Borderless and stateless, decentralised and censorship-resistant

We are proud to say that one of our key supporters is Anatoly Crachilov, the CEO and Founding Partner of Nickel Digital Asset Management.

Anatoly posted the below last week on LinkedIn.  It is a beautifully written and thoughtful piece on the characteristics of crypto which could benefit its use as a “flight to quality” which Anatoly has kindly agreed to us posting here on our website, saying “I believe our objectives of providing balanced views on the sector and helping demystify the new technology are very much aligned!”.  They certainly are.

BlackRock CEO Larry Fink once again expressed broad support for digital assets this week, signalling a further evolution in his perception of the asset class. In 2017, he called Bitcoin “an index of money laundering”… now, he believes that crypto could in fact be part of a “flight to quality”.

In an interview with Fox Business Network on Monday, Fink commented on the current bullish momentum for Bitcoin. Fink believes that strong growth this year—despite SEC headwinds—has been strongly driven by organic global demand; “I think it’s just an example of the pent-up interest in crypto. We are hearing from clients around the world about the need for crypto”.

Bitcoin surged around 10% to $30,000 following an erroneous tweet by a media outlet claiming approval of BlackRock’s spot #BitcoinETF, before media clarifications and corrections brought it back down to $28,000. However, Fink thinks that positive performance is based far more on macroeconomic and geo-political factors than hasty tweets: “Some of this rally is way beyond the rumour—I think the rally today is about a flight to quality, with all the issues around the Israeli war now, global terrorism, and I think there are more people running into a flight to quality”.

What characteristics does crypto have which could benefit its use as a “flight to quality” against such uncertainties?

Digital assets are inherently borderless and stateless, decentralised and censorship-resistant. Issuance rates cannot be changed at the whim of any single party, leading to more stable supply flows than many fiat currencies—according to IMF data, the current average global inflation (by CPI) stands at 6.9%, and EY has identified nearly 20 countries as experiencing – or risking -#hyperinflation. In comparison, Bitcoin’s current supply inflation is below 1.8%; and will drop to 0.7% next year.

This matches up with recent commentary by Christopher Wood, Jefferies’ global head of equity strategy; “G7 central banks, including most importantly the Fed, will not be able to exit from unconventional monetary policy in a benign manner… such failure is likely to culminate in the collapse of the USD paper standard to the benefit of #gold bullion and #Bitcoin”.

Yesterday, Bank of America reported unrealised losses of hefty $131.6 Billion “on government-guaranteed securities”, showcasing the scale of financial upheaval caused by the Fed’s policies.

Other banking institutions without BofA’s massive liquidity may not have the same ability to hold all their underwater bonds to maturity, potentially meaning more Q1-style bankruptcies in the observable future.

Earlier this year, Fink outlined Blackrock’s proposed ETF as a means to make digital assets more accessible to a broader investor base and streamline access to this asset class. In times like these, we may see more and more investors realising the benefits of assets with programmable supply, thus making forthcoming ETF launches even more relevant.