The Capital
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The Capital

Bitcoin And The Next Financial Meltdown

Doesn’t matter the year. The market isn’t fussy, nor selective. It’s already been eleven since the chaos of 2008. Now, with cryptocurrencies at large, will the next financial crisis turn out differently?

Time Bomb

Corporate borrowings, oil prices falling, so, too, commodity prices. To that bag add home loans, credit card debt up to your eyeballs, savings in bonds, student loan repayments, stocks, mutual funds and you have a time bomb ready to explode. It’s never-ending, and for some, it can mean the end.

If you’re one of these people with any of the above, you better watch out.

And maybe that end is coming soon, real soon. It’s happened before, too many times, in fact: 1929, the Dot Com Bubble of the early 2000s. That clusterfuck back in ’08, which to this date has been the biggest financial crisis the world has ever seen.

‘Crisis prevention is incomplete. As we have put it, ‘fix the roof while the sun shines’. But, like many of you, I see storm clouds building and fear the work on crisis prevention is incomplete.’

- David Lipton, the first deputy managing director of the IMF

The world’s in debt, trillions in debt, and the global debt crisis are getting worse. The United States itself, as of February 2019, owes $22 trillion. China, too, a lot. And when these countries can’t manage to pay their debts, there’s no hope for the rest of us.

It’s shit-soup for dinner, I’m afraid.

Yet, there’s worse to come, much worse, something so bad we aren’t even ready for it.

At least that’s what a large minority believe.

A stock market crash, a global financial explosion, a bear market so bad Yogi will be hibernating for years to come. People don’t want to talk about it. We’ve been in a ‘bull’ market now for more than a decade, or more to the point, we haven’t had another financial crisis.

It’s too long. Something’s got to give.

Some claim it’s imminent, that it’s just around the corner and we better be ready for it.

Where, though, does would this leave Bitcoin and other cryptocurrencies if the doomsayers in some quarters believe it is the correct one?

Would they fare well? Go the same way as traditional assets of value? Take a middle ground?

Recent news that Deutsche Bank is going to lay off 18,000 workers aside, things aren’t looking rosy for many financial institutions at all.

Quantitative easing and bailouts, not to mention low-interest rates haven’t helped the climate of confidence.

Currently, investors around the globe are playing it cool, but it only takes one sign of a tumbling market, a panic on Wall Street, for everything to go belly-up.

Cryptocurrencies To The Rescue

Cryptocurrency advocates, however, see all this potential fallout as heaven-sent for Bitcoin as an asset, for it is independent of the traditional financial ecosystem. This will make it immune to the effects of a market collapse, and they even go as far as saying that the price will rise because of it when panic sets in and frightened investors move their assets into the havens that cryptocurrencies offer to safeguard their wealth.

‘Bitcoin has no intrinsic value, but neither does government-issued paper money. The market should determine its value, while government should focus on disclosure, education, fraud prevention, and curbing its use to support criminal activities. Do not to invest in it unless you can afford a complete loss.’

- Sheila Bair, who headed the FDIC during the dark days of the 2008 financial crisis

They back this claim up by reiterating that in the 2008 crash, there was no cryptocurrency available and nowhere to put their money except in gold, silver, and other precious metals.

It is completely different now, though. Bitcoin is, in the eyes of futurist and others sick of the mind games and cheating of stockbrokers and bankers, a safe alternative to fiat currencies.

Contrary opinions espouse the theory that the record price of Bitcoin in late 2017 was down to how assets, commodities, and stocks rose over the same period, pegging (in some way) crypto prices to that of the stock market trends. If there was a crash, a rush to liquidate Bitcoin into fiat currency would occur, at least for the kind of investor who has little faith in cryptocurrencies and a store of value, which for many it is not anyway.

When the meltdown happens, it’s going to be big for Bitcoin one way or another, making it mainstream. It’s going to be an indicator of where cryptocurrencies are going to take us and how reliable they can be as a transactional currency and store of value.

Surviving the nuclear winter of all financial crises will be the credence trigger the masses will need to adopt Bitcoin and other altcoins as their de facto currency of choice and leave Trumplandia, Wall Street bankers, money cartels and the Federal Reserve with egg on their faces.

It’s in times like these that I wish I could use a crystal ball, that I could simply assume the form of Pythia, the Oracle of Delphi, to forewarn those who deserve it of what is going to happen.

But I can’t. Nobody can. Not even Warren Buffet or Alan Greenspan.

Nevertheless, there are subtle signs, ripples of concrete actions taken against counterfactual reality, that can if interpreted correctly, show us how it ‘may be’.

When national banks, high-net hedge fund managers and bankers start investing in cryptocurrencies, it is likely that something is afoot, that somewhere down the line, they see a red flag fluttering over the financial horizon.

‘In terms of cryptocurrencies generally, I can say almost with certainty that they will come to a bad ending. Now, when it happens or how or anything else, I don’t know. If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it, but I would never short a dime’s worth.’

- Warren Buffett

They Could Be Getting Into It For One Of Two Reasons:

One, because they believe in it, because they, like millions of techies and those with a penchant for futurism, see it as the go-to value system and trusted store of value for tomorrow’s day.

Two, because they want to destroy it, leave it devastated, as it has been the revolution they have always feared.

The Innocent Suffer

But to get there normal people will have to suffer, more so than they did in ’29 or ’08 or any other period in history when we let our governments and those college-educated schmucks with no moral scruples in charge of our money. Because as of yet, only a fraction of the population of the world, I’m guessing five-percent, knows anything about cryptocurrencies and how they can counter the shambles that is fiat, the biggest scam in history.

Mark my words, people, once that crash occurs, the cash will fly away from the banks, into real estate, into gold and silver, and of course, Bitcoin and other cryptocurrencies, because they will be the sole asset class people will trust in.

Bond yield will invert, the National Reserve, the European Central Bank and other national treasuries around the world won’t know what to do.

Okay, some people, the old, the uneducated and the ignorant, will see Bitcoin as an intangible asset and will keep faith in fiat. And good for them.

So, those of you with crypto, keep it, cherish that goddamn baby, even if it goes down, loses value — didn’t the same thing happen with those who invested in the internet companies in the early 2000s when everything went south. They believed because Boo.com, Worldcom and Global Crossing went bankrupt, they thought investing in dot.com companies was a poison chalice.

But it wasn’t, obviously. It was just a hiccup, a slight bump in the road. Apple, Google, and Amazon are proof of that.

Those investors are regretting their decision now. You gotta have faith.

‘Bitcoin is what used to be called fiat money.’

-Alan Greenspan

And that’s how it’s going to be with crypto. Bitcoin may lose value, disappear even. But there will be others.

Facebook wasn’t the first social media site. It wasn’t even the tenth. I think it was the twentieth or something, but don’t check me on that. SixDegrees.com, established in 1997, was deemed the first-ever social media site– who’s heard of them today?

Nobody.

That’s what I mean, just because you’re the first, or an early starter doesn’t mean you’re going to be successful (Neal Armstrong’s an exception to the rule).

So, the bull market’s got to end sometime, and when it does, have those cryptocurrencies wallets and those keys handy.

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James Dargan

Author & futurist writing about quantum computers, AI, crypto/blockchain. Journalist @ thequantumdaily.com Read my fiction on Amazon or jamesdargan.com