Suppose Central Bank buys in

Bitcoin has now become a mainstream Wall Street investment. It’s on every investor’s radar. So like any other investment, you have to wonder: what can the government do to eliminate it, or make a purchase?

Last week, we all saw this Tweet by Mayor Miami.

It did little to stop sales from Bitcoin.

After hitting $ 40,000, BTC is now back to around $ 34,000- $ 35,000. Virtually no one I talk to about Bitcoin thinks this thing goes back to $ 5,000 or so, which is where it was a year ago. In March, when the coronavirus became a pandemic, it was around $ 3,300. If you haven’t bought Blink Charging Company stocks (I did, and I sold it over 150%) over the last two months, what’s been better than Bitcoin?

I started thinking: what if central banks got in and started buying? They may want to put it on board and take it out of circulation.

“That Christmas is coming every day for Bitcoin traders. Even such rumors will blow the price of Bitcoin into a new area, ”says Naeem Aslam, lead market strategist for AvaTrade in the UK

If someone like the People’s Bank of China were to say, okay, this notion of Bitcoin, we’re taking this out of circulation by taking it out of the market. They had to find willing sellers on the other side. If the PBoC or the Bank for International Settlements – the central bank of central banks – started buying a few million Bitcoin, the price would rise. Those who did not sell would keep volatile gold so that these central banks could ensure that gold no longer had any value. You had to close miners, which is not impossible. This is the doomsday BTC situation, I believe.

“I think there is a very low chance that China’s central bank will buy Bitcoin,” said Aries Wanlin Wang, a crypto investor in Singapore. “The only chance would be for all the major countries to adopt Bitcoin as a central bank reserve. China will not be the first mover, ”he thinks.

There are a few reasons why China – which I thought would be the most obvious mover while testing their own digital yuan – would not be a BTC buyer, Wang says:

The Chinese government does not consider Bitcoin to be a frontier currency. It is a commodity; digital gold in relation to them. Bitcoin has been used in many black market industries and Beijing likes control and may not want to have to pay for their Bitcoins. And finally, China’s central bank sees no intrinsic value in Bitcoin; at least for now.

Bitcoin Black Swan

For many retail investors, Bitcoin is a mystery. We don’t know what we’re dealing with, or what the risks are. We receive no warnings.

If you are a risk investor, like me, and you buy emerging market stocks, you already knew what would come if you were an investor in Chinese telecom stocks. A Governing Order signed by President Trump imposes disqualifications from the likes of China Mobile. You had a fair warning.

If Petrobras, a Brazilian oil company, is under investigation for financial crimes and caught in a government corruption scandal, you had information. You would also know that Petrobras, one of the largest oil companies in America, comes with a price risk associated with oil futures. You would know that there is a danger that more people will come to electric cars; of governments penalize fossil fuel producers by regulations.

Bitcoin doesn’t come with any of those things. It’s easy to let your imagination run worse with Bitcoin.

One Boston-based company that buys Bitcoin now but did not speak on the record said investors may fear the bank’s central bank’s black bitcoin event. But other cryptocurrencies like Ethereum would replace BTCn as the preferred crypto of the decentralized web fan. The central bank’s digital currency to which China draws is completely different than traditional crypto, and is not really seen as a competitor, this person said.

“It simply came to our notice then. Even if China, the European Central Bank, the Fed, or the Bank of England all went up and they could get everyone to sell their Bitcoins on the market right now – which is around 18 million Bitcoins – more decentralized currencies would be created and issued instead, ”they said. “So this is not what I was scared of. It is not an economic option for China or the ECB to buy BTC to take it out of circulation. Given the large number of cryptocurrency investors in China, this move would anger wealthy Chinese, no matter how worth it. “

All right. So now I’m not so scared about that particular Bitcoin black swan.

“Yeah, I don’t think a medium-sized bank buying bitcoins and removing them from circulation is a real risk,” said Jung Sanghun, CEO of Pando Browser and also Filecoin data center operator in South Korea and China. .

“That’s because they would have to buy these coins from whales and institutions, which are unlikely to just give them away. There is also a large base of Bitcoin holders and ‘OG whales’ who are not planning on parting with large portions of their coins anytime soon, ”says Sanghun.

The ‘OG whales’ are the people who own thousands of BTC and bought many of them at less than $ 1,000 a year ago. If they knew that the world’s central banks were coordinating to buy BTC out of circulation, they would easily raise the price to six figures. And maybe ask for tax exemptions when you turn to fiat.

“A central bank buying BTC to remove them from direct circulation is not expected to make much sense and would only reduce the supply of available coins – thus pumping prices to very high levels. as a request cannot be fulfilled. The coins that circulated them would become increasingly scarce. ” Sanghun says.

More rationally then central banks are working to reduce the threat of Bitcoin and other cryptocurrencies by creating their own digital currencies. The average person feels that Bitcoin is too complex, setting up crypto wallets at companies they have never heard of and keeping a close eye on hacks. This is why the Grayscale Bitcoin Trust (GBTC) ETF does so well. It is the easy way into Bitcoin. Not to forget personal keys and password recovery phrases that are thousands of long: fast cat sandwich elephant motorcade sidewalk icecream tomorrow xylophone anthills. Yeah, if you don’t write that down in five different places you’ll never remember that.

Assuming central banks see Bitcoin as a threat, they would be more likely to encourage governments to regulate it instead, while extracting their own fiat-pegged coins.

We already see that happening in China. Although at this point, if the PBoC wanted a few hundred thousand Bitcoins, it would take us to $ 50,000 in flames.