The ‘R’ And ‘C’ Words Enter The Vocabulary Of Bitcoin Enthusiasts

Rehypothecation. Commingling. These two words are entering the vocabulary of bitcoin enthusiasts. Soon, they will roll off tongues as freely as the term “fiat currency” does today, thanks to the entry of Wall Street incumbents into bitcoin, because rehypothecation and commingling are pervasive Wall Street practices that enable the financial system to create more claims to an underlying asset than there are underlying assets. This can offset bitcoin’s algorithmically-enforced scarcity and, all else equal, suppress its price.

Rehypothecation and commingling are “inside baseball” terms about collateral—used and applied by a narrow group of people working in far-flung corners of Wall Street’s collateral- and credit risk management departments. But, owing to the entry of ICE (parent of the NYSE) into…