(Aug 13, 2021)

July’s Price Action 

It would appear that the crypto bull market has returned and the interim pull back is probably over. During July, BTC had a third trip below $29,000 and for a time threatened to go lower whilst at the same time BTC was withdrawn from exchanges. We believe that a multi month rally is now under way with far higher prices for BTC and alt coins is most probable. We also believe that the Bitcoin Dominance Index will head eventually below 10% within 6 months. Therefore, SCF has gained a minority exposure to some good quality alt coins beyond ETH and XRP.  

Fiat’s 50th Birthday. 

On 15th August 1971, President Nixon ended the convertability of the USD into gold in order to prevent the run on the US gold reserves from foreign governments, most notably De Gaulle’s France. This effectively ended the Bretton Woods agreement in which the other major currencies were linked to gold via the Dollar. The effect on society over the next 50 years was profoundly damaging: The USA’s Federal Debt to GDP ratio rose from 38% to 128% whilst its Gini Coefficient rose 25% from 0.39 to 0.49. The UK average wage to average house price ratio more than doubled from 4 to 8.5 whilst houses became smaller, damaging family formation. We believe that access to Bitcoin’s store of value function will play an important role in reversing these issues in the coming years.   

Ethereum’s London Fork. 

Ethereum’s long awaited London Fork (EIP 1559) upgrade went by smoothly on August 5th and is another stepping stone from proof of work to proof of stake for the network. Significantly, ETH is now burned with each transaction (in a similar manner to XRP) and it would appear that Ethereum could become a deflationary currency in the future. (It is fascinating to observe how almost all cryptocurrency projects comply to the free market’s demand of either a fixed monetary or a negative supply model.) Furthermore, DeFi protocols continue to build on the network and add to the demand for ETH. The price of ETH has increased significantly and makes up the largest proportion of SCF’s allocation.