This week in crypto. August 23-29: The Nixon shock and dollar dominance, ArtBlocks NFTs and more...
The Nixon Shock and dollar dominance
This August marked the 50th anniversary of one of the most significat economic events of this century – and the one that is downplayed far too often – the Nixon Shock. It influenced the entire world, as the majority of countries found themselves (literally overnight) holding a reserve currency without any intrinsic value, with a supply at the mercy of the American Federal Reserve. This issue is not only of historic importance, though. Its consequences are impacting us all, especially now that the Fed’s printing machine has been producing billions upon billions of new dollars, diluting the value of those that are hold by individuals and countries all over the planet. So how did this happen?
The after-war Bretton-Woods agreement, championed by the US, was supposed to bring monetary order: the US holding over two-thirds of the world’s gold, it was decided that the gold-pegged dollar would become the world’s reserve currency. Fixed at $35/ounce, dollars were redeemable for gold at any time. However, US economic struggles and later need to finance the war in Vietnam made it impossible to keep their word. So Nixon threw the US obligations out of the window and unilaterally un-pegged dollar from gold.
Without gold redemption, the Fed could print as much as it wished – and it printed plenty, to distribute mostly among the well-connected and powerful figures of the American business, bringing big money and politics closer than ever.
US diplomats have been excelling in their art, trying to keep the dollar as the dominant reserve currency across the globe, which motivated the Fed to print even more. Some countries with rebellious ideas of replacing dollar with other currencies saw American troops landing on their soil, others – economic hurdles. To this day dollar is a universal unit of account and the most popular reserve currency, which makes other countries dependent on the USA and the Fed in particular.
The Covid-related money-printing frenzy has shown the extent to which countries and people holding dollars do not have any control over it, and the search for an alternative store of value has become paramount. Some countries began to pile gold, El Salvador bet on Bitcoin. Others, however, have been silently watching the depreciation of their reserves, lost within intricate political maneuvres.
On a personal level people are more agile and quick to invest their dollars into real assets. Stocks, real estate, art or commodities… their prices are not miraculously going up. It’s the buying power of dollar that is going down, and we believe that this is only the beginning.
Luckily, Bitcoin has no borders, no decision-makers, no politics. It cannot be invaded in the name of peace, and it cannot be imprisoned under whatever pretext. To us it is the ultimate store of value, and its fast-increasing adoption proves the point much better than confusing attempts to justify unlimited money printing.
Art and NFT
NFT sales continue marking new highs, with over $2.8Bn trading volume in August across platforms (DAppRadar).
The leaders unsurprisingly include Axie Infinity, which is still most popular crypto game by volume, and Cryptopunks - collectible pixellated images that keep on setting new records with an average price of almost $200k (they’re so hot now that even VISA bought itself a Cryptopunk for 49.5 ETH).
The third place is more of a surprise, with Artblocks collection that is rapidly gaining traction: $3.3M was recently paid for a single artpiece called “The Tulip”. Art blocks are designed by different artists, but all have one main characteristic in common: every NFT is created directly on Ethereum, where the artist deploys their algorithm. The final image is generated via the hash string provided by the token, making it a crypto-native piece of art.
Markets
Bitcoin
In the beginning of the week Bitcoin price marked a higher high of over $50k, but later corrected itself by 5%, landing below $48k.
This week’s speech of the Fed’s Chair Jerome Powell was considered overall as “uber dovish” (the Fed expected to maintain low interest rates of 0-0.25%), even if he hinted that the Fed would begin to reduce the pace of its asset purchases in a move known as tapering.
Overall this means that the dollar won’t get stronger any time soon, and the stocks reacted accordingly, with S&P500 hitting (yet another) high and Bitcoin analysts being predominantly positive too.
Ethereum
Ethereum continued to trade sideways this week, oscillating around $3200.
Quote of the week
“Over the last 60 years, Visa has built a collection of historic commerce artifacts - from early paper credit cards to the zip-zap machine. Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection.”
VISA announcing its $150k purchase of a CryptoPunk