Hedging a $200 billion stablecoin with Bitcoin is impractical due to significant counterparty risk. The perception of risk in the economy affects the value of assets like gold. Gold is likely to reach $10,000 within two years due to its scarcity and historical role as a store of value.
Key Takeaways
- Hedging a $200 billion stablecoin with Bitcoin is impractical due to significant counterparty risk.
- The perception of risk in the economy affects the value of assets like gold.
- Gold is likely to reach $10,000 within two years due to its scarcity and historical role as a store of value.
- Gold is the neutral reserve asset of the world, outperforming Bitcoin in terms of liquidity and market size.
- Bitcoin has shifted from being viewed as digital cash to a store of value, affecting its adoption and volatility.
- In times of crisis, central banks will prefer gold over Bitcoin, impacting Bitcoin’s value.
- Investing large amounts in crypto can be dangerous due to market volatility.
- The best use case for crypto is settling payments outside the banking system.
- The reserve asset for the world will be gold.
- A gold-backed stablecoin with a rewards program for users is being developed.
- The market cap of Bitcoin is too small to support the issuance of the world’s biggest stablecoin.
- Holding both Bitcoin and gold serves different purposes in a diversified portfolio.
- Silver is overheated right now and should not dominate an investment portfolio.
- Integrating privacy features into Bitcoin could lead to government backlash and hinder its adoption.
- Fiscal dominance occurs when excessive government debt undermines the effectiveness of central banks.
Guest intro
Vinny Lingham is Co-founder and President of Xash. He previously co-founded Civic, a blockchain-based identity verification platform, and launched Gyft, an early Bitcoin-accepting gift card platform acquired by First Data. He designed USDX, a gold-backed, reward-bearing stablecoin, to address Bitcoin’s liquidity and adoption gaps relative to gold.
Why Bitcoin is not the ideal stablecoin backing
- “Hedging a $200 billion stablecoin with Bitcoin is impractical due to counterparty risk.” – Vinny Lingham
- Bitcoin’s market cap is too small to support large stablecoin issuance.
- “You cannot hedge $200 billion in Bitcoin right now without a ridiculous amount of counterparty risk.” – Vinny Lingham
- Gold is a more viable option for backing a large stablecoin due to its market size and lower counterparty risk.
- “You can hedge $200 billion in gold… the counterparty risk disappears.” – Vinny Lingham
- Bitcoin’s liquidity and market size are not sufficient for it to be a global reserve asset.
- “Bitcoin has not reached the levels of liquidity required for it to be a global reserve asset.” – Vinny Lingham
- The limitations of Bitcoin as a backing asset highlight the need for alternative solutions like gold-backed stablecoins.
The evolving role of gold in the global economy
- Gold is likely to reach $10,000 within two years due to its scarcity and historical role as a store of value.
- “There’s only eight million ounces of gold in the world… it’s a scarcity thing.” – Vinny Lingham
- Gold is the neutral reserve asset of the world, outperforming Bitcoin in terms of liquidity and market size.
- “Gold is effectively the neutral reserve asset of the world.” – Vinny Lingham
- In times of crisis, central banks will prefer gold over Bitcoin.
- “Central banks in crisis buy gold, not Bitcoin.” – Vinny Lingham
- The reserve asset for the world will be gold.
- “I think the reserve asset for the world is gonna be gold.” – Vinny Lingham
- A gold-backed stablecoin with a rewards program for users is being developed.
- “We’ll be the first gold-backed stablecoin with a rewards program for users.” – Vinny Lingham
Bitcoin’s shifting narrative and its implications
- Bitcoin has shifted from being viewed as digital cash to a store of value, affecting its adoption and volatility.
- “The narrative was changed from digital cash to a store of value and digital gold.” – Vinny Lingham
- Bitcoin has failed to meet the expectations set for it as digital gold over the past nine years.
- “Bitcoin has failed to live up to the promise of what digital gold was supposed to be.” – Vinny Lingham
- Integrating privacy features into Bitcoin could lead to government backlash and hinder its adoption.
- “Adding an anonymity layer to Bitcoin is not healthy and kind of dangerous.” – Vinny Lingham
- Bitcoin was intentionally designed to be pseudonymous rather than anonymous.
- “The whole point of Bitcoin was… they made it pseudonymous for a bunch of reasons.” – Vinny Lingham
Investment strategies in a volatile market
- Investing large amounts in crypto can be dangerous due to market volatility.
- “When you put in large amounts of money to crypto, it’s kind of dangerous.” – Vinny Lingham
- Holding both Bitcoin and gold serves different purposes in a diversified portfolio.
- “Holding both Bitcoin and gold definitely has different purposes in your portfolio.” – Vinny Lingham
- Gold should not be the sole focus of an investment strategy.
- “Being all in on Bitcoin is risky, and so is being super exposed to gold.” – Vinny Lingham
- A diversified portfolio helps manage market volatility.
- “When you have a well-balanced portfolio, you should do okay over the long term.” – Vinny Lingham
The impact of economic conditions on asset valuation
- The perception of risk in the economy affects the value of assets like gold.
- “The rest of the world is losing faith in the US economy’s ability to maintain moderated spending.” – Vinny Lingham
- Central banks maintaining lower real interest rates can lead to varying inflation rates and currency depreciation.
- “Central banks maintaining lower real interest rates lead to higher inflation in some countries.” – Vinny Lingham
- Fiscal dominance occurs when excessive government debt undermines the effectiveness of central banks.
- “Fiscal dominance means central banks lose traction because hiking interest rates bankrupts the government.” – Vinny Lingham
- The experience of currency devaluation highlights that the perceived value of assets can be misleading.
- “Currencies can go to zero… it’s the floor you’re standing on going down.” – Vinny Lingham
The geopolitical influence on crypto and gold
- Geopolitics is the core of demand for crypto and central bank actions.
- “Geopolitics is the core of demand… central banks’ demand is driven by sanctions.” – Vinny Lingham
- The future will see the emergence of regional blocks as a response to geopolitical tensions.
- “The natural endpoint is blocks, regional blocks.” – Vinny Lingham
- China’s currency is likely to appreciate, impacting global economic relationships.
- “China’s rise… CNY is clearly gonna be appreciating.” – Vinny Lingham
- The development of economic blocks is crucial for the future of crypto and gold.
- “China and the development of blocks is really important for crypto and gold.” – Vinny Lingham
The future of global reserve currencies
- The dollar will not lose its status as a reserve currency but will share it with others over time.
- “The dollar will not lose its status, it’ll share its status over time.” – Vinny Lingham
- Humans often prefer a single dominant currency, complicating the acceptance of multiple reserve currencies.
- “Humans like one king’s picture… they don’t like multiple reserve currencies.” – Vinny Lingham
- Economic historians will likely highlight a significant decline of the dollar against gold by 2025.
- “Economic historians will say the dollar went down 50% against gold.” – Vinny Lingham
- The US has fewer fundamental problems compared to the Eurozone and Japan.
- “UK, Japan, Eurozone have far worse and more fundamental problems than the US.” – Vinny Lingham
The challenges of monetary policy and economic stability
- The calculation of M0 varies by country, complicating the creation of a global M0 metric.
- “M0 is calculated differently by different countries, complicating global metrics.” – Vinny Lingham
- The gold equalizing price for M0 can yield significantly different values based on methodologies.
- “The gold equalizing price for M0 is $34,000 an ounce, for M2 it’s $189,000 an ounce.” – Vinny Lingham
- High real interest rates can stabilize economies even during recessions.
- “High real interest rates can stabilize economies, even if it creates a recession.” – Vinny Lingham
- Emerging markets have learned from past economic crises and are implementing better fiscal policies.
- “Emerging markets are our best students… they created independent central banks and fixed structural problems.” – Vinny Lingham
Source: https://cryptobriefing.com/vinny-lingham-hedging-a-200-billion-stablecoin-with-bitcoin-is-impractical-gold-is-set-to-reach-10000-and-bitcoins-narrative-has-shifted-to-a-store-of-value-unchained/
