One of the reasons why I am so optimistic about the Hive Backed Dollar (HBD) is because of the present need in the global economy. This is something that cryptocurrency is going to have to address and HBD has a chance to be a player in this arena.
Many feel the US Dollar is going to collapse. The challenge with this view is that something has to replace it. Bitcoin Maxis, of course, believe it will be that currency that steps in. As we covered in the past, there are a lot of challenges with this point of view.
Personally, it seems that, of all the cryptocurrencies, stablecoins could be offering a solution in the long run. This could be what steps in to facilitate the transaction we need to conduct. It is, however, a mammoth task. That said, as we will see, the opportunity is enormous.
So let us what what is required.
Global Trade
People have a tendency to look at monetary components in a vacuum. The reality is the global economy is a complex system that has many interwoven parts. Money does not operate on its own nor is it able to be isolated as a factor of what is taken place. It always works in the larger context of what is happening.
When it comes to this topic, one of the major areas is global trade. Here is something we can focus upon since we know enough money is required to facilitate it. If that is not the case, things will have to contract.
Ultimately the role of money is to facilitate business. This is due to the fact that business is what generates wealth. Money is only a tool to get there.
At present, the global economy is comprised of tens of trillions of dollars in trade. If one wants to replace the reserve currency, the amount we are talking is off the charts. We also must account for the fact the amount of money has to exceed the totals in trade. While we can incorporate things such as the velocity of money, the reality is most of time time, the largest percentage of the money supply is stagnant. This means we have to have an order of magnitude higher in currency for every ten trillion dollars in trade we are looking at.
The USD is able to serve this purpose to some degree. Sadly, we are at a point where, since the Great Financial Crisis, we are seeing a shortage in USD available. Due to breakdowns in the Eurodollar System, we are left with a contraction in balance sheets. This is even causes Triffin's Dilemma to become a problem for the Fed.
Stablecoins
Stablecoins offer the potential to augment the USD. While there are many who feel this is going away, the reality is the dollar is no longer a currency. There is no currency involved in the majority of global transactions. Look at the Repo market. This does $4T-$5T per day and there are no dollars involved.
Instead, the USD can be looked at as a unit of measure. It is no different than a meter or ounce. It is a way we measure things.
From this perspective, stablecoins could offer a massive solution. Since most are pegging themselves to the USD, we see how it is maintaining the measuring stick everyone is familiar with.
Unfortunately, due to the present approach of asset backed securities, most stablecoins will not alleviate the problem.
The largest stablecoins, by market cap, are Tether and USDC. Both of these claim to be backed by either cash USD or US Treasuries. Either way, they are not expanding the money supply. Instead, they are simply using money transformation. The currency is moving from 1 USD to one USDC.
As we can see, this is only going to lead to the same problems in the future. While stablecoins of this nature do hold potential, while also offering enhanced utility, the impact could be limited.
Another issue is, when looking at stablecoins, even the top ones deal in billions. Global trade is in trillions.
In other words, we need a lot more stablecoins.
Hive Backed Dollar Powering Economic Productivity
Could the Hive Backed Dollar be a part of the solution?
The answer is most definitely. In fact, this could be a bigger component than most people are realizing. The tendency is to look at Hive and believe nothing associated with that blockchain is going be successful in any meaningful way. To me, this is a mistake.
HBD is an algorithmic stablecoin. This is very important because it does offer the solution that is required. Of course, we have the hatred of the politicians and regulatory agencies but that is a side issue. The reality is we need these to expand greatly to provide the tools required to facility global trade.
Anyone who knows Hive realized that HBD is backed by $1 worth of HIVE. Thus we see how HBD utilizes the USD unit of account (measurement) yet is not backed by the dollars. It is tied to a completely different asset.
Hence the supply of HBD can growth without relying upon the US dollar. In fact, as that occurs, it actually enhances the money supply.
Under this circumstance, the USD is not transformed but, rather, augmented.
This is nothing knew. The Eurodollar system is estimated to fund 90% of international trade. This is the true global funding mechanism. Unfortunately, collateral constraints meant almost 15 years of deflationary money.
Stablecoins like HBD can step in to fill in the void that is being left. It is also a mammoth task.
The Repo market is trillions of dollar per day in funding. This number only encompasses what is known through the custodian and primary dealers. How much more is done on a bilateral basis is anyone's guess. Some estimates have that number over ten trillion (daily) alone.
In reality, we have no way of knowing.
Whatever total amount is, we are dealing with tens of trillions. This is the target for stablecoins. We are now dealing in tens of billions.
What this means is we are going to need a lot more stablecoins if the system is going to be funded in this manner.
That is what is required to power the global economy.