⬇️ My Thoughts ⬇️
(re)monetization of gold is already in progress central banks have been consistently buying gold for many years this is especially true for Russia & China
Over 10 years the Russian Central Bank has increased gold holdings by x4.5 🇷🇺 Gold is now 35% of all international reserves held by Russia 🤯 🇺🇸 Comparatively, for USA the number is 5% This is why Russia and Ruble have been so resilient to sanctions
transition into multipolarity brings risks & volatility into financial markets some FX currencies & bonds go up - others down the demand for safe assets is not going away anywhere the debt still needs to be refinanced 🤷♀️
now you might think that gold would be a perfect collateral for repos, but currently: it’s too volatile - price may drop > 10% on systemic risks there is no lender of last resort (you can’t print gold or have swap lines for it 😀)
now you might think that gold would be a perfect collateral for repos, but currently: it’s too volatile - price may drop > 10% on systemic risks there is no lender of last resort (you can’t print gold or have swap lines for it 😀)
most of debt is issued for re-financing of existing debt, not for new debt repo markets are the backbone of that. and since they’re collateralized loans - there is a huge demand for collateral/safe assets
most of debt is issued for re-financing of existing debt, not for new debt repo markets are the backbone of that. and since they’re collateralized loans - there is a huge demand for collateral/safe assets
90% of all newly issued debt is for refinancing of existing debt, not new debt/financing Thus, new debt is extremely inflationary & asset bubble-nurturing The financial system is extremely leveraged at a high risk We need to fix this. DeFi is the tool
remember those HUGE repo markets that I talked about? US bonds/treasuries are the favorite collateral for those transactions and that’s why they’re not going away anytime soon but of course, the financial system is slowly diversifying
repo markets are HUGE - about the size of USD M2! they underpin the global financial system however, there’s not many DeFi protocols addressing this part of the market i may pick it up in the near future if you’re working on something similar - hit me up!
overall blockchain DeFi lacks development for short-term lending markets short-term market volumes are larger than M2 & Co. yes, you can lend on AAVE, but rates vary greatly
repo markets are HUGE - about the size of USD M2! they underpin the global financial system however, there’s not many DeFi protocols addressing this part of the market i may pick it up in the near future if you’re working on something similar - hit me up!
repo markets are HUGE - about the size of USD M2! they underpin the global financial system however, there’s not many DeFi protocols addressing this part of the market i may pick it up in the near future if you’re working on something similar - hit me up!
in the end, you get your UST bond back and it makes sense for you to repurchase the bond (collateral) even if the price falls as long as the price fall is < ≈haircut (2% in our case)
in the end, you get your UST bond back and it makes sense for you to repurchase the bond (collateral) even if the price falls as long as the price fall is < ≈haircut (2% in our case)
so if you have a UST bond worth $100: lender applies a haircut (e.g. 2%) - 100*(1-0.02)=$98 lender sets a repurchase price (e.g. $98.013) so you use your $100 bond to get a $98 loan, for which you must repay with a fee (interest) $98.013
so if you have a UST bond worth $100: lender applies a haircut (e.g. 2%) - 100*(1-0.02)=$98 lender sets a repurchase price (e.g. $98.013) so you use your $100 bond to get a $98 loan, for which you must repay with a fee (interest) $98.013
repurchase agreements are almost always over-collateralized the borrower undervalues the collateral by a percentage (haircut) - this is a buffer against price volatility the purchase and repurchase price are computed over the post-haircut value
repurchase agreements are almost always over-collateralized the borrower undervalues the collateral by a percentage (haircut) - this is a buffer against price volatility the purchase and repurchase price are computed over the post-haircut value
Basel framework treats "capital" as a funding source that can absorb losses, rather than an owned asset assets are funded by liabilities and equity, so assets are not a funding source Tier 1 capital is the first-line of losses absorption for a bank so gold can't be in "Tier"
🚨🏦 claims that gold is a Tier 1 asset under Basel III are FALSE: 1. gold is NOT a Tier capital under Basel - it’s on the liability, not asset side 2. gold had 0% risk weight since Basel I (no haircut) 3. gold is still NOT considered a high quality liquid asset (HQLA)
🏦 under Basel III gold is subject additional funding requirements there’s a 85% required stable funding (RSF) factor on gold under net stable funding ratio (NSFR) so for every $1B of gold that a bank holds - $850M must be funded with longer term retail or wholesale funding
🚨🏦 claims that gold is a Tier 1 asset under Basel III are FALSE: 1. gold is NOT a Tier capital under Basel - it’s on the liability, not asset side 2. gold had 0% risk weight since Basel I (no haircut) 3. gold is still NOT considered a high quality liquid asset (HQLA)
🚨🏦 claims that gold is a Tier 1 asset under Basel III are FALSE: 1. gold is NOT a Tier capital under Basel - it’s on the liability, not asset side 2. gold had 0% risk weight since Basel I (no haircut) 3. gold is still NOT considered a high quality liquid asset (HQLA)
volatility is at best - a part of a the risk an increase in volatility doesn’t necessarily mean an increase in risk e.g.: shortages in global liquidity put mismatched liabilities at a loss. safe assets raise in price the high risk already existed while there was low volatility
pre-market tesla is already down to a weekly support back from July 2023 the narrative that equities price is mainly linked with EBIDTA or other revenue/profit metrics is false it’s all about where the credit flows
check the correlation between FED swap line volumes and Bitcoin price large spikes in swap volume trigger an uptrend in Bitcoin understanding these global liquidity flows helps to visualize them as a part of the larger system and understand where it’s likely to move next
new currency in circulation is just one of the side-effects and that transition is neither direct, nor instant before these funds effectively become new currency, they flow into financial markets - that’s why you see the stock market going up first the same for risky assets
new currency in circulation is just one of the side-effects and that transition is neither direct, nor instant before these funds effectively become new currency, they flow into financial markets - that’s why you see the stock market going up first the same for risky assets
FED swap line operations reach ≈$600 bn while the swaps are closed/repaid in less than a year, ≈80% of the repayment comes from newly issued wholesale debt thus, ≈80% of the swap volume eventually becomes new currency in circulation and then you wonder about inflation 😄
FED swap line operations reach ≈$600 bn while the swaps are closed/repaid in less than a year, ≈80% of the repayment comes from newly issued wholesale debt thus, ≈80% of the swap volume eventually becomes new currency in circulation and then you wonder about inflation 😄
💧FED swap lines = infinite liquidity pool 👉 here’s how: 1️⃣ central banks exchange their foreign currency for USD, 7-80 days later, they reverse the exchange at the same rate + fee 2️⃣ central banks then lend these new USD to commercial banks thus, USD demand is met
💧FED swap lines = infinite liquidity pool 👉 here’s how: 1️⃣ central banks exchange their foreign currency for USD, 7-80 days later, they reverse the exchange at the same rate + fee 2️⃣ central banks then lend these new USD to commercial banks thus, USD demand is met
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central bank balance sheets are an underrated resource for understanding the global liquidity moves if you’re following my posts - you already know that rising US bond yields, ruble & gold falling USD i’ve been warning about it for months 90's style data = massive alpha 😂⬇️
central banks will continue to buy gold you’ll be able to confirm that in their upcoming balance sheets reports. pay special attention to China & Russia enjoy the dip, because smart money is!
beware that a lot of accounts with massive leverage trades are paid advertisements wether it’s by the exchange or larger parts of the industry. don’t forget that smart money needs a counterparty 😉 a lot of them, specially the larger are definitely hedging behind the scenes
expected? yes ✅ normal? no ❌ gold shouldn’t be up 50% in a year and you shouldn’t ignore what that means i wrote this back in 2013. as the current highs are consolidated - it will move up further maybe when you’re reading this the above has already played out 😄
If you only understood how cheap $GOLD is now. To put it in perspective, its current FIAT price only reflects inflation prior to 2011 🤯 Any direct or indirect inflation following that time period has not yet been accounted for You don’t have to trust me. Trust the price action
central banks will continue to buy gold you’ll be able to confirm that in their upcoming balance sheets reports. pay special attention to China & Russia enjoy the dip, because smart money is!