#67.2 - Bitcoin's unlikely allies, BRICS update, and where is the recession?

Powerful interests flip positive on Bitcoin, the BRICS nations introduce a gold-backed currency to compete with US Dollar, and the global economy's Wile E Coyote moment

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Wall Street flips positive on Bitcoin

Something strange just happened.  All of the recent mainstream media coverage about Bitcoin has been… positive. 

For example, here are all the recent headlines from Forbes:

What changed? 

Nothing changed about Bitcoin.  But what did change is that BlackRock flipped its stance on Bitcoin. 

As part of their recent push to have their Bitcoin ETF application approved, BlackRock CEO Larry Fink has made it clear that he views Bitcoin as a positive force in the world, saying that Bitcoin could “revolutionize finance” and linking the essence of Bitcoin with BlackRock’s foundational value of “hope.”

BlackRock wields its influence to shape narratives in the corporate media.  This is the firm that invented and promoted ESG.  All of the ESG fixation over the last handful of years was because BlackRock wanted to promote a system of corporate social good, somehow not realizing that this system would be politicized and gamed. 

Well here comes Bitcoin, which actually embodies the purported tenets of “Environmental, Social, Governance.”  And after 14 years of the mainstream generally misunderstanding Bitcoin’s merits, now the pages of Forbes are promoting Bitcoin as good for global emissions, good for human rights in developing countries, and not a haven for criminality after all.  It seems the top brass at BlackRock finally did their homework.

If you deduced that Bitcoin belonged in your portfolio before the institutions did, you deserve your victory lap.  If you’re just starting out your Bitcoin educational journey, make haste — it looks like the mainstream is hot on your heels.

Unlikely champions

Perhaps I’m a sucker, but there is an earnestness and an excitement in Larry Fink’s recent positive comments on Bitcoin that I recognize.  It’s how all of us who did our research on Bitcoin felt in the early stages of our respective discoveries of Bitcoin’s merits. 

Everyone dismisses Bitcoin at first.  But, in time, everyone must also come to terms with its staying power and wrestle with a nagging dissonance.  On the one hand, this thing sounds completely ridiculous.  On the other hand, every smart person who does their diligence becomes enraptured by Bitcoin.

Funnily enough, this dissonance is most deafening for Wall Street titans.  These Masters of the Universe are a rare breed.  They are razor sharp, extremely well read, and hyper social.  They are in the business of finding an edge, and that means relentless information seeking and nearly pathological competitive drive. 

This is why it is so troubling for Wall Street titans to see a pattern emerging: their peers are one-by-one becoming Bitcoin believers.  At first it was Paul Tudor Jones, and then Bill Miller and Stan Druckenmiller.  Then Ray Dalio took a closer look and warmed up to it. 

Larry Fink didn’t get to the top of the finance world by ignoring what his smartest peers were saying. Without a doubt, Larry and his team have taken a closer look at the merits of Bitcoin.  And I believe he is in the early stages of realizing its splendor.

I will generalize here to make a two-part assertion:

• Wall Street billionaires love American values.

• Bitcoin is American values.

It’s not often that I have positive things to say about Wall Street billionaires.  But at their core, these men are passionate about American values — self-determination, work ethic, property rights, and building a brighter future.  (Here’s Jamie Dimon waxing poetic on American exceptionalism, all pumped up with patriotism after the 4^th of July.)

Bitcoin is counter to the establishment monetary system.  And yet, Bitcoin embodies the same American values described above. 

The only way these statements can both be true is if the establishment system does not embody American values.

And that is what Wall Street is in the early stages of reckoning with. 

It’s my belief that Bitcoin’s greatest allies will be the Wall Street mavericks who come to realize that Bitcoin shares their values, just as existing Bitcoiners did.

The system will fight against Bitcoin, but the system relies on its vassals siding with it.  This works when the enemy is Russia, China, terrorism, or drugs.  But it doesn’t work when the enemy is more aligned with the American ethos than the establishment system is.

I may be a hopeful fool on this one, but more Wall Street titans may become vocal Bitcoin advocates — partly because they can make money by embracing Bitcoin, but more deeply because it champions America’s core values.

If my sense is right, Paul Tudor Jones, Bill Miller, and Stan Druckenmiller were just the overture.

BRICS gold-backed currency

A very important story is quietly unfolding on the global stage — the latest chapter in the ongoing challenge of the BRICS nations to US Dollar monetary hegemony. 

After decades of frustrated acceptance of USD as the currency for global trade, the war in Ukraine brought an inflection point. In my February 2022 update, I summarized where we stood:

“The long and short of it all is that the violation of central bank foreign currency reserves will be looked back on as the demarcation point where the global monetary system (that was imposed on the world by the unipolar might of the United States in the early 70s)... ended.  In its place, the international community will have to converge on a new de facto monetary system, as the hegemonic dominance of the United States yields to a multipolar balance of power based on commodities production and trade.”

In April 2023, I provided an in-depth update of how the BRICS nations have responded to this weaponization of the Eurodollar system…

#64 - April 2023: The decline of US hegemony & the changing monetary world order

And now, there’s a new development: the BRICS nations are planning to launch a gold-backed currency, which they hope can compete with the USD as a currency for international trade.  For the last 80 years, the US Dollar has enjoyed its singular status as the preferred currency of the world – now, for the first time in that remarkable run, it faces a competitor backed by an equal weight of the world’s GDP (on a PPP basis).

A couple things to note: this system would ostensibly rely on China to custody the gold and deliver trustworthy, reliable reporting.  (Not exactly their proven forté.)  Additionally, it appears that US diplomats are using what leverage they have to stall this effort, as India quickly signaled its objections to the BRICS gold-backed currency, citing its desire not to harm relations with the US and Europe.

While nothing is certain yet, it appears that we will soon find ourselves in a world where the US Dollar is competing with a currency pegged to gold.  In other words, the realities of hard money will be a part of global currency dynamics again. 

This is bad for the US Dollar, good for gold, and great for Bitcoin.  In an era where neutral reserve assets matter, Bitcoin’s value proposition as a digital neutral reserve asset without gold’s need for custodial trust (especially when dealing with the CCP) will shine.

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