Perfect Storm: Bitcoin Didn’t Exist in the Last Financial Crisis
Bitcoin has been quietly preparing for over a decade for the next market storm as a non-political alternative to the money printing pyramid.
Bitcoin Separates Money and State
Bitcoin was forged by the last great financial crisis of 2008 and designed to thrive in financial turmoil.
“Bitcoin adoption has always been driven by bank failures, bailouts, bail-ins, and political unrest,” said Max Keiser in an interview with Bitcoinist earlier this month.
It’s certainly no coincidence that Satoshi Nakamoto left a message in the first ever mined Bitcoin block —known as the genesis block. It famously contains the dated title of an FT article:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
The anonymous creator hints that Bitcoin is a non-political alternative to the existing financial system. The Bitcoin whitepaper could, in fact, be interpreted by some as a declaration of the separation of money and state.
Bitcoin was an inevitability — a solution to downfalls of the trust-based monetary system — in which central banks and governments have historically abused that trust at the expense of the public.
For almost fifty years now, the de facto global currency has essentially been running on ‘full faith and credit’ only. The problem is that when this faith is tested by the markets (i.e. reality), credit-fuelled bubbles are exposed. When they go pop, liquidity dries up and cash once again becomes king.
Bitcoin: Trust Buster
So it’s no surprise that cash injections — euphemistically known as QE (Quantative Easing) — have become the preferred drug prescribed by central banks to fuel the longest bull market in history.
At the same time, the demand for the US dollar hasn’t waned but actually risen. This phenomenon may have impacted the price of bitcoin 00 this year, according to Keiser.
“The problem Bitcoin has had recently is its competitor, the US Dollar, has been rising,” he explains.
When the dollar rolls over and starts dropping, Bitcoin will hit new ATH.
Meanwhile, critics say it’s too volatile to be a safe haven alternative. Its price has admittedly dropped by 85 percent from its all-time high in 2017. But proponents, like Max Keiser and many others, argue that short-term price fluctuations do not matter if the legacy fiat monetary system is inherently flawed.
They also note that savvy investors are realizing the long-term value proposition of holding the world’s most politically-neutral, hard form of money.
Simply put, trusting no one pays off for those who wait.
Bitcoin Transfers Value From the Sodler to the Hodler
Saifedean Ammous, economist and author of the Bitcoin Standard, states that Bitcoin’s attributes, particularly immutability and neutrality, make it attractive to investors with a long-time preference.
Bitcoin has already gone through 9 years of growth out in the wilds of the internet, mostly without a central planner in charge of it after its creator disappeared. It grew because it offered utility to enough users and developers to keep maintaining it.
It has weathered attacks and hacks and ‘community conflict’ and plenty of powerful interests and questionable characters trying to bend it to their will. After all of this, Bitcoin can indeed claim to be immutable. Once it became clear Bitcoin was successful at doing this, then anyone who was interested in an immutable digital hard money could use it.”
Coinbase President Asiff Hirji, whose San Francisco-based exchange launched a custodial platform for institutional investors earlier this year, also sees Bitcoin and cryptocurrencies rewarding the patient in the future.
According to Hirji, none of Coinbase’s investors speculated on BTC price when they valued the exchange at $8 billion earlier this year. They weren’t betting on what the price will be “today, tomorrow or even a year from now,” he said
“If that’s your time horizon, as an institutional investor, you shouldn’t be touching this,” adds Hirji.
From a security standpoint, centralized money systems are also honeypots. Centralized infrastructure is prone to hacks and shut down compared to a much more robust decentralized network like Bitcoin, which has been operating 24/7 with 99.8 percent uptime.
What’s more, third-parties aren’t just security holes. They are also structurally political. A duopoly such as Visa and Mastercard, for example, can (and do) restrict access for their own reasons, and even have the power to push other companies to toe the line.
The next global financial crisis is baked into the fiat cake. It’s a matter of not if, but when.
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Images courtesy of Bitcoinist archives, Shutterstock