Mati Greenspan / Quantum Economics
Mati Greenspan on Bitcoin's future during economic uncertainty
In this episode
Ashton Addison speaks with Mati Greenspan on the future if Bitcoin during times of economic uncertainty. They discussed whether cryptocurrency will benefit from economic volatility, any risks of Bitcoin and gold, whether bitcoin is positively correlated to the stock market, and how which nations are in a race to push out the first central bank digital currency.
quantumeconomics.io · binance.com · mercatox.com
- Bitcoin is classified as a risk asset rather than a safe haven, showing correlation with stock markets during crises like the coronavirus pandemic.
- Bitcoin correlation with stocks reached 0.6 in early 2020, its highest ever, though still below strong correlation levels of traditional risk assets.
- Bitcoin cannot trade at negative prices unlike oil, and maintains buyer support from millions worldwide at any price level.
- Bitcoin serves as currency refuge in economically unstable countries like Venezuela, Turkey, Iran, and Zimbabwe where local premiums reflect demand.
- Peer-to-peer channels like Telegram and WhatsApp groups are preferred access methods for Bitcoin in developing nations over formal exchanges.
Transcript
Read the full transcript
background in the financial space what was the vision behind quantum economics and how you started it yes sure so I've been in I've been involved in the financial markets since a child really and now I've have a portfolio managers license from the EU and co-author of the book called the complete guide to FinTech investing if you're familiar
with the brokerage eToro so I was there for seven and a half years and rose to be senior market analyst there and as you mentioned have now started a new firm called quantum economics which is for analysis advisory and money management that's great and you know I want to dive right into this because there's been so much economic volatility recently and I'm really
curious on your take on the cryptocurrencies so I'm just going to go out there and ask you know do you think cryptocurrencies are benefiting from this economic crisis that we are now getting into well I think that it is not really a happy time for anybody I mean even you know let's say Netflix on their earnings call last week you know they better they had more paid subscribers
they broke their record by far but even they said look this is this is not a happy time and this is sad times but in the last few days and only in the last few days we have seen some signs that Bitcoin might be kind of a refuge for people who are a bit scared about the future of fiat currencies so I am seeing that but initially it wasn't initially
kind of felt but now going into bitcoins having we're starting to see signs that people are understanding the idea of digital scarcity the idea there's a very limited amount of Bitcoin out there in the world and that isn't that is creating desire to own it and you know in the past people have said that Bitcoin has been negatively correlated to the stock
market but throughout the first part of 2020 we saw a positive correlation and confusing signs you know do you have any right or wrong answer for whether there is correlation and which direction it goes between the public markets and between cryptocurrencies well how long you guys today something that I've devoted to quite a fair bit of time to but I'll give you the answer in a
nutshell cryptocurrencies and Bitcoin are what's known as a risk asset so all assets in the world all financial assets are divided into risk assets and safe havens gold is a safe haven it's taken thousands of years to build up its trade as a safe haven bonds are a safe haven because people feel like you know over the last hundreds of years the government is always gonna at some point
pay you back stocks are risk assets for example because a company can go bust a company can you're under and they're booked thereby negatively affecting the stock Bitcoin is a risk asset and the reason is the reason being that it's so new in the world that it's an emerging technology so because of that we do have we do want to put it into into the category it's it's untested just because
it's never been hacked before doesn't mean it won't be hacked in the future the way I see it's one of the most the most secure computer networks in the world at the moment but we see that still hasn't stood the test of time so when the coronavirus hit on February 24th and jumped from China into being an international issue we did see some slides in the stock markets and
everybody rushed to safety they rushed to the US dollar and basically Bitcoin took a hit as well bitcoin is not has basically been uncorrelated on from its during its entire history until now and now it's jumped up to its highest correlation ever so if you look at correlation from 0 to 1 0 being no correlation and the negative 1 is
absolute reverse correlation meaning if the stocks go up the twin goes down and then 1 being absolute correlation if the stock market goes up 5% Bitcoin was at 5% so it's usually between negative zero point 3 and positive zero point 3 so it fluctuates and now it's shot up to zero point 6 which is the highest it's ever been still not an exactly strong
correlation but it has it has been following that tendency of a risk asset so far with the exception as I mentioned just in the last 48 hours or so we've seen some sort of a decoupling but we'll see where that goes it's still quite early to tell definitely and that's a great answer and in quantifying as well so thank you so much Mattie and I guess that leads me to
ask about the volatility you know there's been talk about how Bitcoin is much more volatile than the stock market and so far in 2020 we've seen quite a bit of volatility in the stock market some touting that Bitcoin had less volatility do you foresee the bitcoins volatility to you know remain equal to the stock market or go down eventually as people say adoption will come Bitcoin
price will stabilize yeah and I think that the most what really threw people for a loop this is during this whole crisis is the price of oil which actually managed to go into negative at some point several hundred thousand barrels of oil we're trading for minus thirty seven dollars meaning you come to Cushing Oklahoma you take the oil and we'll give you thirty seven dollars for
every barrel you take from us now that just kind of puts everybody's perception of value just throws us all for a little bit I think as far as I see Bitcoin could never go into a negative there's no situation that I could imagine the planet where somebody would actually pay you to take a Bitcoin but rather the lower it goes and there's a very strong
supportive community of Bitcoin which is millions of people around the world and you'll always find a buyer at what price that's the question of course we do hear sometimes about whales who are holding like sale a large amount of Bitcoin maybe because they were in from the beginning or because they have a lot of money and they bought a lot and they can
sometimes move the price on the short-term basis however what we've seen and to go back to your previous question Bitcoin can act as a safe haven for certain people those people for example who are in countries third world countries who don't have that we don't have the benefit of a stable economy in a stable currency if somebody was holding Bitcoin in Venezuela and they
bought it all the way at the top at bitcoins all-time high and then they sold it all the way down at the very lows the all-time high was around twenty thousand dollars per coin and then the lows are around three thousand dollars it took about a year year and a half for it to fall that to fall that hard for Bitcoin to fall that hard but somebody in Venezuela who had bought would bought
in the top and sold out at the lows they're still ahead in Venezuela Boulevard terms wow that's crazy and I've heard of a few other struggling countries that are also flocking to Bitcoin and it seems like Bitcoin at least using local bitcoins to acquire bitcoins through that country's currency there's huge premiums for that so do you see other countries potentially you know
throughout the next couple years as some countries might not be faring as well the countries themselves will flock to Bitcoin at least the people inside and start using it or more of just holding on until something happens where that currencies the nation's currency is back and able to be used yeah we see that in different geographic locations over different times in different directions
you mentioned the site look in the coins just local bitcoins calm I think that they haven't been doing as well since they implement that more strict anti-money laundering measures basically they're now requiring every single person who logs into the website to present a photo ID and verify their address which basically means that they can then be recorded to their local
government which is not something that everybody wants especially when you're in a country with an oppressive government places where bitcoin is thriving at the moment include Turkey and Iran and Zimbabwe Argentina and Venezuela as we mentioned earlier but I believe that every country has a different way of accessing Bitcoin and a different type of Bitcoin market so
there's a lot of different unique markets I think that there's hundreds of thousands of access points these days I mean most anybody in the developing world they have the benefit of logging into an exchange you know and you can go and buy it with your credit card but I think that most people in third world countries are gonna prefer to use a back-channel
I don't know like a telegram or a whatsapp group to find you know to find buyer meet the seller or even you know in a public market or friend knows a friend type of deal definitely yeah and there are so many people trading Bitcoin as of recently with price rise last week I think the price rose about 18% in one day the volumes of trading of Bitcoin was actually higher than it was in
December of 2017 when the Bitcoin price hit around 19 to 20,000 so with the volume that much higher not accounting for who knows how much of the volume was from bots and market makers and versus retail but I believe by Nantz recorded 11 billion in trading just a few days ago and coinbase actually went down because of the amount of volume just temporarily they were trying to funnel
all their users into the platform there's too many people you know with how important do you see this volume as a sign of positive sign and the positive sign for next bull run potentially with cryptocurrency yeah well as volume is I mean in any asset when you have a strong movement that's accompanied by strong volumes that gives more waiting to the movement that means that
movement was caused by a referral reason by a lot of people and very strong interest with Bitcoin there's many different ways that you can read the volumes my guess is that you're probably quoting a source of volume because from what I've seen the volumes on the Bitcoin blockchain itself are quite suppressed at the moment we're talking about about a billion dollars traded on
the blockchain itself per day which is it's we've come a long way since 2017 of course but certainly it's been a lot higher since then we've seen it at two billion three billion etc and I didn't see I didn't see that happening necessarily last week so probably what you're talking about is exchange volume yeah and you've got to be a bit careful about that because some exchanges like
to falsely report their volumes in order to say hey we've got a lot of trading happening on our exchange you should come and join our exchange so that's called watch trading and it is a problem in the crypto industry specifically so we got to be we got to be a bit careful when we look at those statistics and actually wrote about that today in my newsletter about where to find exactly
the right the right volumes to look at definitely yeah and that's super important that you mentioned that because I'm guessing that you know the exchanges are touting that they have a lot of volume but with the ability to have zero trading fees and wash trading obviously you want to find what the real actual number is of how many people were actually buying Bitcoin and getting in
and I guess my next question is you know with all this popularity around crypto currencies there's been so much talk about central bank digital currencies in the US China potentially do you see a light bulb going off that the u.s. or China needs to kick in gear and get this I get a central bank digital digital currency out quickly because of all of this you know
economic turmoil it would behoove them yes central bank digital currencies has been I mean China is way ahead of the game on that I mean they've been actively researching Bitcoin and cryptocurrency since 2014 and saying you know how can we use this or and obviously when they on when they unveil the renminbi or digital yuan the Chinese currency Chinese central banking digital
currency if it weren't for coronavirus it probably would have been out in the world already but I believe that they're putting it in stages now so they said that really kicked off with Libra and 2019 if you'll remember that whole thing where Facebook decided that they wanted to make a cryptocurrency now these have nothing to do with Bitcoin of course they're just what
they're doing is they're trying to take technology of Bitcoin and apply it to their currency in a way that they'll have it a currency that is natively digital and it's not only currencies that are going this direction there are gonna be many stocks in the future because everything is traded digitally these days but it's really relying on a system that is really that is very much
based in agent it is based in trust and the broker and everything like that when you have a natively digital asset whether it's a stock or a currency or a title deed to a property it makes trading a lot more fluid and all in it and proof of ownership and Reconciliation a lot more simple so basically the US dollar right now and for the past few decades has enjoyed
from being the global reserve currency which means that all international trade pretty much all international trade goes through the US dollar these days of course if China and Europe Japan or if China comes up with an alternative her and see which is natively digital it'll be a lot easier for people to come in and use that currency instead now Europe
Japan the Bank of England and just about everybody else are trying to make their own version so there's a race for it right now and I do believe that should the United States lose out in that race they do stand there is a chance that they'll lose their reserve currency status Wow well sorry for the background noises well I got a few kids running around no problem we're all working from
home right now Maddy thank you so much for all this information you know it sounds like a very interesting race I'm excited to see who wins and for all the information about Bitcoin thank you so much if the viewers are interested in learning more about your work and your newsletter what's the best way for them to reach out and connect yeah so just come to quantum economics IO sign up for
the newsletter there's a bunch of other services that we have that you can check out explore we've really got something for everybody from beginning traders to professionals to full-on brokers so come and see what we got available there but definitely sign up for the newsletter because everybody who knows just seems to love it we've got 40% of people who are subscribed they're
opening up every single day and reading it so I'm sure gonna make enjoy it as well that's awesome alright thank you so much Mattie let's follow up in the near future all right awesome have a great day
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