[CORRECTION] Tuesday, Oct 8, 2024

apologies, a couple of egregious typos in the earlier version!

“There is hopeful symbolism in the fact that flags do not wave in a vacuum.” – Arthur C Clarke  ||

Hi everyone! I hope you’re all doing well.

In today’s email, I look at an ECB paper that shows an understandable misunderstanding of “safe havens” and stablecoins. I also share a thoughtful post on the internet by crypto critic Molly White, and look at what we can learn from the web’s evolution. And, another “Newsletter Stuff” entry, this time on topics.

IN THIS NEWSLETTER:

• “Safety” is relative and misunderstood

• Warnings for crypto from the internet parking lot

• Newsletter stuff

If you’re not a premium subscriber, I hope you’ll consider becoming one! It’s the price of a couple of New York coffees a month, and you get ~daily commentary on how macro moods are influencing crypto markets, and also on how crypto is impacting the macro economy.

WHAT I’M WATCHING:

“Safety” is relative and misunderstood

This morning, I dove into a paper on stablecoins published yesterday by the European Central Bank (ECB) so you don’t have to – you can thank me later (the paper itself is not worth it, but there are a couple of tangential points worth mentioning). The focus is on the impact of monetary policy on crypto markets, which is in itself an interesting topic. The main takeaways:

• Crypto market shocks have no impact on traditional markets. (You don’t say.)

• They do lead to a drop in stablecoin market cap. (Yes.)

• US monetary policy shocks boost flows into money market funds. (Of course.)

• But they also lead to a drop in stablecoin market cap. (Really.)

The conclusion, therefore, is that stablecoins are not the “crypto safe haven” proponents paint them to be.

Yes, because their market capitalization drops when crypto appetite drops.

Before you elegantly raise one eyebrow in befuddlement, I, too, thought this was a waste of a paper, because the authors have obviously misunderstood both “safe haven” and the role of stablecoins in crypto markets.

But they do somewhat inadvertently make an interesting point.