Cryptocurrency highlights several certainties of life, but it may be time to buy cabbages
OF whether pigs have wings...
In case you don’t recognise it, that is a quote from the Walrus and the Carpenter by Lewis Carroll which also contains the wonderful lines 'The time has come,' the walrus said, 'To talk of many things. Of shoes and ships and sealing wax – of cabbages and kings.'
You might think that none of this has any right to be in the Crypto Sermon, but I assure you it does. The poem is a nonsense rhyme, but wonderful in its imagery and for conjuring up visions that delight. One of the visions that delights me is that more people in America now own crypto than dogs. I have this vision of fractions of Bitcoins on leads being taken out for walks.
But the nonsense is the number of crypto so-called currencies that are currently sloshing about. There is no earthly use for the vast majority of them as I have said before. There is without a doubt a use for a few and some have applications well beyond just transferring value (which is one of the things that blockchain does immeasurably well).
I very much regret that sealing wax is no longer de rigueur in business. Believe it or not I remember receiving sealed instructions in my early days in business from a wonderfully rich and delightfully twinkly lady of unknown vintage.
The only problem was she sometimes forgot to write what it was all about inside the letter before sealing it and sending her very explicit unknown instructions to the relevant parties. It’s a bit like not attaching the attachment to an email I suppose. In her case, she refused to speak on the telephone as well, and the phone was in the servant’s quarters. That necessitated the butler running up and down stairs to get and give instructions. Amazingly, he outlasted her. Don’t forget I’m very old.
This is by no means an encouragement to buy or advice, but crypto now represents around 1.5% of world assets at about $1.7 trillion. Any serious money manager cannot, in my view, afford to ignore crypto. I am not for one second suggesting it will go up – in fact it may well go down - but it does represent assets which have a value, like wine, or art or even (tell it not in Gath) NFTs.
The overwhelming need of money managers is to preserve wealth, not necessarily increase it, and it may be that crypto has a role to play in that. The SEC settlement with XRP (assuming it isn’t appealed, though all the indications are it won’t be) highlights both the dangers and the upside of crypto, and, in this case, it appears more clarity is making itself felt with a concomitant addition in confidence.
XRP didn’t succumb to the recent bout of selling and is in fact well up over the period. Although what the bulls describe as “choppy waters” - falling prices, for example - rule at the moment.
One of the certainties in life beyond death and taxes is that recession follows the ending of the liquidity cycle. Central banks have been very successful in pushing that particular truth back time and again, but one would have to think that it can’t go on forever. As Sir Humphrey would have said, Jerome Powell’s decision NOT to lower interest rates last time was “a brave decision – one might even say a VERY brave decision” – which may yet come back to bite him.
We’ve just seen a huge sell off in tech stocks and once again, Bitcoin going to be £1m by the end of 2024 has somewhat been undermined by the fact it has dropped 15% in no time – and will maybe do more. Or go up. You never know with Bitcoin.
There are more and more stories emerging of falling sales in the real world and other difficulties for companies and for sure the Crowdstrike outage will not have helped.
I’m a cautious soul and my view would be – as others have said – we are in for a torrid time. Now might be a good time to think defensively. Buy those cabbages.
