Missing Out on Crypto Drives People to Quit Traditional Gainful Jobs https://lastjeudi.org/fear-of-missing-out-on-crypto-drives-people-to-quit-traditional-gainful-jobs/ Thu, 23 Dec 2021 19:36:27 +0000 https://lastjeudi.org/fear-of-missing-out-on-crypto-drives-people-to-quit-traditional-gainful-jobs/ There’s a wave of tech executives and engineers leaving Google, Amazon, Apple, and other big companies to pursue what they see as a once-in-a-lifetime opportunity. Some of these jobs even pay millions of dollars in annual compensation. According to them, crypto is the next big thing, including digital currencies like bitcoin and blockchain-based non-fungible tokens […]]]>

There’s a wave of tech executives and engineers leaving Google, Amazon, Apple, and other big companies to pursue what they see as a once-in-a-lifetime opportunity. Some of these jobs even pay millions of dollars in annual compensation. According to them, crypto is the next big thing, including digital currencies like bitcoin and blockchain-based non-fungible tokens (NFTs).

Members of banking institutions viewed cryptocurrency as ‘cute’

This year, the global market capitalization of the cryptocurrency market outmoded $ 2.26 trillion, with Bitcoin increasing by over 60% and Ethereum increasing by 378%. One of the fascinating aspects of the evolution of cryptocurrency is the rate and scope of its adoption.

The reason for this is their future potential, which stems from the growing acceptance of businesses, consumers and institutions; increased flow of payments / purchases; and the increase in transaction volumes, which is due, in part, to their use as a hedge against fiat currencies.

The founders of Meta Platforms Inc. and Tesla Inc., which was barely launched during the Wall Street Crisis pre-crisis boom, are worth more than Citigroup Inc., the country’s most valuable bank. Previously, banks were so averse to cryptocurrency that they saw no threat beyond a fad. Since then, newcomers trading in crypto and meme stocks have flaunted their huge gains by taking on crypto.

About a year ago Sam Peurifoy noticed that his colleagues at Goldman treated cryptocurrency as “some kind of cute niche curiosity.” Peurifoy, known for his game character Das Kapitalist, left in June for Floating-Point Group, which provides digital currency trading services, and is now an executive at Hivemind, a $ 1.5 billion crypto fund. Despite the bankers’ exceptional year, Peurifoy said there was a “feeling in the air that they are missing something”, describing it as “this overwhelming wow”.

Silicon Valley booms with crypto as millennials take matters into their own hands

Millennials are leading the charge in investing in cryptocurrencies, with growing sums of money pouring into bitcoin and other digital currencies. According to a new survey, one in five Millennials (aged 25 to 40) now owns a cryptocurrency. Almost half of those polled also made their first investment in the stock market last year, due to renewed interest among young people during the COVID-19 pandemic.

Stories of people making seemingly ridiculous crypto investments like Dogecoin, a digital play based on a dog meme, life-changing wealth abounds in Silicon Valley these days. Skeptics say cryptocurrency is no different from previous speculative bubbles such as subprime mortgages or the 17th-century tulip craze. They claim that much of the mania is driven by the desire to get rich quick by trading an asset class that appears to be based on internet jokes.

Even though the future of crypto is still highly speculative, there are specific applications where cryptocurrency is a viable solution.

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