DAA Manager Insights: Global Macro Crypto

Sep 21, 2018 · 5 min read

Mihail Semertzidis of Global Macro Crypto believes crypto will transform the world of finance as we know it. In this interview, he discusses the war between crypto and traditional banking, the coming influx of retail and institutional investment in crypto, and the role of stablecoins in in the crypto-economy.

You have an extensive background in the traditional banking sector, having worked as a treasury director at the Council of Europe Development Bank for 17 years, from 1996 to 2013. How do you see the current financial state of the world, and what has brought us here? Where do cryptocurrencies fit in in all this?


We are 10 years after the subprime crisis, Lehman’s bankruptcy, and the subsequent creation of Bitcoin. The global markets “stabilized” thanks to a massive injection of new “printed” money, with massive new debt with low interest rates worldwide. Obviously, that created massive inflation, and that’s why stocks, commodities, and real estate are expensive again in USD terms, but USD is worth less now. In other words, 10 years later we have a lot more USD, and at the same time, the different asset classes are worth more or less the same as they were 10 years ago in nominal USD terms. But there is a lot more USD than there was 10 years ago, and it is less distributed than before.

Crypto war

The biggest part of the financial establishment is in a war with the crypto community. Why? A bank takes commissions for every operation, from the simplest money transfer to more complicated ones. If you can do most of those operations without banks, obviously the banks will lose money. Also, if you don’t keep your money in banks, they can’t use it for a lot of different profitable operations.

So banks, at least at the beginning, are afraid of the entire cryptocurrency system. Some banks will adopt it, integrate it, and survive; the others will simply become smaller and smaller until they are finally bought or they die.

Flight to crypto

Last month, Fundstrat’s Tom Lee published an analysis with a hypothesis that bitcoin correlates with emerging markets because hedge funds sell off risks, which consequently reduces their stake in bitcoin positions. I almost agree with Tom Lee that this is happening now.

I would add that stocks markets in general, and especially the US stock market (the engine of the world stock market), are at their highest in the current economic cycle. A contagion in emerging markets or any other event could be the catalyst for the imminent big stock correction. I think that at this moment, retail investors and most institutional investors will realize the comparative advantages of the decentralized economy to the current centralized capitalist economy and will buy cryptocurrencies on a massive scale, especially bitcoin and ethereum, multiplying today’s cryptocurrency valuations by a factor of 10 to 100.

We are seeing more and more asset-backed tokens and stablecoins being introduced. What do you think about this?

Asset-backed tokens and stablecoins

Asset-backed tokens are very useful and quite popular because of the ability to trade traditional assets in a decentralized economic system (e.g. trading USD, stocks, or real estate using Ethereum or another blockchain system). Here I have to emphasize that it is not antithetical for a pro-crypto investor to want to trade those assets, as a lot of anti-crypto people say. It’s normal for a pro-crypto investor to desire to buy and sell USD or other fiat currencies because for the moment, USD is the standard currency of our traditional everyday economy. Even in a future where cryptocurrencies have more value than fiat currencies, we will still need asset-backed tokens as a bridge/gateway between the traditional economy and the crypto-economy.


First of all, the term “stablecoins” is a misnomer. Most of them are actually a one-to-one peg to USD, EUR, JPY, CNY, etc. and are backed either by one of these fiat currencies or by cryptocurrencies. So they are not stablecoins but are only as stable as specific fiat currencies. A better name would be pegcoins when they are pegged using collateral and an algorithmic mechanism (e.g. DAI of MakerDAO), or fiat-backed coins when they are backed by fiat deposits in a bank account (e.g. Tether).

Stablecoins are very useful for storing fiat in the blockchain so investors can avoid the credit risk of a bank, transfer fiat with almost no fees, or be ready to exchange them very quickly on a weekday night or on the weekend, something that is impossible with traditional (centralized) banks.

Someone should create a more economically decentralized stablecoin: a basket of fiat currencies inspired by the IMF XDR . Currently the composition of the IMF’s XDR, rounded to zero decimal points, is 42% USD, 31% EUR, 8% CNY, 8% JPY, and 11% GBP.

Such a stablecoin should be more stable than a USD or EUR peg compared to a benchmark because it will be the “average” of the most important fiat currencies in the world.

This reminds me of the fiat wars and the narratives of those wars (USD rises; oh no, EUR is down; in the end, they are obviously the same). In the same context, in July, European Central Bank President Mario Draghi said that “one euro today is a euro tomorrow; its value is stable.” But he forgot to say that we have a lot more euros and a lot more USD today than we did 10 years before, as I mentioned at the beginning. He also forgot to say that the Greek euro is not fungible with other European euros, as the Greeks can use only a small fraction of their euros due to capital controls and bank restrictions. So a Greek euro is not a euro! I will not even enter into the question of whether the Greeks deserve that. I just emphasize that today a Greek euro is not a euro. Unbelievable but true.

So the question is: which currency is the benchmark, the reference? And which one should be the reference? It depends on mass adoption. And how could the people fail to realize in the end that decentralized cryptocurrencies are by design better than fiat because of smaller inflation and the impossibility of government intervention?


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