How does Bitcoin face the possible economic crisis?

Anyone who knows cryptocurrency knows that the environment in which Bitcoin was born was in the global financial crisis triggered by the US subprime mortgage crisis in 2008. Therefore, Bitcoin has been regarded by many people as the savior of the economic crisis, and 2008 has passed. Thirteen years later, it just happened that the recent remarks about the economic crisis caused by the bankruptcy of a Chinese real estate company were rampant, and the crypto market has been falling like the traditional market. After more than a decade, things seem to have not developed as much as everyone had imagined. What is the problem?

Born in the economic crisis, but shouldering the mission of saving the economy

When Satoshi Nakamoto released the Bitcoin white paper, not many people realized that this disruptive achievement could develop so much now. In the past ten years or so, Bitcoin has been regarded more as a subversion of the existing legal currency system and the savior of the economic crisis. It seems that as long as you buy Bitcoin, you don’t have to fear the coming of the economic crisis. This view is very important. There has been a large market for a long time.

In addition to the early idealists’ belief, there has also been a certain market for this view in recent years. For example, in the period from 18 to 19 years, the world structure has also undergone great changes. Whenever there is a country’s legal currency collapse or partial When a war broke out, Bitcoin and other cryptocurrencies experienced a sharp rise in the short term. This performance also confirmed that Bitcoin plays a key role as an additional “insurance” for the existing economic system. When people are facing turbulence, Fiat currencies often fail temporarily, or when people don’t trust fiat currencies, the demand for bitcoin will increase significantly. During this time period, bitcoin is regarded as the “savior” of saving the economy and the last guarantee of people’s lives. .

From “subversion” to “assimilation”

However, things often have a certain turning point. This turning point is the new crown epidemic. The advent of the new crown epidemic has caused many countries’ economies to shut down, and traditional markets such as stock markets also face systemic risks. Therefore, there has been a sharp decline. The currency is also the same as the traditional market, and the mud and sand are all down, and there is a 312 market.

After the 312 market, countries began to release water, and Bitcoin, like the US stock market, continued to rise and set new highs. This is also the basic status of the current bull market in 2020-201.

So now, if local turbulence in a certain country is directly related to Bitcoin? It may not be necessary. During the turmoil in Afghanistan some time ago, the price of Bitcoin did not change significantly. Even though many people promoted the importance of Bitcoin at this time, it is clear that it did not play a big role. In other words, at present Bitcoin has gradually deviated from the image of a traditional financial “disruptor” and has stood in an echelon like traditional finance. For example, during the Mid-Autumn Festival, the news about the bankruptcy of Chinese real estate companies once caused the global stock market to plummet, and Bitcoin also fell for the first time.

Bitcoin now has a tendency to be assimilated gradually.

Why Bitcoin will be “gradually assimilated”

In fact, the reason for this phenomenon is also very obvious. This is that Bitcoin has been valued by a large number of traditional investment institutions. From the launch of Bitcoin futures on the US futures exchange in 2017 to the establishment of bakkt, in fact, Bitcoin has been widely used. Invested by institutions such as Wall Street. In the United States, Bitcoin has become an asset class that is close to well-known. Investing in Bitcoin is also a fashionable performance, such as Grayscale , Musk , Mu Jie and so on.

After the wallstreetbets incident at the beginning of this year, not only a large number of young retail investors, but also a large number of institutions including Rothschild and other families invested in the cryptocurrency industry directly or indirectly, that is, the traditional financial circle has gradually met to accept Bitcoin as asset allocation. For one thing, although there are still some people who believe that Bitcoin is rat poison like Buffett, the “increased service” is still a very realistic manifestation.

In this case, Bitcoin’s situation is more subtle. For example, when a large institution is betting on a real estate junk bond and also allocates a “small amount” of bitcoin, then once the institution defaults on the real estate bond, When it comes to liquidation, then you can only sell Bitcoin “incidentally”. Although Bitcoin may have a good rise at this time, it is also forced to be helpless.

When this phenomenon occurs in an institution, many people may not care, but when more and more institutions do this, Bitcoin is the same as the traditional market, with the same ups and downs.

The other is that the transaction time unique to the traditional market is fixed, and Bitcoin can be traded at all times throughout the year. It can be said to be one of the assets with relatively good liquidity. When there is a temporary problem in the market, the investment institution will be the first time In order to raise money, Bitcoin may be chosen for sale, especially when other markets have not yet opened. Therefore, Bitcoin is actually a barometer of economic risk feedback in the first place.

Can investing in Bitcoin now avoid financial risks?

When there is a risk in the market, since all targets have fallen, and Bitcoin will fall for the first time because of its relatively good liquidity, many people may consider whether Bitcoin can still help us avoid financial risk.

In fact, Bitcoin as an “insurance”, its characteristics have not disappeared at present, and it will be difficult to disappear in the future. Bitcoin still has the function of avoiding financial risks, but this phenomenon may occur after the release of financial risks.

For example, in the event of a financial crisis or an economic crisis, most of the asset prices will be sold indiscriminately as investors panic. Therefore, during this period of time, Bitcoin and other assets may not show much difference. Because this period is an irrational time, a large number of liquidations and bankruptcies will cause Bitcoin to be “passively” sold in the market, so it is obvious that the price of the currency will fall.

Then after the irrational time has passed, the financial order will begin to be re-established. At this time, there are generally two methods. The first is that the government intervenes to rescue the market, so a large-scale money printing plan is put on the agenda, and the second is to smoothly. Naturally, let the bankruptcy of the bankruptcy, the bankruptcy of the bankruptcy, wait until the social debt or leverage is reduced to a safe level, and the economy will gradually rise. Of course, this process may take a long time, so the resistance is also relatively large.

If it is government intervention and large-scale printing of money, then it is clear that Bitcoin is a deflationary asset. At this time, the price of the currency will naturally rise, and at the same time it will have an effect similar to gold. Therefore, Bitcoin is called digital gold, which is actually It refers to the scarcity that is maintained in the face of large-scale inflation, and the price of Bitcoin will naturally rise further, which is called the first start-up capital for venture investors under the new economic cycle.

If the government let the flow go and survive the economic crisis through corporate bankruptcy and debt liquidation, then at this time, Bitcoin may first be used by the poor for basic survival needs, although the price may be lower, but relative to As for assets such as stocks and bonds, there is still a certain degree of value preservation. Therefore, Bitcoin will not disappear immediately, but will gradually rise as the economy gradually picks up. For example, when the regime changes, such as Afghanistan and other countries, Bitcoin Coins will become life-saving assets. Once society develops again, Bitcoin will naturally bear the brunt and become one of the best assets, but this period of time may be relatively slow, because the impact on society is also very tragic. We assume that when Bitcoin appeared in the Great Depression in 1929, it was possible to restore the value that Bitcoin might have been in under the social conditions at that time.

Of course, there is another point of view. Bitcoin needs to consume a lot of energy when mining. This is beneficial to the society in economic crisis. The economy itself has a relatively virtuous cycle. The surplus electricity is also due to mining. With the so-called consumption method, unlike the current overproduction and increased internal consumption, the continuous increase in computing power and the increase in the difficulty of mining coins will also make people tend to consume excess electricity, and finally enable the economy to quickly return to normal from decline. .


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