E-franc, E-krona...E-volution?

by Murray Gunn
Updated: November 10, 2017

With all the speculation around the future of Bitcoin and other cryptocurrencies, we thought you’d find this interesting.

Dam Square, Amsterdam 1636. Rue de Quincampoix, Paris 1719. 'Change Alley, London 1720. Is Zug, Switzerland 2017 about to be added to this roll call of bubble epicenters?

The sleepy town of Zug, nestled amidst beautiful countryside, is the unlikely host of what has become known as Crypto Valley as crypto currency ventures flock to set-up business there, lured by low taxes and light regulation. The Swiss, it would appear, are at the forefront of a potentially radical change in global currency markets. As an article from CityWire states - "Known for its innovative spirit, Switzerland's financial industry has been ahead of the curve in developing blockchain and cryptocurrencies."

The Swiss National Bank are said to be seriously considering an e-franc, a cryptocurrency using the blockchain technology. Sweden, where, to be fair, the world's first central bank was created in the 1600s, is also said to be quite far down the line of development. The CME has announced that it is to start a Bitcoin future. Is crypto-mania the biggest bubble in history, or an epochal change for money and FX markets? It might be both.

Elliott Prechter was among the very first to note the potential for Bitcoin, both to turn into a bubble and for its disruptive potential. As he alluded to in his most recent paper, crypto-mania is almost undoubtedly a bubble but, after the inevitable crash, whichever currency is left standing may well change the way the world works.

How will FX trading evolve? Perhaps it will disappear altogether. After all, if there is just one world currency, there would be no need for exchange. Perhaps there will be national crypto currencies, which undoubtedly defeats the objective. Perhaps crypto currencies aren't currencies at all, but actually speculative assets with zero intrinsic value. At this stage, I, for one, don't mind admitting that I have no idea how the crypto technology will affect FX and money-markets. As Alan Watts so serenely put it, "The only way to make sense out of change is to plunge into it, move with it, and join the dance." That, I hasten to add, is most definitely not an endorsement of doing any trading in the crypto space.

I will leave you with a chart to ponder. Did you know that you can buy shares in a central bank? Yes, the Swiss National Bank shares are freely traded. The chart below shows you what they have done over the last couple of years, alongside the price of Bitcoin. Is it just me, or is anyone else intrigued with what is going on in Switzerland?

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