Crypto Beans #16 The importance of Dollar and Implications on Trade

Hey there everyone! 👋 This is Shivam. I bring to you the 16th weekly edition of Crypto Beans. This is an effort through which I try to share my thoughts on the crypto space and help you stay updated. Your 0 to 1 guide in crypto.

Read time - 4 mins

In this edition, the article I explore is titled "The Importance of Dollar and Implications on Trade" Hope you enjoy it.

State of Crypto affairs - A quick look at the market 

The global cryptocurrency market cap today: $1.22 Trillion

Weekly change: 0.23% | Yearly change: -41.26% 

Bitcoin (BTC) is the largest cryptocurrency with a market cap of $540 Billion.

Weekly change: 0.52% | YTD change: 67.82%

Another important metric is Bitcoin dominance which can be used as a rough indicator of the relative strength of Bitcoin versus other cryptocurrencies. A high Bitcoin dominance means that Bitcoin has a large market share and is potentially more influential in the overall cryptocurrency market and vice-versa.

Bitcoin dominance: Current Year: 44.25% | Last year (April 2022): 42.02%

Greed and fear index 

The market sentiment has been turning, now the market seems to be getting more cautious with the news around layoffs and looming recession.

Note: The data used is based on metrics like Volatility, Surveys, Bitcoin Dominance, Social and Google Trends. Source: Coinstats

Is ETH ultrasound money? 

Let's have a look at Ethereum supply changes post its merge to a PoS blockchain from PoW, as there is a shift in the narrative for Ethereum to become a store of value due to the expected reduction in ETH emissions.

Supply change since merge POS -81,262 ETH

The graph highlights POS vs POW issuance since the merge. Impressive numbers, look super bullish for ETH long term given the supply of ETH is not growing as before

Spill the beans (Explain to me like a 5 year old) 

US Dollar: Why is it important?

US Dollar is the backbone of international barter system but why is dollar so important? Let's try to understand that using an analogy

1} Let’s go back in history

If you go back to the world picture, there's roughly 180 currencies, and they have, a barter problem

How does a country like Sri Lanka trade with Iceland? They don't trust each other's ledgers, necessarily, right?

Because either one of them can print all the currency they want and so historically the medium of exchange was gold. The problem is gold is it's not very quick

And so right now, what they do is they all kind of look at the United States and say, well, Iceland doesn't necessarily trust Sri Lanka and Sri Lanka doesn't necessarily trust Iceland but they both say

Well, we'll use dollars!

Because the United States is big, relatively stable, and so we can use dollars for that international solving of the barter problem

2} This takes us to the next piece about what makes Dollar valuable

Imagine the world countries to be an arcade, more of an entertainment park with games and sports. Now if their tokens (currencies) were not pegged to the dollar, they're just free floating, right?

Then what happens?

The quality of the entertainment park determines basically what those tokens are worth. If they have the best games and adventures and they don't change things very frequently. You're fine to hold those tokens for a period of time.

Whereas if that park is on the decline, if they printed a ton of extra tokens, nobody wants to hold the tokens. And so all these countries, there's like 180 currencies. They're basically local monopolies.

If you pick a very small, impoverished country, that currency is not going to be worth much. Whereas if you pick a country like the United States or Japan. That currency historically holds value reasonably well because it's a more stable system.

Since the US entertainment park is so valuable, and therefore the dollar is valuable

The US right now has the best entertainment park in the game, at least has for the last 80 years since Bretton Woods.

And people want to play, great games!

What's brewing today? Bringing fresh beans to you: 

Happy 48th Birthday, Satoshi Nakamoto: We don’t know who Satoshi is and we likely never will, but the pseudonymous founder does apparently have a birthday.

Binance.US unable to find bank partners in the United States: Report: The United States arm of global crypto exchange Binance has been facing challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country, according to a Wall Street Journal report on April 8

Whats meme-ing? Better make sure this is fun

And now the funny part,

What did you think of today's edition?  

Reach out to me on Twitter or Linkedin for any feedback :)

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.