I’m not worried about crypto (because I’m busy worrying about fiat’s coming global crisis)
When you work in blockchain, you get a regular sense of deja vu (pardon the redundancy).
If a technical analysis trader – you know, the ones we all follow on social media to seek some form of validation for market direction – were to create a chart trying to find a relation between crypto prices and the sentiment of questions people ask us at AmaZix, we’d probably end up with a pattern showing high correlations!
In that sense, whenever I enter into conversations with industry players these days, the sentiment in the market now has a flavor rather familiar to that of just over a year ago. At least eToro also notices the potential for emotion in the crypto market, just this week announcing a new trading bot that derives signals from Twitter sentiment!
The general emotion then prompted me to talk about the case being made for blockchain, and how price had nothing to do with it.
Looking back, it was a period of gloom for a lot of crypto people. In the past 10 months previous, Bitcoin had been on a slippery slope downwards, losing 70% of its value. Only three months after I wrote that, it would lose another half of its value!
Suddenly, people were scrambling for the exits. Long-time self-professed holders were liquidating. Startups were breaking up. The dream was over for many.
A much-needed renewal
Yet the market, as unflinchingly fickle as ever, took a turn for the better since the end of Q1 2019. After bottoming out in February, and then surging 300% to the year’s high in July, Bitcoin continues to demonstrate how quickly it’s managed to build up on hardness (I’ll come back to that in a little while).
In some ways, that winter of discontent was a blow to the industry… but for others who remained committed, and for us at AmaZix, the sight ahead had actually become a lot clearer.
Much as the speculators saw the period as an opportunity to purge weak hands, we saw how our industry peers and competitors took the opportunity to unite and strengthen.
There’s also a stark difference in the clients we work with today and with some of those we came into contact with in the past! Today’s blockchain projects are no less idealistic, no less passionate than their predecessors -- but they are very much more grounded in the realities of what it takes for an actual business to succeed. Today’s crypto investors are no less tech savvy, no less passionate than they were a year or two ago -- but they want deeper due diligence, they want more meaningful engagement.
Those projects with weak economic models and poor use cases were found out, and their investors and backers lost confidence. Those who simply weren’t innovative enough, or who were peddling vapourware? They were the first out the door, the first to get abandoned and trampled beneath the retreating bulls.
And now, as the industry consolidates, even the traditional world of finance faces the threat of yet another great, cleansing wildfire of renewal. The whispers are getting louder, warning us that a global economic crisis is almost upon us.
The IMF already says this year that the risk of a sharper decline in global growth has “certainly increased”. The United Kingdom is already well on course for its worst economic performance since the 2009 crisis. Hot on the heels of an economic contraction in Germany, both the US and the Eurozone’s central banking authorities have been in the thick of quantitative easing measures all year long, staving off the effects of a global economic slowdown.
And yes, despite all the denials, QE4 for the US has already started and is well underway. Wyoming Blockchain Task Force’s Caitlin Long today just tweeted:
“...the Fed solves a big bank's liquidity problem by exacerbating the shortage of collateral in the repo market (removing the best collateral)...4x oversubscribed”
Long-time Bitcoin educator Andreas Antonopoulos, in a recent interview with London Real, talked about some of the implications that played out in the Greek tragedy after the last financial crisis.
“Greece was basically asset-stripped by the German banks in order to make sure they were capitalized enough to pretend they’re solvent and they made [bad] loans… but if they [banks and institutions] wrote off the bad loans they gave to Greece, a whole bunch of French and German banks would be effectively insolvent. They couldn’t allow that to happen, so they asset-stripped the middle class in Greece…”
He reminds us that the concepts of our money and our privacy, which crypto enshrines, is not only paramount to our existence as a society, but to the “freedoms we take for granted”.
Whether or not you believe it is coming or even underway, there is plenty of writing on the wall to suggest a gloomy outlook.
Now, if we have been paying attention throughout the relatively short lifespan so far of cryptocurrency as we know it, we shouldn’t be surprised with all these forewarnings.
Got 99 money problems but crypto ain’t one
Even if you’re only a millennial, you would have lived through at least two past periods of recession on this kind of scale. These crises seem to have a cyclical pattern – one in the late 1990s, which shook Asian banks to their core, claiming the demise of many, and, a decade on, another that very likely helped birth Bitcoin at its apex in 2008-2009.
The creator(s) of Bitcoin designed a new form of digital money that not only recognized the deep-rooted problems of the current banking and financial structures, but that also made a serious attempt to solve those problems.
I spoke about the money hardness of Bitcoin earlier, and while it’s true that as a new class of asset, it will need more time to fully mature, Bitcoin has already drawn so much comparison to gold because of how hard it is -- how difficult it is to reverse a payment made with it.
And that’s becoming a really relevant aspect of crypto today, because if the current discussions about a possible failure of the world’s financial system(s) become closer to reality, states and banks are going to need more hard money. Just this week, the Dutch central bank further released a startling statement about gold, saying [translated from Dutch]:
“If the entire system collapses, gold stock provides a collateral to start over.”
The Dutch central bank isn’t alone in buying up gold. The World Gold Council’s latest report already shows record-breaking gold purchases by central banks all over the world.
Whether or not you believe Bitcoin is digital gold or Gold 2.0, it is becoming clearer that hard money, like Bitcoin and a handful of other crypto, is going to be ever more important if economies and people are to rebuild in the aftermath of a global crisis .
Former Bank of England governor Mervyn King, writing for the Wall Street Journal, asked in 2017:
He didn’t think they were, and I don’t think even they think they are.
Banks and the financial system simply aren’t learning their lessons and like those who don’t heed history, are doomed to repeat them in a macabre circle of financial deja vu.
So this is why I continue to worry about money – in the form we know it exists in. A global economic downturn, financial crisis, recession – whatever you want to call it – is coming, and we’ve known it for a while now.
And this is why we at AmaZix continue to hold fast in our belief in crypto. The crypto that hopes to fix the problems of unlimited supply (by fixing supply, centralized trust (by decentralizing control), value determinations (not simply supply and demand but fundamental strength), double spending, interchangeability, portability, security, durability, divisibility, scarcity, sovereignty, programmability… you can tell that crypto is trying to fix a lot of money problems!
Here, in the crypto industry, I meet plenty of peers who are preparing for such an outcome. On Yavin, Cointelligence founder and CEO, who also appears on our Talk-o-nomics Podcast, says:
“It’s very simple. We have a cycle of financial crises, and the next one should happen in the next few years. And whenever that happens, it will boost up crypto big time.”
And that, for me, isn’t purely speculation based on opinion and conjecture. Crypto isn’t some theoretical fantasy, but cold, hard computer code that is as tangible and permanent as money can ever get. So for us crypto believers, saying that crypto will be big, that blockchain will change the world, that’s just spelling out the logical outcome.
We cannot know if crypto will end up being the final solution for money. But I’m not worried about it because we haven’t given it a proper chance to succeed. And sooner or later, we’ll have to give it a shot.
Because we cannot keep doing the same thing with money over and over again, hoping for a different outcome.
We have to do differently. We simply have to.