Crypto Riches for Investors - Part 3
Abraham George Crypto Musings
Read Part 1and Part 2 if you haven’t already.
Most of us are underestimating and are not prepared for what is ahead of us. The nature of money is changing. We will be moving from a centralized banking system to a decentralized financial system known as DeFi.
No longer a small group of people at central banks will be controlling the money supply. There are major changes coming and these changes will come fast as new technologies will become mainstream. One of the biggest changes that you will see will be in the financial sector. In the future banks won’t be required for loans or for savings accounts. Every aspect of financial services is up for major changes and it will be all good for the common man.
Since the dollar is no longer backed by gold or anything, it is easy for the Fed to create an unlimited amount of dollars. Can you believe more than 40% of all the dollars that exist today have been created in the last 18 months? The total US debt amounts to $29 trillion most of which is interest on the debt, but that amount does not include the unfunded liabilities such as Social Security, Medicare, and other benefits that have been promised but not reserved for. If you take all these debts, the estimated debt is around $140 trillion.
It is not the US alone that is in debt but all other countries too. There is no other time the world has been in so much debt and these debts cannot be repaid. Is it any wonder that inflation is running so high? None of this debt will be fully repaid. So there is a reset coming for sure. How that will be and when it will be is difficult to say but the people in power are preparing for it.
When you say the US dollar has lost all of its value since 1913 many don’t understand how. The US dollar may be still strong against other currencies due to its military power and political dominance but the dollar’s purchasing power has vanished and is still going down due to inflation. It is always losing value against real assets like real estate meaning the purchasing power is going down.
Cryptocurrencies can be a solution to the dollar’s or other fiat currencies’ problems. Firstly, they are deflationary - if they limit the quantity in existence and or they decrease in total supply each time they are used, their supply is reduced. That way they will retain their value and not have the problems of fiat currencies that can be created without limits.
There are two cryptocurrencies that I think will be a major force in this transition and that will be XRP and XLM. Ripple is the force behind XRP and Stellar that of XLM. The major creator behind both these currencies is a gentleman named Jed McCaleb. Jed partnered with Chris Larsen to start XRP but later had a fallout with Chris and started XLM. So the technology is more or less the same with some variations depending on what sector of the market they are targeting. They do not compete with fiat currencies but rather will serve as a bridge currency. They will be able to exchange currencies at high speed for a fraction of the cost. The time to transfer money between banks is cut from days to 3 seconds costing a fraction of a penny per transaction. Each time it is used, $0.000001 is charged as transaction cost and it is burned. This is a real game-changer!
In my opinion, Bitcoin is ill-suited as a currency; it is best used as a store of value. Bitcoin evangelists like Michael Saylor and Max Keiser describe the unimpeachable brilliance of Bitcoin and it may probably even reach highs of $500,000 or more. I don’t wish to dispute that but I think Bitcoin will not replace any reserve currency status. It doesn’t support smart contracts, uses too much energy, and is too costly and too slow. Christine Lagarde, former IMF MD and current ECB president, has repeatedly said that Bitcoin will never be used as a currency. However, I believe that there is every chance that XRP can become a bridge currency. It can move across borders quickly and inexpensively. It is decentralized and suited for smart contracts. One day it may even be backed by assets which could become an alternative to fiat currency. Stay tuned!
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.