Episode #156 - Caitlin Long and the Lingering Questions Over Fed Crypto Policy
Oct 12, 2023
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Caitlin Long, Wall St. veteran and CEO of Custodia Bank, discusses the crackdown on digital assets, Bitcoin's evolution as a payment instrument, the need for a political revolution in the US, risks of undercapitalization in banks, geopolitics and the origin of wars, Bitcoin custody and the Fed's opposition, concerns of central bankers, tapering the biggest Ponzi, and political dynamics and the presidential election.
Bitcoin's stability and potential as an investment asset distinguish it from other markets.
The Federal Reserve's strategy of raising interest rates and tightening liquidity has implications for the banking sector.
Gold and silver markets are undergoing changes driven by centralization and a regional pricing model.
The global monetary system may experience transformations due to the current economic and geopolitical landscape.
Custodia has demonstrated resilience and emerged as a strong competitor in the cryptocurrency custody industry.
Deep dives
Bitcoin's Strength Amid Market Movements
Bitcoin's price remained relatively stable despite the movement in other markets, indicating its resilience and potential as an investment asset. While other markets experienced significant volatility, Bitcoin's lack of drastic movement suggests that the bulls and bears are not interested in pushing the price in either direction for now. This stability may be attributed to factors such as limited liquidity and the cautious approach of investors. Additionally, Bitcoin's unique infrastructure investment and regulatory environment differentiate it from other cryptocurrencies and contribute to its steady performance.
Federal Reserve's Strategy and Impact on Banking
The Federal Reserve's strategy of raising interest rates and tightening liquidity has significant implications for the banking sector. By raising rates, the Fed aims to address undercapitalization issues within banks and promote responsible lending practices. However, this strategy may put pressure on smaller banks and lead to consolidation through mergers and acquisitions. Furthermore, as liquidity conditions normalize, banks' balance sheets will need to adapt to ensure solvency. The Fed's approach demonstrates its focus on strengthening the banking system and addressing systemic risks.
Evolution of Gold and Silver Markets
Gold and silver markets are undergoing significant changes as central banks and institutions move towards a regional pricing model. This shift is driven by the desire to keep gold and silver within the domestic markets and control their flow across borders. The consolidation of gold custodian services, such as JP Morgan becoming the sole custodian of GLD and SLV, further suggests the emphasis on centralizing the control and distribution of these precious metals. As the markets evolve, physical settlement and direct purchase from producers may become more prevalent, altering the traditional futures contract model.
Potential Economic and Monetary Transformations
The current economic and geopolitical landscape is setting the stage for potential transformations in the global monetary system. As interest rates rise and yield curves normalize, the US dollar's strength and potential market adjustments are coming to the fore. The Fed's efforts to maintain control of the monetary system indicate the possibility of gold and Bitcoin playing a role in the future. However, political and fiscal reforms are necessary before any major shifts can occur. The upcoming US presidential election in 2024 is expected to be volatile, with Bitcoin's rally coinciding with the election cycle, contributing to the potential monetary transformations.
The Super Delegate Structure and RFK Jr.'s Independent Run
RFK Jr. announced his independent run for the presidency, which is significant considering the super delegate structure in the Democratic Party. While the super delegates hold significant voting power in the Democratic primary, Kennedy's decision to run independently suggests that winning the super delegates may be challenging. This move highlights the importance of ballot access and the need for a strong infrastructure to support an independent campaign.
Kennedy's Potential Alignments and Policy Stances
Kennedy's potential alignments with political parties such as the Libertarians or the Greens rely heavily on ballot access and policy similarities. While his policies on the environment and gun control may align more closely with the Greens, other factors, such as his ability to secure ballot access and his overall campaign strategy, may influence his final alignment.
Hopes and Worries for the Democratic Party
The Democratic Party hopes that Kennedy's independent run will follow a similar fate to John Anderson's campaign while also acknowledging the potential for it to resemble Ross Perot's candidacy. Additionally, the party is mindful of the concerns of pro-crypto voters who voted for Biden but have been disappointed with the administration's stance on cryptocurrencies. This highlights the significance of the crypto voting block in the upcoming election.
Custodia's resilience in the face of regulatory challenges and market forces
Despite facing regulatory hurdles and market challenges, Custodia, a cryptocurrency custody provider, has demonstrated resilience and emerged as a strong competitor in the industry. Custodia's commitment to building a secure and innovative bank infrastructure has been recognized by industry experts and investors, positioning them as a leader in the space. The recent denial by the Federal Reserve to grant Custodia a master account did not deter their progress, as they have successfully navigated through the obstacles and continue to grow. Additionally, Custodia's patent for a US dollar stablecoin issued by a bank opens up exciting possibilities for the future of stablecoin integration with traditional banking systems.
The battle for control over Bitcoin and the significance of Bitcoin's liquidity
The podcast episode explores the ongoing struggle for control over Bitcoin by various financial institutions and regulatory bodies. It highlights how Bitcoin's unique qualities, like its limited liquidity and the majority of coins being held by long-term investors, make it challenging for traditional financial players to exert control over the cryptocurrency. The discussion also touches upon the potential political implications of Bitcoin's growing influence, with predictions that the left may make Bitcoin and the Federal Reserve a central issue in future elections. The episode concludes by emphasizing the importance of Custodia's approach to custody, which aligns with the ethos of Satoshi Nakamoto and ensures that users have control over their own keys and coins.
Wall St. veteran, Bitcoin advocate and CEO of Custodia Bank Caitlin Long returns to the podcast for another long talk about what's going on at the Fed, regulations regarding crypto legislation in the US and the state of changes occurring in the banking system that they most likely will not be able to avoid.
