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Being a nascent industry, cryptocurrency has never been amidst an economic recession. In fact the first cryptocurrency, Bitcoin was born as a result of the GFC back in 2008 by creator Satoshi Nakamoto who documented that his aim was to replace the monetary system ruled by central banks and was designated as a new kind of money. For the last 10 years, we’ve seen other cryptocurrencies rise up with many tumbling into non-existence. The ones that will survive are purposeful and able to be utilized in a growing ecosystem, not subject to speculation.
Although Bitcoin still takes the top spot in the total cryptocurrency market cap, it is now generally regarded as a store of value with Bitcoin investors predominantly opting to buy and hold their Bitcoin rather than spend it which is not what Nakamoto originally wanted. His vision was for Bitcoin to be used and transacted through a peer to peer financial network which would ultimately increase demand, velocity, and value.
The recession we face at present brought on by COVID-19 is predicted to be worse than that of 2008 and although on the surface it appears to be a very positive thing that many governments are handing out money to appease the public concerns and provide liquidity and placate the nervous markets, the Federal Reserve is having to resort to quantitative easing again, which is a type of printing money electronically in the form of Government Bonds and securities. This adds trillions of dollars to the balance sheet and causes the domestic currency to devalue. (higher inflation)
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Bitcoin, along with all worthy cryptocurrencies are inherently deflationary and defined by decentralization and a finite amount of coins that cannot be increased. Underpinned by Blockchain Technology means it does not need to be controlled by central banks or governments. Cryptocurrencies will benefit from an ever-increasing awareness that the monetary policy for fiat currency is solely in the hands of a small group of bankers able to control the cash flow at will.
So what does this mean for the cryptocurrency market? Research shows that people invest in the time of a recession and now for the first time they are able to invest in cryptocurrencies and companies that are driven by the blockchain. There are cryptocurrency projects that are thriving amidst this crisis regardless if the market is bullish or bearish.
The ramifications of COVID-19 are purported to eclipse the GFC in 2008 as well as the Great Depression. Below are various comments from Crypto industry pundits with their forecasts for the cryptocurrency domain as the world rides out the pandemic.
Jason Wu, CEO of DeFiner.org, a peer-to-peer network for digital savings, loans, and payments, believes that a recession will be the catalyst for the mass adoption of digital assets as well as decentralized finance or DeFi. Wu said that DeFi builds trust whereas the traditional financial system is based on human trust and company reputation,
“DeFi allows people to manage and own their assets without any intermediaries. The 2008 financial crisis taught people that financial intermediaries are not always trustworthy. The current financial system is associated with high-costs and lacks transparency. Thus, a future financial crisis could also be a factor in proving the worth of DeFi. Bitcoin was born from the last financial crisis and DeFi will thrive in these economic conditions. While a global recession will be good for digital assets, it will crush the market at the beginning due to the liquidity crisis.
Financial institutions will go into default and bankruptcy, and balance sheets of depository banks will end up with a deficit. Then the central bank will step in and print out even more money. This will lead to inflation. People lose faith in the existing financial system. DeFi is an alternative system for people to manage and grow their savings. It’s cheaper, faster, and gives back people full control of wealth. People will learn from their painful experiences and embrace the world of crypto to enjoy true financial freedom. For the next several decades, more and more assets will be managed through blockchain and the world of digital assets will thrive.”
Ashish Singhal, CEO, and co-founder of CRUXPay and Coinswitch.co said,
“Cryptocurrencies seem to be taking as much beating as debt, equity, and commodities like Gold. This happens because, at the onset of a recession, when panic strikes, all fundamentals are lost. However, during a crisis, debt and equity lose value because of the decline in asset value and decline in profit, respectively. But the underlying value of cryptocurrencies doesn’t lose value during a recession, in fact, it gets even stronger.
A global recession is a defining moment for cryptocurrencies. The long-touted “Bitcoin is a safe haven” is put to the test during a recession. A recession forces governments worldwide to introduce measures to ease the downturn, which will have adverse economic effects for years to come. Cryptocurrencies are inherently designed to be hedged against such implications. This makes an excellent case in favor of cryptocurrencies. The underlying value of cryptocurrencies defined by decentralization and mathematical stability will continue to hold even in the worst recessions. Cryptocurrencies will then become the choice of investment during such economic turmoil.”
Nicholas Pelecanos, Head of Trading at NEM Ventures, views cryptocurrencies as an uncorrelated asset class:
“Hidden in the bitcoin genesis block is a quote that perhaps acknowledges Bitcoin’s true purpose: ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.’ The creation of Bitcoin is not incidental to financial crises but a direct response to the 2008 financial crash and failings of the global financial system. As a global recession or even depression looms, I’m more bullish on Bitcoin and cryptocurrencies than ever. Unlimited Quantitative Easing, unserviceable global debt, a failing monetary system and negative interest rates all at a time where society, globally is moving away from cash. This is precisely what Bitcoin was designed to hedge against.
The crypto sell-off witnessed in March was a result of a global liquidity event and Bitcoin has now climbed 90% from its low - a swift recovery. More importantly than being a safe haven, Cryptocurrencies are an uncorrelated asset class. This alone can attract a lot of capital in times of uncertainty and with a total market capitalization of $200billion it won’t take much capital inflow for the price to rapidly climb.”
Thomas Prendergast, CEO, and Founder of Markethive - has built the first blockchain-driven Social Market Network in anticipation of another economic downturn, to give a more sovereign way to conduct any business online. He believes crypto will stand the test of a recession if approached facilitated in a holistic way,
“In the midst of this crisis, it’s business as usual and then some for Markethive, providing financial inclusion for all is our main objective. The answer is Markethive’s blockchain technologies and integrated entrepreneurial ecosystem where people have their privacy, autonomy, and sovereignty. They earn an income with our coin (MHV) in many different ways on a daily basis, including becoming a shareholder via the ILP, the added advantage of the Vault, and also profiting from the many cottage industries within the Markethive ecosystem. Essentially, it’s the community that owns Markethive and not hierarchy.
Bitcoin is the premier Fintech blockchain. Markethive Coin is designed to be a premier Consumer Blockchain coin. This means MHV is being utilized within the Markethive exchange and on the platform. So the coin is used within the commerce of the system thus creating the velocity. The revenue is a vehicle that is used to buy the Markethive coin back in the free market so it can be redistributed into the economic vortex of the system.
This is a fundamental difference and is not dependent upon speculative value as is the case with other cryptocurrencies and platforms, thereby creating eternal economic velocity in the entrepreneur ecosystem within Markethive. It is an eternal economy that has more demand than supply, therefore, the demand will continue to outstrip the supply. The bottom line being the Markethive Consumer Coin and Incentivized Loan Program or ILP Token will only become increasingly more valuable.”
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Now dubbed the ‘Great Lock Down’, a name given to this recession by world economists will see the world economy suffer once more as we endure this induced coma of industries on a global level with some that will struggle to recover. Crypto, along with Blockchain may very well have an edge in this prophesied new normal. Many crypto advocates are hoping that the recession will help push cryptocurrency into the mainstream.
The cryptocurrency market presents unique types of currencies that are not governed by economies, traditional exchange rates, and boast the benefits of added security and traceability through blockchain technology. These characteristics may appeal to many consumers and investors who may lose faith in the traditional financial economy. This general separation from international economies provides hope to many that the cryptocurrency market would strengthen during financial crises if market adoption increased.
During economic turmoil, investors will always flock towards safe-haven assets that are largely resilient to fluctuations of international monetary markets. So far Bitcoin and other cryptocurrencies have shown many characteristics of the ultimate safe-haven - gold.
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Regardless of the crisis, it is worth knowing that there are cryptocurrency and blockchain companies that have created a path to self and financial sovereignty no matter whether the markets go down or up. Markethive is proving to be a safe-haven and the next generation of social media, marketing, e-commerce, and digital media distribution network. It’s giving the community the opportunity to be part of a sovereign platform that will eclipse the tyrannical big tech colluding with the corrupt elite desperately trying to hang on to their power and control.
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Deb Williams
A Crypto/Blockchain enthusiast and a strong advocate for technology, progress, and freedom of speech. I embrace "change" with a passion and my purpose in life is to help people understand, accept and move forward with enthusiasm to achieve their goals.
