Image Courtesy: Chicago Sun Times
Whoa! Has Ken Griffin been reading my blog!?! The billionaire hedge fund manager Ken Griffin based in Chicago has changed his mind on crypto. The man once called Bitcoin “a jihadist call to end the Dollar as the world’s reserve currency”. Now Griffin has changed his mind. Griffin has called crypto one of the great stories in finance over the course of the last 15 years. The Crypto market now has a market cap of $2 trillion. Griffin admits that he was wrong on Crypto and that he can see Citadel in the future making markets in cryptocurrencies.
This is huge for cryptocurrencies. We have discussed before institutions have been slow to adapt to crypto. But Crypto adoption is slowly picking up. Citadel Securities is the largest market maker by volume. Citadel starting to make markets in the cryptocurrency space will give a big boost for the cryptos.
In his interview with Dave Rubenstein on Bloomberg, he also mentioned a subject I have frequently discussed here on Armchair Banker. It is the backfiring of Washington’s sanctions, rise of US Dollar alternatives, and threats to the Dollar as the global reserve currency. Ken Griffin explicitly mentions that by weaponizing the Dollar, we are encouraging other countries to embrace other currencies. This is going to destroy the US Dollar
Another point made by Griffin was very eye-opening and rarely mentioned on mainstream financial media. What Griffin mentioned was that as Western Companies, especially tech companies, retreat from the Russian market this is going to increase market share for Chinese tech companies. Per Griffin this is going to make it much harder for American tech to compete against Chinese tech firms in emerging markets. American tech was already struggling to compete against Chinese tech in emerging markets.
As for sanctions, this is something that I have been talking about a lot here at Armchair Banker. Since the end of the financial crisis, as emerging markets’ share of the economy pie started to grow, these countries have been discussing trading and investing with their own currencies outside of the Dollar. Russia has been leading the way of de-Dollarization. Russia has been preparing for years by selling off its US Treasury holdings and buying gold. As I mentioned before, the Chinese are loving this move by the West where it can test China’s homegrown digital payments system and digital Renminbi. As more countries adopt different payment systems and abandon the Dollar, the demand for the Greenback will decline thus challenging the currency’s reserve status. The Dollar’s Reserve status is the reason why America can have massive deficits and incur large sums of debts. As demand for the currency is high, the value stays stable. If this demand goes down so does America’s status as a superpower. This is not just currency. As Western companies leave Russia the void will be filled by Chinese companies. Huawei will replace Apple, NIO will replace VolksWagen, Li Ning will replace Nike, and AliPay and WeChat will replace ApplePay and Google Pay.
What is interesting about the topic of de-Dollarization is that this is a topic that was only discussed on alternative financial media. Now mainstream investors like Ken Griffin and Ray Dalio are warning about the visible threats to the US Dollar’s status as the global reserve currency.
As for Crypto, this just further proves our point that Cryptos are not going anywhere. Cryptocurrencies and their related technologies are only going to grow. No one can buck the trend of decentralization. We are also at the beginning of the crypto revolution. Only 57% of institutional investors have crypto in their balance sheet. Only 23% of Americans own crypto. Just like Ken Griffin and Citadel, many hedge funds, institutional investors, and institutions will want to hold Bitcoin. More clients of brokerage houses and RIAs will want access to Bitcoin and crypto-related investments. As demand for crypto increases, market makers are going to be more involved in the crypto market. What is very interesting about crypto is unlike the internet revolution Bitcoin and the crypto revolution was one of the few times the common investor was able to front run and outsmart the big boys on Wall Street. People who were lucky to invest in Bitcoin in 2010/2011 or Ethereum in 2015 and did not sell till now made a killing. Bitcoin was the best performing asset of the decade where the cumulative return since 2011 has been 20,000,000%! (as of March 2011). Bitcoin and crypto are also giving opportunities to the poor and underprivileged. But for many who are still behind, don’t worry because it is still only the beginning for cryptos.
What I write here is not investment advice. Please do your own research and/or consult a professional before investing. Investing involves risk.
Link:
Ken Griffin’s interview with Dave Rubenstein on Bloomberg
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