FTX, Bitcoin Utility & The G20 to BRICS(S) Economic Shift

Black Swan Event

A black swan event is an economic term that describes an infrequent and unexpected but adverse phenomenon that drags financial markets lower. The FTX implosion, driven by World Economic Forum (WEF) funder Sam Bankman-Fried’s corruption, provided the black swan event that regulators needed as an excuse to attempt to over-regulate the cryptocurrency market and stifle innovation to ensure the dominant financial interests of today maintain control. Thankfully, the overall momentum of the crypto market and the destruction of confidence in the existing system casts doubt on whether those efforts to protect dominant financial interests will be successful.

FTX’s implosion teaches us many lessons, a major one being the importance of efficient self-custody because anybody who left their money on an exchange was not taking advantage of the true potential of crypto by removing it from external custody (like in a crypto exchange or a bank) and keeping it themselves. However, retail/commerical and central banks controlling fiat currencies also suffer from deep corruption, though their mistakes are covered up by the machine backing them most of the time. Banks often use the money you store with them to gamble and/or invest in companies whose operations contradict public interest. Central banks weaponize monetary policy to ensure developing countries never achieve national and financial sovereignty.

BRICS – Brazil, Russia, India, China & South Africa – And Saudi Arabia

Saudi Arabia – the potential (S) in BRICS(S) – is the latest nation cozying up to the emerging international economic block (3) and is in the process of changing its stance on bitcoin. Saudi Arabia’s central bank hired “Mohsen Al Zahrani to lead its virtual assets and digital currency program. The appointment of Al Zahrani, according to the report, signals that the country which banned cryptocurrencies just over four years ago has changed its stance.” (4)

This pivot by the world’s largest oil producer is particularly significant because the core of US political, economic and military power lies in the petrodollar standard that exists primarily thanks to Saudi Arabia requiring it for oil payments. However, more recently, the middle eastern kingdom has started more seriously exploring the idea of accepting the Chinese Yuan for oil payments (5) and made it clear it will be ignoring American pressure to participate in their sanctions against Russia (3). Saudi Arabia is reiterating its commitment to increase economic ties with China despite pressure from America in the opposite direction. The two most powerful nations in the economic block known as BRICS (Brazil, Russia, India, China, and South Africa), Russia and China, are forging strategic alliances with the cornerstone of America’s Petrodollar.

BRICS are loudly exploring the creation of a new reserve currency (7), and each nation has made moves to strengthen its own – for example, Russia, which recently began backing theirs with gold. Interestingly, Bitcoin Magazine writer Luke Mikic theorizes that the US dollar could benefit tremendously if the US monetary authority decides to ‘back the dollar with bitcoin’. If they don’t do it, it’s also possible BRICS nations could consider including bitcoin as part of a basket of commodities backing a shared currency they’re loosely discussing. Most of the world sees America as the greatest threat to world peace (10), and the second most populous African country, Ethiopia, is publicly pivoting away from America, towards BRICS nations after America’s recent attempt to overthrow their democratically elected government (11).

The Bitcoin Standard – A Bitcoin-Backed USD

Backing the dollar with bitcoin would increase demand for dollars by making it redeemable for a finite asset and, thus, a more reliable currency. Centralized US dollar stablecoin issuers already back their stablecoins with US debt, so the US government would benefit from stablecoin usage across the world if it’s adopted. In that case, the US dollar could become the defacto complementary currency alongside bitcoin because bitcoin’s short-term volatility makes it impractical for a country to use bitcoin as a medium of exchange (though it’s a great long-term savings vehicle and store of wealth), so USD stablecoins could be used for pricing goods and transactions, while bitcoin is used as a savings mechanism.

Once more of the world’s wealth is stored in bitcoin after the transition period, the currency would become less volatile, and ultimately, the US dollar would become irrelevant. However, in the short term, a US stablecoin is the best option for a country adopting bitcoin to price its goods. Furthermore, if the American government decides to pick up where JFK left off and returns control of the money supply to the treasury (where management can be held publicly accountable) to keep it out of private hands (7), then bitcoin with a USD stablecoin becomes an attractive two punch combo for the economic stability and growth of a nation.

Self-Custody

As governments become more oppressive, it’s also becoming more and more clear bitcoin cannot be banned. The ability to efficiently self-custody your wealth free from government or institutional control has never been more critical during a time when governments like Canada (1) and Brazil (2) are freezing the bank accounts of protesters who disagree with government mandates. In the world’s most authoritarian country, China, cryptocurrency transactions “have picked up in recent months despite a ban in September 2021, suggesting that trading restrictions imposed by Beijing have been largely bypassed by determined users.” (9) As long as the internet is around, bitcoin cannot be banned, though governments can make it more inconvenient for a determined population to transact.

Conclusion

FTX’s implosion has already caused tremendous damage to crypto markets, and the totality of its effects on the market may or may not be done. The price may sink lower in the short term, especially if another potential black swan event (of which there are several possibilities) impacts financial markets. However, contrary to previous financial patterns that established gold as a safe haven during shaky and uncertain economic times, the price of gold steadily dropped in this recent downturn along with bitcoin, stocks, and most other financial classes – meaning a lot of investors are likely holding cash and liquid assets that can be employed if a positive catalyst influences the market in the opposite direction, which are detailed at the video linked at reference number (12).

Bitcoin is often thought of as a better store of value than gold since it’s finite by nature, and the laws of supply and demand dictate that lower supply means higher value. Bitcoin’s limited supply cannot suffer from the intentional inflation perpetrated by The Federal Reserve that has resulted in a massive transfer of wealth from the middle to upper classes through boom and bust cycles driven by the money printing that controls the global economy. The world is unlikely to immediately transition to a currency controlled by BRICS(S) nations as the base of the new financial system because they have their own publicly visible issues and do not have America’s global financial infrastructure.

America backing the US dollar with bitcoin would be monumental for preserving and further building American middle-class wealth. It could be a crucial part of a long-term strategy for building back the world’s confidence in its stability. Additionally, embracing it as part of the American financial system could start a new era, with countries moving forward as peers rather than oppressed and oppressors. It’s a step towards self-sovereignty that decentralizes power and makes the world fairer and more efficient. Read more about the countries already considering BTC adoption here.