Cryptocurrency's legtimization

How come something that you would find difficult to use to buy a coffee with almost anywhere in the world has jumped more than 34% in just one week? That's what has happened to Bitcoin, which on Thursday this week was trading at more than $90,000 (around £72,000). By now everyone knows that the next US President has changed his mind about cryptocurrency. In 2019 he posted on Twitter that Bitcoin and other cryptocurrencies are "not money" and whose value is "based on thin air". Those comments were true then, and despite the best efforts of Bitcoin fans, remain true today. Certainly some holders have used Bitcoin in transactions; in 2010 10,000 Bitcoins (then worth about $41) were used to buy two pizzas. In 2021 a mansion in Florida changed hands for $22.5 million, paid entirely in cryptocurrency by an anonymous buyer.

Donald Trump is now a convert to the world of cryptocurrency, thanks it seems to the influence of his sons. They launched a new crypto platform - called World Liberty Financial - in September this year, with the stated mission of making "crypto and America great by driving the mass adoption of stablecoins and decentralized finance". Does Trump know what a stablecoin is? He is on record as saying to his 18-year-old son Barron, who possesses digital wallets, "what is a wallet? Explain this to me...It's almost like younger people know it a lot better than older people." Despite his ignorance of the crypto world, he has vowed to turn the US into the "crypto capital of the world". That prompted a flood of cash into his re-election campaign.

Domestic de-dollarization?

It's becoming clear how Trump will govern - he has promised federal government appointments to those to whom he feels personally close, and will try to fire those he sees as obstacles. He has so far pledged to reward staunch personal allies with jobs in his government, no matter what their qualifications may (or may not) be. Billionaires Elon Musk and Vivek Ramaswamy have been promised co-leadership of a newly created 'Department of Government Efficiency, despite never having served in government. Trump has said he will fire on "day one" Gary Gensler, the former investment banker who now chairs the Securities and Exchange Commission (SEC) and who has taken a sceptical view of cryptocurrencies (of which there were more than 20,000 at the start of 2023). Trump's transition team are reportedly drawing up a list of military figures who are to be fired.

Stepping back from the froth surrounding Trump certain things need reiteration. The first and most important is that Bitcoin is not money. One important characteristic of money is that a transaction in say Dollars or Pounds is immediate; transactions in Bitcoin generally need an hour or so to complete. With Glint, a transaction in gold can also be immediate. The second is that, like Trump, cryptocurrency can defeat quick understanding - it depends on a complex computer network (the blockchain) that is anathema for many, whereas fiat cash is easily understandable.

Trump has said he wants to build a US "strategic reserve" in Bitcoin, which has helped Bitcoin reach new high prices but the risk is that all this does is inflate the price of...nothing. Bitcoin, like all cryptocurrencies, may be an asset, similar to a house or an artwork or indeed gold, but its value depends on someone else desiring it. For many years gold has occupied the same space, an asset rather than money, until Glint arrived, when gold recovered its ancient status and use as money.

The biggest mystery of all is that Trump should take any step towards undermining the US Dollar, which promoting Bitcoin certainly does. Indeed, Bitcoin was invented specifically to allow Bitcoin holders to bypass a currency that was felt to be at the mercy of government, able to be devalued and debauched by printing money without limit. So far Trump has shown a readiness to throw all the cards in the air and depart from the conventional. This is breeding uncertainty, and serious people are starting to be worried that inflation (as a result of some of Trump's promises) will make a nasty comeback. And that helps explain gold's recent - and probably short-lived - setback; it now looks as though the long-expected interest cuts by the Federal Reserve may be slower and smaller. As the Dollar has strengthened, gold has weakened. Uncertainty remains dominant; January will see Trump back in the White House and perhaps the fog will lift. Or maybe thicken.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.