Cryptocurrencies are now also scary for Xi
by Ranieri Razzante * Monday, 27 September 20215356
What do cryptocurrencies have to do with the economy, with “real” currencies, with businesses? Intimate connections with the wealth that could emerge from China in the face of the crisis, as declared by the Chinese Central Bank itself.
Because investments in “crypto currencies” are increasing, especially outside China, after which – somewhat schizophrenically, in truth – it has repeatedly banned, then in fact readmitted, the negotiations that have been banned since yesterday.
Until May of this year, more than 60% of the world’s miners found asylum in China. The “cryptocurrency manufacturers”.
Also in China, Bitcoin, the most famous and traded cryptocurrency in the world, was born 12 years ago.
Transactions are now global, speculative and adventurous. Dizzying fluctuations on the sites – which are not real “stock exchanges” – which host trading on more than 7,000 currencies in the world.
And then, paradox of paradoxes, the US is home to many of the escaped miners.
Markets, real currencies and the danger of virtual ones
The link and interconnection between real and virtual currency markets and financial instruments is as obvious as it is historical. Volatility is an axiom of the economy, that is, the mutability in the occurrence of events external or endogenous to the countries of the world, of prices, rates, yields of the products mentioned.
For this reason, the president of the ECB also had to reassure the markets about Europe’s not excessive exposure to China for Evergrande bonds.
What happened only exacerbates the concept of the “dangerousness” of investments in cryptoassets, not only for the potential of use by crime and terrorism, but above all for the stability of the markets. Markets are places that are not officially born to deal with assets with such high volatility, precisely because they are not known and supported by any issuing institution. Official markets are created to ensure transparency, fairness of trading, reliability of intermediaries, coverage from defaults.
To give another example, we must remember that the market capitalization (value of the global transaction) of cryptocurrencies in the world today exceeds 2 trillion dollars. That of derivatives is one million billion, therefore incomparable. And derivatives are also highly volatile speculative instruments. But, anyway, they are regulated, and to some extent traceable in investors’ portfolios.
In any case, the danger of financial instruments or assets that are very sensitive to market externalities must be assessed on a case-by-case basis and without exception.
The message in this article is: those who denounce their ontological, creeping danger continue to be right about cryptocurrencies. If we do not take cover with a univocal regulation, which apparently, and guiltily, I do not see the intention of adopting (especially outside the EU), the expansion of critical issues also on interconnected markets will become less and less contained.