The COVID-19 pandemic has forced economies to a halt and stretched the central banking system. Central banks have been printing money on a scale like never before, which makes the 2008 financial crisis pale in comparison. Over $2 trillion dollars were printed to stabilize the markets and increase liquidity.
Back in 2008, Bitcoin (BTC) was created in reaction to these quantitative easing programs as an alternative to fiat currencies and the traditional financial systems. Where governments can print money at will, a numerus clausus asset class is attractive as an inflationary hedge.
In 2008, the financial crisis began with disruption to the United States real estate and financial markets, only spreading to the financial and real economy in the rest of the world after a certain time delay. The COVID-19 outbreak is different in that it exerts a more radical and abrupt effect — first an economic upheaval by putting the real economy out of action immediately and completely, and then culminating in a financial crisis.
Central banks globally have printed trillions in the first wave of COVID-19, with many more expected to come. Airbags have been deployed, whether it be direct deposits for the survival of individuals or new loans for the survival of businesses. A large amount of liquidity has been injected into monetary systems, with a sizable portion of it finding its way to the equity markets. The same will eventually happen to the crypto markets, but that hasn’t happened yet.
The birth of guaranteed income is a result of central banks fighting the crisis with financial instruments — Bitcoin played no part in it. In fact, a hard money system, like what gold was during the great depression, can be detrimental during times of acute crisis. The market crash of 1929 became the economic depression of the 1930’s by way of a monetary transmission — gold was simply held as a store of value.
Crypto market participants should be familiar with the supply-and-demand dynamics causing the current equity markets rally. After all, there are neither economic asset-backing nor earnings models in the crypto realm — prices are driven purely by market supply and demand. With the influx of new money fueling demand in the equity markets, what we are witnessing is the inflation of financial assets, and a floating of the haves, combined with deflation of economic assets, and a needed rescue of the have-nots.
Modern monetary tools are flexible, swift, broad and powerful — it is logical that they are being deployed. The arguments we often hear from the Twitter peanut gallery that “Bitcoin solves this” are just misguided if not financially illiterate. In an age of abundance, paradoxically, Bitcoin simply does not and cannot deploy emergency funds to avoid starvation and civil unrest. To argue in a time of public suffering for hard money almost appears to be one of ignorant if not malignant sociopathy. Forget that Bitcoin isn’t money, much less hard money. Instead…