You say quoi que, I say Ethereum
Jack Cranston
Sovereign X

You say quoi que, I say Ethereum

Key Points

  • Ethereum is a blockchain platform with its own cryptocurrency, Ether. It acts as a decentralized public ledger for verifying and recording transactions.
  • The “world’s programmable blockchain” enables developers to build and publish smart contracts and distributed applications without the risks of downtime, fraud, or third-party interference.
  • Sovereign X believes that Ethereum will be one of the main financial settlement layers of the world, and its price will reflect this reality.

Jack Cranston, writing from New York

As nations squabble over what currency will be used to trade oil, and high school kids open up Coinbase or Robinhood accounts to try and triple their allowance—I sit here with a sick feeling that the world is missing the point when it comes to crypto.

The future is Ethereum (ETH). Simply put, Ethereum is not just a currency (Ether). It is a currency and the future platform to trade ALL commodities and securities. Let’s use gold to illustrate the point.

The problem with investing in gold is that every gold bar out there probably has 100 owners. It’s a well-documented fact that the value of gold and silver is distorted.

So, if the Ethereum platform could be used to create a token that would verify the existence of a physical gold deposit, that token could eliminate the problem of knowing whether or not the physical commodity you own or have a loan against is actually there.

Any such token would become so powerful, that the token would immediately replace any futures contract or ETF for a commodity such as gold.

I could only surmise that the existence of such a vehicle would encourage the Chinese to embrace crypto and possibly send gold to some exorbitant dollar amount per ounce—or, better yet, some exorbitant dollar ETH amount per ounce. Fill in any number you like.

Verification is priceless. Even the people who DO understand that Ethereum can create tokens that can verify the existence of physical commodities or securities, don’t understand what I would call the “equity or ownership” component of Ethereum.

Consider conventional wisdom. People understand that you can exchange one currency for another (i.e., buy Bitcoin with U.S. Dollars) and make money off the exchange rate movements. People also understand that you can buy shares of a company like Tesla and make money as the value of the company’s earnings rises. People also understand buying a sector ETF like XLF. XLF gives you exposure to a group of banking stocks. So, if there is a positive fundamental environment for banks, XLF will go up…and XLF may lead to a broader index like SPY higher as well.

Ethereum represents an entirely different concept of ownership. It’s like buying equity in a financial system as a whole. What does that mean?

Well, it would be not unlike buying stock in the Federal Reserve. Since the Federal Reserve can literally create (or print) money, can you imagine the value of a stock in an entity that has the ability to create or print the earnings and dividends?

ETH gives you equity in a money and securities creation process. In Biblical terms, it would be the equivalent of buying a plot of land in the Garden of Eden. You could own a piece of “creation.” In this case, it would be the creation of a new financial universe.

Sound dramatic?

Ethereum can create trading vehicles that verify the existence and price of commodities or securities. Those tokens—in theory—would then replace futures and countless other trading vehicles. Ethereum’s DNA could spread so that every security traded might have a price in fiat and a price in crypto. For you macro folks, think of this. Instead of a petro-Dollar, ETH could create the petro-crypto.

You may laugh at this notion but, right now, “the people” are speaking Bitcoin. The world changes when people start thinking of an ETH-driven world.

I recently saw the exchange between Ethereum founder, Vitalik Buterin, and a television personality, with Buterin acknowledging (under clear duress) that the cryptocurrency market was a bubble. And that’s okay. As he made clear, bubbles encourage innovation. (Remember the high-flying e-commerce models during the dot-com bubbles at the turn of the century. Most said, “No way, no how will folks buy stuff over the Internet on a regular basis. Nope, won’t happen.”)

So, Buterin’s right about the innovation part but completely wrong about ETH being a bubble (remember, he’s a computer nerd not unlike code writers during the dot-com boom).

In my view, ETH could be the most absurdly undervalued financial instrument in human history. ETH’s fundamental value can’t be calculated because it is a vehicle that can be broadly used to restore integrity to the world’s financial system. This view stands in stark contrast to the average moronic assertion that price action in cryptocurrencies is the sequel to the tulip or dot-com bubble.

Honestly, I won’t be surprised to wake up one morning and find out Warren Buffet is sitting on a huge position in ETH and related crypto tokens.

Jack Cranston is a partner of Sovereign X and resides in San Miguel de Allende.


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