Business

Authored by Charles Hugh Smith via OfTwoMinds blog,

What if bitcoin is a reflection of trust in the future value of fiat currencies?

After last week's payrolls report, the year is starting to wind down for economic events and capital markets, but not before one last hurrah for central banks: indeed, it is a very busy week dominated by central bank meetings for the FOMC, ECB, BOE, SNB and Norges Bank. We will also observe the controversial Alabama Senate elections and the EU Council summit on the state of Brexit negotiations. Data-wise, the most important economic update will be Wednesday's US CPI print, as well as industrial production releases in a number of countries including the US and China.

In the aftermath of the Great Financial Crisis, Central Banks began cornering the sovereign bond market via Zero or even Negative interest rates and Quantitative Easing (QE) programs.

The goal here was to reflate the financial system by pushing the “risk free rate” to extraordinary lows. By doing this, Central Bankers were hoping to:

1)   Backstop the financial system (sovereign bonds are the bedrock for all risk).

Despite broadly-spewed sentiment last week that Bitcoin futures would herald the end of Bitcoin as 'shorts' could finally capitalize on the 'tulipmania', for now, they have failed to turn up as the January-expiring futures are holding a 8% premium to spot prices and remain up around 19% from their opening print overnight.

Futures are holding around a $1000-$1300 premium to spot for the last few hours - implying quite a serious 'term structure' for Bitcoin credit.

U.S. equity index futures pointed to early gains and fresh record highs, following Asian markets higher, as European shares were mixed and oil was little changed, although it is unclear if anyone noticed with bitcoin stealing the spotlight, after futures of the cryptocurrency began trading on Cboe Global Markets.