WEEKLY, Nov 18, 2023

dogecoin, "programmable" money, Miriam Makeba

Hello everyone, I hope you’re all doing ok!

You’re reading the free weekly edition of Crypto is Macro Now, where I update and/or re-share a couple of things I wrote in more detail about during the week. If you’re a premium subscriber, you’ve probably already read them, so feel free to scroll all the way down for some cool non-crypto links.

If you’re not a premium subscriber, I hope you’ll consider becoming one! You’ll get a daily update as to the crypto and macro trends that I feel are being overlooked, along with some market commentary. There are also charts, links to interesting podcast episodes and long reads, and a running commentary on some of the craziness out there. It’s only $8/month for now, and it would allow me to continue to explore the impact the crypto ecosystem will have on the global economy –this intersection matters, now more than ever.

Follow me on X at @noelleinmadrid where I share photos of gorgeous city I live in, charts, comments on headlines, and, you know, stuff depending on the mood. Also, if you love short daily podcasts, I’m now host of the CoinDesk Market Daily, where I give a brief rundown of crypto and macro markets.

Of course, nothing I say is investment advice!

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Programming note: this newsletter will be taking a break over the Thanksgiving holiday – I know I’m not American, but it’ll be a quiet few days (hopefully!), I could use some time to touch grass, and there’s much planning to be done. 😁 So, this free weekly will not publish next Saturday, but will be back in your inbox on December 2nd.

Below in the Weekly:

• Coming up on Crypto is Macro Now

• Dogecoin as a market signal

• Confusion around programmable money

• Miriam Makeba

  

  (from Unsplash, photo by Hu Chen)

Some of the topics discussed on the premium dailies this week:

• BTC vs ETH: A shifting center of gravity?

• Why bitcoin reacted strangely

• What the new VC fund announcements are telling us

• An official US debt warning

• JPMorgan gets it wrong

• Inflation and irrational expectations

Coming up on Crypto is Macro Now

As the end of the year approaches, I’m going to resist the urge to write 2023 reviews and 2024 forecasts, I figure you’re going to get so many of those a couple more from me won’t add much to the narrative. There’s always more than enough noise in December as it is.  

I will be doing deeper dives into key developments that so far I’ve only either mentioned in passing or had to put on my “look into” list for lack of bandwidth, I’m excited about that. For instance:

• Why are big banks experimenting on public blockchains?

• How does the US move to T+1 settlement impact the tokenization drive?

• What is being overlooked in the busy CBDC experimentation?

•  Will bank tokenized deposits displace private stablecoins?

• What else can “money” become?

And so much more…

There’s so much I want to get into in order to understand how blockchain technology and crypto assets can impact broader markets and economies. Not just how they can, also how they will.

If these topics as well as regular market commentary are of interest to you, I hope you’ll consider subscribing! It’s only $8 a month for now. To be honest, I will be taking some time off in December (not sure when yet, but probably between Christmas and New Year, with some other days beforehand), so if you want to wait until January, that’s of course fine! But the price will be going up to $12 a month in January, which is still only a cup of coffee per week. I do hope you’ll think about it, I would love to have you with me on this journey. This field matters, especially now.

Dogecoin as a market signal

I’ve been fighting this all week, but here goes: it’s time to take a deep breath and mention dogecoin. Yes, it’s a meme coin, and no, it is unlikely to make a significant impact on the macro landscape. So, why am I bringing it up? In part, because it’s a key part of the original crypto ethos. Also, it’s an intriguing market barometer, and its numbers are starting to tell a disquieting story.

(chart taken yesterday via TradingView)

To start with, I have to disclose that I hold a very (very!) small amount, that I bought years ago at my husband’s urging. He comes from a tradfi background, definitely not a “crypto native”, but he’s always liked dogecoin because, as he says, “it’s unpretentious”. It doesn’t do anything, it just is.

This raises the question of why anyone would want to hold it, and truthfully I have yet to find a compelling fundamental reason. But that’s not the point, and therein lies the elegance of dogecoin.

People hold dogecoin because they want to. It’s as simple as that. Sure, most hope that the price will go up as more people want to hold it. And there’s always the speculative chance that Elon will one day make dogecoin the currency of X (very unlikely, in my opinion). But it’s not a great store of value in that it has no supply limit (around 14 million new DOGE are created every day), and while it may one day have utility in an app, for now it does nothing*. People hold it because they feel a connection, it’s more a cultural statement than an investment idea.

(*correction, it turns out it can fund a satellite)

That is one of the more compelling features of blockchain rails – tokens can be created with an almost infinite combination of features. And then the market decides what takes hold and what doesn’t. This is incentive experimentation in the wild, in real time, on transparent networks. Before the launch of the first decentralized public network in 2009, this was not possible. Now, we can experiment away, at relatively low cost. Dogecoin is a fascinating example of this experimentation. Given that it now has a market cap of over $12 billion, when even its founders have disavowed the project, we can say it’s an experiment that has worked, even if few understand why. The market has spoken.

What’s more, just going by market cap, dogecoin is now bigger than ABN Amro, Turkish Airlines, Hyatt Hotels, News Corp and many other known names. This is with no organization, no marketing budget beyond what community members themselves put in, no real purpose. You may find it crazy, I find it amazing. It may not make sense, but it doesn’t need to. It’s not a business, it’s a cultural statement with a measurable market value.

Why am I bringing this up now?

Because the price of DOGE and some community moves are sending signals that speculation is picking up. Here’s DOGE relative to BTC over the past few days.

(chart via TradingView)

(As an aside, yesterday I discovered that, when you look up DOGEUSD on TradingView for the first time, a muscular Shiba Inu pops out to flex and say hello. See what I mean? A cultural statement.)

Over the past week, DOGE is up 16% while BTC is down 1%. Over the past month, DOGE is up 45% while BTC is up 27%.

Like I said above, DOGE doesn’t do anything, so when its price starts to climb, it’s because of a technical configuration that chart watchers like, a rumour, or a bit of YOLO, FOMO or whatever social acronym you prefer. In other words, it’s speculative, and is a sign that market participants are getting more comfortable with risk.

We can also see this in community announcements. In December, a physical dogecoin (??) will set off for the actual moon. This is a quirky and expensive play on the rallying cry “to the moon!” that I think originated in the dogecoin community as a playful declaration of the intended price destination. A physical dogecoin will be included in DHL’s Moonbox that will be aboard Astrobiotic’s Peregrine Mission One when it takes off next month.

Why? I don’t know. Why not, I guess?

Anyway, back to pricing. Another way to look at the DOGE signal is via its relationship to BTC expressed by ratio between the two. This has been steadily falling all year, as BTC started to lead the waking up of the crypto market.

(chart via TradingView)

The uptick in the ratio at the far right is for now tiny, and may even disappear, who knows. But it’s worth keeping an eye on for what it says about the weight of speculation in market drivers.

For this reason, dogecoin is more than a fun concept. It’s also a potentially useful market indicator.

Confusion around programmable money

One of the early “promises” of blockchain technology was the possibility of “programmable money” – tokens that could serve as payment and have an embedded function. For instance, a token could serve as payment and identity at the same time. Or, a token could only be used for payment if it is raining.

This potential seems to have been sidetracked by two external forces: one is the top-down instinct to control payments, another is a misunderstanding of the difference between token and account.

On the first, we know that some regions are exploring token programmability as a way to manipulate spending. Last month, the deputy administrator of China’s State Administration of Foreign Exchange (SAFE) explained to a forum how CBDCs could impact the overall money supply by embedding expiration dates or limiting their use. The European Union, on the other hand, has clearly stated that the digital euro will never be programmable money, to assuage any fears that some groups could end up being excluded.  

On the second, there is some confusion over what is meant by “programmable money”. Many trot out examples of topping up accounts if the balance dips below a certain level, or only sending money when certain conditions are met. But that is account programmability, not money programmability, it has to do with the functionality of accounts and nothing to do with what is in them. And banks can already do that today with fiat.

So, to clarify, programmable money is money that is programmable, regardless of where it is held. And blockchain technology allows this, by transforming “money” into snippets of code.

By now you’re probably wondering why I’m bringing this up.

Last week, JPMorgan announced the launch of Programmable Payments using its stablecoin JPM Coin (a “walled garden” payment token available to holders of JPMorgan blockchain-based accounts).

Why it matters:

The feature allows clients to program their accounts by plugging in a set of key conditions which will trigger the automatic movement of funds, such as to cover margin calls or optimise working capital.

You may be thinking, “but isn’t that account programmability?” Yes, it is, but it is sophisticated account programmability. The code-based nature of the accounts and the tokens held in them allows for more than if-then scripts. In theory, anyway.

But it’s not really programmable money, in which the money itself changes according to certain conditions.

Still, it sounds like a step forward in payments efficiency, which is why we get excited about stablecoins in the first place, even “walled garden” ones. JP Morgan has colossal reach in on the financial landscape, its clients are among the most consequential in the world, and JP Morgan has been pushing the envelope on big-bank blockchain experimentation for years. JPM Coin launched in 2019, and today does around $1 billion in transfers per day. For comparison, the largest public stablecoin, tether (USDT), does around $3-4 billion in on-chain volume per day (it probably does a whole lot more off-chain, I unfortunately don’t have that data).

The first client to use JPM Coin programmability was Siemens, and apparently FedEx and Cargill are due to trial the feature in coming weeks. That may sound slow, and it is, but in traditional finance, things have to move slowly given the number of compliance hoops on both ends of any change.

The move does represent progress, though, and while it may lack the heady scent of revolution that many crypto native tokens promise, more efficient payments will trigger cost savings, a better use of capital and greater auditability, which in the end benefits commerce, corporate profits, and financial innovation.

HAVE A GREAT WEEKEND!

Back with some music links, and this week we head over to Africa. A few months ago I featured Geoffrey Oryema’s music. Today I want to share some songs by Miriam Makeba. Born in South Africa, I grew up with her music – my parents had it on a lot at home, and I remember somewhat drunken dinner parties with all guests dancing around the table to “Pata Pata”. She came to represent the “voice” of African music in western circles, but her range goes way beyond that: she also brings a breathtaking glow to jazz and soul. My favourites, however, are some of her original African arrangements to which she lends a timeless depth:

The Click Song

Emabhaceni

Pata Pata