Stablecoins and Crypto Winters

Back on Friday, I discussed about the Russian government’s half-hearted attempt at “reviving” the Gold Standard. I still stand by my conclusions from that post because I am convinced that Russia’s central bank half-opened a gold window, paying around ₽5,000 per gram in order to maintain a steady gold reserve. The gold itself would then be used as an alternate means of payment for any foreign imports that cannot otherwise be paid in other currencies, namely the US Dollar and the Euro. To assume that this is a sign of the Gold Standard being revisited would be a gross inaccuracy, not to mention that the gold reserve alone does not imply that the Ruble will be in any position to overtake the US Dollar. Moreover, it remains to be seen as to whether Russia intends to someday sell any of its gold reserve in order to obtain foreign currency, because I doubt that the Russians would find it prudent to do so as their Special Military Operation in Ukraine continues.

There is another topic worthy of addressing on behalf of the Work-Standard. If the last major post was about one of the Work-Standard’s monetary rivals, then I would like to share some news regarding the Cryptocurrencies, whose significance covers the emerging digital realm. Reading up on news articles from earlier this month, I am beginning to learn that there had been another crash in the prices of Cryptocurrencies. In fact, there was even a recent report published by the International Monetary Fund (IMF) about a few days ago, stating that the crash in Cryptocurrencies did not impact the actual financial markets and central banks. That implied that something had to have happened in the cryptocurrency markets to compel the IMF into disseminating such a report. Apparently, the stability of Cryptocurrencies have come into doubt, raising important questions about their viability as a competing currency model, let alone an serious investment. What has happened over the past several months to warrant the idea that most Cryptocurrencies are becoming increasingly untenable rivals to the Work-Standard?

To begin, consider this article I found from NextAdvisor, in partnership with TIME magazine:

“The crypto market went into a full meltdown in May and June, losing $1 trillion in value in a matter of weeks.

Federal regulators took notice.

The sudden and rapid collapse of popular cryptocurrencies and crypto-related companies revealed the unwieldy nature of the crypto industry and provided some validation to already-skeptical regulators.

And it all happened against a backdrop of already-accelerating regulatory pressure, because unlike the traditional stock market, there aren’t robust federally mandated protections in place for crypto investors. As a result, experts anticipate crypto regulation to ramp up even more in the coming months.”

“Ever since bitcoin and ethereum hit all-time highs at the end of 2021, the market has been on a ruthless downtrend with little sign of relief. Bitcoin has been tracking with the stock markets very closely this year, and has been impacted by the challenging macroeconomic environment as a result.

Conditions in the crypto market took a turn for the worse in May when bitcoin fell below $26,000 for the first time in 16 months. The rest of the cryptocurrency market fell with it. Because investors withdrew their liquidity from the crypto market at an extraordinary rate, a popular stablecoin known as TerraUSD (UST) depegged from the dollar, which caused its linked cryptocurrency luna to crash as well.

The luna and UST crash led to a contagion among other crypto firms. Three Arrows Capital, a crypto hedge fund based out of Singapore, collapsed a few weeks after the Terra Luna crash, which then triggered the downfall of many other companies across the crypto market, particularly lenders which the hedge fund borrowed from in enormous sums, including BlockFi, Celsius, Voyager, and Genesis. Crypto brokerage Voyager Digital and crypto lender Celsius both filed for Chapter 12 bankruptcy recently. Vauld and Zipmex, crypto trading and lending platforms, became the latest crypto firms to halt customer withdrawals.”

One argument being posited online is that the Cryptocurrencies are not at all immune to the ongoing Currency Depreciation of the US Dollar, which is in turn tied to its own Inflation Rate. Those who adhere to that view point to the increased volatility of Bitcoin, whose value has become more unstable throughout the previous two months. It can be determined that the Inflation/Deflation Rates of Bitcoin and most Cryptocurrencies, if they have any to speak of, are in actuality tied to the Inflation Rate of the US Dollar itself. What this means is that if the US Dollar is experiencing Currency Appreciation, the values of the Cryptocurrencies will fall because the latter has consistently been seen as a hedge against the US Dollar’s own Inflation/Deflation Rate. Any efforts by the Federal Reserve to, say, reduce the Quantity of Kapital or increase Interest Rates, can and will diminish the values of most Cryptocurrencies.

Furthermore, as the preceding article from NextAdvisor had demonstrated, there are certain Cryptocurrencies that have been pegged to the US Dollar for some time now. Even more peculiar is the realization that there even other Cryptocurrencies pegged to gold, as if trying to create a digital imitation of the Gold Standard. To be honest, these “Stablecoin” Cryptocurrencies defeat the intended purpose of the “Crypto” in any Cryptocurrency, because what is the point of its existence if the value has to be backed by gold, the US Dollar, or another fiat currency? Were Cryptocurrencies supposed to have been about creating an alternative currency model designed to circumvent the monetary authority of the central banks? Has one not realized the relevance of such a contraction as far as the Work-Standard is concerned?

The very idea that a Cryptocurrency could be backed by fiat currencies or even gold is demonstrative of another flaw in its status as a rival to the Work-Standard. It remains to be seen as to whether any Cryptocurrency, not just Bitcoin or Ethereum, will be able to demonstrate total self-sufficiency from most conventional fiat currencies. The Work-Standard by contrast does have the ability to be self-sufficient insofar as it rejects Kapital in favor of its long-time, Arbeit.

Categories: Financial Warfare

Tags: , , , , , , , , , ,

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: