How The Fed’s Liquidity Crisis May Benefit Bitcoin Enhanced


Simon Paige
Sep 18, 2019 · 3 min read

Yesterday the New York Fed conducted its first repo in a decade. In the words of Tyler Durden the result was:

“in addition to $1.3 trillion in ‘excess reserves’, a Fed which is now cutting rates and will cut rates by 25bps tomorrow, the US financial system somehow found itself with a liquidity shortfall of $53 billion that almost paralyzed the interbank funding market.”

When the temporary liquidity injections provided by the repo process prove not enough, the keep system afloat the Fed will have no option but to resume Quantitative Easing, i.e. the massive expansion of money into the system.

The irony of this situation is that as the Fed’s monetary expansion fails to keep the US economy out of recession and worse, it may flush assets like Bitcoin Enhanced with liquidity as investors seek a safe haven from the fiat system.

Bitcoin Enhanced is a digital token running a long/short Bitcoin strategy. Investors buy tokens to participate in the returns of the strategy. Two attributes make the asset worthy of attention.

First is performance. Eighteen months ago in February 2018 Bitcoin was at the same price as it is today. Any HODLER of Bitcoin would have taken a nail-biting roller-coaster ride in volatility only to arrive where they started. On the other hand, participating in the strategy would have returned 128% over the same period. That is 76% per annum. Even by digital standards that is an impressive track record. To date, Bitcoin Enhanced appears to be the only product that enables investors to take advantage of Bitcoin’s most notorious characteristic.

19 Month Performance of Bitcoin Enhanced Compared to Bitcoin

Second is separation from the fiat system. We have heard enough about the fragility of the fiat system from experts such as Ray Dalio, Donald Amstad and “Bond King” Jeffrey Gundlach to start looking for safe havens away from fiat Armageddon when it comes.

Bitcoin Enhanced is the first of a new asset class called Self-Managed Investments (SMIs). SMIs are specifically designed to be silos of value independent of the fiat system. They join a handful of other asset classes such as property, commodities and digital currencies that have this potentially portfolio-saving characteristic.

The irony then is that the Fed’s liquidity battle may fuel investment into assets that protect value outside the very system the Fed seeks to support. Yet for the investor, at least with Bitcoin Enhanced, there is a rub. Each of the project’s two tokens is capped at just 4 million. Like lifeboats on the Titanic that is not very many to go around. Rather than waiting for liquidity to appear, smart investors may be manning the lifeboats before the ship sinks.

The Capital

The Capital (former Altcoin Magazine) is a social financial news aggregator powered by Bitcoin

Simon Paige

Written by

People Creating Value

The Capital

The Capital (former Altcoin Magazine) is a social financial news aggregator powered by Bitcoin

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