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       #Post#: 81--------------------------------------------------
        Great Graphic: The Bitcoin Surprise and the Dollar
       By: fxvictory Date: October 6, 2014, 9:50 pm
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       A year ago the Bitcoin was the buzz. An analyst from a major
       bank urged central banks to buy some for reserve purposes,
       completely ignoring the fact that there were not Bitcoin bonds,
       the market lacked transparency and was far too small. Another
       analyst tried to calculate intrinsic value of Bitcoins and came
       up with something well north of prevailing prices.
       This Great Graphic was tweeted by Yahoo's Jeff Macke, and he got
       it from coindesk.com. It shows the large downtrend in the
       Bitcoin's value this year. In fact, the Bitcoin is making a new
       low for the year today (though the dollar is also somewhat
       softer on the day).
       Yes, there is still a Bitcoin eco-system, but it has lost the
       buzz. It seems more like a quaint niche artifact. Yes there some
       shops and electronic vendors who will accept it in lieu of
       payment, but it seems this is more a a marketing ploy than an
       secession from sovereign money. The payment system technology
       may have some merit and this may be its real legacy.
       At the end of September, the IMF published its latest reserve
       figures (COFER) for Q2. Global reserves rose $134 bln after
       adjusting for exchange rate movement. This is down from $166 bln
       in Q1 14. The euro's share of reserves slipped to 24.2% from
       25.0%. This was the sharpest drop in euro allocation since 2011.
       Speculators in the futures market had swung to a net short euro
       position in mid-May, arguably responding to the same fundamental
       considerations as the central banks.
       The US dollar's share rose to 60.7% from 60.3% of reserves. The
       Australian and Canadian dollar's share of reserves edged higher,
       as did the "other "category (which likely includes the Scandis,
       the New Zealand dollar, the Singapore dollar, Korean won and
       Danish krone). While many observers still talk about the
       diminished role for the dollar, we suspect the risk is in the
       opposite direction.
       The role of the dollar may be enhanced in the coming years as
       the main alternative, the euro, is again hobbled and
       depreciation a 2-3 year time frame looks more likely. What are
       central banks interested in : liquidity, safety and then
       returns. US yields may rise on a medium and long-term view, but
       this may be more than offset by currency appreciation. Although
       the long term demise of the dollar is the widely held view,
       medium and long-term investors should consider the opposite
       scenario.
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