[2020-03-31] This Crisis Is Good For Bitcoin, But Beware of Recession

[blacky90]

The current global crisis is good for crypto as it shows the dysfunctionality of the existing system, according to Marcus Swanepoel, co-founder and CEO of crypto exchange Luno. However, in case of a global recession, this nascent industry might be hit hard too, he warned.

Crypto was born out of a financial crisis, accompanied with a vision to upgrade the world to the better financial system, so "the more dysfunctional the existing system becomes, the more there's an opportunity to showcase to the world that there is a better way to do it," Swanepoel told Cryptonews.com. Based on the available data, one can speculate, however, where the current situation can lead, he added.

People were expecting bitcoin (BTC) to rise immediately when the traditional market started falling, yet it dropped. That's not strange, explained the CEO. BTC is a proxy for gold, and what happens in a financial crisis is that a lot of assets go down at the same time, including gold. It follows the market "for a little bit," and "once people have basically removed all the money, put a lot more low-risk assets, and they start reallocating, and then they go into gold and then gold decouples." But Swanepoel said that it's too early to make an assessment on just how correlated BTC is to other asset classes.

https://cryptonews.com/exclusives/this-crisis-is-good-for-bitcoin-but-beware-of-recession-luno-6159.htm

[anoufal]

Am I worried about price drops? I'm used to it.

[hatshepsut93]

How is it good if Bitcoin still didn't recover fully from the price drop? And people were saying "this is good for Bitcoin" every time something bad happened, but when Bitcoin's time to shine has finally come it didn't act as expected.

People were expecting bitcoin (BTC) to rise immediately when the traditional market started falling, yet it dropped. That's not strange, explained the CEO. BTC is a proxy for gold, and what happens in a financial crisis is that a lot of assets go down at the same time, including gold. It follows the market "for a little bit," and "once people have basically removed all the money, put a lot more low-risk assets, and they start reallocating, and then they go into gold and then gold decouples." But Swanepoel said that it's too early to make an assessment on just how correlated BTC is to other asset classes.

This man contradicts himself so much, first he says Bitcoin follows gold, then he says it's too early to tell that. He says that the recession is good for Bitcoin, then says it might be bad. If he says everything at the same time, he really just says nothing, because he doesn't commit himself to one prediction.

[cr1776]

"Price drops" depend on your timeframe.  If you bought in Dec 2017, it is a lot differs compared to if you bought (or mined) any time before August/Sept/Oct 2017.  For me, if your horizon is weeks or months vs several years, that is the issue.

Bitcoin has been through a lot.  As time progresses and more people become involved the volatility in fiat will decrease.  The next halving, technical upgrades etc are really going to change things over the next year.

Anyway who panics should probably not be investing in bitcoin.

[stomachgrowls]

"Price drops" depend on your timeframe.  If you bought in Dec 2017, it is a lot differs compared to if you bought (or mined) any time before August/Sept/Oct 2017.  For me, if your horizon is weeks or months vs several years, that is the issue.

Bitcoin has been through a lot.  As time progresses and more people become involved the volatility in fiat will decrease.  The next halving, technical upgrades etc are really going to change things over the next year.

Anyway who panics should probably not be investing in bitcoin.

People who had panicked and sell out their coins or to those people who are just speculating and observing the market but ending up on not to consider it because of the issues it do have.

You're right when you do talk about timeframe and this is one of the factors why each person would have different inputs towards their investment because we didnt get inside on the same time.

Lucky for those who risk while its cheap and unlucky to those who sold early, just like that.

[hugeblack]

The comparison does not seem accurate, because we are in a health crisis and we are not heading to the economic crisis. Both sides of the equation, supply and demand, are present, but they are under the influence of freezing due to the health restrictions imposed by many countries.
Once the covid-19 crisis ends, life will return to normal quickly, and perhaps the continuity of this crisis is what makes us witness a financial crisis and thus the ability of BTC to solve this problem.
The options are still open and we have not seen a real test of cryptos.

[pixie85]

I wouldn't say that it's good for bitcoin because if price keeps going down despite the halving it's going to scare many people and make them stay away from bitcoin.

The only good side that I can see is tha this panic acts as a heavy test. Like you say that all equipment needs to be thoroughly tested under load. This is one of the hardest tests in bitcoin'shistory. If we manage to stop following stocks and act more like gold we're going to be ok.

[bbc.reporter]

Crypto was born out of a financial crisis, accompanied with a vision to upgrade the world to the better financial system, so "the more dysfunctional the existing system becomes, the more there's an opportunity to showcase to the world that there is a better way to do it," Swanepoel told Cryptonews.com. Based on the available data, one can speculate, however, where the current situation can lead, he added.

However, it might never showcase as a better way. Many and more of us in the cryptospace are using cryptocoins more as speculative investments than a better way.

Also, many of us want to conform to the government's financial rules than have our own way. This will lead to failure together with the financial system's failure because the cryptospace is a part of it.

[Ozero]

The comparison does not seem accurate, because we are in a health crisis and we are not heading to the economic crisis. Both sides of the equation, supply and demand, are present, but they are under the influence of freezing due to the health restrictions imposed by many countries.
Once the covid-19 crisis ends, life will return to normal quickly, and perhaps the continuity of this crisis is what makes us witness a financial crisis and thus the ability of BTC to solve this problem.
The options are still open and we have not seen a real test of cryptos.

Unprecedented measures to combat the spread of coronavirus have significantly affected almost all aspects of our activities, and not just the healthcare system. The activities of many enterprises were paralyzed, many of them closed, and the unemployment rate increased sharply. As a result of this, the economies of almost all states continue to fall. The International Monetary Fund has already announced that it will take at least three years to restore the global economy. Therefore, in the near future we will be facing a tough global economic crisis. With it, Bitcoin should prove itself as a reliable refuge from inflation.

[Naida_BR]

It doesn't seem that the crisis is good for Bitcoin.
There is a strong correlation with the traditional economy and cryptocurrency ecosystem. If people start loosing money then money are withdrawn from the crypto market as well. In this way prices are going down and the market is shrunk.

[jossiel]

It doesn't seem that the crisis is good for Bitcoin.
There is a strong correlation with the traditional economy and cryptocurrency ecosystem. If people start loosing money then money are withdrawn from the crypto market as well. In this way prices are going down and the market is shrunk.

You are absolute correct but not all of us are in the same situation.

We don't know how many of the people there that are just waiting for a lower price of bitcoin and they will start buying. I've seen a news that huge companies were accumulating bitcoin, like them:

Grayscale Buys 33% of All Bitcoin Mined in Last Three Months

Report: Square’s CashApp and Grayscale Consumed Over 50% of Bitcoin Mined Q1 2020

[bbc.reporter]

@jossiel. Grayscale's huge purchase does not automatically make that a correct decision, however. We might be in a similar situation 2 years before the 2008 financial crisis. Have you seen the movie The Big Short?

[jossiel]

@jossiel. Grayscale's huge purchase does not automatically make that a correct decision, however. We might be in a similar situation 2 years before the 2008 financial crisis. Have you seen the movie The Big Short?

It may not automatically but looking to the activity, there's something like that which is happening currently that others may not know. I haven't watched the movie but the description that google says that's about the financial crisis of 2007-2008. I understand the message that you are sending me and this made me more aware of the possibility which may or may not come.

I'll watch the movie as soon as I've got time.

[bbc.reporter]

@jossiel. It is a movie about some people who knew that there was a scam in the housing debt derivatives market. They were subprime loans labeled as stable loans. However, the market was pumping until it was unsustainable.

Similar to the coronavirus pandemic. Many people are losing jobs, economy is down, business profits down, however, stock market up? Is this sustainable?

[Harlot]

Crypto was born out of a financial crisis, accompanied with a vision to upgrade the world to the better financial system, so "the more dysfunctional the existing system becomes, the more there's an opportunity to showcase to the world that there is a better way to do it," Swanepoel told Cryptonews.com

So are they assuming that just because Bitcoin was created during the recession it will be invulnerable because of it? I don't think so, Bitcoin's true supple and demands right now has been never tested during the recession if you think about it Bitcoin was essentially valueless during that time and I don't think a lot of people know it or a lot of people will be selling their .01$ BTC during that time. Suppose to say if a recession happens now BTC will be tested for the first time and I don't think it will be safe especially if their investors as well are also affected by unemployment and generally a lost of way to earn money, during this time I know that a lot of people will be liquidating their assets so I don't think Bitcoin will be safe if that happens.

[jossiel]

@jossiel. It is a movie about some people who knew that there was a scam in the housing debt derivatives market. They were subprime loans labeled as stable loans. However, the market was pumping until it was unsustainable.

Similar to the coronavirus pandemic. Many people are losing jobs, economy is down, business profits down, however, stock market up? Is this sustainable?

Thank you, that's interesting.

I guess we have an idea what would be consequences with all of those factors. I haven't found a copy of the movie but will look for one to watch it.

[onrise]

@jossiel. It is a movie about some people who knew that there was a scam in the housing debt derivatives market. They were subprime loans labeled as stable loans. However, the market was pumping until it was unsustainable.

Similar to the coronavirus pandemic. Many people are losing jobs, economy is down, business profits down, however, stock market up? Is this sustainable?

The fear will begin when the lockdown starts to open up and business units starts to function. Then will the real situation come sin front when we know how many people are being removed, how the demand is falling or how much less productions is being done, how much cost of the stuff has increased, tourism is definitely taken the hit for next 1 year etc.

[Vishnu.Reang]

I don't agree with these arguments. A lot of people claim that economic crisis would be good for Bitcoin. But then, why the exchange rates remained stable even after the pandemic killed hundreds of thousands of people? Also, I didn't noticed any spike in the Bitcoin exchange rates, during the Cyprus economic meltdown and the Greek financial crisis. BTC exchange rates actually declined back then.

[bbc.reporter]

@jossiel. It is a movie about some people who knew that there was a scam in the housing debt derivatives market. They were subprime loans labeled as stable loans. However, the market was pumping until it was unsustainable.

Similar to the coronavirus pandemic. Many people are losing jobs, economy is down, business profits down, however, stock market up? Is this sustainable?

Thank you, that's interesting.

I guess we have an idea what would be consequences with all of those factors. I haven't found a copy of the movie but will look for one to watch it.

It is based on a true story of real people hehehe. It shows the overconfidence of people within the banking system and their readiness to look the opposite direction of the scam to sustain an unsustainable condition.

[Kakmakr]

The thing about a recession is this, people start concentrating on "daily" survival and the disposable income that they might have had, would go into "daily" necessities and not into investment options. Even professional traders will tighten the belt and invest in more traditional "safe havens" like Gold and Silver.

In my opinion, Bitcoin is still perceived as a high risk investment and traders will avoid high risk investment during a recession. I expect the price to drop considerably, because there are simply no extra money floating around to gambled on high risk investments.

Also, lots of people lost their jobs and these people might cash out their Bitcoin hoard to survive without a income during these times. This will increase the supply and that will push down the Bitcoin price.