Dispatch #166: The Superficial Allure of CBDCs

Nov 17, 2023 4 min read

Dispatch

In this patch of your weekly Dispatch:

More money flows to crypto 💱
More crypto rallies happen 📈
More profits for BTC miners⛏️

The Big Idea

No Innovation in Centralization

Imitation, they say, is the most sincere form of flattery. And if we’re blunt enough, we’d go on that central bank digital currencies (CBDCs) hardly offer anything revolutionary when compared to cryptocurrencies. Both serve their purposes in a similar manner – both are stored and transacted strictly digitally.

That’s not to say that they are identical, as CBDCs will potentially come with all the support from the central banks issuing them, thus opposing the decentralized nature that digital assets exhibit as their pièce de résistance.

What has sparked such “outrage” at your humble, yet progressive Dispatch? It was the International Monetary Fund’s Managing Director Kristalina Georgieva's speech on Wednesday. Geogieva urged that “the public sector should keep preparing to deploy CBDCs and related payment platforms,” remarking that CBDCs could replace cash in some parts of the world. In all honesty, Georgieva brought across entirely valid points as to the advantages that CBDS bring:

Replace costly cash distribution in island economies.
Provide resilience in more advanced economies.
Improve financial inclusion in areas with limited bank account access.

There hardly are arguments against these points, yet the IMF's stance on crypto has been made clear before (spoiler alert: that banning private cryptos should be an option). Mind you, Mastercard head of crypto for Asia-Pacific expressed skepticism towards the adoption of CBDCs at the Singapore FinTech Festival, and they should know a thing about payments. Which brings us yet again to the friction that could potentially occur between CBDCs and cryptocurrencies.

The beauty of cryptocurrencies lies in their ability to empower individuals. By embracing decentralized solutions, we foster financial systems that prioritize personal well-being over centralized control. Cryptocurrencies exemplify the ideals of transparency, inclusion, and economic empowerment, offering a vision where financial systems are not just efficient, but also equitable.

The true innovation lies in a decentralized future, where personal well-being takes center stage, and financial empowerment becomes a reality for everyone. It's time to embrace a digital era that champions the individual, ushering in a new paradigm where financial freedom is not just an aspiration but a fundamental right.

The Latest In…

The Numbers Keep Adding up

Crypto's recent dance-up in asset price charts has resulted in a whopping $293M entering the sector during the past week to finish off a seven-week streak with inflows north of $1B. Bitcoin ETP trading volumes, making up 19.5% of total Bitcoin trading, show the crowd is feeling the rhythm more than it did in 2020 and 2021.Ethereum's slick moves include its highest inflows since August 2022, hitting $49M over the week and signaling a sentiment U-turn. Year-to-date, the crypto party has raked in $1.14B, ranking as the third-highest yearly inflow on record.

The Latest In…

Rising up for Good Reason

AVAX, the native token of Avalanche, surged 14% to over $20 for a 60% increase in the last week. The catalyst? A proof-of-concept collaboration between JP Morgan's Onyx and Apollo Global in Singapore's Project Guardian that utilizes an Avalanche subnet.
SOL hit a new yearly high of over $62 for a massive 165% increase over the last 30 days. The momentum appears fueled by Visa and Shopify's interest, along with Solana’s cheap and fast transactions.
SHIB experienced a 7% surge to $0.00000862 as the meme coin has been adopted by living legend Filipino boxer Manny Pacquiao's non-profit foundation. The Manny Pacquiao Foundation has selected SHIB for its fund-raising activities, aiming to enhance transparency and efficiency.

The Latest In…

Mining Their Own Business

It’s great having our crypto bags gain some weight before the festive season. Fortunately, that’s also true for Bitcoin miners, who, you know, keep it all going for the rest of us. Continuously reaching revenues of around $40M over the last 10 days has seen miners’ income reach yearly highs. This notable increase coincides with BTC’s latest moves above $35,000 but also mirrors a previous peak in May when revenue spiked due to network congestion from high demand for the Ordinals inscriptions. Optimism surrounds the potential SEC approval of a U.S. spot Bitcoin ETF, signaling institutional acceptance and providing investors access to the crypto market.

The Week’s Most Interesting Data Story

Scarcity Effects

In recent weeks, ETH has gone deflationary again. This is following increased network activity and the resulting burning mechanism tied to rising gas fees, which sees more ETH being permanently removed from circulation. In other words – that’s how a change in scarcity looks like on a chart. Just don’t expect extra points for aligning those with the price spikes.