Bitcoin-Yuan divergence reaches new highs
Bitcoin-yuan divergence reached new heights, once again fueling speculations that China is possibly seeking to find safety in the world’s largest cryptocurrency. The Bitcoin and the yuan have been going to different trends for a while now, and their inverse correlation has reached a record last week, as a Bloomberg analysis of their 30-day correlation shows. This strong inverse correlation may be due to several reasons, including the trade war, the central bank’s monetary policy and the slowing economy. Bitcoin can be used as a way to hedge against traditional market volatility. “The role of these assets has essentially been reversed. Traders have been expecting a fall in the yuan for a while, in light of international tensions and the central bank monetary easing policy. With the trade war raging on, nervous forex traders have started to look at ways to diversify their portfolio and hedge against any market volatility. And, ironically, this has led them to turn to bitcoin, which has long been considered a notoriously “risky” asset, to hedge against a traditionally safer investment,” said a crypto expert interviewed by Cryptonews.com.
PBoC is ready for its digital yuan
PBOC’s new digital currency chief, Changchun Mu, said the Chinese central bank’s upcoming digital yuan has features that Facebook’s Libra does not have. Mu has published details on PBoC’s digital yuan, describing it as a digital currency and electronic payment tool with ‘value characteristics.”Its functional attributes are exactly the same as paper money, but it is just a digital form,’ Mu said. PBoC’s digital yuan will be able to be transferred between users without an account and without a mobile or internet network. Providing a user’s mobile phone has a wallet, the digital currency can be transferred to another user by placing the two phones in physical contact. Presumably, this feature is enabled by near-field communication (NFC). ‘Libra can’t do this,’ Mu added. PBoC’s digital currency also doesn’t need a bank account, and it is free from the control of the traditional bank account system. It also allows users to preserve their privacy when using the system. However, the digital currency will be delivered via commercial banks like fiat currencies. The banks must open accounts with the central bank and buy the token at 100% value. Users may open digital wallets through the banks or commercial institutions. Mu added that the main reason which is incentivising China to develop its digital currency is “planning ahead” to protect monetary sovereignty and Bejing’s legal currency. The advent of Libra may be behind the sudden Chinese rush to develop its digital yuan. Former central bank governor Zhou Xiaochuan said in July that “Libra has introduced a concept that will impact the traditional cross-border business and payment system”, and this is why China should “make good preparations and make the Chinese yuan a stronger currency”.
The biggest misconceptions in the Cryptoverse according to Buterin
Cryptonews.com has reported the five biggest misconceptions in the cryptoverse by Vitalik Buterin, co-funder of the digital currency Ethereum. There are the following:
1. Bitcoin misconceptions:
“On the Bitcoin side for example, like this idea that 2% inflation is this thing that’s wrecking the economy and the next… And the next big step for progress would be turning humanity into a type one civilization that roams the stars is to get rid of existing fiat currencies and replace them with this 21 million fixed supply kind of thing. I think that’s crazy.”
2. Tron and EOS misconceptions:
“I think they have this belief that basically says like, ‘Oh these blockchains are not super decentralized anyway and so we’re just going to be even more centralized and so we’re going to get more efficiency without getting any of the downsides… I think they don’t really realize the kind of, some of the more subtle benefits that de-centralization gets you and a lot of those things are going to come out like if political environments become less favorable.”
3. General cryptocurrency misconception:
“I see a lot of people kind of making a mistake one way or the other where they think that either cryptocurrencies are going to completely overtake Venmo [a mobile payment service owned by PayPal] or they think that there is no room for them at all.”
4. Censorship resistance misconception:
“Basically, a lot of people have this mindset that says, ‘We’re going to create this thing, and it’s going to just on its own completely be able to overpower governments and they’re not going to be able to do anything about it and it’s just going to turn the world into a crypto-anarchy and that’ll be great.’”
5. Government-related misconception:
“I think they underestimate the power that governments do have. So you look at things like, the great fire wall, like different countries attempts at enforcing copyright infringements on the Internet. Crackdowns on the sex industry — a lot of these different kinds of censorship.”
Mobius says cryptocurrency is not a safe haven
Mark Mobius, founder of Mobius Capital Partners, is still quite doubtful on cryptocurrencies and blockchain technology. Speaking on CNBC about emerging markets and safe-haven asset classes, Mobius said cryptocurrencies, like fiat money, are backed by faith and only hold utility as far as others are willing to use them.“The bottom line is there is a whole generation of people who have faith in the internet, they have faith in these cryptocurrencies…the degree to which a cryptocurrency can enable you to buy something and you believe that to be the case, then that’s fine.”Mobius also said a gold-backed cryptocurrency run on the blockchain would be of interest, however. “If there is a cryptocurrency that is really backed by gold and there is a meaningful agreement and some kind of modern thing connection, then this could be quite interesting,” he said. On blockchain, the investor remains skeptical. Mobius said the underlying technology itself remains open to attacks. “I believe blockchain is a very high-risk situation . . . anything that’s created by man can be broken into . . . and it could create a big crises, so I think we have to be very careful with blockchain.” The statements follow the stablecoin issuer Paxos’ announcement of a gold-backed cryptocurrency. Tokenized on the ethereum blockchain, Pax Gold entitles holders to a gold bar stored London by Brinks.