Bitcoin (BTC) before, during and after a financial crisis
The world is in a great crisis. A health crisis, a financial crisis, an identity crisis and a climate crisis. In the midst of all these crises, society continues to do as well and as badly as it can. But what are the consequences of this situation for Bitcoin? And how can this change the world?
Bitcoin (BTC) before the crisis Let's go back to the previous crisis first. 2008, the credit crisis. The crisis was largely triggered by a stagnating housing market in the United States and the rapid decline in value of bundled bonded mortgages.
Credit crisis sounds like something with limited availability of cash and long-term capital. Financial institutions cannot or do not want to lend money (credit) in such a case. This results in large-scale liquidity problems and this has an impact on the economy.
But in addition to a credit crisis, there was also a crisis of confidence in the overall financial sector. From 2010, people started to doubt the financial position of a number of governments. A textbook example is the problems surrounding the Greek public finances.
Similar cases also occurred in Portugal, Spain and Italy. A rescue plan with tons of money was the only solution.
Electronic cash In the midst of this turmoil, there was Satoshi Nakamoto. This genius came up with something new, a digital solution. That was Bitcoin, a "Peer-to-Peer Electronic Cash System" with solutions for credit and trust ingrained.
It is a protocol that has its foundations in mathematics and cryptography. Aspects such as privacy and the lack of discrimination are two other spearheads. Bitcoin can be used by anyone and there is no one who has anything to say about your money.
The money press cannot be turned on, (commercial) banks are not needed, payment providers who act as expensive middle-men are cut out of the system and it is a first digital form of value exchange where the double spending problem does not exist.
This is Bitcoin. Bitcoin came alive on January 3, 2009 with the message: Chancellor on Brink of Second Bailout for Banks. And what next?
Bitcoin during the crisis With this Bitcoin story in mind, we are now more than 11 years later. A similar situation arises. Liquidity is drying up and confidence in the authorities is falling to an ever lower level.
The Corona virus creates a split between government and citizen. Stock markets are collapsing and the economy and society are stalling. The solution? The money press.
Whether it's the Federal Reserve, the People's Bank of China (PBoC) or our own European body, money is needed. After all, the economy has to keep running! Right?
It is difficult to predict where this crisis will take us. And whether Bitcoin will survive this. What is clear is that Bitcoin was conceived for a similar situation.
But why did the price of Bitcoin fall so fast a few weeks ago? And is Bitcoin not a safe haven? Jack Mallers shares a thread on Twitter explaining how things are going with BTC during a crisis.
According to the talented developer, it comes down to the following: "BTC is just a little too young to painlessly deal with such a global liquidity crisis". But a situation like today is the very reason Bitcoin was invented.
Digital gold? A couple of weeks ago (and also in 2008) gold also plummeted. Is gold worthless and useless in a crisis? Not in the least.
In the course of the crisis that continued for years, gold eventually rose to record highs, peaking in 2011.
Bitcoin will be no different. Once those who get their funds from the people who quickly sought liquidity out of the market, the fundamentals remain. And these are the very reasons why Bitcoin is so badly needed today.
How is Bitcoin's position during a crisis? Mallers describes it as follows:
A crisis is exactly what Bitcoin needed more than ever, just before halving.
In times when the world is standing still, Bitcoin keeps going. Every 10 minutes ~ 12.5 new BTCs enter the market. We know exactly where we stand in troubled times. We do not need to rely on Central Banks and governments now. Bitcoin works without emotions. Bitcoin works today. But will Bitcoin also work tomorrow.
Bitcoin after the crisis There is no guarantee that the world will return to what it was a year ago. What we do know is that we can learn a lot from the current situation. The twitter account @Bitcoin sums it up nicely:
We can all evaluate the policy after a crisis, which we will undoubtedly emerge from. We can look back and create scripts to avoid similar situations. But we are building on the wrong foundation. Or as Albert Einstein once said:
We can't solve problems by using the same kind of thinking we used when we created them.
We have to go further back: we have to go back to sound money properties.
Back to real money The motive for our economy is wrong. Our money doesn't work. It is time to tear ourselves away from this money system. Because the solution will not be provided from the top.
Where there is money, there is power. And where there is power, there is money. And once one has this power in his hands, it will never be let go.
Where the established order prints (and decreases in value) money to save the banks, there is a solution where banks are not needed.
It is a solution that encourages you to use your money economically and safely. Bitcoin is a savings technology. Bitcoin does not need bubbles. It stems from the crisis, will have to flourish during this crisis. It will have to prevent another credit crisis.
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