Bitcoin and the Looming Global Crisis
Our newsfeeds are flooded and saturated with the repeated headline that ‘it’ is coming, to every household on every street, whether you live in a city or in the countryside. You would be stupid not to prepared for it – at best, naive. Although, those in the relatively small community that is crypto know that this could inevitably be Bitcoin’s time to shine, because yes, this is what it is about: the infamous and inevitable global crisis that seems to be perpetually promised. And once it comes, Bitcoin will be ready to take control and finally realise its true potential; entering an era where Bitcoin is not only the king of digital currency, but of ALL money.
At the very least, the world’s preferred digital currency would explode in value, as massive inflows of capital from investors deserting, en masse, from their other assets (such as the dollar and its other fiduciary cousins).
This apocalyptic discourse is seductive. It feels sexy and dangerous, giving Bitcoin holders the impression that – thanks to their brilliant anticipation skills – they will be ready to ‘cope’ with this monumental shift.
However, as often happens in life, things end up being more complicated. Let’s see if we can look at ‘the crisis’ and Bitcoin more closely.
Introduction to the ‘impending’ global crisis
I am not a fan of conspiracy theories and also I have a particular affliction: I am an unrelenting optimist.
In other words, I am not the best person to make ‘end-of-the-world’ speeches, nor am I fond of the recent narrative that “the crisis is coming and it will be the worst that we will have ever known”. As the saying goes:
“The more people that hear about a crisis, the less likely it is to happen.”
Of course, I’m not pretending that a crisis isn’t brooding, nor am I being blissfully ignorant.
Nonetheless, I am sure that when the next one does take place, it will take every man, woman, child and their dog by surprise (even the monopoly media and political elite). To put it another way, the more people that report on a looming crisis, the less likely it is to happen.
And imagine that it is THE impending crisis, which reporters and experts from all corners of the globe have been reporting on… since, well, forever!
Like apocalyptic clockwork
Spend a couple of minutes surfing the Web and you will soon realise that since the 2008 subprime mortgage crisis (the financial world’s 9/11 moment) not a year goes by without the word crisis or recession being uttered. This is not used in a simple context but instead regularly used as the next one, the big one, the mother of all crises (the crisis to rule them all!) and it’s not like its only self-proclaimed financial gurus who are spouting out such nonsense.
2015 was announced as ‘the year of shock’ by France’s l’Express. In 2016, the French newspaper Le Figaro explained that the bankruptcies of American hedge funds Third Avenue and Stone Lion were similar to those which had taken place in 2007, triggering the subprime crisis. A crisis of the same magnitude was logically announced as imminent.
In March of the same year L’Humanité reported that the economist Yves Dimicoli (of the l’Observatoire Français des Conjonctures Économiques and author of the book ‘Faced with the Impending Crisis’ – an original title, right?), shared an identical discourse of (have a guess), yep, things would soon go south. It should be noted that Dimicoli is someone who has been ringing the religious bell of ‘the end of nigh/repent your sins’ since the beginning of time.
In 2017, an ARTE documentary “The Gangsters of Finance” bet that ‘political irresponsibility’ would lead to a global crisis in 2018.
In 2018, there was a general consensus that 2019 was going to be cataclysmic. Capital even explained to us that “this crisis would ridicule all those before it”.
In April 2019, Georges Ugeux, the former second in command of Wall Street was so sure that he explained in his book “The descent into Finance hell”: A global financial crisis would “bring the world to its knees before the end of 2020″…
Are you beginning to understand how the story goes?
Since 2008, not a year has passed without an army of observers and analysts of all seniorities announcing some sort of ‘doom and gloom’ news. The 2008 crisis embodied a perfect cultural scarecrow (by that I mean everyone remembers it and it leaves scars that are still visible to this day). Whether you are 27 or 47 years old it’s hard to think of a time when the official narrative was not built around the notion of ‘crisis’.
Back to 2020
What do all the stock, financial analysts and economists that have a chance to publicise their views, tell us?
That the crisis is obviously coming and it’s going to be terrible… in 2021, according to Jacques Attali! Or 2022? Well, that’s when the IMF anticipates it, “in the event of an increase in interest rates”.
According to a Natixis poll, “83% of institutional investors” are convinced there will be a crisis “before 2025”.
Why this enumeration you might ask yourself?
To make you realise that this discourse of an apocalypse, on the one hand is tangible, and on the other hand serves all the most concrete of interests.
As I mentioned earlier, conspiracy theories mean very little to me. However, it is difficult to ignore that an anxious and paranoid general public will always be easier to manipulate and direct than one which is confident in their values and optimistic about their future.
Surfing on the crest of ‘crisis’, some see certain advantages
And yet, in spite of current appearances and moods, the individual has never, in the entire human history, experienced so much opulence than in today’s world. As for the progress of financial markets so far this year? Do I hear record highs?
Let’s be clear: the world is not feeling well. Economically, ecologically, demographically it is not going well and it is hard to disagree.
Since the industrial revolution, whether we like it or not, the world has more or less always been bad, as it only longs for the individual’s comfort and the mechanisation of war.
Nevertheless, with the help of the global media and technological advances, the world has got smaller. No longer is a conflict not covered and illustrated in real time. Any potential confrontation or dramatic event continuously and instantly fills news feeds and news channels alike.
We stretch out global misfortunes before the world’s eyes so that their redeemable attention is retained for as long as possible. This phenomenal amount of stimulus feeds the existential anguish of a large part of the western world’s population, worried about losing the unprecedented material and societal comfort in which it revels. This would-be “collapse” on our doorstep, is the crisis of tomorrow.
This anxiety-provoking retheroic perfectly affects our human psyche as we always listen more attentively to words of catastrophe than that of good fortune. This perhaps is why the western world pays too much attention to the doomsayers inciting a phenomenal amount of existential anguish – recounting that some day the material and societal comfort in which they find themselves could disappear thanks to some sort of crisis or collapse.
It is for this reason we can sell more news and generate more clicks on sensationalist articles like ‘the 10 signs that prove that the next crisis will be catastrophic and happen tomorrow’ than on an article that explains that things might not be so bad after all and that, when in doubt, sometimes taking a step back can help.
With all said and done, this article is perhaps the best illustration of everything and why now it’s time to talk about… Bitcoin!
Crisis? No, crisEs!
I am no more a fortune teller than the next economist, however, let me offer two of my main crises hypotheses, both with very different and potentially opposing consequences for Bitcoin.
Hypothesis 1: A ‘traditional’ crisis strikes. Long live Bitcoin!
I think it useful to recall at this stage that the financial world is now infinitely better equipped and able to withstand an economic crisis today than it was in 2008.
In line with the principle “once bitten, twice shy” (of subprime negative interest rates), the financial system is no more virtuous, its players still as cynical and invested, but now there are alerts and countermeasure systems of unparalleled performance.
That being said, whether it is American student debt, the Sino-American trade war, negative interest rates or any other economic parameter, it is possible that a serious economic collapse – or even structural one – can happen.
Please note: this article was started before the coronavirus epidemic came to light in China.
Here we go again
In the most severe cases, this collapse could be accompanied by a fall in investor and consumer confidence in the traditional fiat economic structure, leading towards an exodus towards traditional ‘safe’ assets which, along with real estate, raw and precious materials, Bitcoin now also belongs to! This is JP Morgan’s assumption as well as the assumption of an increasing number of reputable investment funds. Bitcoin is increasingly designated as a safe haven that can store value in the event of economic or geopolitical unrest.
The year 2019 demonstrated this particularly well when US-Iranian tensions came to furore and there were bets that 2020 would also be full of incidents of such a genre.
Therefore, assuming a similar – if not more severe – crisis than in 2008, Bitcoin could (should?) see its value increase, if not explode.
Hypothesis 2: A systemic (‘collapsology’-like) crisis that causes everything to crash (including Bitcoin)
It is the hypothesis of those who foresee an unprecedented event which by its magnitude and nature would lead to this ‘collapsology’ scenario.
We are talking about a collapse that would not only be of economic proportions.
This would be more severe than hyperinflation and would constitute the complete loss of confidence in currencies and the global economic system, to mention just one facet of this type of collapse. The number of people who believe in such a theory (and its variations) is growing, fuelling discussion groups on social media networks and survivalist forums (even if collapsologists and survivalists are not necessarily part of the same audience).
According to the convictions of collapsologists, a systemic collapse could be so dramatic that it would send society back to a pre-industrial stage (or even prehistoric according to the most worried) since the modern man, who now would be suddenly deprived of his modern objects, would be as lost as a lamb in a cave full of wolves.
The purpose of this article is not to debate the realism of this hypothesis, or the potential severity of a systemic crisis. However, such a situation would imply a horrific deterioration in living conditions, where the world’s population would need to review its needs based on Maslow’s Hierarchy/Triangle.
96 hours without electricity and you drop 3 or 4 levels on the pyramid
So rather than worrying about the value of Bitcoin and cryptocurrency, people will be more concerned with ensuring their basic livelihood or even – in the most radical cases – ensuring their personal security.
In this scenario, the impact, from a monetary point of view, would consist more of a return to a barter economy and possibly of the use of precious metals or tangible goods rather than a recourse to digital currencies.
Furthermore, even if work is (and experiments are) underway to allow the use of the Bitcoin blockchain, without the need of an online connection, one should be realistic: in a world where the access to inexpensive sources of energy would be lacking, won’t people favour heating and other primary needs over the mining and storing of cryptocurrency?
It is also worth remembering that not too long ago the human race didn’t always have today’s seemingly unlimited access to electricity and computer power. You only have to go back a little over a century for electricity and a few decades for computing power for it to have been a very different scenario.
It’s certain that Bitcoin is thriving under the current and future notion of crisis. Nakamoto’s creation is obviously able to perfectly play its ‘Plan B’ role in relation to political upheavals as it embodies the ideal repository for investors – institutional and retail alike – who become more aware of its qualities and resilience with every passing day.
The context of a ‘classic’ capitalist cyclical economic crisis will play perfectly into Bitcoin’s hands.
However, unfortunately if there is complete collapse where houses only have access to electricity and heating for two hours a day, the intrinsic qualities of Bitcoin will disappear instantly.
While you are waiting for the looming crisis, why not mine Bitcoin in Canada!
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The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.