Could Bitcoin become the cause of the next financial crisis?

John Roberson

John Roberson, Stock Trader

Répondu il y a 46w · L'auteur dispose de réponses 254 et de vues de réponses 7.7m

Could I brainstorm out loud for a minute?

Crypto is a disruptive juggernaut in the financial world. Combining the two most scalable fields of the last forty years, tech and finance, it can “eat the world” in an instant. This is why I’m long crypto, including dominant Bitcoin. Yet this also creates ruinous hazards:

Scaling Quickly. By scaling too quickly you don’t have time to grow risk mitigators organically. As Bitcoin has been punched in the mouth a few times and worked through the problems, people trust it somewhat more. Nonetheless, we accrue risks in the wake of each inflection point.

Scaling Big. When an institution gets sufficiently big in the financial world, its own struggles are threats to other parts of the system. So once Bitcoin hits an inflection point in terms of size, shocks to Bitcoin have rapidly increasing significance for the rest of the financial system.

I’m no expert on the mechanics of Bitcoin, but I do ask: How might Bitcoin be part of a future financial crisis?

Marché

  • Topples fiat, massive wealth transfer from lenders to borrowers. Fixed income & currency fluctuations make business environment volatile on a 1920s/30s level.
  • Topples fiat, governments get a one-time erasure of their debt BUT struggle with debt issuance and lose central bank policy levers. The political and military fallout is enormous.
  • When lots of economies are under one currency (Euro), stronger/weaker economies in the group can whipsaw. Now do that with one monde devise.

Centralisation

  • Crypto makes certain gatekeepers irrelevant, but elevates others. Mining hardware, wallet makers, exchanges, and transaction systems are powerful; hack them for a few minutes and you might take everything.
  • Mining or ownership is cornered, allowing a small group to bully the rest of the market. Orphaned coins increase the danger over time as we won’t know the effective market cap. Government and/or corporate alliances are also a threat here.

Économie

  • Should Bitcoin supplant fiat, we might lose lots of great financial structures. A big one is fractional reserve banking, which provides the credit on which the economy runs. Without it things grind to a halt and will take forever to start back up.
  • Transaction costs or costs to maintain ledger velocity may expand massively, thus requiring a huge support ecosystem. Threats to that ecosystem are now threats to the world economy.

Réseau

  • A huge leap in computer technology (e.g., quantum computing) hacks wallets or the ledger. In five seconds it’s all gone.
  • An electricity/internet outage stymies ledgers and/or miners and halts the system. Some range of the world shuts down.

Politique

  • Authoritarian/totalitarian regimes thrash against coins flowing out of their countries. Dangerous policies or military actions ensue.
  • Frightening wealth inequality results, with lenders doing well, holders of many debt/financial assets losing everything, pensioners looking hopeless, and a small number of crypto owners becoming oligarchs. Volatile political situation.

There’s a new set of risks for blockchain use cases other than fiat-currency-replacement: for instance, smart contracts. There’s also the simple risk case where yield-hungry people put way too much money into crypto and a bubble pops.

Not investment advice or recommendation. Do not rely. Probably wrong.

Jeremy Jones

Jeremy Jones, I spend a lot of time in the clouds.

Répondu il y a 44w · L'auteur dispose de réponses 73 et de vues de réponses 89.7k

You could look at it from two perspectives- if Bitcoin goes to $0 or if Bitcoin goes to some obscene number like $1,000,000.

My answer would be a definite yes for the $1,000,000 option, but I find the $0 option far more likely so I’m going to speak to that one here.

To answer whether or not Bitcoin will cause the next financial crisis you have to look at what caused the last ones- and most of the time it was the collapse of very real industries.

What would happen if Bitcoin went to zero today?

Would the stock market fail? Would the housing market crumble? Would people stop going out and spending money? Would it trigger WWIII?

I’m not seeing any good answers here. Until Bitcoin is actually leveraged for what it was designed for it is simply a lot of money riding on the roulette wheel.

There would definitely be crises on the individual level (I’m looking at you people who maxed out credit cards and got second mortgages to invest), but je l'espère no real industry is leveraged heavily in Bitcoin at this time. So it is unlikely that a collapse would affect them at all.

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Lots of people will be left with an expensive and possibly obsolete piece of code that they spent way too much money on.

That’d be about it.

For more Bitcoin thoughts, read about why I am not investing in Bitcoin here.

Jeyo Sargunam

Jeyo Sargunam

Répondu il y a 17w · L'auteur dispose de réponses 184 et de vues de réponses 1.3m

Cher Chercheur,

Crptocurrency were made to challenge the Monopoly of Governments.. i believe it has been successful. Atleast now Governments don’t have the Monopoly in creating a Financial Crisis… now i am sure Bitcoins will surely contribute to the upcoming crisis atleast in some form or degree.

Could Bitcoin become the cause of the next financial crisis?


Whats wrong with the World:

There are many things that can go wrong in today tightly integrated world. If china falls sick… the whole world will also get flu.

Without getting into details:

  • Debt problems in almost all critical countries
  • Global Trade wars
  • Geopolitical tensions between nation states
  • Over valued stock & real estate market
  • Demographic changes in Developed countries & many more

Whats wrong with Cryptocurrency:

Bitcoin was created with a sole purpose to offset Government monopoly in printing money & also creating inflation. Now with some 1500 Active Cryptocurrency we have created a Mother of all Fiat system which is worse than the partially regulated Government Currency.

With the Blockchain technology being open source, any Tom, Dick & Hari can create a “Coin” & have a “ICO”.

I am worried that since Bitcoin & its ilks are not regulated, most of the retail investors are going to get hurt. Also it is bothering that Cyptocurrency owners have a lot of control on their coins.

For ex : Dogecoin have removed the currency limit and it will be unlimited ,.. aka Fiat money. 1

Founder of Litecoin have sold all his coins 2

We have jumped from the frying pan directly in to blazing fire.

I will be surprised if this bubble doesn't burst .. .. I don’t know if I might have to wait for 20 years or 30 years .. however it will all come crashing for sure.


To answer the question: I believe Cryptocurrency including Bitcoin will have a major influence in the next Financial Crisis. It may or may not be the real trigger for the crisis. However should something get screwed in the financial world like in 2008. Cyrptocurrency holders will be hit hard for sure.

All Asset owners have some degree of protection offered by their respective Government laws .. EXCEPT Cyrptocurrency.. …

If the Bitcoin world fails & we have a black swan moment ….. most will be just left with some algorithm sitting in their Hard-drive.

Paix

JEyo

Notes de bas de page

1 Dogecoin to allow annual inflation of 5 billion coins each year, forever

2 A Cryptocurrency Founder Sold All His Coins After 7,500% Rally

Hector Quintanilla

Hector Quintanilla, Fondateur de DigitalAgeEducation.com

Répondu il y a 46w · L'auteur dispose de réponses 1k et de vues de réponses 21.7m

QUAND — NOT COULD!

The question should be WHEN?

  • The demand for cash on all global markets is constantly growing.
  • Our current economy is based on creditism. 1 We need to keep printing dollars... if we stop printing dollars the economy falls into recession.
  • If we continue to print dollars, history proves that the currency will eventually devaluate.

Could Bitcoin become the cause of the next financial crisis?

(Dessin animé)

The Dollar has never been affected because it was simply the “gold standard.” No currency or nation could challenge it.

Until NOW!

For the first time in history there’s an alternative currency to the world! It’s decentralized, cant be manipulated and there is a limited supply.

I think a war for crypto-supremacy has started!

We will see a power play over Bitcoin, cryptocurrencies, and the future of the blockchain. This is not a startup play anymore. Everyone is now implicated, regulators, central banks, nation states and world leaders.

Do you really think this crypto-trend will simply pass and go away like a popular video game? NO!

Bitcoin was a test, and the period of testing is over!

This a new industry!

This is the internet in 1994 all over again!

The blockchain technology has been validated. In 2018 we will see the monstre institutions in banking, government and enterprise race for control. Today everyone is working behind the scenes to accelerate their positioning. Nothing can hold the blockchain back anymore.

Qu'est-ce que cela signifie?

I don't know if it means inflation or deflation.

I don't know if it means recession...

All I know is that what happened in 2008 scared the hell out of me and still hunts me every single day.2 At some point, shit could hit the fan again and could make the dollar discutable for the first time in history.

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I think some country will probably replace their paper money with a crypto in the next 3-5 years. There are many countries in the world that don't have anything to lose and too much to gain.

Did you know that more than 260,000 retailers in Japan are starting to accept cryptocurrencies?3 Once you see a few million stores accepting cryptos, we may reach another point of no return.

The war has started!

It is a battle for crypto-supremacy.

This is not a small battle between start-up...
This is a battle between GLOBAL CENTRAL BANKS!

Vous savez quoi?

I HOPE I’m wrong!

Pourquoi?

Because this is scary…

J'enseigne DigitalAgeEducation.com à Aidez-moi people and businesses understand the new rules of the Digital Age, because…

Ignoring disruptive change is NOT an option!

The Digital Age is full of amazing opportunities and threats. We can identify the Opportunités and grab them or we can sit still and simply watch disruption slowly take over.

Notes de bas de page

1 Richard Duncan - Economics

2 Hector Quintanilla's answer to What is the hardest thing you've gone through being an entrepreneur?

3 Rollout of 260,000+ Bitcoin-Accepting Stores in Japan Begins - Bitcoin News

Cody Shirk

Cody Shirk, Explorateur, investisseur - codyshirk.com

Répondu il y a 46w · L'auteur dispose de réponses 533 et de vues de réponses 16.1m

When I sat down to write this, late last night, Bitcoin was just over $10,000. After sleeping for about eight hours, I woke up to see that Bitcoin is now just over $11,000.

That's a 10% increase in 8 hours. Annualized, that's a 10,950% return.

Whether you're a Bitcoin believer, Bitcoin hater, or you don't even know about Bitcoin... you must at least acknowledge that the digital currency is a big deal.

But, will it stay that way?

Could Bitcoin become the cause of the next financial crisis?

La source: Coindesk

Non.

At least, that's what history tells us.

If you were to show the following chart to anyone, they would tell you what's next...

Could Bitcoin become the cause of the next financial crisis?

La source: Bloomberg

Meteoric rises - in anything - are typically greeted with an equally violent crash. And this isn't just in the investing world.

It happens in nature too.

Think about what happens during the spring. Flowers bloom, grass grows, and creatures are born. Then, during the fall, leaves turn brown and the cycle of life comes to an end. The next year, this process repeats.

Now think of a wave in the ocean. Wind blows across the surface of the water, creating ripples. These ripples start to stack up on each other and create a wave of energy that travels across the ocean. Soon, that wave of energy comes close to the shore line. As the ocean floor becomes more shallow, the wave increases in height until it reaches a peak and then crashes down.

It's all cyclical.

Could Bitcoin become the cause of the next financial crisis?

What stage of the cycle is Bitcoin in?

Does Bitcoin even have a cycle?

That's the big question... both for Bitcoin skeptics and believers.

However, we can Essai to compare Bitcoin to previous bubbles...

Could Bitcoin become the cause of the next financial crisis?

La source: Bloomberg

The problem is that people want to compare Bitcoin with other assets. Whether it's real estate or the stock market... it's tempting to compare Bitcoin's value to these traditional investments.

However, is Bitcoin an asset? Or is it just a medium of exchange? Or is it some different kind of store of wealth?

Those are the questions that everyone is asking.

Many Bitcoin believers think that the crypto currency is all of those things. It's a store of wealth, a medium of exchange, and a currency that can't be manipulated by outside entities. C'est parfait.

And that's why the Bitcoin exchange 'Coinbase' opened up over 100,000 new accounts over the Thanksgiving weekend, which makes them larger (in terms of clients) than the mega-brokerage Charles Schwab.

That's incredible.

Now, I am not calling a 'Bitcoin bubble' here.

In fact, right now it feels like there is a bubble in calling the 'Bitcoin bubble!'

But... for argument's sake, let's assume that Bitcoin is becoming overheated...

In any bubble there is a start and an end. The 'end' doesn't necessarily mean that it's over... just that there is a significant correction.

This was evident during the 2000 dot com bubble. The bubble was fueled by the idea that the internet would change the world. Dot com companies were so valuable, investors were willing to pay astronomical prices for 'future' returns.

We all know what happened. The dot com bubble popped and many companies disappeared. But, the internet did - and still is - changing the world. It's just that the rapid appreciation of valuations that these dot com companies had were not sustainable.

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This happened again in 2008 with the US housing market.

The housing bubble resulted in the US stock market dropping by over 50%, finally bottoming on March 9th of 2009.

Interestingly, Bitcoin was officially released in January of 2009, just two months before the market bottom.

Could Bitcoin become the cause of the next financial crisis?

Has Bitcoin's rise been a result of the bull market we're in?

The start of our current bull market and the release of Bitcoin are within two months of each other.

To add fuel to the fire, current Bitcoin 'investors' are now taking out loans on their houses in order to buy Bitcoin.

Throughout history, we can see that nearly every financial bubble has popped because of the expansion of credit which ends up not being supported by the underlying asset. (Speculation in 1929, dot com companies in 2000, real estate in 2008, etc.)

And while the actual amount of money that is flowing into Bitcoin is relatively small in the bigger picture, perhaps Bitcoin's rise is just another symptom of an overheated market.

Or... maybe Bitcoin really is the 'thing' that changes our financial system.

Maybe it really is 'different this time.'

David Caune

David Caune, Concert, Festival, Theatrical, Event Production

Répondu il y a 45w · L'auteur dispose de réponses 689 et de vues de réponses 3m

The current Bitcoin fracas is to the financial world as block chain is to gambling apps.

In traditional markets, when everyone from the President to the waiter is talking stocks, its time to be very cautious about investment.

That said, Bitcoin is the flavour of the day in media because it’s the easy to understand public face of block chain—“Look at all those graphs” and the comment on social media from armchair experts. 1

The real, revolutionary power of block chain is already being implemented in the supply chains and data reporting patterns of large companies. 2

Could Bitcoin become the cause of the next financial crisis?

As for Bitcoin? The total supply is controlled, with a 50% reduction in possible new blocks every 210,000. Of the target of twenty-one million coins available to be mined, seventeen million have already been produced. At current prices levels that’s still only a total value of $231 billion. If bitcoin goes to $100,000 as predicted by some academics in the field, that’s $2.3 trillion. 3

BITCOIN IS NOT AN ASSET

Total world Gross World Product (GWP) per annum at the moment is roughly $90 trillion with purchasing power parity at $100 trillion. Bitcoin might be likely to be volatile in the event of a flight of capital during a financial crisis but its effect on global liquidity and asset values will be minimal.

To keep it simple, the last Global Financial Crisis was caused by credit—low interest rates inducing investors to use leverage, low bond yields and lack of regulation encouraging financial institutions to indulge in risk-taking behaviour and low lending standards, involving real assets secured by credit.

Once all bitcoins have been mined, the major source of income for traders shifts from mining to transaction fees. If Bitcoin then continues to become popular, a medium of exchange used everywhere creates deflation, which increases buying power. 4

The chances of Bitcoin or any of the 1,000+ of cryptocurrencies causing a financial crisis are almost non-existent. The media’s asking the wrong questions.

Notes de bas de page

1 Bitcoin can get to $100,000 if it keeps following one of tech's golden rules

2 David Caune's answer to Is Augur a cryptocurrency?

3 Here's how Bitcoin can get to $US100,000 in 2021

4 The Global Financial Crisis: Causes, Consequences and Countermeasures

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