Italexit and European Union Existential Fears are Shifting Perceptions and the New Altcoin Discussion
Italexit possibilities that have cooled in the short term, dissension within the European Union as a whole, European Union hostilities with the United States, the potential formation of a European Union defense force (preparing for war?), and interest rate hokey-pokey from the European Central Bank (ECB) make for a tinder box. While the Euro has bounced off fears that Spain and Italy have unstable governance, the currency and the overall European Union still face fundamental issues. How has the market responded? It is changing the Altcoin Discussion as there is an interesting behavior in pricing of Altcoins relative to the Euro and each other during the past two weeks.
Here’s a brief and cursory explanation of what is going on currently with the European Union and Italy for those who have been on Mars for the past decade, in a cave with their eyes shut, and with fingers in their ears.
Italian Government Bonds tell the story of the Threat of Italexit
The run-up on Italian Government Bonds was due in large part to the uncertainty surrounding the Italian Government, the new Italian Government, and what are depicted as outlandish debt write-off proposals by the new power-brokers in Rome. The Eurosceptic Coalition in Rome faces challenges regarding massive debt, immigration disputes, and conflicts with the European Union’s powerful bureaucratic leaders. Summarizing the complexity of remaining and leaving for Italy for the sake of brevity does not do the matter justice.
Then there’s always Mario Draghi, the President of the European Central Bank, being accused of playing politics with bond purchases.
With the ECB seemingly propping up the irresponsible Italian debt load, they are exercising their might in the way that European Union Budget Commissioner Gunther Oettinger threatened. They are not purchasing Italian bonds like they did in the past and they have purchased German Bonds (bund) instead. The ECB with jawboning about tightening and the cessation of Quantitative Easing is perceived as trying to make Italy blink. Of course, this could result in substantial damage to the economies of Europe as a whole. The European Union has a great deal of debtor nations and suddenly removing the punch bowl of easy money is going to have negative consequences. After all, the Great Recession has not ended in all parts of Europe. In essence, this is a big game of chicken between a sovereign nation and supranational Central Bank may put a fragile continental economy in the balance.
Enter the New Altcoin Discussion that has created an interesting dynamic lately
Altcoins during May and the beginning of June 2018 have been behaving very differently. It all aligns very well with the issues going on with the European Union as far as timing, but the following charts illustrate the peculiar way the market is reacting to the current environment.
Ethereum has surged against the U.S. Dollar, but this is a higher volatility currency pair. Where it gets more interesting is when this sort of a thing occurs. The rise of Ethereum against the U.S. Dollar matches the rise against the Euro.
Ethereum and Bitcoin have been acting in tandem lately just like the way the Euro and U.S. Dollar are behaving. They are not alone in this somewhat unusual altcoin discussion. Ripple has been moving similarly against Bitcoin for a longer period of time.
Litecoin is not following the act of mimicking EURUSD with Bitcoin.
There’s a bit of a tandeming going on in this new Euro uncertainty world. “Lesser” alternatives in the commodity and currency markets are all being traded similarly against the dominant instrument in their respective realms, but is this a long term trend?
It certainly excites altcoin investors and users to see that their currencies are in the short term copying the way precious metals (Gold and Silver) and the dominant sovereign currencies are behaving. It’s a bit of a validation for this new wave of privatized currency and the more they behave like more established sovereign currencies and commodities, the more likely they are going to last.
Italexit could result in cryptocurrencies outlasting the Euro. A dive in the Euro below parity with the U.S. Dollar could result in the old currencies of the European Union resurrecting. With uncertainty concerning the individual sovereign nations of the European Union and the health of the Union, it would propel altcoins. The altcoin discussion would then shift from faddish, volatile alternative that is risky and relatively underground to a viable mainstream replacement that results in sovereign nations not needing to create their own currencies after all if they choose to leave the EU. It could even be a situation where exiting countries copy Venezuela and create their own blockchain sovereign currency.
The possibilities are out there and recent activity may all be a reaction to European affairs rather than the United States or Asia. Italexit and EU woes are showing connections to the cryptocurrency markets based on technical behavior.