what is happening?
ETH is becoming the bond of the digital age. While we anticipated this trend long ago, it was not until the recent merger of the Ethereum consensus mechanism that this ETH requirement was formally added to our cognitive framework.
Here are four signs that the era of ETH bonds is coming.
1. Distrust in the U.S. dollar reaches an all-time high
Distrust of the dollar has reached an all-time high. No matter how morally sound it may be, there is no turning back for the United States to remove the world’s 11th largest economy from the global dollar system. While Russia’s foreign assets were frozen, it exposed the weaknesses of other countries in using the dollar system (the United States can freeze dollar assets for political and other reasons).
Here’s a look at the exorbitant debt the Fed has:
This would lead to unusually high inflation rates not seen in decades.
In the latest interview, Jim Bianco believes that the U.S. Treasury bond market is bound to usher in a deep bear market.
“Nobody wants to be a holder of U.S. Treasuries,” he said.
It is not surprising that the Fed’s extremely high book debt combined with the rising inflation rate has caused the long-term and short-term yields of US Treasury bonds to invert. This indicator shows that investors have no desire to hold U.S. Treasuries for a long time.
People are looking for alternatives to U.S. Treasuries.
Ethereum is filling the U.S. Treasury market that has fled for lack of confidence, and it’s worth noting that this is a market with $14 trillion of space.
This has also made it very popular to compare the Ethereum staking market with the U.S. Treasury market.
While the Fed has an all-time high level of debt, Ethereum cannot hold debt. ETH is heading for deflation at a time when inflation threatens real returns for holders of U.S. Treasuries. Unlike the U.S. directly freezing the 11th largest economy in the world, Ethereum is neutral and trustworthy.
Change is happening; the $14 trillion US Treasury market is shrinking and the $0.5 trillion ETH staking market is on the rise.
2. ETH bonds offer higher real returns
But the value of USD is relatively stable, while the value of ETH fluctuates wildly! You can’t directly compare the US bond market to ETH staking! This is ridiculous!
First, the past decade has been “ridiculous”. In this decade, everyone is changing their understanding of the paradigm of the world in which they live, and investors who don’t embrace new ideas will struggle to succeed.
Second, the value of the US dollar is relatively stable, while the value of ETH fluctuates wildly. But you can compare the two markets and calculate the drawdown threshold in ETH (the same return for both).
The image above is from a new work by Arthur Hayes. This graph shows how much ETH should depreciate if both markets offer the same return.
For example: if ETH’s pledge rate yield is 8%, assuming that ETH falls by 32.6%, the rate of return that ETH can provide will not be lower than the 2.5% interest provided by the US 10-year Treasury bond.
Arthur Hayes believes that even if ETH fully realizes its value-added potential (the currency price rises to $10,000 or even higher), compared to the traditional US Treasury bond market, rational investors will still be enthusiastic to find more in the Ethereum pledge market. High return.
Yes, the price of ETH is not stable. But ETH’s staking yield is so high that price volatility is almost irrelevant.
If you’re fundamentally bullish on the future value of ETH, it’s easier to understand.
3. Traditional investors are gradually accepting ETH pledge
Traditional finance is waking up and accepting ETH staking.
1. “The idea that the future of finance will run on Ethereum is becoming clear” – One River Asset Management.
2. “Ethereum transitions to a global asset” Bloomberg.
My favorite quote from Marcel Kasumovich (who is also from One River):
“Ethereum is transforming into a low-risk cheap bond”.
Cryptocurrencies are generally not considered low-risk assets, and this is especially true for institutional investors. But they’re starting to realize it’s biased.
Ethereum volatility is relatively high, however:
- will not owe foreign debts.
- Circulation is controlled by the program.
- Globally accessible and permissionless; Ethereum will not exclude Russia from the dollar system like the US.
Plus, volatility goes both ways! Historically, in cryptocurrencies, the longer the holding period, the greater the positive gain from volatility:
4. The new risk-free rate
Wikipedia explains the “risk-free rate”:
The long-term yield on U.S. Treasury coupon bonds is generally considered to be the risk-free rate. Government bonds are generally considered relatively risk-free to holders in their home country because they have no risk of default.
But there is also the risk that the government will “print more money” to meet its obligations, which will result in a lower value of the repayment currency. For investors, the consequences of loss of value need to be measured by themselves, so strictly speaking, default risk does not include all risks.
In the past, the dollar has been slowly depreciating. Because the rate of depreciation is slow, everyone has ignored it for a long time.
But now the dollar depreciation problem can not be ignored.
As Bridgewater’s Ray Dalio puts it, we’re in a period of excess sovereign debt, excess currency, and disparity between rich and poor.
When a lot of money printing becomes a deterministic event, is the “risk-free rate” really that risk-free? Of course, we can still stick to the so-called risk-free rate. But this is only because the government has the money printing machine, so the default of the government’s sovereign currency is basically impossible.
However, a negative real risk-free interest rate will inevitably lead to losses. Is the risk-free interest rate really “risk-free”?
The Fed’s finances don’t look too good. This has the potential to spur changes in the benchmarks against which risk is measured.
Will ETH be the new risk-free rate?
- Ethereum can issue tokens at any time, but cannot hold any debt.
- ETH’s “money printing” is governed by an algorithm designed to best serve the Ethereum community, not the social elite.
- ETH staking is globally accessible and does not require permission from a centralized authority; no one can stop the earning.
The world is poised for more radical change in the third decade after the millennium, and we will give new meaning to the term “risk-free rate”.
ETH is the new internet bond.
Get ready for a new trust paradigm built for the digital age.
Get ready to stake your ETH.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bankless-four-signs-heralding-ethereums-bond-era-is-coming/
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